G.R. No. 120639 September 25, 1998
Plaintiff sent defendant another letter dated March
BPI EXPRESS CARD CORPORATION, petitioner,
vs.
COURT OF APPEALS and RICARDO J.
MARASIGAN, respondents.
Facts: The case arose from the dishonor of the credit card of
the plaintiff Atty. Ricardo J. Marasigan by Caf Adriatico, a
business establishment accredited with the defendant-
appellate BPI Express Card Corporation (BECC for
brevity), on December 8, 1989 when the plaintiff entertained
some guests thereat.
The records of this case show that plaintiff, who is a
lawyer by profession, was a complimentary member of BECC
from February 1988 to February 1989 and was issued Credit
Card No. 100-012-5534 with a credit limit of P3,000.00 and
with a monthly billing every 27th of the month, subject to the
terms and conditions stipulated in the contract. His
membership was renewed for another year or until February
1990 and the credit limit was increased to P5,000.00. The
plaintiffs oftentimes exceeded his credit limits but this was
never taken against him by the defendant and even his mode
of paying his monthly bills in check was tolerated. Their
contractual relations went on smoothly until his statement of
account for October 1989 amounting to P8,987.84 was not
paid in due time. The plaintiff admitted having inadvertently
failed to pay his account for the said month because he was in
Quezon province attending to some professional and personal
commitments. He was informed by his secretary that
defendant was demanding immediate payment of his
outstanding account, was requiring him to issue a check for
P15,000.00 which would include his future bills, and was
threatening to suspend his credit card. Plaintiff issued Far East
Bank and Trust Co. Check No. 494675 in the amount of
P15,000.00, postdated December 15, 1989 which was received
on November 23, 1989 by Tess Lorenzo, an employee of the
defendant, who in turn gave the said check to Jeng Angeles, a
co-employee who handles the account of the plaintiff. The
check remained in the custody of Jeng Angeles. Mr. Roberto
Maniquiz, head of the collection department of defendant was
formally informed of the postdated check about a week later.
On November 28, 2989, defendant served plaintiff a letter by
ordinary mail informing him of the temporary suspension of
the privileges of his credit card and the inclusion of his
account number in their Caution List. He was also told to
refrain from further use of his credit card to avoid any
inconvenience/embarrassment and that unless he settles his
outstanding account with the defendant within 5 days from
receipt of the letter, his membership will be permanently
cancelled. There is no showing that the plaintiff received this
letter before December 8, 1989. Confidential that he had
settled his account with the issuance of the postdated check,
plaintiff invited some guests on December 8, 1989 and
entertained them at Caf Adriatico. When he presented his
credit card to Caf Adriatico for the bill amounting to P735.32,
said card was dishonored. One of his guests, Mary Ellen
Ringler, paid the bill by using her own credit card a
Unibankard.
In a letter addressed to the defendant dated December
12, 1989, plaintiff requested that he be sent the exact billing
due him as of December 15, 1989, to withhold the deposit of
his postdated check and that said check be returned to him
because he had already instructed his bank to stop the payment
thereof as the defendant violated their agreement that the
plaintiff issue the check to the defendant to cover his account
amounting to only P8,987.84 on the condition that the
defendant will not suspend the effectivity of the card. A letter
dated December 16, 1989 was sent by the plaintiff to the
manager of FEBTC, Ramada Branch, Manila requesting the
bank to stop the payment of the check. No reply was received
by plaintiff from the defendant to his letter dated December
12, 1989.
12, 1990 reminding the latter that he had long rescinded and
cancelled whatever arrangement he entered into with
defendant and requesting for his correct billing, less the
improper charges and penalties, and for an explanation within
five (5) days from receipt thereof why his card was dishonored
on December 8, 1989 despite assurance to the contrary by
defendant's personnel-in-charge, otherwise the necessary court
action shall be filed to hold defendant responsible for the
humiliation and embarrassment suffered by him. Plaintiff
alleged further that after a few days, a certain Atty. Albano,
representing himself to be working with the office of Atty.
Lopez, called him inquiring as to how the matter can be
threshed out extrajudicially but the latter said that such is a
serious matter cannot be discussed over the phone. The
defendant served its final demand to the plaintiff dated March
21, 1990 requiring him to pay in full his overdue account,
including stipulated fees and charges, within 5 days from
receipt thereof or face court action and also to replace the
postdated check with cash within the same period or face
criminal suit for violation of Bouncing Check Law. The
plaintiff in a reply letter dated April 5, 1990, demanded
defendant's compliance with his request in his first letter dated
March 12, 1990 within three (3) days from receipt, otherwise
the plaintiff will file a case against them, . . .
Thus, on May 7, 1990 private respondent filed a
complaint for damages against petitioner before the Regional
Trial Court of Makati. After trial the trial court ruled for
private respondent, finding that herein petitioner abused its
right in contravention of Article 19 of the Civil Code. The
lower court ordered the defendant to pay plaintiff (1) P
100,000.00 as moral damages; (2) P 50,000.00 as exemplary
damages; and (3) P 20,000.00 by way of attorney's fees. On
the other hand, plaintiff is ordered to pay defendant its
outstanding obligation in the amount of P14,439.41, amount
due as of December 15, 1989. Petitioner appealed to the Court
of Appeals, which affirmed the lower court with
modifications. Defendant-appellant shall pay the plaintiff-
appellee the following: P50,000.00 as moral damages:
P25,000.00 as exemplary damages; and P10,000.00 by way of
attorney's fees.
ISSUE: WON BECC was justified in suspending Ricardo
Marasigans credit card despite his issuance of a postdated
check as payment
HELD: YES. Indeed, there was an arrangement between the
parties, wherein the petitioner required the private respondent
to issue a check worth P15,000.00 as payment for the latter's
billings. However, we find that the private respondent was not
able to comply with this obligation. Clearly the purpose of the
arrangement between the parties on November 22, 1989, was
for the immediate payment of the private respondent's
outstanding account, in order that his credit card would not be
suspended.
As agreed upon by the parties, on the following day,
private respondent did issue a check for P15,000.00. However,
the check was postdated 15 December 1989. 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. This is especially true in the case of a
postdated check. Thus, the issuance by the private respondent
of the postdated check was not effective payment. It did not
comply with his obligation under the arrangement with Miss
Lorenzo. Petitioner corporation was therefore justified in
suspending his credit card.

G.R. No. 89802 May 7, 1992
ASSOCIATED BANK and CONRADO CRUZ, petitioners,
vs.
HON. COURT OF APPEALS, and MERLE V. REYES,
doing business under the name and style "Melissa's
RTW," respondents.
FACTS: Merle Reyes is engaged in the business of ready-to-
wear garments under the firm name "Melissa's RTW." Among
her customers were Robinson's Department Store, Payless
Department Store, Rempson Department Store, and the
Corona Bazaar. These companies issued 6 crossed checks
totalling P15,805 payable to Melissa's RTW for the payment
of their various accounts:
Payless Solid Bank P3,960.00 January 19, 1982
Robinson's FEBTC 4,140.00 December 18, 1981
Robinson's FEBTC 1,650.00 December 24, 1981
Robinson's FEBTC 1,980.00 January 12, 1982
Rempson TRB 1,575.00 January 9, 1982
Corona RCBC 2,500.00 December 22, 1981
When she went to these companies to collect on what she
thought were still unpaid accounts, she was informed of the
issuance of the above-listed crossed checks. Further inquiry
revealed that the said checks had been deposited with the
Associated Bank and subsequently paid by it to one Rafael
Sayson, one of its "trusted depositors," in the words of its
branch manager and co-petitioner, Conrado Cruz, Sayson had
not been authorized by the private respondent to deposit and
encash the said checks.
Reyes filed with the RTC of Quezon City a complaint for
recovery of the total value of the checks plus damages. The
RTC ruled in favour of Reyes and required the defendants to
pay the total value of the checks plus 12% interest, P50,000
actual damages, P25,000 exemplary damages, P5,000
attorney's fees, and the costs of the suit.
The petitioners appealed to the CA alleging that Reyes has no
cause of action against them and should have proceeded
against the companies that issued the checks. CA dismissed
the appeal and affirmed the RTC holding that The cause of
action of the appellee in the case at bar arose from the illegal,
anomalous and irregular acts of the appellants in violating
common banking practices to the damage and prejudice of the
appellees, in allowing to be deposited and encashed as well as
paying to improper parties without the knowledge, consent,
authority or endorsement of the appellee which totalled
P15,805.00, the six (6) checks in dispute which were "crossed
checks" or "for payee's account only," the appellee being the
payee.
The sole issue raised in this case is whether or not the private
respondent has a cause of action against the petitioners for
their encashment and payment to another person of certain
crossed checks issued in her favor.
ISSUE: WON Reyes has a cause of action against Associated
Bank and Cruz
HELD: YES. The Supreme Court held that Reyes has a cause
of action against the bank and Cruz. There being no evidence
that the crossed checks were actually received by the private
respondent, she would have a right of action against the
drawer companies, which in turn could go against their
respective drawee banks, which in turn could sue the herein
petitioner as collecting bank. In a similar situation, it was held
that, to simplify proceedings, the payee of the illegally
encashed checks should be allowed to recover directly from
the bank responsible for such encashment regardless of
whether or not the checks were actually delivered to the payee.
We approve such direct action in the case at bar.
Under accepted banking practice, crossing a check is done by
writing two parallel lines diagonally on the left top portion of
the checks. The crossing is special where the name of a bank
or a business institution is written between the two parallel
lines, which means that the drawee should pay only with the
intervention of that company. The crossing is general where
the words written between the two parallel lines are "and Co."
or "for payee's account only," as in the case at bar. This means
that the drawee bank should not encash the check but merely
accept it for deposit.
The effects of crossing a check are: (1) that the check may not
be encashed but only deposited in the bank; (2) that the check
may be negotiated only once to one who has an account
with a bank; and (3) that the act of crossing the check serves
as a warning to the holder that the check has been issued for a
definite purpose so that he must inquire if he has received the
check pursuant to that purpose.
The six checks in the case at bar had been crossed and issued
"for payee's account only." This could only signify that the
drawers had intended the same for deposit only by the person
indicated, to wit, Melissa's RTW. The subject checks were
accepted for deposit by the Bank for the account of Rafael
Sayson although they were crossed checks and the payee was
not Sayson but Melissa's RTW. The Bank stamped thereon its
guarantee that "all prior endorsements and/or lack of
endorsements (were) guaranteed." By such deliberate and
positive act, the Bank had for all legal intents and purposes
treated the said checks as negotiable instruments and,
accordingly, assumed the warranty of the endorser.
It is not disputed that the proceeds of the subject checks
belonged to the private respondent. As she had not at any time
authorized Rafael Sayson to endorse or encash them, there was
conversion of the funds by the Bank.
When the Bank paid the checks so endorsed notwithstanding
that title had not passed to the endorser, it did so at its peril
and became liable to the payee for the value of the checks.
This liability attached whether or not the Bank was aware of
the unauthorized endorsement.
The petitioners insist that the private respondent has no cause
of action against them because they have no privity of contract
with her. They also argue that it was Eddie Reyes, the private
respondent's own husband, who endorsed the checks.
The Bank does not deny collecting the money on the
endorsement. It was its responsibility to inquire as to the
authority of Rafael Sayson to deposit crossed checks payable
to Melissa's RTW upon a prior endorsement by Eddie Reyes.
The failure of the Bank to make this inquiry was a breach of
duty that made it liable to the private respondent for the
amount of the checks.
It is worth repeating that before presenting the checks for
clearing and for payment, the Bank had stamped on the back
thereof the words: "All prior endorsements and/or lack of
endorsements guaranteed," and thus made the assurance that it
had ascertained the genuineness of all prior endorsements.
G.R. No. 72764 July 13, 1989
STATE INVESTMENT HOUSE, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, ANITA PEA
CHUA and HARRIS CHUA, respondents.
FACTS: It appears that shortly before September 5, 1980,
New Sikatuna Wood Industries, Inc. requested for a loan from
private respondent Harris Chua. The latter agreed to grant the
same subject to the condition that the former should wait until
December 1980 when he would have the money. In view of
this agreement, private respondent-wife, Anita Pena Chua
issued three (3) crossed checks payable to New Sikatuna
Wood Industries, Inc. all postdated. The total value of the three
(3) postdated checks amounted to P 299,450.00.
Subsequently, New Sikatuna Wood Industries, Inc. entered
into an agreement with herein petitioner State Investment
House, Inc. whereby for and in consideration of the sum of
Pl,047,402.91 under a deed of sale, the former assigned and
discounted with petitioner eleven (11) postdated checks
including the aforementioned three (3) postdated checks
issued by herein private respondent-wife Anita Pea Chua to
New Sikatuna Wood Industries, Inc.
checks were dishonored by reason of "insufficient funds",
"stop payment" and "account closed", respectively. Petitioner
claims that despite demands on private respondent Anita Pea
to make good said checks, the latter failed to pay the same
necessitating the former to file an action for collection against
the latter and her husband Harris Chua before the Regional
Trial Court of Manila, Branch XXXVII docketed as Civil Case
No. 82-10547.
Private respondents-defendants filed a third party complaint
against New Sikatuna Wood Industries, Inc. for reimbursement
and indemnification in the event that they be held liable to
petitioner-plaintiff. For failure of third party defendant to
answer the third party complaint despite due service of
summons, the latter was declared in default.
RTC: Rendered judgment against herein private respondents
spouses. On the third party complaint, third party defendant
New Sikatuna Wood Industries, Inc. is ordered to pay third
party plaintiffs Anita Pena Chua and Harris Chua all amounts
said defendants' third- party plaintiffs may pay to the plaintiff
on account of this case.
CA: Reversed RTC
ISSUE: Whether or not petitioner is a holder in due course as
to entitle it to proceed against private respondents for the
amount stated in the dishonored checks
RULING: NO. Section 52(c) of the Negotiable Instruments
Law defines a holder in due course as one who takes the
instrument "in good faith and for value". On the other hand,
Section 52(d) provides that in order that one may be a holder
in due course, it is necessary that "at the time the instrument
was negotiated to him he had no notice of any x x x defect in
the title of the person negotiating it." However, under Section
59 every holder is deemed prima facie to be a holder in due
course.
This Court has taken cognizance of the practice that a check
with two parallel lines in the upper left hand corner (crossed
checks) means that it could only be deposited and may not be
converted into cash. Consequently, such circumstance should
put the payee on inquiry and upon him devolves the duty to
ascertain the holder's title to the check or the nature of his
possession. Failing in this respect, the payee is declared guilty
of gross negligence amounting to legal absence of good faith
and as such the consensus of authority is to the effect that the
holder of the check is not a holder in good faith.
Petitioner submits that at the time of the negotiation and
endorsement of the checks in question by New Sikatuna Wood
Industries, it had no knowledge of the transaction and/or
arrangement made between the latter and private respondents.
We agree with respondent appellate court.
Relying on the ruling in Ocampo v. Gatchalian (supra), the
Intermediate Appellate Court (now Court of Appeals),
correctly elucidated that the effects of crossing a check are:
(1) the check may not be encashed but only deposited in the
bank; (2) the check may be negotiated only once to one who
has an account with a bank; (3) and the act of crossing the
check serves as a warning to the holder that the check has
been issued for a definite purpose so that he must inquire if he
has received the check pursuant to that purpose, otherwise he
is not a holder in due course. Further, the appellate court said:
It results therefore that when appellee rediscounted
the check knowing that it was a crossed check he was
knowingly violating the avowed intention of crossing
the check. Furthermore, his failure to inquire from the
holder, party defendant New Sikatuna Wood
Industries, Inc., the purpose for which the three
checks were cross despite the warning of the
crossing, prevents him from being considered in good
faith and thus he is not a holder in due course. Being
not a holder in due course, plaintiff is subject to
personal defenses, such as lack of consideration
between appellants and New Sikatuna Wood
Industries. Note that under the facts the checks were
postdated and issued only as a loan to New Sikatuna
 Wood Industries, Inc. if and when deposits were
made to back up the checks. Such deposits were not
made, hence no loan was made, hence the three
checks are without consideration (Sec. 28, Negotiable
Instruments Law).

Likewise New Sikatuna Wood Industries negotiated

the three checks in breach of faith in violation of
Article (sic) 55, Negotiable Instruments Law, which
is a personal defense available to the drawer of the
check.

Sec. 541. The maker or any legal holder of a check shall be

entitled to indicate therein that it be paid to a certain banker or
institution, which he shall do by writing across the face the
name of said banker or institution, or only the words "and
company."

The payment made to a person other than the banker or

institution shall not exempt the person on whom it is drawn, if
the payment was not correctly made.

Under usual practice, crossing a check is done by placing two

parallel lines diagonally on the left top portion of the check.
The crossing may be special wherein between the two parallel
lines is written the name of a bank or a business institution, in
which case the drawee should pay only with the intervention
of that bank or company, or crossing may be general wherein
between two parallel diagonal lines are written the words "and
Co." or none at all as in the case at bar, in which case the
drawee should not encash the same but merely accept the same
for deposit.

Under Section 72 of the Negotiable Instruments Law,

presentment for payment to be sufficient must be made (a) by
the holder, or by some person authorized to receive payment
on his behalf ... As to who the holder or authorized person will
be depends on the instructions stated on the face of the check.

The three subject checks in the case at bar had been

crossed generally and issued payable to New Sikatuna
Wood Industries, Inc. which could only mean that the
drawer had intended the same for deposit only by the
rightful person, i.e., the payee named therein. Apparently,
it was not the payee who presented the same for payment
and therefore, there was no proper presentment, and the
liability did not attach to the drawer.

Thus, in the absence of due presentment, the drawer did

not become liable. 7 Consequently, no right of recourse is
available to petitioner against the drawer of the subject
checks, private respondent wife, considering that
petitioner is not the proper party authorized to make
presentment of the checks in question.

The Negotiable Instruments Law does not provide that a

holder who is not a holder in due course may not in any case
recover on the instrument for in the case at bar, petitioner may
recover from the New Sikatuna Wood Industries, Inc. if the
latter has no valid excuse for refusing payment.

That the subject checks had been issued subject to the

condition that private respondents on due date would make the
back up deposit for said checks but which condition
apparently was not made, thus resulting in the non-
consummation of the loan intended to be granted by private
respondents to New Sikatuna Wood Industries, Inc.,
constitutes a good defense against petitioner who is not a
holder in due course.

G.R. No. 75954 October 22, 1992
PEOPLE OF THE PHILIPPINES, petitioner,
vs.
HON. DAVID G. NITAFAN, Presiding Judge, Regional
Trial Court, Branch 52, Manila, and K.T. LIM alias
MARIANO LIM, respondents.
FACTS: Private respondent K.T. Lim was charged before
respondent court with violation of B.P. 22 in an Information
alleging
That on . . . January 10, 1985, in the City of Manila . .
. the said accused did then and there wilfully,
unlawfully and feloniously make or draw and issue to
Fatima Cortez Sasaki . . . Philippine Trust Company
Check No. 117383 dated February 9, 1985 . . . in the
amount of P143,000.00, . . . well knowing that at the
time of issue he . . . did not have sufficient funds in or
credit with the drawee bank . . . which check . . . was
subsequently dishonored by the drawee bank for
insufficiency of funds, and despite receipt of notice of
such dishonor, said accused failed to pay said Fatima
Cortez Sasaki the amount of said check or to make
arrangement for full payment of the same within five
(5) banking days after receiving said notice.
Private respondent moved to quash the Information of the
ground that the facts charged did not constitute a felony as B.P.
22 was unconstitutional and that the check he issued was a
memorandum check which was in the nature of a promissory
note, perforce, civil in nature. On 1 September 1986,
respondent judge, ruling that B.P. 22 on which the
Information was based was unconstitutional, issued the
questioned Order quashing the Information. Hence, this
petition for review on certiorari filed by the Solicitor General
in behalf of the government.
ISSUE: Whether a memorandum check issued postdated in
partial payment of a pre-existing obligation is within the
coverage of B.P. 22.
(The constitutionality of the "Bouncing Check Law" has
already been sustained by this Court in Lozano v. Martinez)
RULING: YES
Private respondent contends that although a memorandum
check may not differ in form and appearance from an ordinary
check, such a check is given by the drawer to the payee more
in the nature of memorandum of indebtedness and, should be
sued upon in a civil action.
We are not persuaded.
A memorandum check is in the form of an ordinary check,
with the word "memorandum", "memo" or "mem" written
across its face, signifying that the maker or drawer engages to
pay the bona fide holder absolutely, without any condition
concerning its presentment. Such a check is an evidence of
debt against the drawer, and although may not be intended to
be presented, 7 has the same effect as an ordinary check, 8 and
if passed to the third person, will be valid in his hands like any
other check. 9
From the above definition, it is clear that a memorandum
check, which is in the form of an ordinary check, is still drawn
on a bank and should therefore be distinguished from a
promissory note, which is but a mere promise to pay. If
private respondent seeks to equate memorandum check with
promissory note, as he does to skirt the provisions of B.P. 22,
he could very well have issued a promissory note, and this
would be have exempted him form the coverage of the law.
Verily, a memorandum check comes within the meaning of
Sec. 185 of the Negotiable Instruments Law which defines a
check as "a bill of exchange drawn on a bank payable on
demand." A check is also defined as " [a] written order or
request to a bank or persons carrying on the business of
banking, by a party having money in their hands, desiring
them to pay, on presentment, to a person therein named or
bearer, or to such person or order, a named sum of money," or
"[a] draft drawn upon a bank and payable on demand, signed
by the maker or drawer, containing an unconditional promise
to pay a sum certain in money to the order of the payee."
A memorandum check must therefore fall within the ambit of
B.P. 22 which does not distinguish but merely provides that
"[a]ny person who makes or draws and issues any
check knowing at the time of issue that he does not have
sufficient funds in or credit with the drawee bank . . . which
check is subsequently dishonored . . . shall be punished by
imprisonment . . ."
But even if We retrace the enactment of the "Bouncing Check
Law" to determine the parameters of the concept of "check",
We can easily glean that the members of the then Batasang
Pambansa intended it to be comprehensive as to include all
checks drawn against banks.
A memorandum check, upon presentment, is generally
accepted by the bank. Hence it does not matter whether the
check issued is in the nature of a memorandum as evidence of
indebtedness or whether it was issued is partial fulfillment of a
pre-existing obligation, for what the law punishes is the
issuance itself of a bouncing check 15 and not the purpose for
which it was issuance. The mere act of issuing a worthless
check, whether as a deposit, as a guarantee, or even as an
evidence of a pre-existing debt, is malum prohibitum.
WHEREFORE, the petition is GRANTED and the Order of
respondent Judge of 1 September 1986 is SET ASIDE
G.R. No. 108555 December 20, 1994
RAMON TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and RIZAL
COMMERCIAL BANKING
CORPORATION, respondents.
FACTS: Petitioner Ramon Tan, a trader-businessman and
community leader in Puerto Princesa, had maintained since
1976 Current Account No. 109058068 with respondent
bank's Binondo branch. On March 11, 1988, to avoid carrying
cash while enroute to Manila, he secured a Cashier's Check
No. L 406000126 from the Philippine Commercial
Industrial Bank (PCIB), Puerto Princesa branch, in the
amount of Thirty Thousand (P30,000.00) Pesos, payable to his
order. He deposited the check in his account with RCBC
Binondo on March 15. On the same day, RCBC erroneously
sent the same cashier's check for clearing to the Central
Bank which was returned for having been "missent" or
"misrouted." 1 The next day, March 16, RCBC debited the
amount covered by the same cashier's check from the account
of the petitioner. Respondent bank at this time had not
informed the petitioner of its action which the latter claims he
learned of only 42 days after, specifically on March 16, when
he received the bank's debit memo. 2 Relying on the common
knowledge that a cashier's check was as good as cash, that the
usual banking practice that local checks are cleared within
three (3) working days and regional checks within seven (7)
working days, and the fact that the cashier's check was
accepted, petitioner issued two (2) personal checks both dated
March 18. Check No. 040719 in the name of Go Lac for Five
Thousand Five Hundred (P5,5000.00) Pesos was presented on
April 25, 3 more than 30 days from petitioner's deposit date of
the cashier's check. Check
No. 040718 in the name of MS Development Trading
Corporation for Six Thousand Fifty-Three Pesos and Seventy
Centavos (P6,053.70) was returned twice on March 24, nine
(9) days from his deposit date and again on April 26, twenty-
two days after the day the cashier's check was deposited for
insufficiency of funds. 4
Petitioner, alleging to have suffered humiliation and loss of
face in the business sector due to the bounced checks, filed a
complaint against RCBC for damages in the Regional Trial
Court of Palawan and Puerto Princesa.
In its defense, RCBC disowning any negligence, put the
blame for the "misrouting" on the petitioner for using the
wrong check deposit slip. It insisted that the misuse of a local
check deposit slip, instead of a regional check deposit slip,
triggered the "misrouting" by RCBC of the cashier's check to
the Central Bank and it was petitioner's negligent "misuse" of
a local deposit slip which was the proximate cause of the
"misrouting," thus he should bear the consequence. RCBC
alleged that it complied strictly with accepted banking practice
when it debited the amount of P30,000.00 against petitioner's
account since under Resolution No. 2202 dated December 21,
1979 of the Monetary Board, it is a matter of policy to
prohibit the drawing against uncollected deposits (DAUDS)
except when the drawings are made against uncollected
deposits representing bank manager's/cashier's/treasurer's
checks, treasury warrants, postal money orders and duly
funded "on us" checks which may be permitted at the
discretion of each bank. Without crediting the P30,000.00
deposit, petitioner's balance before and after was Two
Thousand Seven Hundred
Ninety-Two Pesos and the (P2,792.88) Eighty-Eight
Centavos. 14 Thus, it dishonored the two (2) checks amounting
to P11,553.70 since they were drawn against insufficient
funds. RCBC added that petitioner had no bills purchase (BP)
line which allows a depositor to receive or draw from proceeds
of a check without waiting it to be cleared. RCBC further
asseverated it was merely acting as petitioner's collecting
agent and it assumed no responsibility beyond care in selecting
correspondents under the theory that where a check is
deposited with a collecting bank the relationship created is that
of agency and not creditor-debtor, thus it cannot be liable.
RTC: Ruled in favor of petitioner
CA: Reversed RTC.
What appeared to have caused the unfortunate incident was
that the plaintiff filled up the wrong deposit slip which led to
the sending of the check to the Central Bank when the clearing
should have been made elsewhere.
But the claim of the plaintiff that he was not advised that the
Cashier's check was missent does not seem to be correct. The
evidence indicated that the defendant bank thru its personnel
had called him up thru telephone in the number (No. 60-45-
23) which he gave in his specimen signature card. But it came
out, that said telephone number was no longer active or was
already deleted from the list of telephone numbers.
There was an instruction on the part of the plaintiff for the
bank to contact his daughter, Mrs. Evelyn Tan Banzon and
according to the plaintiff, she too, was not contacted as per his
instruction. The evidence, however, indicated that Ms. Evelyn
Tan also could not be contacted at the number supposed to
pertain to her as appeared in the specimen signature card. In
other words while there was compliance with the
instructions given by the plaintiff but said instructions
were faulty. The plaintiff as a customer of the bank is
under obligation to inform the defendant of any changes in
the telephone numbers to be contacted in the event of any since PCIB and RCBC are members of the same clearing
exigency. house group relying on each other's solvency. RCBC could
surely rely on the solvency of PCIB when the latter issued
All in all, the facts indicate that the refusal of RCBC to its cashier's check.
credit the amount of P30,000.00 to the plaintiff's current
account is consistent with the accepted banking practice.
As the defendant bank had claimed, under Resolution No.
2202 dated December 21, 1979 of the Monetary Board, it had
been emphatically declared as a matter of policy that no
drawings should be made against uncollected deposits except
when the drawings are made against uncollected deposits
representing bank manager's/cashier's/treasurer's checks,
treasury warrants, postal money orders, and duly funded "on-
us" checks as may be permitted at the discretion of each bank.

It is clear that immediate payment without awaiting

clearance of a cashier's check is discretionary with the
bank to whom the check is presented and such being the
case, the refusal to allow it as in this case is not to be
equated with negligence in the basic perception that
discretion is not demandable as a right. In the instant case,
prior to the deposit of P30,000.00, the plaintiff's account
appeared to be only in the amount of P2,792.98. So the two (2)
checks issued by the plaintiff amounting to P11,553.70 had to
be dishonored since they were drawn against insufficient
funds.

What the plaintiff should have done, before issuing the two (2)
checks, was to await the clearance of the Cashier's check and
his failure to do so is a fault not ascribable to the defendant
who appeared under the circumstance merely to have followed
the usual banking practice

ISSUE: Whether a cashiers check is as good as cash, so as to

have funded the two checks subsequently drawn.

RULING: YES.

RCBC insists that immediate payment without awaiting

clearance of a cashier's check is discretionary with the bank to
whom the check is presented and such being the case, its
refusal to immediately pay the cashier's check in this case is
not to be equated with negligence on its part. We find this
disturbing and unfortunate.

An ordinary check is not a mere undertaking to pay an

amount of money. There is an element of certainty or
assurance that it will be paid upon presentation that is why it is
perceived as a convenient substitute for currency in
commercial and financial transactions. The basis of the
perception being confidence. Any practice that destroys that
confidence will impair the usefulness of the check as a
currency substitute and create havoc in trade circles and the
banking community. 26

Now, what was presented for deposit in the instant cases was
not just an ordinary check but a cashier's check payable to the
account of the depositor himself. A cashier's check is a
primary obligation of the issuing bank and accepted in
advance by its mere issuance. 27 By its very nature, a cashier's
check is the bank's order to pay drawn upon itself, committing
in effect its total resources, integrity and honor behind the
check. A cashier's check by its peculiar character and general
use in the commercial world is regarded substantially to be as
good as the money which it represents. 28 In this case,
therefore, PCIB by issuing the check created an unconditional
credit in favor of any collecting bank.

All these considered, petitioner's reliance on the layman's

perception that a cashier's check is as good as cash is not
entirely misplaced, as it is rooted in practice, tradition, and
principle. We see no reason thus why this so-called
discretion was not exercised in favor of petitioner, specially

G.R. No. 156846 February 23, 2004
TEDDY G. PABUGAIS, petitioner
vs.
DAVE P. SAHIJWANI, respondent.
FACTS:
Pursuant to an "Agreement And Undertaking"4 dated
December 3, 1993, petitioner Teddy G. Pabugais, in
consideration of the amount of Fifteen Million Four Hundred
Eighty Seven Thousand Five Hundred Pesos
(P15,487,500.00), agreed to sell to respondent Dave P.
Sahijwani a lot containing 1,239 square meters located at
Jacaranda Street, North Forbes Park, Makati, Metro Manila.
Respondent paid petitioner the amount of P600,000.00 as
option/reservation fee and the balance of P14,887,500.00 to be
paid within 60 days from the execution of the contract,
simultaneous with delivery of the owners duplicate Transfer
Certificate of Title in respondents name the Deed of Absolute
Sale; the Certificate of Non-Tax Delinquency on real estate
taxes and Clearance on Payment of Association Dues. The
parties further agreed that failure on the part of respondent to
pay the balance of the purchase price entitles petitioner to
forfeit the P600,000.00 option/reservation fee; while non-
delivery by the latter of the necessary documents obliges him
to return to respondent the said option/reservation fee with
interest at 18% per annum.
Petitioner failed to deliver the required documents. In
compliance with their agreement, he returned to respondent
the latters P600,000.00 option/reservation fee by way of Far
East Bank & Trust Company Check No. 25AO54252P, which
was, however, dishonored.
Petitioner claimed that he twice tendered to respondent,
through his counsel, the amount of P672,900.00 (representing
the P600,000.00 option/reservation fee plus 18% interest per
annum) in the form of Far East Bank & Trust Company
Managers Check No. 088498, dated August 3, 1994, but said
counsel refused to accept the same. On August 11, 1994,
petitioner wrote a letter to respondent saying that he is
consigning the amount tendered with the Regional Trial Court
of Makati City. On August 15, 1994, petitioner filed a
complaint for consignation.
Respondents counsel, on the other hand, admitted that his
office received petitioners letter dated August 5, 1994, but
claimed that no check was appended thereto. He averred that
there was no valid tender of payment because no check was
tendered and the computation of the amount to be tendered
was insufficient, because petitioner verbally promised to pay
3% monthly interest and 25% attorneys fees as penalty for
default, in addition to the interest of 18% per annum on the
P600,000.00 option/reservation fee.
RTC: Rendered a decision declaring the consignation invalid
for failure to prove that petitioner tendered payment to
respondent and that the latter refused to receive the same. It
further held that even assuming that respondent refused the
tender, the same is justified because the managers check
allegedly offered by petitioner was not legal tender, hence,
there was no valid tender of payment.
CA: Affirmed RTC.
On MR: Declared the consignation as valid. It held that the
validity of the consignation had the effect of extinguishing
petitioners obligation to return the option/reservation fee to
respondent. Hence, petitioner can no longer withdraw the
same.
ISSUE: Whether or not petitoners issuance of managers
check constitute as payment
RULING: YES
While it is true that in general, a managers check is not legal
tender, the creditor has the option of refusing or accepting
it.24 Payment in check by the debtor may be acceptable as
valid, if no prompt objection to said payment is made.
Consequently, petitioners tender of payment in the form
of managers check is valid.
[SIDE ISSUES]
(1) Was there a valid consignation? YES
Consignation is the act of depositing the thing due with the
court or judicial authorities whenever the creditor cannot
accept or refuses to accept payment and it generally requires
a prior tender of payment. In order that consignation may be
effective, the debtor must show that: (1) there was a debt
due; (2) the consignation of the obligation had been made
because the creditor to whom tender of payment was made
refused to accept it, or because he was absent or incapacitated,
or because several persons claimed to be entitled to receive the
amount due or because the title to the obligation has been lost;
(3) previous notice of the consignation had been given to the
person interested in the performance of the obligation; (4) the
amount due was placed at the disposal of the court; and (5)
after the consignation had been made the person interested
was notified thereof. Failure in any of these requirements is
enough ground to render a consignation ineffective.
Since there being a valid tender of payment in an amount
sufficient to extinguish the obligation, the consignation is
valid.
(2) Can petitioner withdraw the amount consigned as a matter
of right? - NO
The amount consigned with the trial court can no longer be
withdrawn by petitioner because respondents prayer in his
answer that the amount consigned be awarded to him is
equivalent to an acceptance of the consignation, which has the
effect of extinguishing petitioners obligation.
Moreover, petitioner failed to manifest his intention to comply
with the "Agreement And Undertaking" by delivering the
necessary documents and the lot subject of the sale to
respondent in exchange for the amount deposited. Withdrawal
of the money consigned would enrich petitioner and unjustly
prejudice respondent.