DELA VICTORIA V.

BURGOS
245 SCRA 374

FACTS:

Sesbreno filed a case against Mabanto Jr. among other people wherein the court decided in favor
of the plaintiff, ordering the defendants to pay former a definite amount of cash. The
decision had become final and executory and a writ of execution was issued. This was questioned
in the CA by the defendants. In the meanwhile, a notice of garnishment was issued to
petitioner who was then the City Fiscal. She was asked to withhold any check or whatnot in
favor of Mabanto Jr. The CA then dismissed the defendant’s petition and the garnishment
was commenced only to find out that petitioner didn't follow instructions of sheriff. She is now
being held liable.

ISSUE: WON there was a valid garnishment of the check?

HELD:

Garnishment is considered as the species of attachment for reaching credits belonging to the
judgment debtor owing to him from a stranger in litigation. Emphasis is laid on the phrase
belonging to the judgment debtor since it is the focal point of resolving the issues raised.

As Assistant City Fiscal, the source of Mabanto’s salary is public funds. Under Section 16 of
the NIL, every contract on a negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means
the transfer of the possession of the instrument by the maker or drawer with intent to transfer
title to the payee and recognize him as the holder thereof.

The petitioner is the custodian of the checks. Inasmuch as said checks were in the custody
of the petitioner and not yet delivered to Mabanto, they didn't belong to him and still had the
character of public funds. The salary check of a government officer or employee doesn't
belong to him

before it has been physically delivered to him. Until that time the check belongs to the
government. Accordingly, before there is actual delivery of the check, the payee has no power over
it, he cannot assign it without the consent of the government.
 Metropol vs. Sambok
L-39641 February 28, 1983
De Castro, J.:

Facts:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd.
Payable in 12 equal monthly installments with interest. It is further provided that in case on non-
payment of any of the installments, the total principal sum then remaining unpaid shall become due
and payable with an additional interest. Sambok Motors co., a sister company of Ng Sambok Sons
negotiated and indorsed the note in favor of Metropol Financing & investment Corporation.
Villaruel defaulted in the payment, upon presentment of the promissory note he failed to pay the
promissory note as demanded, hence Ng Sambok Sons Motors Co., Ltd. notified Sambok as indorsee
that the promissory note has been dishonored and demanded payment. Sambok failed to pay. Ng
Sambok Sons filed a complaint for the collection of sum of money. During the pendency of the case
Villaruel died. Sambok argues that by adding the words “with recourse” in the indorsement of the
note, it becomes a qualified indorser, thus, it does not warrant that in case that the maker failed to
pay upon presentment it will pay the amount to the holder.

Issue:
Whether or not Sambok Motors Co is a qualified indorser, thus it is not liable upon the failure
of payment of the maker.

Held:
No. A qualified indorserment constitutes the indorser a mere assignor of the title to the
instrument. It may be made by adding to the indorser’s signature the words “without recourse” or
any words of similar import. Such indorsement relieves the indorser of the general obligation to
pay if the instrument is dishonored but not of the liability arising from warranties on the
instrument as provided by section 65 of NIL. However, Sambok indorsed the note “with recourse”
and even waived the notice of demand, dishonor, protest and presentment.
Recourse means resort to a person who is secondarily liable after the default of the person
who is primarily liable. Sambok by indorsing the note “with recourse” does not make itself a
qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it
agreed that if Villaruel fails to pay the not the holder can go after it. The effect of such indorsement
is that the note was indorsed witout qualification. A person who indorses without qualification
engages that on due presentment, the note shall be accepted or paid, or both as the case maybe, and
that if it be dishonored, he will pay the amount thereof to the holder. The words added by Sambok
do not limit his liability, but rather confirm his obligation as general indorser.
 GEMPESAW V. CA

218 SCRA 682

FACTS:

Gempensaw was the owner of many grocery stores. She paid her suppliers through the issuance
of checks drawn against her checking account with respondent bank. The checks were
prepared by her bookkeeper Galang. In the signing of the checks prepared by Galang,
Gempensaw didn't bother

herself in verifying to whom the checks were being paid and if the issuances were necessary.
She didn't even verify the returned checks of the bank when the latter notifies her of the same.
During her two years in business, there were incidents shown that the amounts paid for were
in excess of what should have been paid. It was also shown that even if the checks were crossed,
the intended payees didn't receive the amount of the checks. This prompted Gempensaw to
demand the bank to credit her account for the amount of the forged checks. The bank refused to
do so and this prompted her to file the case against the bank.

HELD:

Forgery is a real defense by the party whose signature was forged. A party whose signature was
forged was never a party and never gave his consent to the instrument. Since his signature
doesn’t appear in the instrument, the same cannot be enforced against him even by a holder in
due course. The drawee bank cannot charge the account of the drawer whose signature was forged
because he never gave the bank the order to pay.

In the case at bar the checks were filled up by petitioner’s employee Galang and were later
given to her for signature. Her signing the checks made the negotiable instruments complete. Prior
to signing of the checks, there was no valid contract yet. Petitioner completed the checks by
signing them and thereafter authorized Galang to deliver the same to their respective payees. The
checks were then indorsed, forged indorsements thereon.

As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot
debit the account of a drawer for the amount of said check. An exception to this rule is
when the drawer is guilty of negligence which causes the bank to honor such checks. Petitioner
in this case has relied solely on the honesty and loyalty of her bookkeeper and never
bothered to verify the accuracy of the amounts of the checks she signed the invoices
attached thereto. And though she received her bank statements, she didn't carefully examine
the same to double-check her

payments. Petitioner didn't exercise reasonable diligence which eventually led to the fruition of her
bookkeeper’s fraudulent schemes.
 VICENTE R. DE OCAMPO & CO. v. ANITA GATCHALIAN.
G.R. No. L-15126. November 30, 1961.

FACTS:

Anita Gatchalian was interested in buying a car. Manuel Gonzales offered to her a car owned by
plaintiff. Gonzales claimed that he was authorized by the plaintiff to sell the car. Gonzales order
defendant to issue a cross-check to comply on showing interest in buying the car. Gonzales
promised to return the check the next day.

When Gonzales never appeared after, defendant issue a stop payment order on the check. She found
out that Gonzales used the check as payment to plaintiff's clinic for his wife's fees. Plaintiff now
demands defendant for payment of the check, in which defendant refused citing that plaintiff is a
not a holder in due course.

The lower court held that defendant should pay plaintiff.

ISSUE: Whether or not De Ocampo is a holder in due course.

RULING:

The SC held that plaintiff is a not a holder in due course. There were obvious instances to show that
the check was negligently acquired like plaintiff having no liability with defendant and that the
check was crossed. Plaintiff failed to exercise prudence and caution. Plaintiff should have asked
questions to further inquire upon suspicion.

The presumption of good faith did not apply to plaintiff because the defect was apparent on the
instruments face – it was not payable to defendant or bearer.