1. Caltex v.
CA CTDs in question are negotiable instruments as they
FACTS:
Security Bank and Trust Co. issued 280 certificates of
time deposit (CTD) in favor of one Mr. Angel dela Cruz
who deposited with the bank P1.12 million. Dela Cruz
delivered the CTDs to Caltex in connection with his
purchase of fuel products from the latter. Subsequently,
dela Cruz informed the bank that he lost all the CTDs,
and thus executed an affidavit of loss to facilitate the
issuance of the replacement CTDs. When Caltex
presented said CTDs for verification with the bank and
formally informed the bank of its decision to preterminate
the same, the bank rejected Caltex’ claim and demand
as Caltex failed to furnish copies of certain requested
documents. In 1983, dela Cruz’ loan matured and the
bank set-off and applied the time deposits as payment
for the loan. Caltex filed a complaint which was
dismissed on the ground that the subject certificates of
deposit are non-negotiable.
ISSUE:
Whether the Certificates of Time Deposit (CTDs) are
negotiable instruments.
RULING:
The CTDs in question are negotiable instruments as
they meet the requirements of the law for negotiability as
provided for in Section 1 of the Negotiable Instruments
Law. The documents provide that the amounts
deposited shall be repayable to the depositor. And
according to the document, the depositor is the "bearer."
The documents do not say that the depositor is Angel de
la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be
repayable to the bearer of the documents or, for that
matter, whosoever may be the bearer at the time of
presentment. However, petitioner cannot recover on the
CTDs. Although the CTDs are bearer instruments, a
valid negotiation thereof for the true purpose and
agreement between it and dela Cruz, as ultimately
ascertained, requires both delivery and indorsement. In
this case, there was no indorsement as the CTDs were
delivered not as payment but only as a security for dela
Cruz' fuel purchases.
**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. The
meet the requirements of the law for negotiability as
provided for in Section 1 of the Negotiable Instruments
Law. The documents provide that the amounts
deposited shall be repayable to the depositor. And
according to the document, the depositor is the "bearer."
The documents do not say that the depositor is Angel de
la Cruz and that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be
repayable to the bearer of the documents or, for that
matter, whosoever may be the bearer at the time of
presentment.
2. RIVERA VS. SPOUSES CHUA (2015)
746 scra 1
FACTS:
The parties were friends and kumpadres for a long time
already. Rivera obtained a loan from the Spouses Chua
evidenced by a Promissory Note.
Three years from the date of payment stipulated in the
promissory note, Rivera, issued and delivered to
Spouses Chua two (2) checks drawn against his account
at Philippine Commercial International Bank (PCIB) but
upon presentment for payment, the two checks were
dishonored for the reason “account closed.”
The Spouses Chua alleged that they have repeatedly
demanded payment from Rivera to no avail. Because of
Rivera’s unjustified refusal to pay, the Spouses Chua
were constrained to file a suit before the MeTC.
Rivera, in his Answer, countered that he never executed
the subject Promissory Note.
After trial, the MeTC ruled in favor of the Spouses Chua.
The decision was affirmed by both the RTC and the CA.
ISSUE:
WON Negotiable Instruments Law is applicable in the
present case.
HELD:
No. The subject promissory note is not a negotiable
instrument and the provisions of the NIL do not apply to
this case. Section 1 of the NIL requires the concurrence
of the following elements to be a negotiable instrument:
(a) It must be in writing and signed by the maker or
drawer;
(b) Must contain an unconditional promise or order to
pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time; general manager Quirino Gonzales, applied for credit
(d) Must be payable to order or to bearer; and accommodation with Republic Bank, later known as,
(e) Where the instrument is addressed to a drawee, he Republic Planters Bank (the Bank). The obligation was
must be named or otherwise indicated therein with
secured by a real estate mortgage of parcels of land.
reasonable certainty.
QGLC executed a promissory note, which they later on
defaulted. The Bank foreclosed the property and was
The Promissory Note in this case is made out to
subsequently owned by the same bank. The latter then
specific persons, herein respondents, the Spouses
Chua, and not to order or to bearer, or to the order of filed a complaint for a sum of money in regards to the
the Spouses Chua as payees. unpaid notes.
However, even if Rivera’s Promissory Note is not a
negotiable instrument and therefore outside the
coverage of Section 70 of the NIL which provides that The notes were payable 30 days after date and
presentment for payment is not necessary to charge the
provided for the solidary liability in their non-payment at
person liable on the instrument, Rivera is still liable
under the terms of the Promissory Note that he issued. maturity. Petitioners deny having received the value of
the promissory notes.
PROMISSORY NOTE

120,000.00
The trial court favored the petitioners, but the CA
FOR VALUE RECEIVED, I, RODRIGO RIVERA
reversed the decision.
promise to pay spouses SALVADOR C. CHUA and
VIOLETA SY CHUA, the sum of One Hundred Twenty
Thousand Philippine Currency (P120,000.00) on Issue:
December 31, 1995.
W/N the promissory notes were valid
It is agreed and understood that failure on my part to pay
the amount of (P120,000.00) One Hundred Twenty Held:
Thousand Pesos on December 31, 1995. (sic) I agree to
pay the sum equivalent to FIVE PERCENT (5%) interest Yes, the promissory notes were valid. The
monthly from the date of default until the entire obligation petitioners claim that they signed the notes in blank but
is fully paid for. did not receive the value of the notes. They also admit
the genuineness and due execution of the notes. The
Should this note be referred to a lawyer for collection, I promissory notes were negotiable as they met the
agree to pay the further sum equivalent to twenty requirements of Section 1 of the Negotiable Instruments
percent (20%) of the total amount due and payable as
and for attorney’s fees which in no case shall be less Law. The notes are prima facie deemed to have been
than P5,000.00 and to pay in addition the cost of suit issued for consideration.
and other incidental litigation expense.

Any action which may arise in connection with this note

shall be brought in the proper Court of the City of Manila. In any case, it is no defense that the promissory
notes were signed in blank as Section 14 of the
Manila, February 24, 1995[.] Negotiable Instruments Law concedes the prima
facie authority of the person in possession of negotiable
(SGD.) RODRIGO RIVERA instruments, such as the notes herein, to fill in the
blanks.

4. Quirino Gonzales Logging Concessionaire vs. The

Court of Appeals 5. JUANITA SALAS, petitioner,
vs.
G.R. No. 126568. April 30, 2003. HON. COURT OF APPEALS and FIRST FINANCE &
LEASING CORPORATION, respondents.

G.R. No. 76788 January 22, 1990

Facts:

On October 15, 1962, petitioner Quirino

Gonzales Logging Concessionaire (QGLC), through its
FACTS:
Juanita Salas bought a motor vehicle from the Violago
Motor Sales Corporation (VMS for brevity) as evidenced
by a promissory note.
This note was subsequently endorsed to Filinvest
Finance & Leasing Corporation (hereinafter referred to
as private respondent) which financed the purchase.
Petitioner defaulted in her installments allegedly due to a
discrepancy in the engine and chassis numbers of the
vehicle delivered to her and those indicated in the sales
invoice, certificate of registration and deed of chattel
mortgage, which fact she discovered when the vehicle
figured in an accident.
This failure to pay prompted private respondent to
initiate a Civil Case for a sum of money against
petitioner before the RTC of San Fernando, Pampanga.
RTC: rendered judgement against the defendant
(ordered the defendant to pay the plaintiff the sum of
P28,414.40 with interest thereon at the rate of 14% from
October 2, 1980 until the said sum is fully paid; and the
further amount of P1,000.00 as attorney's fees)
Imputing fraud, bad faith and misrepresentation against
VMS for having delivered a different vehicle to petitioner,
the latter prayed for a reversal of the trial court's
decision.
Petitioner argues that in the light of the provision of the
law on sales by description which she alleges is
applicable here, no contract ever existed between her
and VMS and therefore none had been assigned in favor
of private respondent.
CA: affirmed lower court’s decision
ISSUE: Whether the promissory note is a negotiable
instrument which will bar completely all the available
defenses of the petitioner against private respondent
RULING:
Yes. Among others, the instrument in order to be
considered negotiable must contain the so-called words
of negotiability—i.e., must be payable to ‘order’ or
‘bearer.’
Under Section 8 of the Negotiable Instruments Law,
there are only two ways by which an instrument may be
made payable to order. There must always be a
specified person named in the instrument and the bill or
note is to be paid to the person designated in the
instrument or to any person to whom he has indorsed
and delivered the same. Without the words “or order” or
“to the order of”, the instrument is payable only to the
person designated therein and is therefore non-
negotiable.
Any subsequent purchaser thereof will not enjoy the
advantages of being a holder of a negotiable instrument,
but will merely “step into the shoes” of the person
designated in the instrument and will thus be open to all
defenses available against the latter. Such being the
situation in the above-cited case, it was held that therein
private respondent is not a holder in due course but a
mere assignee against whom all defenses available to
the assignor may be raised.
A careful study of the questioned promissory note
shows that it is a negotiable instrument, having complied
with the requisites under the law as follows:
[a] it is in writing and signed by the maker Juanita
Salas;
[b] it contains an unconditional promise to pay the
amount of P58,138.20;
[c] it is payable at a fixed or determinable future time
which is “P1,614.95 monthly for 36 months due and
payable on the 21st day of each month starting March
21, 1980 thru and inclusive of Feb. 21, 1983;”
[d] it is payable to Violago Motor Sales
Corporation, or order and as such,
[e] the drawee is named or indicated with certainty.
It was negotiated by indorsement in writing on the
instrument itself payable to the Order of Filinvest
Finance and Leasing Corporation and it is an
indorsement of the entire instrument.
Under the circumstances, there appears to be no
question that Filinvest is a holder in due course, having
taken the instrument under the following conditions:
[a] it is complete and regular upon its face;
[b] it became the holder thereof before it was
overdue, and without notice that it had previously been
dishonored;
[c] it took the same in good faith and for value; and
[d] when it was negotiated to Filinvest, the latter had
no notice of any infirmity in the instrument or defect in
the title of VMS Corporation.
Accordingly, respondent corporation holds the
instrument free from any defect of title of prior parties,
and free from defenses available to prior parties among
themselves, and may enforce payment of the instrument
for the full amount thereof. This being so, petitioner
cannot set up against respondent the defense of nullity
of the contract of sale between her and VMS.
Even assuming for the sake of argument that there is
an iota of truth in petitioner’s allegation that there was in
fact deception made upon her in that the vehicle she
purchased was different from that actually delivered to
her, this matter cannot be passed upon in the case
before us, where the VMS was never impleaded as a
party.
Note.— The instrument is payable to order where it
is drawn payable to the order of a specified person or to
him or his order

6. Metrobank vs. CA
Metropolitan Bank & Trust Company vs. Court of
Appeals
G.R. No. 88866 February, 18, 1991
Cruz, J.:
Facts:
Eduardo Gomez opened an account with Golden
Savings and deposited 38 treasury warrants. All
warrants were subsequently indorsed by Gloria Castillo
as Cashier of Golden Savings and deposited to its
Savings account in Metrobank branch in Calapan,
Mindoro. They were sent for clearance. Meanwhile,
Gomez is not allowed to withdraw from his account,
later, however, “exasperated” over Floria repeated
inquiries and also as an accommodation for a “valued”
client Metrobank decided to allow Golden Savings to
withdraw from proceeds of the warrants. In turn, Golden
Savings subsequently allowed Gomez to make
withdrawals from his own account. Metrobank informed
Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded
the refund by Golden Savings of the amount it had
previously withdrawn, to make up the deficit in its
account. The demand was rejected. Metrobank then
sued Golden Savings.
Issue:
1. Whether or not Metrobank can demand refund
agaist Golden Savings with regard to the amount
withdraws to make up with the deficit as a result of the
dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable
instruments
Held:
No. Metrobank is 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. Without such assurance, Golden
Savings would not have allowed the withdrawals.
Indeed, Golden Savings might even have incurred
liability for its refusal to return the money that all
appearances belonged to the depositor, who could
therefore withdraw it anytime and for any reason he saw
fit.
It was, in fact, to secure the clearance of the
treasury warrants that Golden Savings deposited them
to its account with Metrobank. Golden Savings had no
clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own
services. The proceeds of the warrants were withheld
from Gomez until Metrobank allowed Golden Savings
itself to withdraw them from its own deposit.
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 Sec. 66 of NIL. The simple
reason that NIL is not applicable to non negotiable
instruments, treasury warrants.
No. The treasury warrants are not negotiable
instruments. Clearly stamped on their face is the word:
non negotiable.” Moreover, and this is equal
significance, it is indicated that they are payable from a
particular fund, to wit, Fund 501. An instrument to be
negotiable instrument must contain an unconditional
promise or orders to pay a sum certain in money.
7. HSBC vs. CIR
GR No. 166018
June 4, 2014
Facts
Hong Kong and Shanghai Banking Corporation,
Limited (HSBC) performs, among others, custodial
services on behalf of its investor clients. HSBC’s
investor-clients maintain Philippine peso and foreign
currency accounts which are managed by HSBC through
electronic messages, known in the banking industry as
Society for Worldwide Interbank Financial
Telecommunication (SWIFT).
In purchasing shares of stocks and other
investment in securities here in the Philippines, the
investor clients would send electronic messages from
abroad instructing HSBC to debit their accounts here in
the Philippines to pay for the purchase price thereof.
Pursuant to the electronic messages of its
investor-clients, HSBC purchases the investments and
pays the corresponding Documentary Stamp Taxes to
the Bureau of Internal Revenue pursuant to Sec. 181 of
the Tax Code which states that Documentary Stamp Tax
must be paid upon acceptance of a bill of exchange.
However, on 1999, the BIR through its
Commissioner issued a ruling which states that
transactions from electronic instructions from abroad
should not be subject to Documentary Stamp Taxes
(DST) if the funds used are already in Philippine
accounts and the DST were already paid for the
investment purchase pursuant with Sec. 230 of the Tax
Code.
Thereafter, HSBC filed for the refund of the
overpaid DST to the BIR.
Issues
 1. Whether or not electronic messages through
SWIFT is considered as a bill of exchange
and therefore, must be subject to DST.
2. Whether or not the overpayment of DST by
HSBC be entitled to tax refund.
Ruling
The court ruled to the negative.
The electronic messages through SWIFT cannot
be constituted as a Bill of Exchange for it does not
comply with the Section 1 of the Negotiable Instruments
Law for it does not contain an unconditional order to pay
a sum certain in money and they are not payable to
order or bearer but to a specifically designated person.
Thus, no bill of exchange was made on the part
of HSBC and therefore, the covered transactions should
not be subject to DST. Wherefore, erroneous payment of
taxes for the abovementioned transactions entitles
HSBC to a tax refund.
But an order to promise to pay out of particular fund is
not unconditional. The indication of Fund 501 as the
source of the payment to be made on the treasury
warrants makes the order or promise to pay “not
conditional” and the warrants themselves non-
negotiable. There should be no question that the
exception on Section 3 of NIL is applicable in the case at
bar.
8. ILANO VS HON. DOLORES L. ESPAÑOL
FACTS: Amelia Alonzo is a trusted employee of Victoria
Ilano. During those times that Ilano is in the Unied States
for medical check-up, Alonzo was entrusted with Ilano„s
Metrobank Check Book which contains both signed and
unsigned blank checks. A Complaint for
Revocation/Cancellation of Promissory Notes and Bills
of Exchange (Checks) with Damages and Prayer for
Preliminary Injunction or Temporary Restraining Order
(TRO) against Alonzo et al. before the Regional Trial
Court of Cavite. Ilano contends that Alonzo, by means of
deceit and abuse of confidence succeeded in procuring
Promissory Notes and signed blank checks. Alonzo
likewise succeeded in inducing Ilano to sign antedated
Promissory Notes.
The RTC rendered a decision dismissing the complaint
for lack of cause of action and failure to allege the
ultimate facts of the case. On appeal, the Court of
Appeals affirmed the dismissal of the complaint. Hence,
this petition. **Defendant AMELIA O. ALONZO is a
trusted employee of [petitioner]. She has been with them
for several years already, and through the years,
defendant ALONZO was able to gain the trust and
confidence of [petitioner] and her family; That due to
these trust and confidence reposed upon defendant
ALONZO by [petitioner], there were occasions when
defendant ALONZO was entrusted with [petitioner‟s]
METROBANK Check Book containing either signed or
unsigned blank checks, especially in those times when
[petitioner] left for the United States for medical check-
up; Defendant Alonzo was able to succeed in inducing
the petitioner to sign PN through fraud and deceit;
defendant ALONZO in collusion with her co-defendants,
ESTELA CAMACLANG, ALLAN CAMACLANG and
ESTELITA LEGASPI likewise was able to induce plaintiff
to sign several undated blank checks.
The named defendants-herein respondents filed their
respective Answers invoking, among other grounds for
dismissal, lack of cause of action, for while the checks
subject of the complaint had been issued on account
and for value, some had been dishonored due to
“ACCOUNT CLOSED;” and the allegations in the
complaint are bare and general.
The trial court dismissed petitioner‟s complaint for failure
“to allege the ultimate facts”
-bases of petitioners claim that her right was violated
and that she suffered damages thereby. The Court of
Appeals affirmed the trial court‟s decision and held that
the elements of a cause of action are absent in the case
and petitioner did not deny the genuineness or
authenticity of her signature on the subject promissory
notes and the allegedly signed blank
ISSUE: In issue then is whether petitioner‟s complaint
failed to state a cause of action.
RULING: As reflected in the above-quoted allegations in
petitioner‟s complaint, petitioner is seeking twin reliefs,
one for revocation/cancellation of promissory notes and
checks, and the other for damages. While some of the
allegations may lack particulars, and are in the form of
conclusions of law, the elements of a cause of action are
present. For even if some are not stated with
particularity, petitioner alleged
1) her legal right not to be bound by the instruments
which were bereft of consideration and to which her
consent was vitiated;
2) the correlative obligation on the part of the
defendants-respondents to respect said right; and 3) the
act of the defendants-respondents in procuring her
signature on the instruments through “deceit,”“abuse of
confidence” “machination,” “fraud,” “falsification,”
“forgery,” “defraudation,” and “bad faith,” and “with
malice, malevolence and selfish intent.”
Where the allegations of a complaint are vague,
indefinite, or in the form of conclusions, its dismissal is
not proper for the defendant may ask for more
particulars. With respect to above-said Check No.
0084078, however, which was drawn against another
account of petitioner, albeit the date of issue bears only
the year − 1999, its validity and negotiable character at
the time the complaint was filed on March 28, 2000 was
not affected. For Section 6 of the Negotiable Instruments
Law provides:
Section 6. Omission; seal; particular money.
–
The validity and negotiable character of an instrument
are not affected by the fact that
–
(a) It is not dated; or
(b) Does not specify the value given, or that any value
had been given therefor; or (c) Does not specify the
place where it is drawn or the place where it is payable;
or (d) Bears a seal; or (e) Designates a particular kind of
current money in which payment is to be made.
However, even if the holder of Check No. 0084078
would have filled up the month and day of issue thereon
to be “December” and “31,”respectively, it would have,
as it did, become stale six (6) months or 180 days
thereafter, following current banking practice. It is,
however, with respect to the questioned promissory
notes that the present petition assumes merit.
For, petitioner‟s allegations in the complaint relative
thereto, even if lacking particularity, does not as priorly
stated call for the dismissal of the complaint. **While
some of the allegations may lack particulars, and are in
the form of conclusions of law, the elements of a cause
of action are present. For even if some are not stated
with particularity, Ilano alleged 1) her legal right not to be
bound by the instruments which were bereft of
consideration and to which her consent was vitiated; 2)
the correlative obligation on the part of the defendants-
respondents to respect said right; and 3) the act of the
defendants-respondents in procuring her signature on
the instruments through “deceit,” “abuse of confidence”
“machination,” “fraud,” “falsification,” “forgery,”
“defraudation,” and “bad faith,” and “with malice,
malevolence and selfish intent.
9. G.R. No. 170325 September 26, 2008
PHILIPPINE NATIONAL BANK, Petitioner,
vs.
ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ,
Respondents.
WHEN the payee of the check is not intended to be the
true recipient of its proceeds, is it payable to order or
bearer? What is the fictitious-payee rule and who is
liable under it? Is there any exception?
FACTS:
The spouses were engaged in the informal lending
business. In line with their business, they had a
discounting arrangement with the Philnabank Employees
Savings and Loan Association (PEMSLA), an
association of PNB employees. Naturally, PEMSLA was
likewise a client of PNB Amelia Avenue Branch. The
association maintained current and savings accounts
with petitioner bank.
PEMSLA regularly granted loans to its members.
Spouses Rodriguez would rediscount the postdated
checks issued to members whenever the association
was short of funds. As was customary, the spouses
would replace the postdated checks with their own
checks issued in the name of the members.
It was PEMSLA’s policy not to approve applications for
loans of members with outstanding debts. To subvert
this policy, some PEMSLA officers devised a scheme to
obtain additional loans despite their outstanding loan
accounts. They took out loans in the names of
unknowing members, without the knowledge or consent
of the latter. The PEMSLA checks issued for these loans
were then given to the spouses for rediscounting. The
officers carried this out by forging the indorsement of the
named payees in the checks.
In return, the spouses issued their personal checks
(Rodriguez checks) in the name of the members and
delivered the checks to an officer of PEMSLA. The
PEMSLA checks, on the other hand, were deposited by
the spouses to their account.
Meanwhile, the Rodriguez checks were deposited
directly by PEMSLA to its savings account without any
indorsement from the named payees. This was an
irregular procedure made possible through the
facilitation of Edmundo Palermo, Jr., treasurer of
PEMSLA and bank teller in the PNB Branch. It appears
that this became the usual practice for the parties.
For the period November 1998 to February 1999, the
spouses issued sixty nine (69) checks, in the total
amount of P2,345,804.00. These were payable to forty
seven (47) individual payees who were all members of
4
PEMSLA.
Petitioner PNB eventually found out about these
fraudulent acts. To put a stop to this scheme, PNB
closed the current account of PEMSLA. As a result, the
PEMSLA checks deposited by the spouses were
returned or dishonored for the reason "Account Closed."
The corresponding Rodriguez checks, however, were
deposited as usual to the PEMSLA savings account. The
amounts were duly debited from the Rodriguez account.
Thus, because the PEMSLA checks given as payment
were returned, spouses Rodriguez incurred losses from
the rediscounting transactions.
The spouses Rodriguez filed a civil complaint for
damages against PEMSLA and PNB. They sought to
recover the value of their checks that were deposited to
the PEMSLA savings account amounting to
P2,345,804.00. The spouses contended that PNB paid
the wrong payees, hence, it should bear the loss.
The RTC rendered judgment in favor of spouses
Rodriguez, and ruled that PNB is liable to return the
value of the checks.
On appeal, the CA affirmed the RTC Decicion..
intention on the part of respondents-spouses that the
payees would not receive the checks’ proceeds.
Considering that respondents-spouses were transacting
with PEMSLA and not the individual payees, it is
understandable that they relied on the information given
by the officers of PEMSLA that the payees would be
receiving the checks.
Verily, the subject checks are presumed order
instruments. This is because, as found by both lower
courts, PNB failed to present sufficient evidence to
defeat the claim of respondents that the named payees
were the intended recipients of the checks’ proceeds.
The bank failed to satisfy a requisite condition of a
fictitious-payee situation – that the maker of the check
intended for the payee to have no interest in the
transaction.
Because of a failure to show that the payees were
“fictitious” in its broader sense, the fictitious-payee rule
does not apply. Thus, the checks are to be deemed
payable to order. Consequently, the drawee bank bears
the loss.

ISSUE:

Whether the subject checks are payable to order or to

bearer and who bears the loss.

RULING:

A check is “a bill of exchange drawn on a bank payable

on demand.” It is either an order or a bearer instrument.

As a rule, when the payee is fictitious or not intended to

be the true recipient of the proceeds, the check is
considered as a bearer instrument.

Under Section 30 of the NIL, an order instrument

requires an indorsement from the payee or holder before
it may be validly negotiated. A bearer instrument, on the
other hand, does not require an indorsement to be
validly negotiated. It is negotiable by mere delivery.

Under Section 9(c) of the NIL, a check payable to a

specified payee may nevertheless be considered as a
bearer instrument if it is payable to the order of a
fictitious or non-existing person, and such fact is known
to the person making it so payable. Thus, checks issued
to “Prinsipe Abante” or “Si Malakas at si Maganda,” who
are well-known characters in Philippine mythology, are
bearer instruments because the named payees are
fictitious and non-existent.

For the fictitious-payee rule to be available as a defense,

PNB must show that the makers did not intend for the
named payees to be part of the transaction involving the
checks. At most, the bank’s thesis shows that the
payees did not have knowledge of the existence of the
checks. This lack of knowledge on the part of the
payees, however, was not tantamount to a lack of