METROBANK vs.

RENATO CABILZO
G.R. No. 154469
December 6, 2006
FACTS:
November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank Check payable to "CASH" and
postdated on November 24, 1994 in the amount of P1,000 drawn against his Metrobank account to
Mr. Marquez, as his sales commission.
The check was presented to Westmont Bank for payment who indorsed it to Metrobank for
appropriate clearing.
After the entries thereon were examined, including the availability of funds and the authenticity of the
signature of the drawer, Metrobank cleared the check for encashment in accordance with the
Philippine Clearing House Corporation (PCHC) Rules.
November 16, 1994: Cabilzos representative was at Metrobank when he was asked by bank
personnel if Cabilzo had issued a check in the amount of P91K to which he replied in negative.
That afternoon: Cabilzo called Metrobank to reiterate that he did not issue the check.
He later discovered that the check of P1K was altered to P91K and date was changed from Nov 24 to
Nov 14. Then, Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account.
June 30, 1995: Through counsel sent a letter-demand for the amount of P90K. CA affirmed RTC:
Favored Cablizo
ISSUE:
W/N Cablizo can recover from Metrobank
HELD:
YES. CA Affirmed
Material alteration
- changes the items which are required to be stated under Section 1 of the Negotiable Instruments
Law
Section 1. Form of negotiable instruments. - An instrument to be negotiable must conform to
the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand or at a fixed determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.
-

changes the effect of the instrument

Section 125. What constitutes material alteration. Any alteration which changes:
(a) The date;
(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relation of the parties;
(e) The medium or currency in which payment is to be made;
Or 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 is a material alteration.
In the case at bar, the check was altered so that the amount was increased from P1,000.00 to
P91,000.00 and the date was changed from 24 November 1994 to 14 November 1994.
Section 124. Alteration of instrument; effect of. Where a negotiable instrument is materially
altered without the assent of all parties liable thereon, it is avoided, except as against a party who has
himself made, authorized, and assented to the alteration and subsequent indorsers.
But when the instrument has been materially altered and is in the hands of a holder in due course not
a party to the alteration, he may enforce the payment thereof according to its original tenor.

Cabilzo was not the one who made nor authorized the alteration. Neither did he assent to the
alteration by his express or implied acts

There is no showing that he failed to exercise such reasonable degree of diligence required of a prudent
man which could have otherwise prevented the loss. Banks must be a high degree of diligence, if not the
utmost diligence
Surprisingly, however, Metrobank failed to detect the above alterations which could not escape the
attention of even an ordinary person "NINETY" is also typed differently and with a lighter ink, only 2
asterisks were placed before the amount in figures, while 3 asterisks were placed after such amount ;
"NINETY" are likewise a little bigger when compared with the letters of the words "ONE THOUSAND
PESOS ONLY"
When the drawee bank pays a materially altered check, it violates the terms of the check, as well as
its duty to charge its clients account only for bona fide disbursements he had made.
The corollary liability of Westmont Ban's indorsement, if any, is separate and independent from the
liability of Metrobank to Cabilzo.
Bank of America vs. Philippine Racing Club
G.R. 150228 July 30, 2009
Ponente: Leonardo-De Castro, J:
FACTS:
PRCI is a domestic corporation which maintains several accounts with different banks in the Metro
Manila area. Among the accounts maintained was with defendant-appellant BA. The authorized joint
signatories with respect to said Current Account were plaintiff-appellees President (Antonia Reyes) and
Vice President for Finance (Gregorio Reyes). On or about the 2nd week of December 1988, the President
and Vice President of plaintiff-appellee corporation were scheduled to go out of the country. In order not
to disrupt operations in their absence, they pre-signed several checks. These checks were entrusted to
the accountant with instruction to make use of the same as the need arose. The internal arrangement
was, in the event there was need to make use of the checks, the accountant would prepare the
corresponding voucher and thereafter complete the entries on the pre-signed checks.
It turned out that on December 16, 1988, a John Doe presented to BA for encashment a couple of
corporations checks with the indicated value of P110, 000.00 each. The 2 checks had similar entries with
similar infirmities and irregularities. On the space where the name of the payee should be indicated (Pay
To The Order Of) the following 2-line entries were instead typewritten: on the upper line was the word
"CASH" while the lower line had the following typewritten words, viz: "ONE HUNDRED TEN THOUSAND
PESOS ONLY." Despite the highly irregular entries on the face of the checks, BA encashed said checks.
The checks appeared to have come into the hands of an employee of PRCI (one Clarita Mesina who was
subsequently criminally charged for qualified theft) who eventually completed without authority the
entries on the pre-signed checks. PRCIs demand for defendant-appellant to pay fell on deaf ears hence
the complaint. After due proceedings, the trial court rendered a Decision in favor of PRCI. BA appealed
the aforesaid trial court Decision to the CA which, however, affirmed said decision in toto in its July 16,
2001 Decision. Petitioners Motion for Reconsideration of the CA Decision was subsequently denied,
hence this instant petition.
ISSUES:
1.
Whether or not the Court of Appeals gravely erred in holding that petitioner was liable for the
amount of the checks despite the fact that petitioner was merely fulfilling its obligation under law and
contract.
2.
Whether the proximate cause of the wrongful encashment of the checks in question was due to (a)
petitioners failure to make a verification regarding the said checks with the respondent in view of the
misplacement of entries on the face of the checks or (b) the practice of the respondent of pre-signing
blank checks and leaving the same with its employees.
HELD:
1.
No, the Court of Appeals was correct in holding petitioner bank liable for the amount of
the checks.
There is no dispute that the signatures appearing on the subject checks were genuine signatures of the
respondents authorized joint signatories. It is likewise admitted that neither of the subject checks
contains any material alteration or erasure. However, on the blank space of each check reserved for the
payee, the following typewritten words appear: "ONE HUNDRED TEN THOUSAND PESOS ONLY." Above
the same is the typewritten word, "CASH." On the blank reserved for the amount, the same amount of
One Hundred Ten Thousand Pesos was indicated with the use of a check writer. The presence of these

irregularities in each check should have alerted the petitioner to be cautious before proceeding to encash
them which it did not do.
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 who transact business with
them. They have the obligation to treat their clients account meticulously and with the highest
degree of care, considering the fiduciary nature of their relationship. The diligence required of
banks, therefore, is more than that of a good father of a family.
In the case at bar, extraordinary diligence demands that petitioner should have ascertained from
respondent the authenticity of the subject checks or the accuracy of the entries therein not only because
of the presence of highly irregular entries on the face of the checks but also of the decidedly unusual
circumstances surrounding their encashment. Respondents witness testified that for checks in amounts
greater than (P20, 000.00) it is the companys practice to ensure that the payee is indicated by name in
the check. However, the confluence of the irregularities on the face of the checks and circumstances that
depart from the usual banking practice of respondent should have put petitioners employees on guard
that the checks were possibly not issued by the respondent in due course of its business. Petitioners
subtle sophistry cannot exculpate it from behavior that fell extremely short of the highest degree of care
and diligence required of it as a banking institution.
2.
The proximate cause of the wrongful encashment was due to Petitioner Bank but
Respondent PRCI should also share the loss for contributing to the said wrongful encashment.
An allocation of 60% of the actual damages involved in this case (represented by the amount of the
checks with legal interest) to petitioner is proper under the premises. Respondent should, in light of its
contributory negligence, bear forty percent (40%) of its own loss.
Petitioner cannot evade responsibility for the loss by attributing negligence on the part of respondent
because, even if we concur that the latter was indeed negligent in pre-signing blank checks, the former
had the last clear chance to avoid the loss (doctrine of last clear chance). To reiterate, petitioners own
operations manager admitted that they could have called up the client for verification or confirmation
before honoring the dubious checks. Verily, petitioner had the final opportunity to avert the injury that
befell the respondent. Failing to make the necessary verification due to the volume of banking
transactions on that particular day is a flimsy and unacceptable excuse, considering that the "banking
business is so impressed with public interest where the trust and confidence of the public in general is of
paramount importance such that the appropriate standard of diligence must be a high degree of
diligence, if not the utmost diligence." Petitioners negligence has been undoubtedly established and,
thus, pursuant to Art. 1170 of the NCC, it must suffer the consequence of said negligence.
Also, in the interest of fairness, however, we believe it is proper to consider respondents own negligence
to mitigate petitioners liability.
Article 2179 of the Civil Code provides:
Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendants lack of due care, the
plaintiff may recover damages, but the courts shall mitigate the damages to be awarded.
Respondents practice of signing checks in blank whenever its authorized bank signatories would travel
abroad was a dangerous policy; especially considering the lack of evidence on record that respondent had
appropriate safeguards or internal controls to prevent the pre-signed blank checks from falling into the
hands of unscrupulous individuals and being used to commit a fraud against the company. We cannot
believe that there was no other secure and reasonable way to guarantee the non-disruption of
respondents business.
We also cannot ignore the fact that the person who stole the pre-signed checks subject of this case from
respondents accountant turned out to be another employee, purportedly a clerk in respondents
accounting department. As the employer of the "thief," respondent supposedly had control and
supervision over its own employee. This gives the Court more reason to allocate part of the loss to
respondent.

Metropolitan Bank And Trust Company vs. BA Finance Corporation & Malayan Insurance Co.,
Inc.
G.R. No. 179952. December 4, 2009.
FACTS:
Lamberto Bitanga obtained from respondent BA Finance Corporation a loan, to secure which, he
mortgaged his car to respondent BA Finance. Bitanga had the mortgaged car insured by respondent
Malayan Insurance.
The car was stolen. On Bitangas claim, Malayan Insurance issued a check payable to the order of
"B.A. Finance Corporation and Lamberto Bitanga", drawn against China Banking Corporation. The
check was crossed with the notation "For Deposit Payees Account Only."
Without the indorsement or authority of his co-payee BA Finance, Bitanga deposited the check to his
account with the Asianbank, now merged with herein petitioner Metrobank. Bitanga subsequently
withdrew the entire proceeds of the check.
In the meantime, Bitangas loan became past due, but despite demands, he failed to settle it. BA
Finance eventually learned of the loss of the car and of Malayan Insurances issuance of a crossed
check payable to it and Bitanga, and of Bitangas depositing it in his account at Asianbank and
withdrawing the entire proceeds thereof.

BA Finance thereupon demanded the payment of the value of the check from Asianbank but to no
avail, prompting it to file a complaint before the RTC for sum of money and damages against
Asianbank and Bitanga, alleging that, inter alia, it is entitled to the entire proceeds of the check.
The trial court, holding that Asianbank was negligent in allowing Bitanga to deposit the check to his
account and to withdraw the proceeds thereof, without his co-payee BA Finance having either
indorsed it or authorized him to indorse it in its behalf, found Asianbank and Bitanga jointly and
severally liable to BA Finance following Section 41 of the Negotiable Instruments Law.
The appellate court, affirming the trial courts decision, held that BA Finance has a cause of action
against [it] even if the subject check had not been delivered to BA Finance by the issuer itself. Hence,
the present Petition for Review on Certiorari filed by Metrobank to which Asianbank was, as earlier
stated, merged, faulting the appellate court.

ISSUE:
WON the petitioner is liable for the full value of the check?
HELD:
Yes. Affirming the decision of the CA, the SC held that Section 41 of the Negotiable Instruments Law
provides:
Where an instrument is payable to the order of two or more payees or indorsees who are
not partners, all must indorse unless the one indorsing has authority to indorse for the
others.

Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and release of the
proceeds thereof, despite the absence of authority of Bitangas co-payee BA Finance to endorse it on
its behalf.
The payment of an instrument over a missing indorsement is the equivalent of payment on a forged
indorsement or an unauthorized indorsement in itself in the case of joint payees. Clearly, petitioner,
through its employee, was negligent when it allowed the deposit of the crossed check, despite the
lone endorsement of Bitanga, ostensibly ignoring the fact that the check did not, it bears repeating,
carry the indorsement of BA Finance.

FAR EAST REALTY INVESTMENT INC. v. CA

G.R. No. L-36549 October 5, 1988
Paras, J.
Facts:
Private respondents asked the petitioner to extend an accommodation loan in the sum of P4,500.00.
Respondents delivered to the petitioner a check for P4,500.00, drawn by Dy Hian Tat, and signed by them

at the back of said check, with the assurance that after one month from September 13, 1960, the said
check would be redeemed by them by paying cash in the sum of P4,500.00, or the said check can be
presented for payment on or immediately after one month. Petitioner agreed and extended an
accommodation loan
The aforesaid check was presented for payment to the China Banking Corporation, but said check
bounced and was not cashed by said bank, for the reason that the current account of the drawer thereof
had already been closed. Petitioner demanded payment from the private but the latter failed and refused
to pay notwithstanding repeated demands.
Both private respondents raised the defense that both have been wholly discharged by delay in
presentment of the check for payment.
The Lower Court ruled in favor of the petitioner. However, this was reversed by the CA upon appeal by
the respondents, ruling that the check was not given as collateral to guarantee a loan secured since the
check passed through other hands before reaching the petitioner and the said check was not presented
within a reasonable time. Hence this petition.
Petitioner argues that presentment for payment and notice of dishonor are not necessary as when funds
are insufficient to meet a check, thus the drawer is liable, whether such presentment and notice be
totally omitted or merely delayed.
Issues:
1. Whether or not presentment for payment can be dispensed with
2. Whether or not presentment for payment and notice of dishonor of the questioned check were made
within reasonable time
Held:
1. No. Where the instrument is not payable on demand, presentment must be made on the day it falls
due. Where it is payable on demand, presentment must be made within a reasonable time after issue,
except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a
reasonable time after the last negotiation thereof (Section 71, Negotiable Instruments Law).
2. No. It is obvious in this case that presentment and notice of dishonor were not made within a
reasonable time.
Reasonable time has been defined as so much time as is necessary under the circumstances for a
reasonable prudent and diligent man to do, conveniently, what the contract or duty requires should be
done, having a regard for the rights, and possibility of loss, if any, to the other party (Citizens Bank Bldg.
v. L & E. Wertheirmer 189 S.W. 361, 362, 126 Ark, 38, Ann. Cas. 1917 E, 520).
Notice may be given as soon as the instrument is dishonored; and unless delay is excused must be given
within the time fixed by the law (Section 102, Negotiable Instruments Law).
In the instant case, the check in question was issued on September 13, 1960, but was presented to the
drawee bank only on March 5, 1964, and dishonored on the same date. After dishonor by the drawee
bank, a formal notice of dishonor was made by the petitioner through a letter dated April 27, 1968. Under
these circumstances, the petitioner undoubtedly failed to exercise prudence and diligence on what he
ought to do al. required by law. The petitioner likewise failed to show any justification for the
unreasonable delay.
No hard and fast demarcation line can be drawn between what may be considered as a reasonable or an
unreasonable time, because reasonable time depends upon the peculiar facts and circumstances in
each case (Tolentino, Commentaries and Jurisprudence on Commercial Laws of the Philippines, Vol. I,
Eighth Edition, p. 327).
Doctrine:
Where the instrument is not payable on demand, presentment must be made on the day it falls due.
Where it is payable on demand, presentment must be made within a reasonable time after issue, except
that in the case of a bill of exchange, presentment for payment will be sufficient if made within a
reasonable time after the last negotiation thereof.

 Reasonable Time has been defined as so much time as is necessary under the circumstances for a
reasonable prudent and diligent man to do, conveniently, what the contract or duty requires should be
done, having a regard for the rights, and possibility of loss, if any, to the other party.
No hard and fast demarcation line can be drawn between what may be considered as a reasonable or
an unreasonable time, because reasonable time depends upon the peculiar facts and circumstances in
each case.

LUIS S. WONG vs.COURT OF APPEALS and PEOPLE OF THE PHILIPPINES,

G.R. No. 117857, February 2, 2001
Facts:
Petitioner Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of calendars. After printing
the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would
come around to collect the payments. Petitioner, however, had a history of unremitted collections.
Hence, petitioners customers were required to issue post-dated checks before LPI would accept their
purchase orders. In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00,
intended to guarantee the calendar orders of customers who failed to issue post-dated checks.
However, following company policy, LPI refused to accept the checks as guarantees. Instead, the
parties agreed to apply the checks to the payment of petitioners unremitted collections.
Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and
promised to replace them within 30 days. However, petitioner reneged on his promise. Hence, on June
5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks
were returned for the reason "account closed." Petitioner failed to make arrangements for payment
within five (5) banking days.
Among others, Wong argued that hes not guilty of the crime of charged because one of the elements
of the crime is missing, that is, prima facie presumption of knowledge of lack of funds against the
drawer. According to Wong, this element is lost by reason of the belated deposit of the checks by LPI
which was 157 days after the checks were issued; that he is not expected to keep his bank account
active beyond the 90-day period 90 days being the period required for the prima facie presumption
of knowledge of lack of fund to arise.
Petitioner was charged with three (3) counts of violation of B.P. Blg. 22 and was found guilty by the
trial court, to which the CA affirmed.
Issue:
Whether or not LPI deposited the checks within a reasonable time.
Whether or not Wong is guilty of the crime charged.
Held:
1. Yes. Petitioner avers that since the complainant deposited the checks on June 5, 1986, or 157days
after the December 30, 1985 maturity date, the presumption of knowledge of lack of funds under
Section 2 of B.P. Blg. 22 should not apply to him. He further claims that he should not be expected to
keep his bank account active and funded beyond the ninety-day period.
Under Section 186 of the Negotiable Instruments Law, "a check must be presented for
payment within a reasonable time after its issue or the drawer will be discharged from
liability thereon to the extent of the loss caused by the delay."
By current banking practice, a check becomes stale after more than six (6) months, or 180 days. Private
respondent herein deposited the checks 157 days after the date of the check. Hence said checks cannot
be considered stale.
Only the presumption of knowledge of insufficiency of funds was lost, but such knowledge could still be
proven by direct or circumstantial evidence. As found by the trial court, private respondent did not
deposit the checks because of the reassurance of petitioner that he would issue new checks. Upon his
failure to do so, LPI was constrained to deposit the said checks. After the checks were dishonored,
petitioner was duly notified of such fact but failed to make arrangements for full payment within five (5)

banking days thereof. There is, on record, sufficient evidence that petitioner had knowledge of the
insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks.
2. Yes. Wong is guilty of violating BP 22. The elements of violation of BP 22 pertinent to this case are:
1. The making, drawing and issuance of any check to apply for account or for value;
2. The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient
funds in or credit with the drawee bank for the payment of such check in full upon its presentment;
and
3. The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or
dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop
payment.
Under the second element, the presumption of knowledge of the insufficiency arises if the check is
presented within 90 days from the date of issue of the check. This presumption is lost, as in the case at
bar, by failure of LPI to present it within 90 days. But this does not mean that the second element was not
attendant with respect to Wong. The presumption is lost but lack of knowledge can still be proven, LPI
did not deposit the checks because of the reassurance of Wong that he would issue new checks. Upon his
failure to do so, LPI was constrained to deposit the said checks. After the checks were dishonored, Wong
was duly notified of such fact but failed to make arrangements for full payment within five (5) banking
days thereof. There is, on record, sufficient evidence that Wong had knowledge of the insufficiency of his
funds in or credit with the drawee bank at the time of issuance of the checks.
The Supreme Court also noted that under Section 186 of the Negotiable Instruments Law, a check must
be presented for payment within a reasonable time after its issue or the drawer will be discharged from
liability thereon to the extent of the loss caused by the delay. By current banking practice, a check
becomes stale after more than six (6) months, or 180 days. LPI deposited the checks 157 days after the
date of the check. Hence said checks cannot be considered stale.
THE INTERNATIONAL CORPORATE BANK V. SPOUSES FRANCIS and MA. LUZ GUECO
351 SCRA 516
FACTS:
Gueco spouses obtained a loan from ICB (now Union Bank) to purchase a car. In consideration thereof,
the debtors executed PNs, and a chattel mortgage was made over the car. As the usual story
goes, the spouses defaulted in payment of their obligations and despite the lowering of the
amount to be paid, they still failed to pay. Thereafter, they tendered a managers check in favor
of the bank. Nonetheless, the car was still detained for the spouses refused to sign the joint motion
to dismiss. The bank averred that the joint motion to dismiss is part of standard office procedure
to preclude the filing of other claims.
Because of this, the spouses filed an action for damages
against the bank. And by the time the case was instituted, the check had become stale in the hands of
the bank.

HELD:
The main issue though unrelated to Negotiable Instruments Law in this case was whether or not the
signing of the joint motion to dismiss a part of the compromise agreement between the spouses and the
bank. The answer is no, it is not a part of the compromise agreement entered by the parties. And thus,
the signing is dispensible in releasing the car to the spouses. And on the ancillary issue of the case,
which is the relevant issue for the subject, whether or not the spouses should replace the check they paid
to the bank after it became stale, the answer is yes. It appeared that the check has not been
encashed. The delivery of the managers check did not constitute payment. The original obligation to pay
still exists. Indeed, the circumstances that caused the non-presentment of the check should be
considered to determine who should bear the loss. In this case, ICB held on the check and refused to
encash the same because of the controversy surrounding the signing of the joint motion to dismiss. There
is no bad faith
or negligence on the part of ICB.
A stale check is one which has not been presented for payment within a reasonable time after its
issue. It is valueless and, therefore, should not be paid. A check should be presented for payment
within a reasonable time after its issue. Here, what is involved is a managers check, which is
essentially a banks own check and may be treated as a PN with the bank as a maker. Even assuming that

presentment is needed, failure to present for payment within a reasonable time will result to the
discharge of the drawer only to the extent of the loss caused by the delaybut here there is no loss
sustained. Still, such failure to present on time does not wipe out liability.
Furthermore, under the negotiable instruments law, an instrument not payable on demand must be
presented for payment on the day it falls due. When the instrument is payable on demand, presentment
must be made within a reasonable time after its issue. In the case of a bill of exchange, presentment is
sufficient if made within a reasonable time after the last negotiation thereof. A check must be presented
for payment within a reasonable time after its issue, and in determining what is a "reasonable time,"
regard is to be had to the nature of the instrument, the usage of trade or business with respect to such
instruments, and the facts of the particular case. The test is whether the payee employed suchdiligence
as a prudent man exercises in his own affairs. This is because the nature and theory behind the useof a
check points to its immediate use and payability.