Negotiable Instruments Law

Metropolitan Bank & Trust Company v. Court of Appeals, G.R. No. 88866,
February 18, 1991

FACTS:
Eduardo Gomez opened an account with Gold savings and deposited over a period of 2
months 38 treasury warrants with a total value of Php 1,755,228.37. They were all
drawn by the Philippine Fish Marketing Authority and purportedly signed by its General
Manager and counter-signed by its Auditor. 6 of these were directly payable to Gomez
while the other appeared to have been indorsed by their respective payees, followed by
Gomez as second indorser.

In various dates between June 25 and July 16 1979, all these warrants were
subsequently indorsed by Gloria Castillo as cashier of Golden Savings and deposited to
its savings account no. 2498 in Metrobank. They were then sent for clearing by the
branch office to the principal office of Metrobank which forwarded them to the Bureau of
Treasury for special clearing.

More than two weeks after the deposits, Gloria Castillo went to the Calapan branch
several times to ask whether the warrants had been cleared. She was told to wait.
Gomez was meanwhile, not allowed to withdraw from his account. Later, exasperated
over Gloria’s repeated inquiries, the petitioner finally decided to allow Golden Savings to
withdraw from the proceeds of the warrants. The first withdrawal was made on July 9
1979, Php 508,000.00, the second on July 13, 1979 Php 310,000.00 and the third on
July 16 1979 Php 150,000.00. Total withdrawal, P968,000.00.
Golden savings subsequently allowed Gomez to make withdrawal from his own
account, eventually collecting the total amount of P1,167,500.00 from the proceeds of
the apparently cleared warrants. The last withdrawal was made on July 16, 1979.

On July 21 1979, Metrobank informed Golden savings that 32 of the warrants had been
dishonored by the Bureau of Treasury on July 19, 1979 and demanded the refund by
Golden savings the amount it had previously withdrawn to make up the deficit in its
account.

Demand was rejected. Metrobank sued Golden saving. RTC of Mindoro ruled in favor of
Golden saving. Metrobank filed notice of appeal. The decision was affirmed prompting
metrobank to file this petition for review.

ISSUES:
1. WON Metrobank may recover the amount Golden savings had previously
withdrawn to make up the deficit in its account.
2. WON the treasury warrants involved are negotiable instruments

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

HELD:
1. NO. from the undisputed facts, it would appear to the Court that Metrobank was
indeed 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 the proceeds thereof from his account with it. Without such assurance,
Golden Savings would not have allowed the withdrawals.
Metrobank exhibited extraordinary carelessness. The amount involved was not
trifling. There no reason why it should not have waited until the treasury warrants
had been cleared; it would not have lost a single centavo by waiting. Yet, despite
the lack of such clearance, it allowed Golden Savings to withdraw, not once, not
twice but thrice, from the uncleared treasury warrants. Its reason? It was
exasperated over the persistent inquiries of Gloria Castillo about the clearance
and it also wanted to accommodate a valued client.
2. NO. The treasury warrants are not negotiable instruments. Clearly stamped on
their face is the word “non-negotiable”. Moreover, and this is of equal
significance, it is indicated that they are payable from a particular fund, to wit,
FUND 501.
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 Sec. 3 of NIL is applicable to the case at bar.
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 the NIL. This law is not applicable to the non-
negotiable treasury warrants.

Wherefor the decision is AFFIRMED with modification.

Ubas Sr vs Chan
G.R. No. 215910, February 06, 2017

FACTS: Petitioner Ubas filed a complaint for Sum of Money with application for Writ of
Attachment against Wilson Chan before the RTC. The two entered in a verbal
agreement that Ubas will be supplying gravel, sand and boulders for the Macagtas Dam
Project for a sum of 1.5 Million pesos. 3 checks (payable to cash) were issued to him by
respondent however upon depositing, the same were dishonored due to a stop payment
order by the bank.
Petitioner alleges that there was no business transaction between them having no
written contract and that the checks were actually for petty cash replenishment and
were reported lost by the project engineer hence the stop payment order.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

RTC ruled petitioner had cause of action finding that respondent failed to overcome the
disputable presumption that every party to an instrument acquired the same for a
valuable consideration under Sec. 24 of NIL. RTC ordered him to pay petitioner 1.5 M,
the principal obligation plus legal interests from June 1998 and litigation expenses,
attorney’s fees and cost of the suit.

CA reversed the decision finding no cause of action. Hence this petition.

ISSUES:
1. WON The complaint states no cause of action considering that the checks do not
belong to respondent but to Unimasters Conglomeration Inc
2. WON There is no contract that ever existed between him and petitioner
3. WON if petitioner had right of action, the complaint should be filed against
Unimasters

HELD:
1. NO. There is a cause of action. In a suit for recovery of sum of money, the
plaintiff-creditor has the burden of proof to show defendant had not paid the
amount of the contracted loan. However it has long been established that where
the plaintiff creditor possesses an instrument showing indebtedness, a
presumption that the credit has not been satisfied arises in his favor.
Presumption stems from Sec. 24 of the NIL - Presumption of Consideration
Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration and every person whose signature appears thereon to
have become a party thereto for value.

The checks were signed by Chan and it is presumed that the subject checks
were issued for a valid consideration, which therefore, dispensed with the
necessity of any documentary evidence to support petitioner’s monetary claim.

2. NO. There is a contract that existed. Although the checks were under the
account name of Unimasters, it should be emphasized that the manner or mode
of payment does not alter the nature of obligation. The source of obligation,
stems from his contract with respondent when they agreed upon the purchase of
the construction materials on credit for the amount of 1.5 M, the contract between
them was perfected.
3. No. There is a cause of action against the respondent. Respondent was not able
to overcome the presumption of consideration under Sec. 24 of the NIL and
establish any of his affirmative defenses.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

WHEREFORE, the petition is GRANTED. The Decision dated October 28, 2014 of the
Court of Appeals in CA-G.R. CV No. 04024 is hereby SET ASIDE. The Decision dated
January 30, 2008 of the Regional Trial Court of Catarman, Northern Samar, Branch 19
in Civil Case No. C-1071 is REINSTATED.

Metropolitan Bank & Trust Co. v. Chiok

G.R. Nos. 172652, 175302 & 175394, November 26, 2014

FACTS:

Wilson Chiok had been engaged in dollar trading for several years. He usually buys
dollars from Gonzalo B. Nuguid at the exchange rate prevailing on the date of the sale.
Chiok pays Nuguid either in cash or manager’s check to be picked up by the latter or
deposited in the latter’s bank account. Nuguid delivers the dollars either on the same
day or on a later date as may be agreed upon between them up to a week later. They
have been dealing like this for 6 to 8 years with each transaction resulting to millions
hence Chiok’s multiple accounts with petitioners Metropolitan Bank and Trust
(Metrobank) and Global Business Bank (Global Bank) later on referred to as the Asian
Banking Corporation (Asian Bank).

On July 5 1995, Asian Bank issued Manager’s checks to Gonzalo Bernardo (aka
Nuguid) with total value of Php 18,455.350.00 pursuant to Chiok’s instruction and was
debited from his account. Metrobank issued Cashier’s check in the name of Gonzalo
Bernardo in the amount of Php 7,613,000.00 and this was debited from Chiok’s
account.

Chiok deposited the 3 checks in Nuguid’s account with Far East Bank & Trust Company
the predecessor in interest of petitioner BPI. Nuguid was supposed to deliver the dollar
equivalent in the afternoon of the same day. Nuguid failed to do so prompting Chiok to
request the payment on the 3 checks to be stopped. Chiok was advised to secure a
court order within 24 hour clearing period. On July 6 1994, Chiok filed a complaint for
damages against Gonzalo and Marinella Nuguid and the depository bank Asian Bank
and Metrobank.

Asian Bank refused to honor the MCs in deference to the TRO. Metrobank claimed
when it received the TRO on july 6 it refused to honor CC and stopped payment
thereon. However, in a letter also dated July 6, FEBTC informed metrobank that the
TRO was issued a day after the check was presented for payment.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

On July 25, the RTC issued an Order directing the issuance of a writ of preliminary
prohibitory injunction.

Issue: Whether or not payment of manager’s and cashier’s checks are subject to the
condition that the payee thereof should comply with his obligations to the purchaser of
the checks.

Held: No. A manager’s check, like a cashier’s check, is an order of the bank to pay,
drawn upon itself, committing in effect its total resources, integrity, and honor behind its
issuance. By its peculiar character and general use in commerce, a manager’s check or
a cashier’s check is regarded substantially to be as good as the money it represents.
While manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against
insufficient funds, or for similar reasons such as a condition not appearing on the face of
the check. Long standing and accepted banking practices do not countenance the
countermanding of manager’s and cashier’s checks on the basis of a mere allegation of
failure of the payee to comply with its obligations towards the purchaser. Therefore,
when Nuguid failed to deliver the agreed amount to Chiok, the latter had a cause of
action against Nuguid to ask for the rescission of their contract; but, Chiok did not have
a cause of action against Metrobank and Global Bank that would allow him to rescind
the contracts of sale of the manager’s or cashier’s checks, which would have resulted in
the crediting of the amounts thereof back to his accounts.

WHEREFORE, the Court resolves to DENY the Joint Manifestation and Motion filed
with this Court on May 28, 2013.

The petitions in G.R. No. 172652 and G.R. No. 175302 are GRANTED. The Decision of
the Court of Appeals in CA-G.R. CV No. 77508 dated May 5, 2006, and the Resolution
on the same case dated November 6, 2006 are hereby REVERSED AND SET ASIDE,
and a new one is issued ordering the DENIAL of the Amended Complaint in Civil Case
No. Q-95-24299 in Branch 96 of the Regional Trial Court of Quezon City for lack of
merit. The Writ of Preliminary Prohibitory Injunction enjoining Asian Banking
Corporation (now Global Business Bank, Inc.) from honoring MC No. 025935 and MC
No. 025939, and Metropolitan Bank & Trust Company from honoring CC No. 003380, is
hereby LIFTED and SET ASIDE.

Global Business Bank, Inc. is ORDERED TO PAY the Bank of the Philippine Islands, as
successor-in-interest of Far East Bank & Trust Company, the amount of
₱18,455,350.00, representing the aggregate face value of MC No. 025935 and MC No.
025939, with interest based on the rates it actually paid its depositors from July 7, 1995
until the finality of this Decision, in accordance with the same compounding rules it
applies to its depositors.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

The petition in G.R. No. 175394 is hereby rendered MOOT.

The liabilities of spouses Gonzalo B. Nuguid and Marinella O. Nuguid under the
Decision and Resolution of the Court of Appeals in CAG.R. CV No. 77508 remain
VALID and SUBSISTING, computed from the amounts adjudged by the Court of
Appeals, without prejudice to any further action that may be filed by Wilfred N. Chiok.

National Marketing Corporation v. Federation of United NAMARCO Distributors,

G.R. No. L-22578, January 31, 1973

FACTS:

Federation had sued Namarco for the specific performance seeking the delivery of the
balance of the goods which Namarco allegedly agreed to sell to it, but which the former
refused to deliver claiming that the contract was illegal, whereas Namarco, in turn sued
Federation in the present action for the payment of the goods already delivered
thereunder, with particularity, however, that Namarco chose to file this suit against the
Federation only when the Federation’s case against it was already pending appeal by
Namarco in this court.

ISSUE: WON

HELD:

The mere delivery by the FEDERATION of the domestic letters of credit to NAMARCO
did not operate to discharge the debt of the FEDERATION. As shown by the appealed
judgment NAMARCO accepted the three letters of credit "to insure the payment of those
goods by FEDERATION. . . ." It was given therefore as a mere guarantee for the
payment of the merchandise. The delivery of promissory notes payable to order, or bills
of exchange or drafts or other mercantile document shall produce the effect of payment
only when realized, or when by the fault of the creditor, the privileges inherent in their
negotiable character have been impaired. (Art. 1249 New Civil Code.) The clause of
Article 1249 relative to the impairment of the negotiable character of the commercial
paper by the fault of the creditor, is applicable only to instruments executed by third
persons and delivered by the debtor to the creditor, and does not apply to instruments
executed by the debtor himself and delivered to the creditor. 39 In the case at bar it is
not even pretended that the negotiable character of the sight drafts was impaired as a
result of the fault of NAMARCO. The fact that NAMARCO attempted to collect from the
Philippine National Bank on the sight drafts is of no material significance. As heretofore
stated they were never taken, in the first instance as payment. There was no agreement
that they should be accepted as payment. The mere fact that NAMARCO proceeded in
good faith to try to collect payments thereon, did not amount to an appropriation by it of
the amounts mentioned in the sight drafts so as to release its claims against the
FEDERATION. A mere attempt to collect or enforce a bill or note from payment results
is not such an appropriation of it as to discharge the debt.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

We note however that the lower court erred in imposing interest at the legal rate on the
amount due, "from date of delivery of the merchandise", and not from the of extra-
judicial demand. In the absence of any stipulations on the matter, the rule is that the
obligor is considered in default only from the time the obligee judicially or extrajudicially
demands fulHllment of the obligation and interest is recoverable only from the time such
demand is made. 41 There being no stipulation as to when the aforesaid payments
were to be made, the FEDERATION is therefore liable to pay interest at the legal rate
only from June 7, 1960, the date when NAMARCO made the extra-judicial demand
upon said party. We likewise fail to Hnd any factual or legal basis for the award of
attorney's fees. llcd ACCORDINGLY, with the modifications above indicated, the
appealed judgment is hereby affirmed, with costs against defendant-appellant.

Fortunado v. Court of Appeals, 196 SCRA 28 (1991)

FACTS:

RTC Quezon City awarded the petitioner Fortunado damages in Civil Case against
Angel Bautista.
Pursuant to the said judgment, Bautista levied upon two parcels of land registered in her
name.
But the second lot had already been purchased by National Steel Corporation although
not yet registered in its name.
After due notice, these lots were sold at public auction to the petitioners, and registered
in his name.
NSC filed with the trial court an urgent motion to redeem both lots, which was opposed
by the petitioner.
As the motion remained unresolved and the period of redemption would expire, NSC
issued to the sheriff PNB Check as the redemption price for the lot.
The sheriff acknowledged receipt of the check as redemption money for the two parcels
of land and issued a certificate of redemption in favor of NSC and Bautista.
The petitioner rejected the redemption by check because it was not legal tender and
was not intended for payment but merely for deposit.

Issue:
WoN Article 1249 of the New Civil Code does not apply to the payment of the
redemption price of property sold at public auction.

Held:
Yes, the Court holds that Art. 1249 is inapplicable as it "deals with a mode of extinction
of debts" while the "right to redeem is not an obligation, nor is it intended to discharge a
pre-existing debt."

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

In Javellana v. Mirasol, the Court declares that "a redemption of property sold under
execution is not rendered invalid by reason of the fact that the payment to the sheriff for
the purpose of redemption is effected by means of a check for the amount due."
Such ruling is applicable to the present controversy, stressing the liberality of the courts
in redemption cases. When a right of redemption is exercised, it is the policy of the law
to aid rather than to defeat the right of redemption. Hence, a payment by check which is
not legal tender is effective when the officer accepted such payment.
Thus, the petition is denied.

Aguilar v. Lightbringers Credit Cooperative, G.R. No. 209605, January 12, 2015

People v. Wagas, G.R. No. 157943, September 4, 2013

FACTS:

Alberto Ligaray entered into a verbal contract through telephone call with, he alleges,
Gilbert Wagas to deliver 200 bags of rice. In payment, he will receive Php 200,000.00
on a post dated check. On April 30, 1997, He released the goods to Canada, Wagas’
brother in law, who signed the delivery receipt and gave in exchange the post dated
check made payable to CASH in the amount of Php 200,000.00 to be deposited on May
8 1997.

When Ligaray tried to deposit the check, it was dishonored due to insufficiency of funds.
He called Wagas about the matter and the latter told him that he would pay upon his
return to Cebu and that despite repeated demands Wagas did not pay him.

Ligaray filed for Estafa. The RTC convicted Wagas of estafa. Wagas filed a motion for
new trial and/or reconsideration. RTC denied the motion. Wagas appealed directly to
this court by notice of appeal.

ISSUE: WON the essential elements of estafa are present in the case

HELD: No. Not all the elements of estafa are not present in the case. The essential
elements of the crime charged are that: (a) a check is postdated or issued in payment of
an obligation contracted at the time the check is issued; (b) lack or insufficiency of funds
to cover the check; and © damage to the payee thereof. It is the criminal fraud or deceit
in the issuance of a check that is punishable, not the non-payment of a debt.

The check delivered to Ligaray was made payable to cash. Under the NIL, this type of
check was payable to bearer and could be negotiated by mere delivery without the need
of an indorsement. This rendered it highly probable that Wagas had issued the check

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

not to Ligaray, but to somebody else like Canada, his brother in law, who then
negotiated it to Ligaray. Relevantly, Ligaray confirmed that he did not himself see or
meet Wagas at the time of the transaction and thereafter, and expressly stated that the
person who signed for and received the stocks of rice was Canada.

Wagas could not be held guilty of estafa simply because he had issued the check used
to defraud Ligaray. The proof of guilt must still clearly show that it had been Wagas as
the drawer who had defrauded Ligaray by means of the check.

Wherefore, the Court reverses and sets aside the decision and acquits Gilbert Wagas of
the crime of estafa on the ground of reasonable doubt but orders him to pay Alberto
Ligaray the amount of P200,000.00 as actual damages plus interest of 6% per annum.

Rivera v. Spouses Chua

G.R. No. 184458, January 14, 2015

FACTS:
The parties were friends of long standing having known each other since 1973. Rivera
and Salvador are kumpadres, the former is the godfather of the spouses Chua’s son.
On February 24 1995, Rivera abstained a loan from the Spouses Chua with a
Promissory note signed by Rodrigo Rivera addressed to spouses Chua the sum of
P120,000.00. Failure to pay the amount on December 31, 1995 rivera will pay the sum
equivalent to 5% interest monthly from the date of default until the entire obligation is
fully paid for.

On October 1998, Rivera issued a check of P25,000.00 as partial payment.

On December 21 1998, the spouses Chua received another check presumably issued
by Rivera but blank as to payee and amount. As per understanding by the parties, the
check was issued in the amount of P133,454.00 with cash as payee. Bother checks
were partial payment for Rivera’s loan in the principal amount.

Upon presentment, the checks were dishonored for reason of account closed.

The spouses alleged that they have repeatedly demanded payment from Rivera to no
avail. Because of this, the Spouses Chua filed a suit.

Rivera countered that:

1. He never executed the subject promissory note
2. In all instances when he obtained a loan from the spouses the loans were always
covered by a security

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

3. At the time of the filing of the complaint, he still had an existing indebtedness to
the spouses Chua secured by a mortgage loan
4. The check signed by him delivered to the spouses on December 21 1998 should
have been issued in the amount of only P1,300.00
5. Contrary to agreement the spouses Chua presented the check for payment in the
amount of P133,454.00
6. There was no demand for payment of the amount of P120,000.00
Rivera claimed forgery of the subject Promissory Note and denied his indebtedness.

MeTC ruled in favor of the spouses Chua. RTC affirmed the decision on appeal. CA
affirmed the decision with modification.

ISSUE: WON there was grave error on the part of the appellate court to apply section
70 of the NIL

HELD: Yes. .We agree that the subject promissory note is not a negotiable instrument
and the provisions of the NIL do not apply to this case. Sec. 1 of the NIL requires the
concurrence of the following elements to be a negotiable instrument:
1. It must be in writing and signed by the maker
2. Must contain an unconditional promise or unconditional order to pay a sum
certain in money
3. Must be payable on demand or at a fixed determinable future time
4. Must be payable to order or to bearer
5. Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
On the other hand, Section 184 of the NIL defines what a negotiable promissory note is:

Section 184. Promissory Note Defined- A negotiable promissory note within the
meaning of this act is an unconditional promise in writing made by one person to
another, signed by the maker, engaging to pay on demand or at a fixed or determinable
future time, a sum certain in money to order or to bearer. Where a note is drawn to the
maker’s own order, it is not complete until endorsed by him.

The promissory note in this case is made out to specific persons, herein respondents,
the Spouses Chua and not to order or to bearer or to the order of the spouses Chua as
payees.

However, even if Rivera’s Promissory note is not a negotiable instrument and therefore
outside the coverage of Sec. 70 of the NIL which provides that presentment for payment
is not necessary to charge the person liable on the instrument, Rivera is still liable under
the terms of the Promissory Note that he issued.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

Wherefore, the petition is DENIED. Petitioner is ordered to pay Spouses Chua the
following:
1. The principal amount of P120,000.00
2. Legal interest of 12% per annum
3. Legal interest of 6% per annum (when this decision becomes final and
executory)
4. 12% per annum applied to the total of paragraphs 2 and 3
5. 6% per annum applied to paragraphs 2 and 3 as interest due earning legal
interest.
6. Attorney’s fees P50,000.00
7. 6% per annum interest on the total monetary awards from the finality of this
decision

The Hongkong and Shanghai Banking Corporation Limited v. Commissioner of

Internal Revenue
G.R. No. 166018. June 4, 2014.

FACTS:
On Aug. 23 1999, the Bureau of Internal Revenue (BIR), thru its then Commissioner,
Beethoven Rualo, issued BIR Ruling No. 132-99 to the effect that instructions or
advises from abroad on the management of funds located in the Philippines which do
not involve transfer of funds from abroad are not subject to DST.

With the above BIR ruling as its basis, HSBC filed on Oct. 8, 1999 an administrative
claim for the refund of the amount of P19,572,992.10 allegedly representing erroneously
paid DST to the BIR for the period covering Sept-December 1997.

Subsequently, on Jan 31, 2000, HSBC filed another administratively claim for the refund
of the amount P32,904,437.30 allegedly representing erroneously paid DST to the BIR
for the period covering January to December 1998.

As claims for refund were not acted upon by the BIR, HSBC brought the matter to the
CTA in order to suspend the running of the 2 year prescriptive period.

CTA favored HSBC. Responder commissioner was ordered to refund or issue a tax
credit certificate in favor of HSBC in reduced amounts representing erroneously paid
DST that have been sufficiently substantiated with documentary evidence.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

CTA ruled that HSBC is entitled to a tax refund or tax credit because Section 180 and
181 of the 1997 Tax code do not apply to electronic message instructions transmitted by
HSBC’s non-resident investor-clients.

CA reversed the decisions of the CTA and ruled that the electronic messages of
HSBC’s investor-clients are subject to DST.

Hence these petitions.

ISSUE:
WON electronic messages of HSBC’s investor-clients containing instructions to debit
their respective accounts is a transaction contemplated under Section 181 of the TAX
CODE as such instructions are parallel to an automatic bank transfer of local funds from
a savings account to checking account maintained by a depositor in one bank.

HELD:
NO. electronic messages cannot be considered negotiable instruments as they lack the
feature of negotiability, which, is the ability to be transferred and that the said electronic
messages are mere memoranda of the transaction consisting of the actual debiting of
the investor-client/payor’s local or foreign currency account in the Philippines and
entered as such in the books of account of the local bank HSBC.

Most fundamentally, the instructions given through electronic messages that are
subjected to DST in these cases are not negotiable instruments as they do not comply
with the requisites of negotiability under Sec 1 of the NIL.

The electronic messages are not signed by the investor-clients as supposed drawers of
a bill of exchange; they do not contain an unconditional order to pay a sum certain in
money as the payment is supposed to come from a specific fund or account of the
investor-clients and they are not payable to order or bearer but to a specifically
designated 3rd party. Thus, the electronic messages are not bills of exchange. As there
was no bill of exchange or order for the payment drawn abroad and made payable here
in the Philippines, there could have been no acceptance or payment that will triffer the
imposition of the DST under sec 181 of the tax code.

Wherefore the petitions are granted and decisions of Court of Tax appeals are
REINSTATED.

Caltex (Philippines Inc) v. CA

G.R. No. 97753. August 10, 1992.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

FACTS:
1. On various dates, defendant, a commercial banking institution, through its Sucat
Branch issued 280 certificates of time deposit (CTDs) in favor of one Angel dela
Cruz who deposited with herein defendant the aggregate amount of
P1,120,000.00.
2. Angel delivered the said CTDs to herein plaintiff in connection with his purchase
of fuel products from the latter
3. On March 1982, Angel Dela Cruz informed Mr. Timoteo Tiangco, the sucat
branch manager, that he lost all the CTDs in dispute. Tiangco advised depositor
to execute and submit a notarized Affidavit of Loss
4. On March 18 1982, Angel Dela Cruz executed and delivered to defendant bank
the required Affidavit of Loss. On the basis of said affidavit, 280 replacement
CTDs were issued in favor of said depositor
5. On March 25 1982, Angel Dela Cruz negotiated and obtained a loan from
defendant bank in the amount of P875,000.00. He also executed a notarized
Deed of Assignment of Time Deposit which stated that he surrenders to
defendant bank full control of the indicated time deposits from and after the date
of the assignment and further authorizes said bank to preterminate, set-off and
apply the said time deposits to the payment of whatever amount or amounts may
be due on the loan upon its maturity.
6. Sometime in November 1982, Mr. Aranas, credit manager of Caltex went to
defendant bank’s sucat branch and presented for verification the CTDs declared
lost by Angel Dela Cruz alleging that the same were delivered as security for
purchases made with Caltex by depositor
7. On November 26 1982, defendant received a letter from Caltex informing it of its
possession of the CTDs in question and of its decision to preterminate the same
8. On December 8 1982, plaintiff was requested by defendant to furnish the former
a copy of the document evidencing the guarantee agreement with Mr. Angel Dela
Cruz as well as the details of Mr. Angel Dela Cruz obligations against which
plaintiff proposed to apply the time deposits.
9. No copy of requested documents were furnished to defendant.
10. Accordingly, bank rejected Caltex demand and claim for payment of the value of
the CTDs
11. In April 1983, the loan of angel dela cruz fell due and on Aug. 5 1983, the latter
set off and applied the time deposits in question to the payment of the matured
loan.
12. Plaintiff filed the instant complaint praying that defendant bank be ordered to pay
it the aggregate value of the CTDs plus accrued interest and compound interest.
The court a quo dismissed the complaint
On appeal, respondent court affirmed the lower court’s dismissal of the complaint.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

ISSUE/S:
1. WON the subject CTDs are non-negotiable despite being clearly negotiable
instruments
2. WON Petitioner did not become holder in due course of the said CTDs
3. WON the court erred in disregarding the pertinent provisions of the Code of
Commerce relating to lost instruments as payable to bearer.

HELD:
1. NO. The CTDs in question are negotiable instruments. The CTDs in question
undoubtedly meet the requirements of the law for negotiability. The parties’ bone
of contention is with regard to requisit d - Must be payable to order or to bearer. It
is noted that Tiangco, testified in open court that the depositor referred to in the
CTDs is no other than Mr. Angel Dela Cruz.
On this score, 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.
In the construction of a bill or note, the intention of the parties is to control, if it can be
legally ascertained. While the writing may be read in the light surrounding
circumstances in order to more perfectly understand the intent and meaning of the
parties, yet as they have constituted the writing to be the only outward and visible
expression of their meaning, no other words are to be added to it or substituted in its
stead.

The documents provide that the amounts deposited shall be repayable to the depositor.
And who, according to the document, is the depositor? It is the bearer. The documents
do not say that the depositor is Angel Dela 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.

If it was really the intention of respondent bank to pay the amount to Angel Dela Cruz
only, it could have with facility so expressed that fact in clear and categorical terms in
the documents, instead of having the word “BEARER” stamped on the space provided
for the name of the depositor in each CTD.

This need to resort to extrinsic evidence is what is sought to be avoided by the NIL and
calls for the application of the elementary rule that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the obscurity.

2. NO. Petitioner did not become holder in due course. The records reveal that
Angel Dela Cruz, whom petitioner chose not to implead in this suit for reasons of

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

its own, delivered the CTDs amounting to P1,120,000.00 to petitioner without

informing respondent bank thereof at any time. Unfortunately for petitioner,
although the CTD 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.
3. NO. A close scrutiny of the provisions of the code of commerce laying down the
rules to be followed in case of lost instruments payable to bearer, which it
invokes, will reveal that said provisions, even assuming their applicability to the
CTDs in the case at bar, are merely permissive and not mandatory.
Wherefore, on the modified premises above set forth, the petition is DENIED and the
appealed decision is hereby AFFIRMED.

TRANSFER, NEGOTIATION AND CONSIDERATION

Salas v. Hon. Court of Appeals, G.R. No. 76788, January 22, 1980

FACTS:

On February 6, 1980, Juanita Salas purchased a motor vehicle from Violago Motor
Sales Corporation evidenced by a promissory note. The promissory note was endorsed
to Filinvest Finance & Leasing Corporation 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 she discovered when the
vehicle figured in an accident on May 9 1980.

Failure to pay prompted Filinvest to initiate a civil case for a sum of money against
petitioner. The RTC held in favor of Filinvest ordering defendant to pay the plaintiff the
sum of P28,414,40 with interest of 14%.

Both petitioner and respondent appealed to the CA.

Imputing fraud, bad faith and misrepresentation against VMS for delivering a different
vehicle, petitioner prayed for a reversal so that she may be absolved from obligation
under the contract.

The CA affirmed the decision but adjusted the amount to what is stated in the
promissory note.

Petitioner’s motion for reconsideration was denied hence the present recourse.

ISSUE: WON the promissory note in question is a negotiable instrument which will bar
completely all the available defenses of the petitioner against private respondent.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

HELD:

YES. Indubitably, the basis of private respondent’s claim against petitioner is a

promissory note which bears all the earmarks of negotiability.

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 it
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 of 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.

The assailed decision is hereby AFFIRMED.

Sonny Lo v. KJS Eco-Formwork System Phil., Inc., G.R. No. 149420, October 8,
2003

FACTS:

Petitioner purchased on account scaffolding equipment from respondent. When

petitioner failed to settle his obligation to respondent, he executed a Deed of
Assignment in favor of respondent assigning to the latter his receivables from Jomero
Realty Corporation. When respondent tried to collect the said credit from Jomero
Realty, the latter refused to honor the Assignment of Credit because it claimed that
petitioner had an outstanding indebtedness to it. When asked to settle his obligation,
petitioner refused to pay claiming that his obligation had been extinguished when they
executed the Deed of Assignment of Credit. Consequently, the respondent filed an
action for recovery of a sum of money before the RTC of Makati. The trial court ruled in
favor of the petitioner. The CA reversed the decision.

ISSUE: WON the Deed of Assignment did not extinguish petitioner’s obligation on the
wrong notion that petitioner failed to comply with his warranty thereunder

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

HELD:

YES. An assignment of credit is an agreement by virtue of which the owner of a credit,

known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or
donation and without the consent of the debtor, transfers his credit and accessory rights
to another, known as the assignee, who acquires the power to enforce it to the same
extent as the assignor could enforce it against the debtor.

In any other contract of sale, the vendor or assignor is bound by certain warranties.
More specifically, the first paragraph of Article 1628 of the civil code provides:

The vendor in good faith shall be responsible for the existence; and legality of the credit
at the time of the sale, unless it should have been sold as doubtful but not for the
solvency of the debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.

From the above provision, petitioner, as vendor or assignor, is bound to warrant the
existence and legality of the credit at the time of the sale or assignment. When Jomero
claimed that it was no longer indebted to petitioner since the latter also had an unpaid
obligation to it, it essentially meant that its obligation to petitioner has been extinguished
by compensation. In other words, respondent alleged the non-existence of the credit
and asserted its claim to petitioner’s warranty under the assignment. Therefore, it
behooved on petitioner to make good its warranty and paid the obligation.

Indeed by warranting the existence of the credit, petitioner should be deemed to have
ensured the performance thereof in case the same is later found to be inexistent. He
should be liable to pay to respondent the amount of his indebtedness.

WE AFFIRM the decision of the CA.

Asia Brewery Inc. v. Equitable PCI Bank, G.R. No. 190432, April 25, 2017

FACTS:

Within the period of September 1996 to July 1998, 10 checks and 16 demand drafts
were issued in the name of Charlie Go. the instruments with a total value of
P3,785,257.38 bore the annotation “endorsed by PCI Bank, Ayala Branch, All Prior
Endorsement and/or Lack of Endorsement Guaranteed”. All tthe demand drafts, except
those issued by the Lucena City and Ozamis branches of Allied bank were crossed.

All of the above checks and demand drafts fell into the hands of a certain Raymond U.
Keh, then a Sales Accounting Manager of plaintiff Asia Brewery who falsely, willfully and
maliciously pretending to be the payee, Charlie Go, succeeded in opening the accounts
with defendant Equitable PCI Bank in the name of Charlie Go and thereafter deposited
the said checks and demand drafts in said accounts and withdrew the proceeds thereof
to the damage and prejudice of Asia Brewery.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

Raymond Keh was charged with and convicted of theft but he YEETED bail and left the
country.

In demanding payment from respondent, petitioners relied on Associated Bank v. CA, in

which this court held “the possession of check on a forged or unauthorized indorsement
is wrongful, and when the money is collected on the check, the bank can be held for
moneys had and received.”

Petitioners demanded payment from respondent. RTC ruled in favor of respondent.

Dismissing the case for not having any cause of action because the instruments had
never been delivered.

ISSUE: WON there was delivery in the legal sense necessitates a presentation of
evidence

HELD:

YES. It was erroneous for the RTC to have concluded that there was no delivery, just
because the checks did not reach the payee.

Section 16 of the NIL which envisions instances when instruments may have been
delivered to a person other than the payee.

SEC. 16. Delivery when effectual; when presumed - Every contract on a negotiable
instrument is incomplete and revocable until delivery of the instrument for the purpose
of giving effect thereto. As between immediate parties and as regards a remote party
other than a holder in due course, the delivery, in order to be effectual, must be made
either by or under the authority of the party, making, drawing, accepting or indorsing as
the case may be and in such case, the delivery may be shown to have been conditional,
or for a special purpose only, and not for the purpose of transferring the property in the
instrument.

But where the instrument is in the hands of a holder in due course, a valid delivery
thereof by all parties prior to him so as to make them liable to him is conclusively
presumed. And where the instrument is no longer in the possession of a party whose
signature appears thereon, a valid and intentional delivery by him is presumed until the
contrary is proved.

WHEREFORE, petition is GRANTED.

San Miguel Corporation v. Puzon, Jr., G.R. No. 167567, September 22, 2010

FACTS:

Respondent Puzon was a dealer of beer products of petitioner San Miguel Corporation
(SMC) for Paranaque City. Puzon purchased SMC products on credit. To ensure
payment as a business practice, SMC required him to issue postdated checks
equivalent to the value of the products purchased on credit before the same were

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

released to him. Said checks were returned to Puzon when the transactions covered by
there checks were paid or settled in full.

On January 23, 2001, Puzon together with his assistant took away from SMC Sales
office one of the checks he issued. SMC demanded return of the said checks. He
ignored the demand, SMC filed a complaint for theft.

DOJ dismissed the complaint. On petition for certiorari, CA dismissed the complaint.

ISSUE: WON The subject checks were issued only as security and therefore
(respondent) retained ownership of the same.

HELD:

YES. Section 12 of NIL provides:

Antedated and postdated - The instrument is not invalid for the reason only that it is
antedated or postdated, provided this is not done for an illegal or fraudulent purpose.
The person to whom an instrument so dated is delivered acquires the title thereto as of
the date of delivery.

Delivery is used means that the party delivering did so for the purpose of giving effect
thereto. Otherwise, it cannot be said that there has been delivery of the negotiable
instrument. Once there is delivery, the person to whom the instrument is delivered gets
the title to the instrument completely and irrevocably.

The evidence SMC failed to establish that the check was given in payment of the
obligation of Puzon. There was no provisional receipt or OR issued for the amount of
the check. What was issued was a receipt for the document, a POSTDATED CHECK
SLIP.

The evidence proves that the check was accepted, not as payment but in accordance
with the longstanding policy of SMC to require its dealers to issue postdated checks to
cover its receivables. The check was only meant to cover the transaction and in the
meantime Puzon was to pay for the transaction by some other means other than the
check.

WHEREFORE, the PETITION IS DENIED.

De la Victoria v. Burgos, G.R. No. 111190, June 27, 1995

FACTS:

Raul Sesebreno filed a complaint for damages against Assistant City Fiscals Bienvenido
N. Mabanto Jr and Dario D. Rama Jr. before the RTC. After trial Judgment was
rendered ordering the defendants to pay P11,000.00 to the plaintiff, private respondent
herein.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

A notice of garnishment was served on petitioner Loreto D. De la Victoria as City Fiscal

of Mandaue city where defendant Mabanto Jr. was then detaied. The notice directed
petitioner not to disburse, transfer, release or convey to any other person except to the
deputy sheriff concerned the salara checks, monies or cash due or belonging to
Mabanto under penalty of law. Private respondent filed a motion before the trial court for
examination of the Garnishees.

Motion was dismissed and the petitioner was ordered on November 4 1992 to submit
his report showing the amount of garnished salaries of Mabanto Jr. within 15 days from
receipt.

On Nov. 24 private respondent filed a motion to require petitioner to explain why he

should not be cited for contempt of court for failing to comply with the order of Nov. 4.

Petitioner moved to quash the notice of garnishment claiming he was not in possession
of any money, funds, credit, property or anything of value belonging to Mabanto Jr.,
except his salary and RATA checks but that said checks were not yet properties of
Mabanto Jr. until delivered to him. He claimed they were still public funds which could
not be subject to garnishment.

ISSUE:

1. WON a check still in the hands of the maker or its duly authorized representative
is owned by the payee before physical delivery to the latter
2. WON the salary check of a government official or employee funded with public
funds can be subject to garnishment

HELD:

1. NO. Sec. 16 of the NIL which states “ And where the instrument is no longer in
the possession of a party whose signature appears thereon, a valid and
intentional delivery by him is presumed”. Yes, the presumption is not conclusive
because the last portion of the provision says “until the contrary is proved”. Proof
to the contrary is its own finding that the checks were in the custody of petitioner.
Inasmuch as said checks had not yet been delivered to Mabanto Jr., they did not
belong to him and still had the character of public funds.
2. NO. as a necessary consequence of being a public fund, the checks may not be
garnished to satisfy the judgment. The rationale behind this doctrine is obvious
consideration of public policy. The Court succinctly stated in Commissioner of
Public Highways v. San Diego that -

“The functions and public services rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of public funds from their legitimate and
specific objects, as appropriated by law.”

Development Bank of Rizal v. Wei, G.R. No. 85419, March 9, 1993

FACTS:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

On July 6 1986, the Development Bank of Rizal filed a complaint for a sum of money
against respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy, Samson Tung,
Asian Industrial Plastic Corporation and the Producers bank of the Philippines on two
causes of action:

1. To Enforce payment of the balance of P1,032,450.00 on a promissory note

executed by respondent Sima Wei on June 9 1983
2. To enforce payment of 2 checks executed by Sima Wei, payable to petitioner,
and drawn against the China Banking Corporation, to pay the balance due on the
promissory note.

The two checks were not delivered to the petitioner-payee or to any of its authorized
representatives.

Except for Lee Kian Huat, defendants filed their separate motions to dismiss alleging a
common ground that the complaint states no cause of action. The trial court granted the
motions to dismiss. The CA affirmed this decision. To which the petitioner bank filed this
petition for review by certiorari

ISSUES:

1. WON petitioner has cause of action

HELD:

NO. The normal parties to a check are the drawer, the payee and the drawee bank.
Courts have long recognized the business custom of using printed checks where blanks
are provided for the date of issuance, the name of the payee, the amount payable and
the drawer’s signature. All the drawer has to do when he wishes to issue a check is to
properly fill up the blanks and sign it. However, the mere fact that he has done these
does not give rise to any liability on his part, until and unless the check is delivered to
the payee or his representative. A negotiable instrument, of which a check is, is not only
a written evidence of a contract but is also a species of property. Just as a deed to a
piece of land must be delivered in order to convey title to the grantee, so must a
negotiable instrument be delivered to the payee in order to evidence its existence as a
binding contract. Section 16 of the NIL which governs checks, provides in part:

“Every contract on a negotiable instrument is incomplete and revocable until delivery of

the instrument for the purpose of giving effect thereto”

The allegations of the petitioner show that the 2 checks were not delivered to the payee.
Without delivery of said checks to petitioner-payee, the former did not acquire any right
or interest therein and cannot therefore assert any cause of action, founded on said
checks, whether against the drawer Sima Wei or against the Producers Bank or any
other respondents.

The judgment of the CA dismissing the complaint is AFFIRMED insofar as the second
cause of action is concerned.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

Bank of Philippine Islands v. Court of Appeals, G.R. No. 136202

FACTS:

Julio Templonuevo, 3rd party defendant and herein also a private respondent,
demanded from BPI the payment of P267,692.50 representing the aggregate value of 3
checks which were allegedly payable to him but which were deposited with the
petitioner bank to private respondent Salazar’s account without his knowledge and
corresponding endorsement.

Accepting Templonuevo’s claim was a valid one, petitioner BPI froze the account of AA
Salazar and Construction and Engineering services, instead of the account where the
checks were deposited, since this account was already closed by private respondent
Salazar or had an insufficient balance.

Salazar was advised to settle the matter with Templonuevo but they did not arrive at
any settlement. As it appeared that Salazar was not entitled to the funds represented by
the checks which were deposited and accepted for deposit, petitioner BPI debited the
amount of P267,707.70 from her account and the sum was paid to Templonuevo by
means of a cashier’s check. The difference between the values of the check
represented bank charges in connection with the issuance of a cashier’s check to
templonuevo.

Salazar filed an action for a sum of money with damages against BPI. RTC rendered
judgment in favor of Salazar.

CA affirmed the decision of the RTC and held that Salazar was entitled to the proceeds
of the 3 checks notwithstanding the lack of endorsement thereon by the payee.

ISSUE:

WON a collecting bank, over the objections of its depositor, have the authority to
withdraw unilaterally from such depositor’s account the amount it had previously paid
upon certain unendorsed order instruments deposited by the depositor to another
account that she later closed

HELD:

YES and NO. In the present case, the records do not support the finding that a prior
arrangement existed between Salazar and Templonuevo regarding the transfer of
ownership of checks. This fact is crucial as Salazar’s entitlement to the value of the
instruments is based on the assumption that she is a transferee within the
contemplation of Sec. 49 of the NIL.

Transfer without indorsemen; effect of- Where the holder of an instrument payable to
his order transfers it for value without indorsing it, the transfer vests in the transferee
such title as the transferor had therein, and the transferee acquires in addition, the right
to have the indorsement of the transferor. But for the purpose of determining whether

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

the transferee is a holder in due course, the negotiation takes effect as of the time when
the indorsement is actually made.

If the transferor had legal title, the transferee acquires such title and in addition, the right
to have the indorsement of the transferor and also the right as holder of the legal title to
maintain legal action against the maker or acceptor or other party liable to the
transferor. The underlying premise of this provision however, is that a valid transfer of
ownership of the negotiable instrument in question has taken place.

Transferees in this situation do not enjoy the presumption of ownership in favor of

holders since they are neither payee nor indorsees of such instruments. Something
more than mere possession by persons who are not payees or indorseres of the
instrument is necessary to authorize payment to them in the absence of any other facts
from which the authority to receive payment may be inferred.

While it is conceded that the petitioner had the right to set-off over the amount it paid to
Templonuevo against the deposit of Salazar, the issue of whether it acted judiciously is
an entirely different matter. As businesses affected with public interest and because of
the nature of their functions, banks are under obligation to treat the accounts of their
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship. In this regard, petitioner was clearly remiss in its duty to private respondent
Salzar as its depositor.

Metropol (Bacolod) Financing & Investment Corp. v. Sambok Motors Co., G.R. No.
L-39641, February 28, 1993

FACTS:

Dr. Javier Villaruel executed a promissory note in favor of Ng. Sambok Sons Motors
Co., Ltd. in the amount of P15,930.00 payable in 12 equal monthly installments,
beginning May 1969 with interest at the rate of one percent per month. Further provided
that in case of non-payment of any of the installments, the total principal sum then
remaining unpaid shall become due and payable with an additional interest equal to
25% of the amount due.

Sambok Motors (sister company of Ng Sambok Sons) negotiated and indorsed the note
in favor of plaintiff Metropol.

Dr. Villaruel failed to pay the promissory note as demanded hence plaintiff notified
Sambok as indorsee of the said note of the fact that the same has been dishonored and
demanded payment.

Sambok failed to pay so plaintiff filed a complaint for collection of a sum of money
before the Court of first instance. Sambok did not deny liability but contended that it
could not be obliged to pay until after Dr. Villaruel has been declared insolvent.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

During the pendency of the case, Dr. Villaruel died and the court dismissed the case
against him.

The trial court rendered its decision ordering Sambok to pay the sum of P15,939.00 plus
interest thereon and 25% interest.

ISSUE: WON appellant Sambok is assignor and a qualified indorsee of the subject
promissory note and not only secondarily liable

HELD:

YES. Appellant 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 Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said
appellant. The effect of such indorsement is that the note was indorsed without
qualification. A person who indorses without qualification engages that on due
presentment, the note shall be accepted or paid, or both as the case may be and that if
it be dishonored, he will pay the amount thereof to the holder. Appellant Sambok’s
intention of indorsing the note without qualification is made even more apparent by the
fact that the notice of demand, dishonor, protest and presentment were all waived. The
words added by said appellant do not limit his liability but rather confirm his obligation
as a general indorser.

An instrument dishonored by non-payment, the person secondarily liable thereon

ceases to be such and becomes a principal debtor. His liability becomes the same as
that of the original obligor. Consequently, the holder need not even proceed against the
maker before suing the indorser.

Decision of the lower court is hereby AFFIRMED.

Ty v. People, G.R. No. 149275, September 27, 2004

FACTS:

Petitioner Vicky Ty executed a promissory note wherein she assumed payment of the
hospital bills of her mother and sister who were confined in Manila Doctor’s hospital. To
assure payment of the obligation, she drew several postdated checks against
Metrobank payable to the hospital. The 7 checks were all dishonored due to
insufficiency of fund with the account closed advice. Soon after, complainant hospital
sent demand letter to Ty by registered mail. Demand letters were left unheeded,
complainant filed 7 informations subject of the instant case.

Ty was convicted of violation of BP 22

ISSUE: WON there is absence of valuable consideration in the issuance of the subject
checks

HELD:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

NO. It is presumed upon issuance of the checks in the absence of evidence to the
contrary, that the same was issued for valuable consideration. Sec. 24 of the NIL
creates a presumption that every party to an instrument acquired the same for a
consideration or for value. In alleging otherwise, Ty has the onus to prove that the
checks were issued without consideration. She must present convincing evidence to
overthrow the presumption.

A scrutiny of the records reveals that petitioner failed to discharge the burden of proof.
“Valuable consideration may in general terms, be said to consist either in some right,
interest, profit or benefit accruing to the party who makes the contract, or some
forbearance, detriment, loss or some responsibility, to act, or labor, or service given,
suffered or undertaken by the other aide. Simply defined, valuable consideration means
an obligation to give, to do or not to do in favor of the party who makes the contract,
such as the maker or indorser”.

In this case, Ty’s mother and sister availed of the services and facilities of the hospital.
For the care given to her kin, Ty had a legitimate obligation to pay the hospital by virtue
of her relationship with them and by force of her signature on her mother’s contract of
admission acknowledging responsibility for payment and on the promissory note she
executed in favor of the hospital.

Patrimonio v. Gutierrez, G.R. No. 187769, June 4, 2014

FACTS:

Patrimonio gave blank checks to Gutierrez for the purpose of the business venture Slum
Dunk Corporation they both were entering. Gutierrez, without the consent or knowledge
of Patrimonio went to Marasigan to secure a loan in the amount of Php 200,000.00
giving one of the checks of petitioner as security but filled up the details with
P200,000.00 and the payee as Cash dated May 23, 1994.

When the check was deposited it was dishonored. Marasigan sought recovery from
Gutierrez to no avail. He then filed a criminal case for violation of BP22 against the
petitioner.

RTC ruled in favor of Marasigan saying that Marasigan is holder in due course of the
check. CA affirmed the decision but agreed with petitioner that Marasigan is not holder
in due course as he did not receive the check in good faith.

ISSUES:

1. WON the loan may be nullified for being void

2. WON petitioner can be made liable under the check he signed
3. WON Marasigan is a holder in due course

HELD:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

1. YES. A review of the records reveals that Gutierrez did not have any authority to
borrow money in behalf of petitioner. Records do not show that the petitioner
executed any SPA in favor of Gutierrez. In fact, the petitioner’s testimony
confirmed that he never authorized Gutierrez, whether verbally or in writing, to
borrow money in his behalf, nor was he aware of any such transaction.

That the petitioner entrusted the blank pre-signed checks to Gutierrez is not
legally sufficient because the authority to enter into a loan can never be
presumed. The contract of agency and the special fiduciary relationship inherent
in this contract must exist as a matter of fact. The person alleging it has the
burden of proof to show, not only the fact of agency, but also its nature and
extent.

The contract of loan lacked the essential element of consent.

2. NO. Section 14 of the NIL provides if the maker or drawer delivers a pre-signed
blank paper to another person for the purpose of converting it into a negotiable
instrument, that person is deemed to have prima facie authority to fill it up. It
merely requires that the instrument be in the possession of a person other than
the drawer or maker and from such possession, together with the fact that the
instrument is wanting in a material particular, the law presumes agency to fill up
the blanks.

Our own examination of the records tells us that Gutierrez has exceeded the
authority to fill up the blanks and use the check. His instruction could not be any
clearer as gutierrez’ authority was limited to the use of the checks for the
operation of their business and on the condition that the petitioner’s prior
approval be first secured.

3. NO. Sec. 52 of the NIL defines a holder in due course is one who takes the
instrument in good faith and for value. It also provides in Section 52 D that in
order that one may be a holder in due course, it is necessary that at the time it
was negotiated to him he had no notice of any infirmity in the instrument or defect
in the title of the person negotiating it.

In the present case, Marasigan’s knowledge that the petitioner is not a party or a
privy to the contract of loan and correspondingly had no obligation or liability to
him, renders him dishonest hence in bad faith.

Since he knew that the underlying obligation was not actually for the petitioner,
the rule that a possessor of the instrument is prima facie a holder in due course
is inapplicable. His inaction and failure to verify, despite knowledge that the
petitioner was not a party to the loan, may be construed as gross negligence
amounting to bad faith.

Wherefore petition is GRANTED.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

Yang v. Hon. CA, G.R. No. 138074, August 15, 2003

FACTS:

Yang and Charimandi had an agreement whereby Chariramani was to give Yang a
PCIB check in the amount of P 4.2M in exchange for 2 of Yang’s manager’s check each
in the amount of P2.087M, both payable to the order of private respondent David. Yang
and Chandiramani agreed that the difference of P26,000.00 in exchange would be their
profit to be divided equally between them. They also agreed that yang would secure a
dollar draft in the amount of USD200,000.00 payable to PCIB account which
Chandiramani would exchange for another dollar draft.

The checks and draft were given to a messenger who reported it missing. As a result
Yang ordered the banks to stop payment on the instrument. Turns out Chandiramani
had the checks (the little devious cunt) and delivered the same to David. Chandiramani
got USD 360,000.00 from David. The stop payment order was not followed and the
USD 200,000.00 was credited to the PCIB Account.

Yang filed a complaint against Equitable, Chandiramani, and David ruling he was the
holder in due course at the RTC. RTC rendered in judgment in favor of David. CA
affirmed judgment.

ISSUE: WON David is a holder in due course

HELD:

YES. Section 24 of the NIL creates a presumption that every party to an instrument
acquired the same for a consideration or for value. Thus, the law itself creates a
presumption in David’s favor that he gave valuable consideration for the checks in
question. In alleging otherwise, the petitioner has the onus to prove that David got hold
of the checks absent said consideration. In other words, petitioner must present
convincing evidence to overthrow the presumption. The petitioner’s averment that David
did not give valuable consideration when he took possession of the checks is
unsupported, devoid of any concrete proof to sustain it.

David was not privy to the transaction between petitioner and Chandiramani. The
petitioner admits that David took the step of asking the manager of his bank to verify
from FEBTC and Equitable as to the genuineness of the checks and only accepted the
same after being assured that there was nothing wrong with said checks. At the time
David was not aware of the stop payment. David did not close his eyes deliberately to
the nature or the particulars of a fraud allegedly committed by Chandiramani upon the
petitioner absent any knowledge on his part that the action in taking the instruments
amounted to bad faith.

Wherefore the petition is DENIED

Cayanan v. North Star International Travel, Inc., G.R. No. 172954, October 5, 2011

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

FACTS:

Petitioner Cayanan issued 5 checks to Virginia Balagtas, the general manager of North
Star. When presented for payment, the check in the amount of P1.5M and P35,000.00
were dishonored for insufficiency of funds while the other 3 checks were dishonored
because of a stop payment. Northstar demanded payment to no avail. North star
instituted criminal case charging petitioner violation of BP 22.

MeTC found petitioner guilty beyond reasonable doubt. On appeal, RTC acquitted the
petitioner. The RTC ratiocinated that the checkes were presented beyond theperiod of
90 days and therefore there is no violation of BP 22 and the accused is not considered
to have committed the offense. CA reversed the decision of the RTC insofar as the civil
aspect is concerned and held petitioner civilly liable for the value of the subject checks.

ISSUE: WON petitioner is civilly liable to north star for the value of the checks since
North star did not give valuable consideration for the checks.

HELD:

YES. the issuance of a check in the absence of evidence to the contrary, it is presumed
that the same was issued for valuable consideration which may consist either in some
right, interest, profit or benefit accruing to the party who makes the contract or some
forbearance, detriment, loss or some responsibility to act or labor or service given,
suffered or undertaken by the other side.

Under the NIL, it is presumed that every party to an instrument acquires the same for a
consideration or for value. As petitioner alleged that there was no consideration, it
devolved upon him to present convincing evidence to overthrow the presumption and
prove that the checks were in fact issued without valuable consideration. Sadly,
petitioner has not presented any credible evidence to rebut the presumption, as well as
North Star’s assertion, that the checks were issued as payment for the USD 85,000.00
petitioner owed.

The subject checks bearing petitioner’s signature speak for themselves. The fact that
petitioner named north star as payee is an admission of his liability to North Star.

Wherefore the petition is DENIED. CA decision is AFFIRMED.

Sesbreno v. Court of Appeals, G.R. No. 89252, May 24, 1993

FACTS:

Petitioner Raul Sesbreno made a money market placement in the amount of

P300,000.00 with the Philippine Underwriters Finance Corporation (Philfinance); the
placement, with a term of 32 days would mature on March 13 1981. Philfinance, in
return, issued the following documents to petitioner:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

1. Certificate of Confirmation of sale “without recourse” of 1 Delta Motors

Corporation Promissory note no. 2731 for a term of 32 days at 17% per annum
2. Certificate of Securities Delivery Receipt indicating the sale of DMC PN 2731
3. Postdated checks payable on March 13 1981 with petitioner as payee,
Philfinance as drawer and Insular Bank of Asia and America as drawee in the
amount of P304,533.33

On March 13, petitioner sought to encash the postdated check but the same were
dishonored for having been drawn against insufficient funds.

On March 26, Philfinance delivered to petitioner DCR No. 10805 issued by private
respondent Pilipinas Bank (Pilipinas).

On April 2, petitioner went to Pilipinas with demand letter informing the bank that his
placement with Philfinance reflected in the DCR No. 10805 had remained unpaid and
outstanding and that he in effect was asking for the physical delivery of the underlying
promissory note. Petitioner then examined the original DMC Pn 2731 and found that the
security had been issued on April 10 1980 and would mature on April 6 1981, it had a
face value of P2.3 M with Philfinance as payee and private respondent Dela Motors
Corporation as maker and that on the face of the promissory note was stamped non-
negotiable. Pilipinas did not the deliver the note nor any certificate of participation in
respect thereof to petitioner.

Despite demands, Pilipnas never released DMC Pn no. 2731 nor any other instrument
in respect thereof to petitioner. Petitioner filed an action for damages with the RTC
against Delta and Pilipinas. The RTC dismissed the complaint and counterclaims for
lack of merit and for lack of cause of action against petitioner.

Petitioner appealed to the CA. CA denied the appeal.

Hence this petition for review on certiorari.

ISSUE: WON DMC PN. no 2731 was non negotiable but had been validly transferred in
part to petitioner.

HELD:

YES. Firstly, it is important to bear in mind that the negotiation of a negotiable

instrument must be distinguished from the assignment or transfer of an instrument
whether that be negotiable or non-negotiable. Only an instrument qualifying as a
negotiable instrument under the relevant statute may be negotiated either by
indorsement thereof coupled with delivery, or by delivery alone where the negotiable
instrument is in bearer form. A negotiable instrument may, however, instead of being
negotiated, also be assigned or transferred. The legal consequences of negotiation as
distinguished from assignment of a negotiable instrument are, of course, different. A
non-negotiable instrument may, obviously, not be negotiated but it may be assigned or
transferred, absent an express prohibition against assignment or transfer written in the
face of the instrument.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

DMC PN No. 2731 while marked non-negotiable was not at the same time stamped
non-transferrable or non assignable. It contained no stipulation which prohibited
philfinance from assigning or transferring in whole or in part, that note.

Apropos Delta’s complaint that the partial assignment by Philfinance of DMC PN No.
2731 had been effected without the consent of Delta, we note that such consent was
not necessary for the validity and enforceability of the assignment in favor of petitioner.

Dino v. Judal-Loot, G.R. No. 170913, April 19, 2010

FACTS:

Petitioner Dino was victimized by a syndicate. He paid 3M with 3 checks in exchange

for a deed of absolute sale of land. However, upon scrutinizing he learned that the sale
was made on government property. He ordered STOP PAYMENT of the checks. 2 of
the checks were already deposited by this time.

Meanwhile, Lobitana (the scammer) indorsed the last check to respondent, Judal-Loot
in exchange for 948K cash. Respondents inquired at Metrobank about the check and
Metrobank said the check was funded. However, upon depositing they were dishonored
for reason of PAYMENT STOP.

Respondents filed suit against petitioner and Lobitana for collection. RTC rules in favor
of respondents. CA affirmed the decision.

Petitioners appealed to this court claiming that respondents are not holders in due
course of the check.

ISSUE: WON respondents were holders in due course

HELD:

NO. Respondents are not deemed holders in due course of the subject check. Sec. 52
of NIL defines holders in due course thus:

A holder in due course is a holder who has taken the instrument under the following
conditions:

a. That it is complete and regular upon its face

b. That he became the holder of it before it was overdue and without notice that it
has been previously dishonored, if such was the fact
c. That he took it in good faith and for value
d. That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.

Respondents failed to ascertain the indorser’s title to the check or the nature of her
possession. The verification from metrobank on the funding of the check does not

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

amount to determination of Lobitana’s title to the check. Failing in this respect,

respondents are guilty of gross negligence amounting to legal absence of good faith
contrary to Sec. 52 © of the NIL..

There is not question that Lobitana was not the one who presented the check for
payment. Lobitana negotiated and indorsed the check to respondents in exchange for
P948,000.00. It was not the payee who presented the check for payment but the
respondents, there was no proper presentment.

Petition is granted.

Chan Wan v. Tan Kim, G.R. No. L-15380, September 30, 1960

FACTS:

Chan Wan presented for payment 11 checks payable to cash or bearer upon the
Equitable Banking Corp. drawn by Tan Kim but they were all dishonored and returned to
him unpaid due to insufficient funds.

He filed suit to collect. Tan kim in her defense declared that the checks had been issued
to 2 persons named Pinong and Muy for some shoes the former had promised to make
and were intended as mere receipt.

ISSUE: WON Chan is holder in due course of the check and has a right to collect

HELD:

NO. 8 of the checks bear in their face 2 parallel transverse lines between which these
words are written: non-negotiable- China Banking Corporation. The check have been
crossed specially to China Banking Corp and should have been presented for payment
by China banking not by Wan Chan. Inasmuch Chan Wan did present them for
payment, there was no proper presentment and the liability did not attach to the drawer.

The circumstances show that the checks had already been presented at China banking
Corporation but as drawee had no funds, they were unpaid and returned some were
stamped account closed. Seeing this, Chan Wan nevertheless proceeded to present
them without bothering to explain. Since he knew this fact, he is not to be holder in due
course.

Bank of America NT & SA v, Philippine Racing Club, G.R. No. 150228, July 30,
2009

FACTS:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

Respondent PRCI President and Vice president were scheduled to go abroad. As part
of their practice, they leave their accountants signed blank checks to ensure the
continuity of their operations.

A certain John Doe presented a check for encashment to Bank of America were
respondents had an account. On the face of the check, on the line for payee were the
words One hundred ten thousand pesos only, above it cash and on the blank reserved
for the amount 110,000 was written with check type writer. Disregarding the anomalies,
Petitioner encashed 110,000 from the account of PRCI.

PRCI filed a suit for collection. RTC granted the suit and CA affirmed the decision.
Hence this petition for review on certiorari

ISSUES:

WON there is material alteration on the check as defined by Sec. 125 of the NIL.

WON the proximate cause of the wrongful encashment of check was due to
petitioner’s failure to make a verfication.

HELD:

NO. Material alteration is defined in Sec. 125 of the NIL to be one which changes the
date, the sum payable, the time or place or payment, the number or relations of the
parties, the currency in which payment is to be made or one which adds a place of
payment where no place of payment is specified or any other change or addition which
alters the effect of the instrument in any respect.

YES. It is well settled that banks are engaged in a business impressed with public
interest and it is their duty to protect in return their many clients and depositors. The
diligence required of banks therefore is more than that of a good father of a family.

Although not in the strict sense, material alterations, the misplacement of the typewritten
entries for the payee and the amount on the same blank and repetition of the amount
are glaring irregularities on the face of the check. The extradiligence demands that
petitioner should ascertained the authenticity of the subject checks because of the
highly irregular entries.

Peitioner insists puursuant to sec. 14 and sec. 16 of the NIL it could validly presume,
upon presentation of the checks, that the party who filled up the blanks had authority
and that a valid and intentional delivery to the party presenting the checks had taken
place. The sole blame would be on respondents for irresponsibly presigning blank
checks. This would have been correct if the checks were properly filled out by the thief
and presented in good order. But circumstances show that the bank should have been
allerted. Sec. 15 of the NIL is applicable in this case as the subject checks are
characterized as incomplete and undelivered instruments.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

However, petitioner can not be entirely to blame for this as the thief is an employee of
PRCI. as such, the respondents are also at fault. But since the doctrine of last clear
chance is applied to banks who had the last opportunity to avoid the harm. They will
bear greater responsibility.

Wherefore the decision of CA is affirmed but that only 60% of the amount is to be
charged against petitioner while respondent will bear 40% of its loss.

Vicente R. De Ocampo & Co. v. Gatchalian, G.R. No. L-15126, November 30, 1961

FACTS:

Gatchalian wanted to purchase a car presented by a certain Manuel Gonzales.

Gonzales told Gatchalian that in order to establish good faith, Gatchalian must write a
check to be shown to the owner of the car only and will be returned the next day by
Manuel Gonzales. However, Gonzales did not return and so Gatchalian ordered stop
payment on the check.

Without knowledge of Gatchalian, Manuel Gonzales indorsed the check to Ocampo

clinic for payment of his wife’s hospital bills. Since the check’s amount was more than
what was due, Ocampo gave the difference in cash to Gonzales.

ISSUE: WON Ocampo was a holder in due course

HELD:

NO. It is the payee’s duty to ascertain from the holder Manuel Gonzales what the nature
of the latter’s title to the check was or the nature of hispossession. Having failed in this
respect we must declare that plaintiff-appellee was guilty of gross neglect in not finding
out the nature of the title and possession of Manuel Gonzales, amounting to legal
absence of good faith and it may not be considered as a holder of the check in good
faith as stated in Sec. 52 ( c) of the NIL.

The rule that a possessor of the instrument is prima facie a holder in due course does
not apply because there was a defect in the title of the holder (Manuel Gonzales),
because the instrument is not payable to him or to bearer.

State Investment House v. Moulic, G.R. No. 101163, January 11, 1993

FACTS:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

Moulic issued to Victoriano as security for pieces of jewelry to be sold on commission.

Thereafter, payee negotiated the checks to petitioner STATE.

Moulic failed to sell the jewelries and returned them to the payee before maturity of the
checks. Since the checks have been negotiated, she withdrew her funds from drawee
bank.

Upon presentment for payment, the checks were dishonored for insufficiency of funds.

State filed a complaint and a third party complaint but the RTC dismissed it. The CA
affirmed the RTC decision.

ISSUE: WON State is holder in due course

HELD:

Yes. State is indeed the holder in due course pursuant to Sec. 52 of the NIL. The
evidence clearly shows that:

a. On the faces of the post dated checks were complete and regular
b. Petitioner bought these checks from the payee, Victoriano, before their due dates
c. Petitioner took these checks in good faith and for value, albeit at a discounted
price
d. Petitioner was never informed nor made aware that these checks were merely
issued to payee as security and not for value

State holds the instruments free from any defect of title of prior parties and from
defenses available to prior parties among themselves; State may enforce full payment
of the checks.

Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals, G.R. No. 93048, March
3, 1994

FACTS:

BCCHI paid George King cross checks in consideration of the delivery of tobacco
leaves. Simultaneously, George King dealt with respondent State Investment House Inc
and sold at a discount the check issued by BCCHI naming George King as payee to
SIHI.

George king failed to deliver the bales of tobacco leaf, BCCHI issued a Stop Payment.

SIHI failed to collect from BCCFI and instituted present case. The RTC held that SIHI
was a holder in due course. CA affirmed the decision.

ISSUE: WON SIHI was holder in due course

HELD:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

NO. The checks issued were cross checks. Jurisprudence pronounced that crossing of
a check should have the following effects:

a. The check may not be encashed but only deposited in the bank
b. The check may be negotiated only once - to one who has an account with a bank
c. 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.

It is then settled that crossing of check should put the holder on inquiry and upon him
devolved the duty to ascertain the indorser’s title to the check or the nature of his
possession. Failing in this respect, the holder is declared guilty of gross negligence
amounting to legal absence of good faith, contrary to Sec. 52 ( c) of the NIL and as such
the consensus of authority is to the effect that the holder of the check is not a holder in
due course.

In this case, the checks were issued with the intention that George King would supply
BCCFI with the bales of tobacco leaf. There being failure of consideration, SIHI is not a
holder in due course. Consequently, BCCFI cannot be obliged to pay the checks.

Petition is granted.

(SIHI is to collect from immediate indorser, George King.)

State Investment House v. Court of Appeals, G.R. No. 72764, July 13, 1989

FACTS:

New Sikatuna Wood Industries Inc sold at a discount to SIHI 3 postdated crossed
checks issued by Anita Pena Chua naming as payee New Sikatuna Wood Industries
Inc.

When SIHI deposited the 3 checks, they were dishonored by reason of insufficient
funds, stop payment and account closed respectively.

Petitioner demanded payment from private respondent Anita Pena to no avail

necessitating the former to fie an action for collection.

RTC ruled in favor of SIHI. CA reversed the decision.

ISSUE: WON petitioner is holder in due course

HELD:

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino
 Negotiable Instruments Law

No. The 3 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, the payee named therein.
Apparently, it was not the payee who presented the same for payment and therefore
there was no proper presentment, the drawer did not become liable. Consequently, no
right of recourse is available to petitioner SIHI against the drawer of the subject checks,
private respondent Anita.

M.L. Francisco | Negotiable Instruments Law Case Digests | Atty. Timoteo Aquino