Philippine Education Co. Vs.

Soriano

Postal Money orders are not negotiable instruments because the system is offered by the government as
a public service, not commerce. There are many restrictions not found in the NIL.

Caltex Philippines, Inc. v. Court of Appeals

Negotiability of instruments is determined by what is written on the face thereof.

Metrobank vs. Court of Appeals

Treasury warrants are not negotiable because it states a specific source of fund. It is conditional.

Sesbreno vs. Court of Appeals

Even if an instrument is non-negotiable, it may still be transferred by assignment.

Firestone Tire & Rubber Co. vs. Court of Appeals

Withdrawal slips are non-negotiable because it does not act as a credit instrument and is contrary to the
characteristics of an NI

Ang Tek Lian vs. Court of Appeals

Pay to “cash” does not purport to be the name of a person. It is a bearer instrument under NIL.

Development Bank of the Phils vs. Sima Wei

Payee does not acquire any right until it was delivered to him for the purpose of giving effect thereto.

Philippine Bank of Commerce vs. Aruego

If a person signs an instrument as an agent and does not disclose his principal, he is liable personally.

Fransisco vs. Court of Appeals

A person who signs as an agent must disclose that he is one. Otherwise he is personally liable.

Jai-Alai Coporation vs. BPI

A collecting bank who endorses a check containing forgery is liable therefor because such forgery was
done before its delivery.

Republic Bank vs. Ebrada

Only indorsements which rely on the forgery are inoperative. Subsequent ones are valid.
MWSS vs. CA

Forgery is not presumed—it must be proved clearly and convincingly. MWSS was grossly negligent when
it used its personalized checks instead of the bank’s.

Banco de Oro vs. Equitable Banking Corporation

Facts: Banco De Oro drew six crossed manager’s check payable to certain member establishments of Visa
Card. The checks were deposited with Equitable Bank. After stamping at the bank the usual endorsements,
the checks were sent for clearing through the PCHC. Banco De Oro paid the checks. Thereafter, Banco De
Oro discovered that the endorsements appearing at the back of the Checks were forged and/or
unauthorized, hence he claimed reimbursement from Equitable bank.

Issue: Whether or not Banco de Oro could collect reimbursement from Equitable Bank.

Held: Yes. The petitioner having stamped its guarantee and indorsed is estopped from claiming that the
checks under consideration are not negotiable instruments. The collecting bank or last endorser generally
suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements.

Gempesaw vs. Court of Appeals

FACTS: In the signing of the checks prepared by Galang, Gempensaw didn't bother herself in verifying to
whom the checks were being paid and if the issuances were necessary. She didn't verify the
returned checks of the bank when the latter notifies her of the same. During her two years in business,
there were incidents shown that the amounts paid for were in excess of what should have been
paid. It was also shown that even if the checks were crossed, the intended payees didn't receive the
amount of the checks. This prompted Gempesaw to demand the bank to credit her account for the
amount of the forged checks. The bank refused to do so and this prompted her to file the case against
the bank.

Issue: Whether or not the bank Gempesaw has the right to demand the credit of the amount forged.

HELD: Forgery is a real defense by the party whose signature was forged. As a rule, a drawee bank who
has paid a check on which an indorsement has been forged cannot debit the account of a drawer for
the amount of said check. An exception to this rule is when the drawer is guilty of negligence
which causes the bank to honor such checks. Petitioner in this case has relied solely on the honesty
and loyalty of her bookkeeper and never bothered to verify the accuracy of the amounts of the
checks she signed the invoices attached thereto. And though she received her bank statements,
she didn't carefully examine the same to double-check her payments. Petitioner didn't exercise
reasonable diligence which eventually led to the fruition of her bookkeeper’s fraudulent schemes.

Associated Bank v. Court of Appeals

Facts: The Province of Tarlac maintains a current account with PNB. Checks were issued and received by
the hospital’s administrative officer and cashier, Pangilinan. Panilinan, through the help of Associated
Bank but after forging the signature of the hospital’s chief was able to deposit the checks in his personal
account. The province discovered that the hospital did not receive several allotted checks, and sought the
restoration of the debited amounts from PNB. In turn, PNB demanded reimbursement from Associated
Bank. Both banks resisted payment. Hence, this present action.

Issue: Whether or not Associated Bank should bear the loss.

Held: Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as genuine, valid
and subsisting at the time of indorsement pursuant to Section 66 of the NIL. The stamp guaranteeing prior
indorsement is not an empty rubric; the collecting bank is held accountable for checks deposited by its
customers.

Metrobank vs. First National City Bank

Facts: A check was drawn by Joaquin Cunanan & Company on First National City Bank (FNCB) which was
deposited in Metrobank by Salvador Sales. The check was cleared the same day and the latter withdrew
it and closed his account. Thereafter, upon return of the cancelled check, Joaquin Cunanan & Company
notified the bank that the check was altered from actual amount of P50 raised to P50,000 and over the
name superimpose the word Cash. FNCB notified and reiterated the request to Metrobank for the
reimbursement but the latter was adamant in its refusal, hence, this action.

Issue: Wether or not Metrobank should bear the loss from a materially altered check?

Held: In this case, the check was not returned to Metro Bank in accordance with the 24-hour clearing
house period, but was cleared by FNCB. Failure of FNCB, therefore, to call the attention of Metro Bank to
the alteration of the check in question until after the lapse of nine days, negates whatever right it might
have had against Metro Bank in the light of the said Central Bank Circular. Its remedy lies not against
Metro Bank, but against the party responsible for the changing the name of the payee and the amount on
the face of the check.

Republic Bank vs. Court of Appeals

FACTS: San Miguel Corporation (SMC) drew a check amounting to P240.00 on its account in First National
City Bank (FNCB) in favor of Delgado, a stockholder. Delgado fraudulently altered the amount of the check
to P9,240 after which he endorsed and deposited it with Republic Bank. Republic Bank endorsed the
check to First National City Bank (FNCB), the drawee bank, by stamping on the back of the check “all prior
and / or lack of indorsement guaranteed". Based on such endorsement, FNCB paid the amount to
Republic Bank. Later on, San Miguel informed FNCB of the material alteration of the amount. FNCB
recredited the amount to San Miguel’s account, and demanded refund from Republic Bank. Republic Bank
refused, claiming there was delay in giving it notice of the alteration.

ISSUE: Whether petitioner Republic Bank as the collecting bank should bear the loss resulting from the
altered check.
RULING: When an indorsement is forged, the collecting bank or last indorser, as a general rule, bears the
loss. But the unqualified indorsement of the collecting bank on the check should be read together with
the 24-hour regulation on clearing house operation. Hence, when a drawee bank fails to return a forged
or altered check to the collecting bank within the 24-hour clearing period, the collecting bank is absolved
from liability.

Philippine Commercial International Bank vs. Court of Appeals

FACTS: Ford Philippines filed actions to recover from the drawee bank Citibank and collecting bank PCIB
the value of several checks payable to the Commissioner of Internal Revenue which were embezzled
allegedly by an organized syndicate. What prompted this action was the drawing of a check by
Ford, which it deposited to PCIB as payment and was debited from their Citibank account. It later
on found out that the payment wasn’t received by the Commissioner. Meanwhile, according to the
NBI report, one of the checks issued by petitioner was withdrawn from PCIB for alleged mistake in the
amount to be paid. This was replaced with manager’s check by PCIB, which were allegedly stolen by
the syndicate and deposited in their own account. The trial court decided in favor of Ford.

ISSUE: Has Ford the right to recover the value of the checks intended as payment to CIR?

HELD: The checks were drawn against the drawee bank but the title of the person negotiating the same
was allegedly defective because the instrument was obtained by fraud and unlawful means, and the
proceeds of the checks were not remitted to the payee. The mere fact that the forgery was
committed by a drawer-payor’s confidential employee or agent, who by virtue of his position had
unusual facilities for perpetrating the fraud and imposing the forged paper upon the bank, doesn’t entitle
the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel
against the drawer.

Ramon Ilusorio vs. Court of Appeals

FACTS: Petitioner was a prominent businessman who, because of different business commitments,
entrusted to his then secretary the handling of his credit cards and checkbooks. For a material
period of time, the secretary was able to encash and deposit in her personal account money from
the account of petitioner. Upon knowledge of her acts, she was fired immediately and criminal
actions were filed against her. Thereafter, petitioner requested the bank to restore its money but the
bank refused to do so.

Issue: Whether or not the bank is liable for the forged checks.

HELD: The petitioner doesn’t have a course of action against the bank. To be entitled to damages,
petitioner has the burden of proving negligence on the part of the bank for failure to detect the
discrepancy in the signatures on the checks. It is incumbent upon petitioner to establish the fact of
forgery. It was petitioner who was negligent in this case. He failed to examine his bank statements and
this was the proximate cause of his own damage. Because of this negligence, he is precluded from
setting up the defense of forgery with regard the checks.
Samsung Construction Company Phils., Inc vs FEBTC

Facts: Petitioner maintains a current account with the respondent bank and authorized Jong to sign checks
in behalf of the company. The checks are in the custody of an accountant Kyu. On one occasion, a certain
Gonzaga presented a check to FEBTC purportedly drawn by the Company in the amount of P999,500. The
check was payable to cash and appeared to be signed by Jong. FEBTC upon ascertaining that there are
sufficient fund to cover the check and finding the signature of Jong appears to be genuine paid Gonzaga.
Later, the forgery was discovered. Samsung demanded that the amount paid to Gonzaga be credited back
to its account because they have not authorized the encashment of the check. On the other hand, the
respondent bank claimed negligence on the part of the petitioner in protecting its check.

Issue: Whether or not FEBTC should bear the loss.

Held: The SC held that the FEBTC should bear the loss. Under Sec. 62 of NIL, among the warranties to be
assumed by the acceptor is it admits the existence of the drawer, the genuineness of his signature, and
his capacity and authority to draw the instrument. It is incumbent upon the drawee bank to ascertain the
genuineness of the signature of its depositor. The respondent bank in this case did not exercise the degree
of diligence required to enable it to detect the forgery.

Philippine National Bank vs. Court of Appeals

FACTS: DECS issued a check in favor of Abante Marketing containing a specific serial number, drawn
against PNB. The check was deposited by Abante in its account with Capitol and the latter consequently
deposited the same with its account with PBCOM which later deposited it with petitioner for
clearing. The check was thereafter cleared. However, on a relevant date, petitioner PNB returned the
check on account that there had been a material alteration on it. Subsequent debits were made but
Capitol cannot debit the account of Abante any longer for the latter had withdrawn all the money already
from the account. This prompted Capitol to seek reclarification from PBCOM and demanded the
recrediting of its account.

Issue: Whether or not PBCOM should bear the loss for the check materially altered.

HELD: An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized
change in the instrument that purports to modify in any respect the obligation of a party or an
unauthorized addition of words or numbers or other change to an incomplete instrument relating to the
obligation of the party. In other words, a material alteration is one which changes the items which
are required to be stated under Section 1 of the NIL.

In this case, the alleged material alteration was the alteration of the serial number of the check in
issue—which is not an essential element of a negotiable instrument under Section 1. Therefore, there
being no material alteration in the check committed, PNB could not return the check to PBCOM. It should
pay the same.

Montinola vs. Philippine National Bank

Facts: Ramos, a disbursing officer of USAFE made cash advancements with the provincial Treasurer of
Lanao. The latter gave him a P500,000 check. Thereafter, Ramos presented the check to laya for
encashment. Laya in his capacity as Provincial Treasurer issued a check to Ramos in the sum of P100,000.
Ramos was assigned only P30000 of the value of the document to Montinola and to deposit the balance
to Ramos’s credit. This writing however, mysteriously obliterated and in its place, a supposed indorsement
appearing on the back of the check was made for the whole amount of the check “Agent, Phil. National
Bank” under the signature of Laya purportedly showing that Laya issued the check as agent of the PNB.

Issue: Whether the words, “Agent, Phil. National Bank” were added after Laya had issued the check and
thus constitutes a material alteration which discharges the instrument.

Held: The insertion of the words “Agent, Phil. National Bank,” which converts the bank from a mere
drawer and therefore changes its liability, constitutes a material alteration of the instrument without the
consent of the parties liable thereon, and so discharges the instrument.

Sadaya vs. Sevilla

FACTS: Sadaya, Sevilla and Varona signed solidarily a promissory note in favor of the bank. Varona was
the only one who received the proceeds of the note. Sadaya and Sevilla both signed as co-makers to
accommodate Varona. Thereafter, the bank collected from Sadaya. Varona failed to reimburse.

Consequently, Sevilla died and intestate estate proceedings were established. Sadaya filed a
creditor’s claim on his estate for the payment he made on the note. The administrator resisted the claim
on the ground that Sevilla didn't receive any proceeds of the loan.

Issue: Whether or not Sadaya had the right to demand payment.

HELD: A solidary accommodation maker—who made payment—has the right to contribution, from his
co-accomodation maker, in the absence of agreement to the contrary between them, subject to
conditions imposed by law. This right springs from an implied promise to share equally the burdens
thay may ensue from their having consented to stamp their signatures on the promissory note.

Crisologo-Jose v. CA

Facts: The VP of Mover Enterprises, Inc. issued a check drawn against Traders Royal Bank, payable to
petitioner Ernestina Crisologo-Jose, for the accommodation of his client. Petitioner payee was charged
with the knowledge that the check was issued for the personal account of teh President who merely
prevailed upon the VP to act as co-signatory in accordance with the arrangement of the corporation with
its depository bank.

Issue: Whether or not private respondent, is an accommodation party under NIL and is liable for the
amount of said check.

Held: Yes. To be considered an accommodation party, a person must (1) be a party to the instrument, (2)
not receive value therefor, (3) sign for the purpose of lending his name for the credit of some other person.
It is not a valid defense that the accommodation party did not receive any valuable consideration when
he executed the instrument. He is liable to a holder for value as if the contract was not for
accommodation, in whatever capacity such accommodation party signed the instrument, whether
primarily or secondarily.

Stelco Marketing vs. Court of Appeals

FACTS: Petitioner was engaged in the distribution and sale of structural steel bars. RYL bought on several
occasion large quantities of steel bars but the same were never paid for despite several demands by
petitioner. On a relevant date, RYL gave to Armstrong Industries a check in payment of its obligations.
That check was a company check of another corporation, Steelweld Corporation of the Philippines, signed
by its President, Peter Rafael Limson, and VP. The check was issued by Limson at the behest of his friend,
Romeo Y. Lim, President of RYL. Romeo Lim had asked Limson, for financial assistance, and the latter had
agreed to give Lim a check only by way of accommodation, "only as guaranty but not to pay for anything.
Stelco filed a complaint against RYL and Steelweld for the recovery of sum of money in payment of
the steel bars ordered on the ground that the said check has been given for payment of steel bars.

Issue: Whether or not petitioner as a holder for value may recover from the accommodation party.

HELD: No. An accommodation party is liable to a holder for value. However, Stelco cannot be considered
as a holder for value for there is no evidence whatsoever that the check was ever given to it, or indorsed
to it in any manner or form in payment of an obligation or as security for an obligation, or for any other
purpose before it was presented for payment. STELCO never became a holder for value and that nowhere
in the check itself does the name of Stelco Marketing appear as payee, indorsee or depositor thereof.

Travel-On vs. Court of Appeals

Facts: Travel-On filed suit to collect on 6 checks issued by private respondent with a total face amount of
P115 ,000 as payment of various airline tickets sold to respondent. Private respondent claimed that he
had already fully paid the obligations. He argued that he had issued postdated checks for purposes of
accommodation, as he had in past accorded similar favors to petitioner.

Issue: Whether or not said checks were for accommodation and that private respondent is still liable
considering that petitioner is a holder for value.

Held: Travel-on is not an accommodated party; it realize no value on the checks bounced. It presented
these checks for payment at the drawee bank but the checks bounced. Thus private responded must be
held liable on the six checks here involved. Those checks in themselves constituted evidence of
indebtedness of private respondent.

BPI vs. Court of Appeals

Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a dollar check
owned by Henry Chan in which he affixed his signature at the dorsal side thereof. For this purpose, Napiza
gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold of the withdrawal slip and used it
to withdraw the proceeds of the dollar check, even before the check was cleared and without the
presentation of the bank passbook.

Issues: Whether or not petitioner can hold private respondent liable for the proceeds of the check for
having affixed his signature at the dorsal side as indorser.

Held: A person ‘who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to some other person.’ As such, she is under the
law ‘liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the
instrument knew * * (her) to be only an accommodation party,’ although she has the right, after paying
the holder, to obtain reimbursement from the party accommodated, ‘since the relation between them is
in effect that of principal and surety, the accommodation party being the surety."

It is thus clear that ordinarily private respondent may be held liable as an indorser of the check or even as
an accommodation party. However, to hold private respondent liable for the amount of the check he
deposited by the strict application of the law and without considering the attending circumstances in the
case would result in an injustice and in the erosion of the public trust in the banking system. The interest
of justice thus demands looking into the events that led to the encashment of the check.

Agro Conglomerates, Inc. vs. Court of Appeals

FACTS: Petitioner sold to Wonderland Food Industries two parcels of land. They stipulated under a
Memorandum of Agreement that the terms of payment would be P1,000,000 in cash, P2,000,000 in
shares of stock, and the balance would be payable in monthly installments. Petitioner Soriano
signed as maker the promissory notes payable to the bank. However, the petitioners failed to pay
the obligations as they were due. During that time, the bank was in financial distress and this
prompted it to endorse the promissory notes for collection. The bank gave ample time to petitioners then
to satisfy their obligations.

Issue: Whether or not Agro Conglomerates is liable as accommodation parties.

HELD: Petitioners became liable as accommodation parties. They have the right after paying the
instrument to seek reimbursement from the party accommodated, since the relation between them
has in effect became one of principal and surety.

Furthermore, as it turned out, the contract of surety between Woodland and petitioner was
extinguished by the rescission of the contract of sale of the farmland. With the rescission, there was
confusion in the persons of the principal debtor and surety.

De Ocampo vs. Gatchalian

Facts: Anita Gatchalian was interested in buying a car when she was offered by Manuel Gonzales to a car
owned by the Ocampo Clinic. Anita accepted the offer but Gonzales advised that the owners would only
comply only upon showing of interest on the part of the buyer. Relying on the latter’s representation,
Anita issued a check.

The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted in Gatchalian to issue
a STOP PAYMENT ORDER on the check. It was later found out that Gonzales used the check as payment
to the Vicente de Ocampo for the hospitalization fees of his wife. De Ocampo now demands payment for
the check, which Gatchalian refused, arguing that de Ocampo is not a holder in due course and that there
is no negotiation of the check.

Issue: Whether or not De Ocampo is a holder in due course.

Held: No. De Ocampo is not a holder in due course. Under the circumstances of the case, instead of the
presumption that payee was a holder in good faith, the fact is that it acquired possession of the instrument
under circumstances that should have put it to inquiry as to the title of the holder who negotiated the
check to it. The holder did not show or tell the payee why he had the check in his possession and why he
was using it for the payment of his own personal account which shows that holder's title was defective or
suspicious.

Mesina vs. IAC

FACTS: Jose Go purchased from Associate Bank a Cashier’s Check, which he left on top of the manager’s
desk when left the bank. The bank manager then had it kept for safekeeping by one of its
employees. The employee was then in conference with one Alexander Lim. He left the check in his desk
and upon his return, Lim and the check were gone. When Go inquired about his check, the same
couldn't be found and Go was advised to request for the stoppage of payment which he did. He executed
also an affidavit of loss as well as reported it to the police. Thereafter, petitioner demanded payment on
the said check which she acquired as payment from Alexander Lim in certain transaction.

Issue: Whether or not petitioner is a holder in due course and can demand payment.

HELD: No, petitioner is not a holder in due course. Admittedly, petitioner became the holder of the
cashier's check as endorsed by Alexander Lim who stole the check. He refused to say how and why it was
passed to him. He had therefore notice of the defect of his title over the check from the start. The holder
of a cashier's check who is not a holder in due course cannot enforce such check against the issuing bank
which dishonors the same.

Metropol vs. Sambok

Facts: Dr. Javier executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd. On the same
date, Sambok Motors, a sister company negotiated and indorsed the note in favour of Metropol Financing
& Investment Corporation adding the word “with recourse”. When Dr. Villaruel failed to pay the
promissory note after the demand of Metropol, the latter notified Sambok of the dishonor and demand
payment. Sambok contended that it could not be obliged to pay until after its co-defendant Dr. Villaruel
has been declared insolvent.

Issue: Whether or not Sambok Motors Company, by adding the words “with recourse” becomes a
qualified indorser and therefor does not warrant that if said not is dishonored, it will pay the amount to
the holder.

Held: Recourse means resort to a person who is secondarily liable after the default of the person who is
primarily liable. 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.

Maralit vs. Imperial

Facts: Petitioner Maralit claimed that, as a consequence of the materially altered treasury warrant
encashed by respondent imperial, she was held personally liable by the PNB for the total amount of
P320,287.30. However, respondent claimed that she merely helped a relative, Aida Abengoza, to encash
the treasury warrant and that she did not know the amounts were altered nor did she represent to
petitioner that the treasury warrants are genuine and that upon being informed of dishonor, she
immediately contacted her relative and signed an acknowledgement to pay the total amount of the
treasury warrant.

Issue: Whether or not respondent should be held liable as a general indorse.

Held: The Court symphatizes with the petitioner that there was indeed damage and loss, but said loss is
chargeable to the respondent who upon her indorsements warrant that the instrument is genuine in all
respect what it purports to be and that she will pay the amount thereof in case of dishonor. Thus, while
the MTC found petitioner partly responsible for the encashment of the altered checks, it found
respondent civilly liable because of her indorsements of the treasury warrants, in addition to the fact that
respondent executed a notarized acknowledgment of debt promising to pay the total amount of said
warrants.

Sapiera vs. Court of Appeals

Facts: On several occasions, petitioner Sapiera, a sari-sari store owner, purchased from Monnico Mart
certain grocery items, mostly cigarettes, and paid for them with checks issued by one Arturo de Guzman.
These checks were signed at the back by the petitioner. When presented for payment, the checks were
dishonored because the drawer’s account was already closed. Private respondent Roman Sua informed
De Guzman and petitioner about the dishonor but both failed to pay the value of the checks.

Issue: Whether or not petitioner be required to pay civil indemnity to private respondent.

Held: Yes. It is undisputed that the four (4) checks issued by De Guzman were signed by petitioner at the
back without any indication as to how she should be bound thereby and, therefore, she is deemed to be
an indorser thereof. The NIL clearly provides – Sec. 17. Construction where instrument is ambiguous. ---
Where the language of the instrument is ambiguous, or there are admissions therein, the following rules
of construction apply: x x x (f) Where a signature is so placed upon the instrument that it is not clear in
what capacity the person making the same intended to sign, he is deemed an indorser. x x x

BPI vs. Court of Appeals and Napiza

Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a dollar check
owned by Henry Chan in which he affixed his signature at the dorsal side thereof. For this purpose, Napiza
gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold of the withdrawal slip and used it
to withdraw the proceeds of the dollar check, even before the check was cleared and without the
presentation of the bank passbook.

Issues: Whether or not petitioner can hold private respondent liable for the proceeds of the check for
having affixed his signature at the dorsal side as indorser.

Held: No. It is thus clear that ordinarily private respondent may be held liable as an indorser of the check
or even as an accommodation party.[17] However, to hold private respondent liable for the amount of
the check he deposited by the strict application of the law and without considering the attending
circumstances in the case would result in an injustice and in the erosion of the public trust in the banking
system. The interest of justice thus demands looking into the events that led to the encashment of the
check.

Prudential Bank vs. IAC

FACTS: To effect payment for machineries purchased by Philippine Rayon Mills with Nissho Co., Ltd, the
former opened a commercial letter of credit with the Prudential Bank and Trust Company in favor of
Nissho. Drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through its
correspondent in Japan. Two of these drafts were accepted by Philippine Rayon Mills while the others
were not. Petitioner instituted an action for the recovery of the sum of money it paid to Nissho as
Philippine Rayon Mills was not able to pay its obligations arising from the letter of credit. Respondent
court ruled that with regard to the ten drafts which were not presented and accepted, no valid demand
for payment can be made. Petitioner however claims that the drafts were sight drafts which did not
require presentment for acceptance to Philippine Rayon.

ISSUE: Whether presentment for acceptance of the drafts was indispensable to make Philippine Rayon
liable thereon.

HELD: In the case at bar, the drawee was necessarily the herein petitioner. It was to the latter that the
drafts were presented for payment. There was in fact no need for acceptance as the issued drafts are
sight drafts. Presentment for acceptance is necessary only in the cases expressly provided for in Section
143 of the Negotiable Instruments Law (NIL). In no other case is presentment for acceptance necessary
in order to render any party to the bill liable. Obviously then, sight drafts do not require presentment for
acceptance.
Wong vs. Court of Appeals

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,
which he duly acknowledged in a confirmation receipt he co-signed with his wife.

Petitioner issued several checks in December 1985, initially to guarantee the payment of unremitted
collections, however, upon agreement between the parties, the checks will be applied to unremitted
collections. Before maturity, petitioner advised not to deposit the said checks, but after failing to replace
them, respondent presented the check on June 1986 which was later on dishonoured by reason of
“account closed”. Having failed to pay, a case of violation of BP 22 was filed against petitioner. Petitioner
contends that he is not liable by reason of the delay in presenting the checks.

Issue: Wether or not the petitioner is discharged from the liability on the said checks due to delay in
presentment.

Held: 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,23 or 180 days. Private respondent herein deposited the checks 157 days after the date of the
check. Hence, said checks cannot be considered stale.

The International Corporate Bank vs. Sps. Francis S. Gueco and Ma. Luz E. Gueco

FACTS: Gueco spouses obtained a loan from ICB to purchase a car. In consideration thereof, the debtors
executed PNs, and a chattel mortgage was made over the car. The spouses defaulted in payment
of their obligations whereupon they entered into a compromise agreement with the bank. After some
negotiation and computation, they tendered a manager’s check in favor of the bank based on the
reduced amount. Nonetheless, the car was still detained for the spouses refused to sign the joint motion
to dismiss. Because of this, the spouses filed an action for recovery of the car and damages against the
bank. As the result of the proceeding, the manager’s check tendered to the bank had become stale in the
hands of the bank.

Issue: Whether or not the bank should bear the loss on the stale manager’s check as a result of the
proceedings.

HELD: 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 delay. It does not totally wipe out all liability. In fact, the legal
situation amounts to an acknowledgment of liability in the sum stated in the check. In this case, the Gueco
spouses have not alleged, much less shown that they or the bank which issued the manager’s check has
suffered damage or loss caused by the delay or non-presentment. Definitely, the original obligation to pay
certainly has not been erased.

State Investment House vs. Court of Appeals

Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harris Chua, who issued 3
crossed checks. Subsequently, NSWI entered in an agreement with State Investment House Inc. (SIHI)
where the former discounted several checks including the crossed checks. When the crossed checks were
deposited by SIHI, the checks were dishonoured by reason of insufficient funds and account closed. SIHI
made demands upon Chua to make good said checks by Chua failed.

Issue: Whether SIHI is a holder in due course so as to recover the amounts in the checks from Chua.

Held: No, the act of crossing a 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. His failure to inquire from the holder the purpose prevents him from
being considered in good faith. SIHI, is subject to personal defences for such as the lack of consideration
between the NSWI and Chua.

Bataan Cigar and Cigarette Factory, Inc. vs. Court of Appeals

Facts: Petitioner engaged one of its suppliers King Tim Pua George to deliver bales of tobacco leaf. In
consideration thereof, petitioner issued a crossed check. Relying on the supplier's representation,
petitioner agreed to purchase additional bales of tobacco leaves, despite the supplier's failure to deliver
in accordance with their earlier agreement upon which he issued post dated crossed checks. However,
the supplier sold the said check at a discount to private respondent State Investment House Inc.(SIHI).
Upon failure to deliver said bales of tobacco leaf, petitioner issued a stop order payment on all checks.
SIHI then instituted this action, upon dishonour of the check, on the ground that the same is a holder in
due course and would be able to collect from petitioner.

Issue: Whether or not SIHI, a holder of a crossed check, is a holder in due course and would be able to
collect from petitioner.

Held: It is a settled ruled that crossing of checks should put the holder on inquiry and upon him devolves
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 and is to the
effect that the holder of the check is not a holder in due course. There being failure of consideration which
is a personal defense, cannot be obliged to pay the checks to SIHI who is not a holder in due course.

CItytrust Banking Corporation vs. Court of Appeals

Facts: The case emanated from a complaint filed by respondent Emme for damages against petitioner.
Respondent deposited with petitioner several cash in order to amply cover the post dated checks she
issued. When presented for encahsement upon maturity, all checks were dishonoured due to insufficiency
of funds. Petitioner in its answer averred that it was respondent’s fault that her checks were dishonoured
because the account no. Reflected in the deposit slip which is 2900823 was not her correct no. Which is
29000823.

Issue: Whether of not petitioner is liable for damages on the dishonoured checks.
Held: The depositor expects the bank to treat his account with utmost fidelity, whether such account
consists only of a few hundred pesos or of millions. The bank is engaged in business impressed with public
interest and it is its duty to protect in return its many clients and depositors who transact business with
it. It is under obligation to treat the accounts of its depositors with meticulous care having in mind the
fiduciary nature of their relationship. Hence, nominal damages may be awarded in order that a right of
the plaintiff, which have been violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him.

Ramon Tan vs. Court of Appeals

Facts: Ramon tan secured a cashier’s from Philippine Commercial Industrial Bank (PCIB) payable to his
order. He deposited his check in his account with Rizal Commercial Banking Corporation (RCBC) Binondo.
On the same day, RCBC erroneously sent the same cashier’s check for clearing to the Central Bank which
was returned for having been “missent” or “misrouted.” The next day, RCBC debited the amount covered
by the same cashier’s check from the account of the petitioner. Respondent bank at this time had not
informed the petitioner of its action.

Relying that said checks were honoured, petitioner issued two personal check which was dishonoured
due to insufficiency of funds. Petitioner alleging to have suffered humiliation and loss of face in the
business sector due to the bounced check filed a complaint against RCBC.

Issue: Whether or not RCBC may be held liable for damages upon erroneous debit covered by the cashier’s
check.

Held: A bank cannot exculpate itself from liability for the consequences of the use of wrong deposit slip
resulting in the misrouting of a regional check to the Central Bank for clearing. The bank is not expected
to be infallible but it must bear the blame for not discovering the mistake of its teller despite the
established procedure requiring the papers and bank books to pass through a battery of bank personnel
whose duty it is to check and countercheck them for possible errors. As the result of the negligence of the
bank, the depositor has the right to recover moral damages even if the bank’s negligence may not have
been attended with malice and bad faith if the former suffered mental anguish, serious anxiety,
embarrassment and humiliation.

Papa vs. A.U. Valencia and Co. Inc.

Facts: On 1992, a complaint was against Petitioner Myron C. Papa as attornery-in-fact of Angela M. Butte
sold to respondent Penaroyo through respondent Valencia a parcel of land on 1973. Petitioner appealed
decision, alleging among others that the sale was never “consummated” as he did not encash the check
given by respondents Valencia and Peñarroyo in payment of the full purchase price of the subject lot. He
maintained that what said respondents had actually paid was only the amount of P5,000.00 (in cash) as
earnest money.

Issue: Whether or not the check did not amount to payment.

Held: While it is true that the delivery of a check produces the effect of payment only when it is cashed,
pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor’s
unreasonable delay in presentment. The acceptance of a check implies an undertaking of due diligence in
presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it
will be held to operate as actual payment of the debt or obligation for which it was given.

It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable
irrespective of loss or injury unless presentment is otherwise excused. This is in harmony with Article 1249
of the Civil Code under which payment by way of check or other negotiable instrument is conditioned on
its being cashed, except when through the fault of the creditor, the instrument is impaired. The payee of
a check would be a creditor under this provision and if its non-payment is caused by his negligence,
payment will be deemed effected and the obligation for which the check was given as conditional payment
will be discharged. Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted
in the impairment of the check through his unreasonable and unexplained delay

Allied Banking Corporation vs. Court of Appeals

Facts: Petitioner purchased a letter of credit from respondent G.G. Sportswear Mfg. Corporation. The
export bill was issued by Chekiang First Bank Ltd., Hongkong. With the purchase of the bill, ALLIED credited
GGS the peso equivalent of the aforementioned bill. On the same date, respondents executed their
respective Letters of Guaranty, holding themselves liable on the export bill if it should be dishonored or
retired by the drawee for any reason.

When ALLIED negotiated the export bill to Chekiang, payment was refused due to some material
discrepancies in the documents submitted by GGS relative to the exportation covered by the letter of
credit. Consequently, ALLIED demanded payment from all the respondents based on the Letters of
Guaranty and Surety executed in favor of ALLIED. However, respondents refused to pay, prompting ALLIED
to file an action for a sum of money.

Respondents claim that the petitioner did not protest upon dishonor of the export bill by Chekiang First
Bank, Ltd. According to respondents, since there was no protest made upon dishonor of the export bill,
all of them, as indorsers were discharged under Section 152 of the Negotiable Instruments Law.

Issue: Whether or not protest upon dishonor is necessary on a guarantor of a commercial paper.

Held: No, Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied on by
respondents, is not pertinent to this case. There are well-defined distinctions between the contract of an
indorser and that of a guarantor/surety of a commercial paper, which is what is involved in this case. The
contract of indorsement is primarily that of transfer, while the contract of guaranty is that of personal
security. The liability of a guarantor/surety is broader than that of an indorser. Unless the bill is promptly
presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable
time, he will be discharged from liability thereon. On the other hand, except where required by the
provisions of the contract of suretyship, a demand or notice of default is not required to fix the surety’s
liability. Hence, respondents are liable and protest upon dishonor is not necessary,.
Sincere Villanueva vs. Marlyn Nite

Facts: Respondent took a loan from petitioner. To secure the loan, respondent issued petitioner an
Asian Bank Corporation check. The check was, however, dishonored due to a material alteration when
petitioner deposited the check on due date. Petitioner, however, filed an action for a sum of money
against ABC which was awarded by the court. When respondent went to withdraw from her account on
ABC, she was unable to do so because the trial court had ordered ABC to pay petitioner the value of
respondent’s ABC check. Respondent then filed a petition to annul and set aside the trial court’s
decision ordering ABC to pay petitioner the value of the ABC check.

Issue: Whether or not ABC may be held liable to petitioner for the dishonour of the check.

Held: If a bank refuses to pay a check notwithstanding the sufficiency of funds, the payee-holder cannot
sue the bank because there is no privity of contract exists between the drawee-bank and the payee.
Contracts take effect only between the parties, their assigns and heirs. In this case, the contract of loan
was between petitioner and respondent. No collection suit could prosper without respondent who was
an indispensable party

Bank of the Philippine Island vs. Commissioner of Internal Revenue

Facts: Petitioner Bank of the Philippine Islands (BPI) sold to the Central Bank of the Philippines U.S. dollars.
BPI instructed, by cable, its correspondent bank in New York to transfer U.S. dollars deposited in BPI’s
account therein to the Federal Reserve Bank in New York for credit to the Central Bank’s account therein.
Thereafter, the funds had been credited to its account and the Central Bank promptly transferred to the
petitioner’s account in the Philippines the corresponding amount in Philippine pesos.

Under the NIRC Section 195, it imposes a documentary stamp tax on (1) foreign bills of exchange, (2)
letters of credit, and (3) orders, by telegraph or otherwise, for the payment of money issued by express
or steamship companies or by any person or persons.

Issue: Whether or not the instruction by cable is a bill of exchange included in the activities where
documentary stamp tax is imposed.

Held: From this enumeration, two common elements need to be present: (1) drawing the instrument or
ordering a drawee, within the Philippines; and (2) ordering that drawee to pay another person a specified
amount of money outside the Philippines. What is being taxed is the facility that allows a party to draw
the draft or make the order to pay within the Philippines and have the payment made in another country.

The fact that the funds belong to BPI and were not advanced by the correspondent bank will not remove
the transaction from the coverage of Section 195 of the NIRC. A bill of exchange, when drawn in the
Philippines but payable in another country, would surely be covered by this section. And in the case of a
bill of exchange, the funds may belong to the drawer and need not be advanced by the drawee, as in the
case of a check or a draft. In the description of a draft provided hereunder, the drawee is in possession of
funds belonging to the drawer of the bill.
Citibank NA vs. Sabeniano

Facts: Respondent Modesta R. Sabeniano was a client of both petitioners Citibank and FNCB Finance.
Respondent filed a complaint to recover substantial deposits and money market placements with
petitioner. Petitioners admitted them however when respondent failed to pay her loans with FNCB
Finance despite repeated demands by petitioner Citibank, the latter exercised its right to off-set. In
support of respondent’s assertion that she had already paid whatever loans she may have had with
petitioner Citibank, she presented as evidence provisional receipts for the acceptance of the checks.

Issue: Whether or not petitioner the provisional receipts upon acceptance of checks evidenced the
payment.

Held: Since a negotiable instrument is only a substitute for money and not money, the delivery of such an
instrument does not, by itself, operate as payment. A check, whether a manager’s check or ordinary check,
is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may
be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation
under a judgment. The obligation is not extinguished and remains suspended until the payment by
commercial document is actually realized. Since the provisional receipt was issued for the the receipt of
the check, the same cannot be considered as evidence of payment hence the loan still subsist.

Equitable PCI Bank vs. Rowena Ong

Facts: Sarande deposited in her account with Philippine Commercial International (PCI) Bank a check in
amount of P225,000 which was cleared. Thereafter, Sarande issued a check amounting to P132,000 owing
to a business consideration. On the same day, Ong presented the check to PCI Bank but instead of
depositing it, she requested that proceeds thereof converted into a manger’s check whereupon a
manager’s check was issued. Thereafter, he deposited said check to Equitable Banking Corporation but
was later on dishonored because PCI Bank issued a stop payment owing to Sarande’s account being
closed.

Issue: Whether or not Ong is a holder in due course in the absence of consideration in the issuance of the
manager’s check.

Held:The claim is without basis. Easily discernible is that what Ong obtained from PCI Bank was not just
any ordinary check but a manager’s check. A manager’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 accepting PCI
Bank Check issued by Sarande to Ong and issuing in turn a manager’s check in exchange thereof, PCI Bank
assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law. Hence,
Petitioner is liable to pay the value of the check with damages.

International Corporate Bank vs. Court of Appeals and PNB

Facts: The Ministry of Education and Culture issued 15 checks5drawn against respondent which petitioner
accepted for deposit on various dates. After 24 hours from submission of the checks to respondent for
clearing, petitioner paid the value of the checks and allowed the withdrawals of the deposits. However,
on 14 October 1981, respondent returned all the checks to petitioner without clearing them on the ground
that they were materially altered. Thus, petitioner instituted an action for collection of sums of money
against respondent to recover the value of the checks.

Issue: Whether or not respondent should be held liable for the materially altered checks.

Held: The alterations in the checks were made on their serial numbers. Alteration on serial numbers are
not within the purview of material alteration as provided under Section 125 of NIL for the name of the
government agency which issued the check was prominently printed. Since there were no material
alterations on the checks, respondent as drawee bank has no right to dishonor them and return them to
petitioner, the collecting bank. Thus, respondent is liable to petitioner for the value of the checks, with
legal interest from the time of filing.

Melva Theresa Gonzales vs. Rizal Commercial Banking Corporation

Facts: Gonzales was an employee of Rizal Commercial Banking Corporation (RCBC). A foreign check in the
amount of $7,500 was drawn by Dr. Don Zapanta and payable to Gonzales’ mother, defendant Eva Alviar.
Alviar then endorsed this check. Gonzales presented the foreign check to Olivia Gomez. After examining
this, Olivia Gomez acquiesced to the early encashment of the check and signed the check but indicated
thereon her authority of “up to P17,500.00 only.”

RCBC then tried to collect the check with the drawee bank but was dishonored because of irregular
indorsement. Insisting, RCBC again sent the check to the drawee bank, but this time the check was
returned due to “account closed.” Unable to collect, RCBC demanded from Gonzales the payment of the
peso equivalent of the check that she received.

Issue: Whether or not Gonzales is liable to the subsequent indorser despite of the defect introduced by
the latter which rendered the instrument dishonored.

Held: The foreign drawee bank, Wilshire Center Bank N.A., refused to pay the bearer of this dollar-check
drawn by Don Zapanta because of the defect introduced by RCBC, through its employee, Olivia Gomez.
There is no doubt in the mind of the Court that a subsequent party which caused the defect in the
instrument cannot have any recourse against any of the prior endorsers in good faith.

The holder or subsequent endorser who tries to claim under the instrument which had been dishonored
for “irregular endorsement” must not be the irregular endorser himself who gave cause for the dishonor.
RCBC, which caused the dishonor of the check upon presentment to the drawee bank, through the
qualified endorsementof its employee, Olivia Gomez, cannot hold prior endorsers, Alviar and Gonzales in
this case, liable on the instrument.

Metropolitan Bank and Trust Co. vs. Renato Cabilzo

FACTS: Cabilzo issued a postdated Metrobank Check payable to “CASH”. The check was presented to
Westmont Bank for payment by Mr. Marquez. Metrobank cleared the check for encashment. Thereafter,
it was discovered that Metrobank Check which he issued in the amount of P1, 000.00 was altered to
P91,000.00. Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his account.

Issue: Whether or not petitioner is liable for the amount of the materially altered check.

Held: The bank on which the check is drawn is under strict liability to pay to the order of the payee in
accordance with the drawer’s instructions. Payment made under materially altered instrument is not
payment done in accordance with the instruction of the drawer. When the drawee bank pays a materially
altered check, it violates the terms of the check, as well as its duty to charge its client’s account only
for bona fide disbursements he had made. Since the drawee bank, in the instant case, did not pay
according to the original tenor of the instrument, as directed by the drawer, then it has no right to claim
reimbursement from the drawer, much less, the right to deduct the erroneous payment it made from the
drawer’s account which it was expected to treat with utmost fidelity. Hence, petitioner is liable to
reimburse the drawer for the amount paid.

Theresa MAcalalag vs. People of the Philippines

Facts: Petitioner obtained loans from Grace Estrella. Failure to pay the interest and the loan, she executed
two acknowledgement/affirmation receipts and as security for payment of the aforesaid loans issued two
PNB checks in favor of Estrella. However, when Estrella presented said checks for payment with the
drawee bank, the same were dishonored for the reason that the account against which the same was
drawn was already closed. Estrella sent a notice of dishonor and demand to make good the said checks to
Macalalag, but the latter failed to do so. Hence, Estrella filed two criminal complaints for Violation of Batas
Pambansa Blg. 22.

Issue: Whether or not petitioner is violated BP 22 upon issuance of the check as security.

Held: We have repeatedly held that there is no violation of Batas Pambansa Blg. 22 if the complainant
was actually told by the drawer that he has no sufficient funds in a bank.10Where, as in the case at bar,
the checks were issued as security for a loan, payment by the accused of the amount of the check prior to
its presentation for payment would certainly serve the same purpose. When Estrella presented the checks
for payment, the same were dishonored on the ground that they were drawn against a closed account.
Despite notice of dishonor, petitioner Macalalag failed to pay the full face value of the second check
issued. Only a full payment of the face value of the second check at the time of its presentment or during
the five-day grace period15 could have exonerated her from criminal liability.

BPI vs. Court of Appeals G.R. 136202

FACTS: Templonuevo demanded payment from petitioner of a sum of money representing the
aggregate value of three checks which were erroneously deposited with the petitioner to A.A.
Salazar Construction and Engineering Services account. Finding merit in the demands, the bank then froze
the account of the engineering firm as the account of Salazar was already closed or had insufficient funds.
Failure of any settlement between Templonuevo and Salazar, this prompted the bank to debit the
account of Salazar and give back the money to Templonuevo through cashier’s check. The account of
Salazar was also debited for whatever charges incurred for the issuance of the cashier’s check. Hence,
respondent Salazar filed this action for the recovery of the money.

ISSUE: Whether or not the collecting bank 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: Consequently, petitioner, as the collecting bank, had the right to debit Salazar’s account for the
value of the checks it previously credited in her favor. It is of no moment that the account debited by
petitioner was different from the original account to which the proceeds of the check were credited
because both admittedly belonged to Salazar, the former being the account of the sole proprietorship
which had no separate and distinct personality from her, and the latter being her personal account.
Howver, the bank is liable for damages caused to Salazar as a result of the erroneous debit by reason of
its failure to perform its obligation to treat their depositors with meticulous care, having in mind the
fiduciary nature of their relationship.