Metrobank vs.
CA (treasury warrants)
Note: Treasury warrant is an order in the form of a check. It is through treasury warrants that
government disbursements are paid. With the treasury warrant, a drawer authorizes someone to
pay a particular sum of money to another.
Facts: Eduardo Gomez deposited 38 treasury warrants with a total value of P1,755,228.37 at
Golden Savings, all drawn by the Phil Fish Marketing Authority signed by its GM and Auditor.
6 of these were directly payable to Gomez and others are indorsed by their respective payees,
followed by Gomez as 2nd indorser.
The said treasury warrants were deposited by the Cashier of Golden Savings to their account in
Metrobank. The Metrobank, exasperated by the repeated inquiries of Gloria and also as an
accommodation to their valued client, they finally decided to allow Golden Savings to
withdraw from the proceeds of the warrants. There were 3 withdrawals, 1st in the amount of
P508k, 2nd in the amount of P310k, and 3rd in the amount of P150k, with a total withdrawal of
P968k. And in turn, Golden Savings subsequently allowed Gomez to make withdrawals
collecting the total amount of P1,167,500 from the proceeds of the apparently cleared warrants.
After a few days (about 5days), Metrobank informed Golden Savings that the 32 warrants had
been dishonored by the Bureau of Treasury, and demanded the refund by Golden Savings of
the amount it withdrawn to make up the deficit in its account. But said demand was rejected,
thus Metrobank sued Golden Savings. The RTC and CA ruled in favor of Golden Savings.
Issue: W/N the treasury warrants, are held by the CA, are not negotiable.
Held: Yes, The treasury warrants in question are not negotiable instruments. Clearly stamped
on the face is the word “non-negotiable.” And it is equally significant that it was payable from
a particular fund, Fund 501.
Requisites of Negotiability; An instrument to be negotiable must contain an unconditional
promise or order to pay a sum certain in money.
SEC. 3. When promise is unconditional. An unqualified order or promise to pay is
unconditional within the meaning of this Act though coupled with:
(a) An indication of a particular fund out of which reimbursement is to be made or a
particular account to be debited with the amount; or
(b) A statement of the transaction which gives rise to the instrument. But an order or
promise to pay out of a 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 unconditional” and the warrants themselves non-
negotiable. There should be no question that the exception on Section 3 of the Negotiable
Instruments Law is applicable in the case at bar.
And this conclusion conforms to the decision on Abubakar vs Auditor General holding that “The
document bearing on its face the words “payable from the appropriation for food administration,
is actually an Order for payment out of “a particular fund,” and is not unconditional and does not
fulfill one of the essential requirements of a negotiable instrument (Sec 3)
And the contentions of Metrobank that they were in accordance with Sec 66 of NIL is not
applicable to non-negotiable treasury warrants.
Golden Savings never represented that the warrants were negotiable but signed them only for the
purpose of depositing them for clearance.
GSIS vs. CA (mortgage with co-owners not beenfited by the loan, not NI)
Facts: Sps. Lagasca were granted 2 loans by the GSIS. Thus, the private respondents, Mr &
Mrs. Racho, together with Sps. Lagasca, being co-owners of a parcel of land, executed a deed
of mortgage in favor of petitioner GSIS. They, both Sps., also executed a “promissory note”
which states: s
“x x x for value received, we the undersigned . . . JOINTLY, SEVERALLY and SOLIDARILY,
promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . .
(P11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded
monthly payable in . . . (120) equal monthly installments of . . .(P127.65) each.”
When mortgagors failed to comply with the conditions of the mortgage, GSIS extrajudicially
foreclosed the mortgage and was sold at public auction. A few years later, private respondents
filed a complaint against petitioner GSIS and Sps. Lagasca praying for the extrajudicial
foreclosure made in their property null and void. Private respondent alleged that they signed
the mortgage contracts not as sureties or guarantors for Sps Lagasca but merely gave their
consent to their co-owners who were solely benefitted by the loans from GSIS. The trial court
dismissed the complaint but the CA reversed and held in favor of the respondents.
Issue: W/N the promissory note in question is a negotiable instrument.
Held: No, the promissory note and the mortgage deeds in question are not negotiable
instruments because they are neither payable to order nor to bearer.—This approach of both
parties appears to be misdirected and their reliance misplaced. The promissory note hereinbefore
quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments.
These documents do not comply with the fourth requisite to be considered as such under Section
1 of Act No. 2031 because they are neither payable to order nor to bearer. The note is payable to
a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would
not apply; governance shall be afforded, instead, by the provisions of the Civil Code and special
laws on mortgages.
