Atty.

Busmente
Sales Negotiable Instruments
Week 1

DOCTRINE: Valid contract of

sale even though the vendee
paid in installment, all elements
Dignos vs. CA 158 SCRA 375 for contract of sale are present,
and there was already an actual
delivery to the vendee by the
vendors and already exercising
possession over the subject land.
DOCTRINE: Contract of sale vs.
Contract to sell: The essence of
a contract of sale is the transfer
of ownership in exchange for a
price paid or promised. A
Tan vs. GR No. contract to sell is a bilateral
Benorilao 153820 contract whereby the prospective
seller expressly reserving the
ownership of the property binds
himself to sell the property
exclusively to the prospective
buyer upon fulfillment of the
condition agreed.
DOCTRINE: Illicit per accidens,
the land could not be subject to
sale since it is protected by the
GR No. L- Public Land Act that grants
Artates vs. Urbi
29421 ownership of the homestead
patent to the owners for 5 years
hence, the land could not be
subject to pay for the damages
accrued by one of the spouses.
DOCTRINE: There was legal
capacity of the spouses
Zambales even though they were
deaf, they were able to hire
prominent and credible lawyers
Heirs of thus, showing that there was no
Enrique misinterpretation nor fraud in
120 SCRA 897
Zambales vs. acquiring their consent. However,
CA the homestead patent is still
covered by the Public Land Act,
thus, ownership is retained.
POSTAL MONEY
ORDERS = X NI
Postal money orders are
not negotiable
instruments. 2 reasons
why:
1. Government is not
engaging in commercial
transactions but merely
Philippine governmental function
Education Co. 39 SCRA 587
vs. Soriano -> negates the nature of
NI that it should be
commercial in character
2. X conform to section 1
of NIL
-> postal laws and
regulations limit
negotiability of PMO
because it only allows 1
indorsement; X circulate
CERTIFICATE OF
TIME DEPOSITS = NI
1) CTDS = negotiable
because it conforms with
Sect 1 of NIL and it is
payable to bearer as
indicated on the face of
the instrument
2) Security bank has
better right over the CTD
because the CTD were
not validly negotiated
Caltex because the intention of
Philippines. Inc. 212 SCRA 448
Angela Dela Cruz is only
vs. CA
to give the instrument as
a pledge to
Caltex date and
description of thing
pledged = X shown on
public instrument while
Security Bank was able
to show through proof
that a deed of
assignment was signed
by both parties

TREASURY
WARRANTS = X NI ->
PAID OUT OF A
PARTICULAR FUND =
NOT
DOCTRINE: It is a contract of a UNCONDITIONAL
sale and not contract of agency According to Section 1,
Quiroga vs. to sell because of the presence Metropolitan must contain an
38 Phil 501 194 SCRA 168
Parsons of essential clauses in the Bank vs. CA unconditional promise or
contract and all essential order to pay a sum
requisites of a contract of sale certain in money.
were present. According to Section 2,
An order to pay pay out
of a particular fund is
NOT unconditional.
Hence, since the source

1
 of payment was a
particular fund (Fund
501), it is not
unconditional, therefore it
is not a negotiable
instrument. Stamped on
its face was the word
non-negotiable
MONEY MARKET
PLACEMENT
NON-NEGOTIABLE
PROMISSORY NOTE =
ASSIGNED
Although it the
promissory note is
marked as non-
negotiable, it can still be
assigned to a person
called an assignee.
DOCTRINE: They were engaged A non-negotiable
in a contract of sale and as a instrument may be not be
Concrete
Aggregates 185 SCRA 461 manufacturer and not a Sesbreno vs. CA 222 SCRA 466 negotiated but it may be
Inc. vs. CTA contractor since their products assigned or transferred,
was available to the general absent an express
public. prohibition against
assignment or transfer
on the face of the
instrument
What is the difference
between an assignment
and NI as to its effect?
- According to the SC, a
NI may be freely
circulated while X in
assignment

SPECIAL
DOCTRINE: In conditional WITHDRAWAL SLIPS
obligations, the acquisition of = X NI
Peoples rights, as well as the
Homesite vs. 133 SCRA 777 CITIBANK AND
extinguishment or loss of those FOJAS ARCA =
CA
already acquired, shall depend SHOULD BEAR OWN
upon the happening of the event RISK
which constitutes the condition.
Withdrawal slips are not
negotiable because it
does not conform to
Section 1. If you look at a
withdrawal slip, it does
not conform with Section
1 (b) (c) and (d)

Firestone Tire (b) must contain an

DOCTRINE: There was no full
purchase price negotiated, thus,
there is no price certain in the
agreement, hence, lacking one of
Toyota Shaw the essential requisites for a
244 SCRA 320
Inc. vs. CA
contract of sale. It cannot bind
appellee in the contract since the
sales representative was the only
one who contracted with the
buyer.
and Rubber Co. 353 SCRA 601 unconditional promise or
vs. CA order to pay a sum
certain in money
(c) Must be payable on
demand, or at a fixed or
determinable future time
(d) Must be payable to
order or to bearer
Withdrawal slips lack the
character of NI because
it cannot be freely
substituted for money.
Respondent bank was
under no obligation to
give immediate notice
that it would not make

2
 payment on subject
withdrawal slips. The
rules governing the
giving of immediate
notice of dishonor of NI
do not apply in this case.
RUBBER CHECK =
DOCTRINE: Ownership is not ESTAFA
transferred by perfection of the CHECK PAYABLE TO
contract but by delivery, either ORDER OF CASH =
actual or constructive. Payment
X NEED
of the purchase price is not
INDORSEMENT
essential to the transfer of
Section 9 (d). - When the
ownership as long as the
name of the payee does
property sold has been delivered.
not purport to be the
Ownership is acquired from the
name of any person, its
Sampaguita moment the thing sold was
is payable to bearer
Pictures vs. delivered to vendee, as when it is Ang Tek Lian vs. A check payable to cash
Jalwindor 93 SCRA 420 placed in his control and 87 SCRA 383
CA is a bearer instrument.
Manufacturers possession.
Inc. Being a bearer
instrument, there is no
need for indorsement.
Mere delivery is enough.
Hence, Ang Tek Liens
defense that he cannot
be held liable for estafa
because he did not
indorse it and so he did
not have any intent is
untenable.
Week 2
Southern
Sugar and DOCTRINE: An option contract to be valid must have consideration distinct
97 Phil 247
Molasses vs. from the price. Thus, it can be withdrawn due to no consideration.
Atlantic Gulf

Atkins, Kroll DOCTRINE: If the option is given without consideration, it is a mere offer of
and Co., Inc. a contract of sale, which is not binding until accepted. If, however, accepted
102 Phil 948
vs. Cua Hian
Tek is made before a withdrawal, it constitutes a binding contract of sale even
though the option was not supported by a sufficient consideration.

Natino vs. IAC 197 SCRA 323 DOCTRINE: An option contract unsupported by consideration distinct from
purchase price is not binding upon the promisor.

DOCTRINE: The court ruled that the contract of "lease with option to buy"
between the petitioner and respondent bank is valid, effective and
enforceable, the price being certain and that there was a consideration distinct
from the price to support the option given to the lease.
Serra vs. CA 229 SCRA 60
In the present case, the consideration is more onerous on the part of the
lessee since it entails transferring of the building and/or improvements on the No New Set of
property to petitioner, should respondent bank fail to exercise its option within Cases
the period stipulated. We do not find the situation in the present case to be
inequitable.

DOCTRINE: The sale of the schooner was not perfected and the purchaser
did not consent to the execution of the deed of transfer for the reason that the
title of the vessel was in the name of one Paulina Giron and not in the name of
Pedro Roman, the alleged owner. If no contract of sale was actually executed
by the parties the loss of the vessel must be borne by its owner and not by a
Roman vs. party who only intended to purchase it and who was unable to do so on
1 Phil 96
Grimalt
account of failure on the part of the owner to show proper title to the vessel
and thus enable them to draw up the contract of sale. The defendant was
under no obligation to pay the price of the vessel, the purchase of which had
not been concluded. The conversations had between the parties and the letter
written by defendant to plaintiff did not establish a contract sufficient in itself to
create reciprocal rights between the parties.
Equatorial
Realty 264 SCRA 483 DOCTRINE: An option is a contract granting a privilege to buy or sell within
Development, an agreed time and at a determined price. It is a separate and distinct contract
3
Inc. vs. Mayfair from that which the parties may enter into upon the consummation of the
Theater, Inc. option. It must be supported by consideration. In the instant case, the right of
first refusal is an integral part of the contracts of lease. The consideration is
built into the reciprocal obligations of the parties

DOCTRINE: The issuance of a sales invoice does not prove transfer of

ownership of the thing sold to the buyer. An invoice is nothing more than a
Norkis detailed statement of the nature, quantity and cost of the thing sold and has
Distributors 193 SCRA 694
been considered not a bill of sale. The critical factor in the different modes of
Inc. vs CA
effecting delivery, which give legal effect to the act, is the actual intention of
the vendor to deliver, and its acceptance by the vendee. Without that
intention, there is no tradition.
Week 3

DOCTRINE: The complaint is an

ordinary civil action for recovery
of the remaining unpaid balance
due on the promissory note (first
option). Had appellee elected the
X DELIVER
foreclosure, it would not have
Southern INSTRUMENT = NO
instituted this case, in court; it
Motors Inc. vs. 2 SCRA 168 EFFECT = NO
would not have caused the
Moscoso LIABILITY
chattel to be attached under rule
59, and had it sold at public Section 16, Sentence #1
auction, in the manner Every contract on an NI
prescribed by Rule 39. Theres is incomplete and
no foreclosure (third option) at revocable until delivery of
all. The public sale was the result the instrument for the
Development
of the court judgment. purpose of giving effect
Bank of Phil. Vs. 219 SCRA 736
Sima Wei thereto. There must be
an intention of
DOCTRINE: Article 1484 is not
transferring title. In this
applicable. The contention that
case, there was no such
what Article 1484 withholds from
intention because Sima
the vendor is the right to recover
Wei did not deliver it at
any deficiency from the
all.
Pascual vs. purchaser after the foreclosure of
Check must be delivered
Universal 61 SCRA 121 the chattel mortgage and not a
Motors Corp. to the payee to give
recourse to the additional
effect thereto.
security put up by a third party to
guarantee the purchasers
performance of his obligation is
untenable. What cannot be
violated directly cannot be
violated indirectly.
WORLD CURRENT
DOCTRINE: The real intention of EVENTS
the parties should prevail. The
nomenclature of the agreement SECT 20 LIABILITY
cannot change its true essence. It OF PERSON SIGNING
is apparent here that the intent of AS AGENT
Filinvest Credit the parties to the subject contract
178 SCRA 188 ARUEGO = X
Corp. vs. CA is for the so-called rentals to be
ACCOMMODATION
the installment payments. Upon
PARTY = X DISCLOSE
the completion of the payments,
PRINICPAL = X SIGN
then the rock crusher, subject
matter of the contract, would AS
become the property of the Philippine Bank REPRESENTATIVE
of Commerce vs. 102 SCRA 530 OF COMPANY =
private respondents.
Aruego
LIABLE
DOCTRINE: Under Article 1484
According to Section 20
of the Civil Code, the vendor of
of NIL, a person signing
personal property, the purchase
in a representative
of which is payable in
Ridad vs. capacity should disclose
installments, has the right, should
Filipinas 120 SCRA 246 his principal or else he is
the vendee default in the payment
Investments personally liable.
of two or more of the agreed
installments, to exact fulfillment by
Requisites under Section
the purchaser of the obligation, or
20:
to cancel the sale, or to foreclose
1) Duly authorized
the mortgage on the purchased
4
 personal property, if one was 2) Adds words indicating
constituted. Whichever right the that he signs as an agent
vendor elects he cannot avail of or as filling a
the other. representative capacity
3) Discloses his principal

In the case at bar,

Aruego did not disclose
that he was signing as a
representative of the
Philippine Education
Foundation Company,
hence he is personally
liable for the drafts
accepted by him and he
may not interpose the
defense that he signed
the drafts merely as an
agent of PEFC.
HOUSING PROJECT,
DOCTRINE: The instant case is TURN KEY
covered by the so-called "Recto FRANSISCO =
Law", now Art. 1484 of the New LIABLE FOR
Civil Code, which provides: "In a
FORGERY
contract of sale of personal
AGENT X DISCLOSE
property the price of which is
NAME OF PRINCIPAL
payable in installments, the
vendor may exercise any of the = PERSONALLY
following remedies: (1) Exact LIABLE
fulfillment of the obligation, should SECT 20 LIABILITY
the vendee fail to pay; (2) Cancel OF PERSON SIGNING
the sale, should the vendee's AS AGENT
failure to pay cover two or more
installments; (3) Foreclose the According to Section 20
chattel mortgage on the thing of NIL, a person signing
sold, if one has been constituted, in a representative
should the vendee's failure to pay capacity should disclose
cover two or more installments. In his principal or else he is
Sps. Dela Cruz this case, he shall have no further personally liable.
GR No. 94828
vs. CA action against the purchaser to
recover any unpaid balance of the Requisites under Section
price. Any agreement to the 20:
contrary shall be void." In this
jurisdiction, the three (3) remedies 1) Duly authorized
provided for in the "Recto Law" Francisco vs. CA 319 SCRA 354
are alternative and not 2) Adds words indicating
cumulative; the exercise of one that he signs as an agent
would preclude the other or as filling a
remedies. Consequently, should representative capacity
the vendee-mortgagor default in
the payment of two or more of the 3) Discloses his principal
agreed installments, the vendor-
mortgagee has the option to avail In the case at bar,
of any of these three (3) Francisco did not indorse
remedies: either to exact the instrument in
fulfillment of the obligation, to accordance with the law.
cancel the sale, or to foreclose Instead of signing Ongs
the mortgage on the purchased name, Fransisco should
chattel, if one was constituted. have signed her own
name and expressly
DOCTRINE: Where the indicated that she was
mortgagor plainly refuses to signing as an agent of
deliver the chattel subject of the HCCC. Thus, the
mortgage upon his failure to pay certification cannot be
Leovillo C. GR No. two or more installments, or if he used by Francisco to
Agustin vs. CA 107846
conceals the chattel to place it validate her act of
beyond the reach of the forgery.
mortgagee, what then is the
mortgagee expected to do? It Sir: Why was the issue of
logically follows as a matter of agency raised in this
5
 common sense, that the case?
necessary expenses incurred in
the prosecution by the mortgagee - Because there was a
of the action for replevin so that MOA that Fransisco can
he can regain possession of the collect receivables from
chattel, should be borne by the GSIS as payment for the
mortgagor. Recoverable loan.
expenses would, in our view,
include expenses properly
incurred in effecting seizure of the
chattel and reasonable attorneys
fees in prosecuting the action for
replevin.

DOCTRINE: The prohibition

mandated by par. (2) of Article
1491 in relation to Article 1409 of
the Civil Code does not apply in
Fiestan vs. CA 185 SCRA 751 the instant case where the sale of
the property in dispute was made
under a special power inserted in
or attached to the real estate
mortgage pursuant to Act No.
3135, as amended.

DOCTRINE: The remedies under

Article 1484 of the Civil Code are
not cumulative but alternative and
exclusive. Should the vendee or
purchaser of a personal property
default in the payment of two or
more of the agreed installments,
the vendor or seller has the option
Borbon II vs. to avail of any of these three
Servicewide 258 SCRA 634
remedies either to exact fulfillment
Specialist, Inc.
by the purchaser of the obligation,
or to cancel the sale, or to
foreclose the mortgage on the
purchased personal property, if
one was constituted. These
remedies have been recognized
as alternative, not cumulative, that
the exercise of one would bar the
exercise of the others.
Week 4

FORGED CHECKS
BPI = COLLECTING
BANK = X LIABLE
DOCTRINE: The controlling FOR LOSS = DEBIT
provision is Article 559 of the Civil FROM JAI ALAIS
Code. It reads thus: 'The ACCOUNT
possession of movable property
acquired in good faith is GR: A collecting bank is
equivalent to a title. Nevertheless, generally NOT liable on a
one who has lost any movable or forged instrument
Dizon vs. has been unlawfully deprived
47 SCRA 160 Jai Alia vs. BPI 66 SCRA 29
Suntay thereof may recover it from the The depositor of a check
person in possession of the as indorser warrants that
same. If the possessor of a it is genuine and in all
movable lost of which the owner respects what it purports
has been unlawfully deprived, has to be. Having indorsed
acquired it in good faith at a public the checks to BPI, Jai
sale, the owner cannot obtain its Alai is deemed to have
return without reimbursing the given the warranty
price paid therefor. prescribed in Sect 66 of
the NIL that every single
one of those checks is
genuine and what is

6
 purports to be. Hence,
since BPI is the
collecting bank, it IS NOT
LIABLE.

Who is a collecting
bank?
- The bank of the
holder/payee o the
instrument
11 YEARS DEAD
REPUBLIC BANK =
RECOVER FROM
EBRADA
CUT OFF RULE
The existence of a forged
signature in the check
will not render void all the
other negotiations of the
check with respect to the
Republic Bank
65 SCRA 680 other parties whose
vs. Ebrada
signature are genuine.
Hence, as last indorser
of the check, petitioner
warranted that she has
good title to it even if she
in fact did not because
the payee of the check
has been dead for 11
years.

FORGERY SECT 23
PRINTING OF
PERSONALIZED
CHECKS
MWSS = GROSS
NEGLIGENCE IN
SUPERVISING
PRINTING OF
CHECKS -> BARRED
DOCTRINE: Ownership in the FROM SETTING UP
thing sold shall not pass to the DEFENSE OF
buyer until full payment of the FORGERY
purchase only if there is a PNB = X RESTORE
stipulation to that effect. AMOUNT TO MWSS
Otherwise, the rule is that such
ownership shall pass from the
MWSS was negligent in
vendor to the vendee upon the
supervising the printing
EDCA actual or constructive delivery of
Publishing and of the personalized
the thing sold even if the
Distributing 184 SCRA 614 MWSS vs. CA 143 SCRA 20 checks. This was the
purchase price has not yet been
Corp. vs. proximate cause of the
Santos paid. Actual delivery of the books
failure to discover the
having been made, Cruz acquired
forgery.
ownership over the books which
he could then validly transfer to
Considering MWSSs
the private respondents. The fact
gross negligence, it is
that he had not yet paid for them
barred from setting up
to EDCA was a matter between
the defense of Forgery
him and EDCA and did not impair
under Section 23.
the title acquired by the private
respondents to the books.
Section 23 When a
signature is forged or
made without the
authority of the person
whose signature it
purports to be, it is wholly
inoperative and no right
to retain the instrument
or to give discharge
7
 therefor, or to enforce
payment thereof against
any party thereto, can be
acquired through or
under such signature,
UNLESS THE PARTY
AGAINST WHOM IT IS
SOUGHT TO ENFORCE
SUCH RIGHT IS
PRECLUDED FROM
SETTING UP THE
FORGERY OR WANT
OF AUTHORITY
WARRANTY STAMP
EQUITABLE =
DRAWEE BANK
COLLECTING BANK =
BDO

STAMPING
GUARANTEE OF
PRIOR
INDROSEMENT BY
BDO AT THE BACK
OF THE CHECK =
ASSUMPTION OF
WARRANTY AS AN
INDORSER =
ESTOPPED FROM
CLAIMING THAT
CHECK ARE NON-
NEGOTIABLE

GR: A collecting bank is

BDO vs. generally not liable on a
157 SCRA 189
Equitable Bank forged instrument
E: A collecting bank is
liable for being the last
indorser and for having a
warranty stamp, all prior
indorsement or lack of
indorsement guaranteed

Hence, although BDO is

the collecting bank, it is
liable for stamping
guarantee of prior
indorsement at the back
of the check.

Basis of doctrine of
estoppel: Forgery in
indorsement last
suffered by collecting
bank or last endorser
Duty of diligence not
owed by drawer to the
collecting bank
TRUSTED
BOOKKEEPER
DOCTRINE: R.A. 6552 governs
ALICIA GALANG
sales of real estate on
installments. It recognizes the
BOTH GEMPESAW
vendor's right to cancel such Gempesaw vs.
Layug vs. IAC 167 SCRA 627 218 SCRA 682 AND PBC WERE
contracts upon failure of the CA
NEGLIGENT = 50- 50
vendee to comply with the terms
RATIO
of the sale, but imposes, chiefly
for the latter's protection, certain
GR: A drawee bank
conditions thereon.
(PBC) who has paid a
8
 forged check on which
an indorsement has been
forged CANNOT charge
the drawers
(Gempesaws) account
for the amount of said
check
E: Where the drawer
(Gempesaw) is guilty of
such negligence which
causes the bank to honor
such check

Both Gempesaw and

PBC were negligent in
this case.

Gempesaw = was
negligent in that she
replied implicitly upon the
honesty and loyalty of
Galang and did not even
verify the accuracy of the
amounts of the checks
she signed, did not
carefully examine the
bank statements, and
discovered the forgeries
only after 2 year.

PBC = was negligent

because it violated its
internal rules that second
endorsements are not
are not be accepted
without the approval of
the branch manager.
Gempesaw cannot set
up the defense of forgery
by reason of her
negligence

Hence, since they are

both negligent, they are
50-50 liable for the loss.
HOSPITAL CASHIER
PROVINCIAL
GOVERNMENT OF
TARLAC = CN ->
BECAUSE IT WAS
DELIVERING CHECKS
TO PANGILINAN
EVEN IF HE WAS
ALREADY RETIRED
PNB = LIABLE TO
PAY 50% OF
203k -> BUT CAN ASK
Associated Bank
252 SCRA 620 FOR
vs. CA
REIMBURSEMENT
FROM ASSOCIATED
BANK BECAUSE OF
THE ABS
WARRANTIES
ASSOCIATED BANK =
COLLECTING BANK
PNB = DRAWEE
BANK

GR: A collecting bank is

generally not liable on a
9
 forged instrument
E: However, a collecting
bank is liable for being
the last indorser
In the case at bar, the
Provincial Government of
Tarlac had contributory
negligence; hence PNB
is liable to pay only 50%.
But since AB is the
collecting bank, it is liable
for being the last
indorser, therefore, PNB
may claim
reimbursement from AB
for the amount it paid.
1. GR: A forged
instrument is wholly
inoperative and no can
gain title through it
E: Sect 23 estoppel
2. Bearer instrument =
indorsement is not
necessary, mere delivery
is enough. Only the
person whose signature
is forged can raise the
defense of forgery
against a HDC
3. Order instrument
(THIS CASE) The
signature of the hospital
(payee) is essential to
transfer title. All parties
prior to the forgery may
raise the defense of
forgery against all parties
subsequent thereto.
4. Checks were indorsed
by AB (collecting bank to
the drawee bank - PNB) -
> Hence, AB is liable to
PNB for the check
bearing the forged
signature
5. Collecting Bank or
Last indorser (AB) =
suffers the loss on the
forged indorsement
6. Drawee Bank (PNB) =
X liable because it
makes no warranty as to
genuineness of the
instrument
7. Duty of the drawee
bank (PNB) to promptly
inform the forgery upon
discovery -> if X, drawee
bank is deemed
negligent and precluded
from recovering from
presentor.
24 HOUR CLEARING
DOCTRINE: (I)n order that this HOUSE REGULATION
Power symbolic delivery may produce
Metrobank vs. 9 days lapsed
Commercial & the effect of tradition, it is
274 SCRA 597 First National 118 SCRA 537 FNCB = LIABLE
Industrial Corp. necessary that the vendor shall Bank FNCB = DRAWEE
vs. CA have had such control over the
BANK
thing sold that xxx its material
MB = COLLECTING

10
 delivery could have been made. It BANK METROBANK =
is not enough to confer upon the X LIABLE = X
purchaser the ownership and the REIMBURSE FNCB
right of possession. The thing sold
must be placed in his control. E TO E: Collecting bank
When there is no impediment is NOT liable despite
whatever to prevent the thing sold having a warranty stamp
passing into the tenancy of the for drawee banks failure
purchaser by the sole will of the to return the forged
vendor, symbolic delivery through check within 24 hours
the execution of a public In the case at bar, FNCB
instrument is sufficient. But if, (drawee bank) did not
notwithstanding the execution of return the check to MB
the instrument, the purchaser (collecting bank) within
cannot have the enjoyment and the 24 hour period after
material tenancy of the thing and clearing. Failure to
make use of it himself or through comply with the 24 hours
another in his name, because regulation = negates
such tenancy and enjoyment are whatever right the
opposed by the interposition of drawee bank (FNCB)
another will, then fiction yields to may have against
reality -- the delivery has not been collecting bank (MB).
effected. Hence, remedy of FNCB
is not against MB but
against the party
responsible for changing
the name of the payee
24 HOUR CLEARING
HOUSE REGULATION
REPUBLIC BANK =
COLLECTING BANK
FNCB = DRAWEE
BANK

GR: A collecting bank is

generally not liable on a
forged instrument
E: A collecting bank is
liable for being the last
indorser and for having a
warranty stamp, all prior
indorsement or lack of
indorsement guaranteed
E TO E: Collecting bank
is NOT liable despite
having a warranty stamp
Republic Bank for drawee banks failure
196 SCRA 100
vs. CA to return the forged
check within 24 hours.

The unqualified
indorsement of the
collecting bank (RB) on
the check should be read
together with the 24 hour
regulation on clearing
house operation.

Hence, in the case at

bar, the drawee bank
(FNCB) failed to return
the forged or altered
check to the collecting
bank (RB) within 24
hours, hence the
collecting bank (RB) is
absolved from liability.
Philippine
Addison vs.
38 Phil 404 DOCTRINE: it is enough to Commercial 350 SCRA 446 PCIB = COLLECTING
Felix and Tioco
International
11
 confer upon the purchaser the Bank vs. CA BANK
ownership and the right of - NEGLIGENT
possession. The thing sold must - Most of the EEs of
be placed in his control. When PCIB were involved in
there is no impediment whatever the syndicate
to prevent the thing sold passing - Negligent in the
into the tenancy of the purchaser selection and hiring of
by the sole will of the vendor, employees
symbolic delivery through the - Liable for 4M
execution of a public instrument is
sufficient. But if, notwithstanding CITIBANK = DRAWEE
the execution of the instrument, BANK
the purchaser cannot have the - NEGLIGENT
enjoyment and material tenancy - Failed to discover that
of the thing and make use of it the clearing stamps do
himself or through another in his not bear any initials
name, because such tenancy and - Negligent in its
enjoyment are opposed by the performance of obligation
interposition of another will, then with Ford
fiction yields to reality the - Checks clearly stated
delivery has not been effected. that they are payable to
CIR yet CB delivered
them to PCIB

FORD =
- CN
- Negligent for failing to
examine passbooks in
timely manner
- Mitigate liability of
PCIB and Citibank
- Employee of Ford was
also at fault
- INTEREST RATE IS
LOWERED FROM 12%
to 6%

PCIB AND CITIBANK

- LIABLE 50-50 BASIS
- Solidary liability
SECRETARY
FORGED CHECK
ILLUSORIO =
PRECLUDED FROM
SETTING UP
FORGERY
MANILA BANKING
DOCTRINE: This Court has held CORPORATION = X
that the execution of a public LIABLE = REFUND
instrument gives rise only to a CHECK
prima facie presumption of ILLUSORIO =
delivery. Such presumption is NEGLIGENT IN
destroyed when the delivery is not ENTRUSTING THE
Ten Forty effected because of a legal
GR No. Ramon Illusorio GR No. CHECKS AND CARDS
Realty &Devt
515212 impediment. Pasagui v. vs. CA 139130
Corp. vs. Cruz TO HIS SECRETARY
Villablanca had earlier ruled that
such constructive or symbolic
GR: When a signature is
delivery, being merely
forged or made without
presumptive, was deemed
the authority of the
negated by the failure of the
person whose signature
vendee to take actual possession
it purports to be, the
of the land sold.
check is wholly
inoperative
E: Unless the party
against whom it is sought
to enforce such right is
precluded from setting up
forgery or want of

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 authority.

Since the proximate

cause of the loss is
Illusorios own
negligence in entrusting
to his secretary his credit
card, checkbooks, and
also he failed to verify his
statement accounts and
did not submit signature
for comparison with the
NBI, he is PRECLUDED
FROM SETTING UP
THE DEFENSE OF
FORGERY
FORGED CHECKS
FEBTC = X EXERCISE
EOD REQUIRED OF
BANKS -> REFUND
SAMSUNG
CONSTRUCTION

A bank is bound to know

the depositors signature.
Since the drawer,
Samsung Construction,
is not precluded by
negligence from setting
up forgery, the general
rule should apply, hence
the check is wholly
Samsung Const.
GR No. inoperative and no right
Co. vs. FEBTC &
129015 to retain the instrument
In Ten Forty vs Cruz and Addison vs Felix, the occupants occupying CA
or to give discharge
the land are in possession in the concept of an owner, therefore it
therefor, or to enforce
constitutes as a legal impediment. Example in the case of Addison, the
payment thereof against
respondent could not acquire the land, for at the time of the sale, the
any party thereto can be
land was subject in a land registration proceeding, where it could mean
acquired through or
that the respondent even if such land was sold to her, she could not
under such signature.
possess nor control over it. Unlike in Power Commercial vs CA, the
Consequently, if a bank
tenants (squatters) are in the possession of land, but not as an owner
pays a forged check, it
but a lessee, therefore it could not constitute as legal impediment, for
must be considered as
they are just mere lessees, it could never defeat the right of a lessor.
paying out of its funds
and cannot charge the
amount so paid to the
account of the depositor.
A bank is liable,
regardless of GF, in
paying a forged check.
IN SHORT!!!
GR: A collecting bank is generally not liable on a forged
instrument (Jai Alai)

- E: However, a collecting bank is liable for being the last

indorser and for having a warranty stamp, all prior
indorsement or lack of indorsement guaranteed (BDO)

o E to E: Collecting bank is NOT liable despite having a

warranty stamp for drawee banks failure to return the forged
check within 24 hours (Republic Bank and MetroBank case)

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