(1) PHILIPPINE EDUCATION CO. vs.

SORIANO
39 SCRA 587

FACTS:

Enrique Montinola sought to purchase from Manila Post Office ten money orders of 200php each payable to E. P.
Montinola. Montinola offered to pay with the money orders with a private check. Private check were not generally
accepted in payment of money orders, the teller advised him to see the Chief of the Money Order Division, but instead of
doing so, Montinola managed to leave the building without the knowledge of the teller. Upon the disappearance of the
unpaid money order, a message was sent to instruct all banks that it must not pay for the money order stolen upon
presentment. The Bank of America received a copy of said notice. However, The Bank of America received the money
order and deposited it to the appellant‘s account upon clearance. Mauricio Soriano, Chief of the Money Order Division
notified the Bank of America that the money order deposited had been found to have been irregularly issued and that,
the amount it represented had been deducted from the bank‘s clearing account. The Bank of America debited appellant‘s
account with the same account and give notice by mean of debit memo.

ISSUE:

Whether or not the postal money order in question is a negotiable instrument.

HELD:

No. It is not disputed that the Philippine postal statutes were patterned after similar statutes in force in United States.
The Weight of authority in the United States is that postal money orders are not negotiable instruments, the reason being
that in establishing and operating a postal money order system, the government is not engaged in commercial
transactions but merely exercises a governmental power for the public benefit. Moreover, some of the restrictions
imposed upon money orders by postal laws and regulations are inconsistent with the character of negotiable instruments.
For instance, such laws and regulations usually provide for not more than one endorsement; payment of money orders
may be withheld under a variety of circumstances.

(2) CALTEX PHILS. vs. CA

212 SCRA 448

FACTS:

On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued 280 certificates of time deposit
(CTD) in favor of one Angel dela Cruz who deposited with the bank the aggregate amount of P1.12 million. Anger de la
Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from the latter. Subsequently, dela
Cruz informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance of the
replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from the bank, and in turn, he executed a notarized
Deed of Assignment of Time Deposit in favor of the bank. Thereafter, Caltex presented for verification the CTDs (which
were declared lost by de la Cruz) with the bank. Caltex formally informed the bank of its possession of the CTDs and its
decision to preterminate the same. The bank rejected Caltex‘ claim and demand, after Caltex failed to furnish copy of the
requested documents evidencing the guarantee agreement, etc. In 1983, de la Cruz‘ loan matured and the bank set-off
and applied the time deposits as payment for the loan. Caltex filed the complaint, but which was dismissed.

ISSUES:

1. Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.

2. Whether the CTDs‘ negotiation require delivery only.

HELD:

1. The CTDs in question meet the requirements of the law for negotiability. Contrary to the lower court‘s findings, the
CTDs are negotiable instruments (Section 1). Negotiability or non-negotiability of an instrument is determined from the
writing, i.e. from the face of the instrument itself. The documents provided that the amounts deposited shall be repayable
to the depositor. The amounts are to be repayable to the bearer of the documents, i.e. whosoever may be the bearer at
the time of presentment.
2. Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it
(Caltex) and de la Cruz requires both delivery and indorsement; as the CTDs were delivered to it as security for dela Cruz‘
purchases of its fuel products, and not for payment. Herein, there was no negotiation in the sense of a transfer of title, or
legal title, to the CTDs in which situation mere delivery of the bearer CTDs would have sufficed. The delivery thereof as
security for the fuel purchases at most constitutes Caltex as a holder for value by reason of his lien. Accordingly, a
negotiation for such purpose cannot be effected by mere delivery of the instrument since the terms thereof and the
subsequent disposition of such security, in the event of non-payment of the principal obligation, must be contractually
provided for.

(3) METROBANK vs. CA

194 SCRA 168

FACTS:

Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All warrants were
subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings account in Metrobank
branch in Calapan, Mindoro. They were sent for clearance. Meanwhile, Gomez is not allowed to withdraw from his
account, later, however, ―exasperated‖ over Floria repeated inquiries and also as an accommodation for a ―valued‖ client,
Metrobank decided to allow Golden Savings to withdraw from proceeds of the warrants before it was cleared. In turn,
Golden Savings subsequently allowed Gomez to make withdrawals from his own account.

Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and
demanded the refund by Golden Savings of the amount it had previously withdrawn, to make up the deficit in its account.
The demand was rejected. Metrobank then sued Golden Savings.

ISSUE:

1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount withdraws to make up
with the deficit as a result of the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable instruments

HELD:

No. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that,
consequently, it was safe to allow Gomez to withdraw. Without such assurance, Golden Savings would not have allowed
the withdrawals. Indeed, Golden Savings might even have incurred liability for its refusal to return the money that all
appearances belonged to the depositor, who could therefore withdraw it anytime and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with
Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to determine the validity of the
warrants through its own services. The proceeds of the warrants were withheld from Gomez until Metrobank allowed
Golden Savings itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were genuine
and in all respects what they purport to be,‖ in accordance with Sec. 66 of NIL. The simple reason that NIL is not
applicable to non negotiable instruments, treasury warrants.

No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the word: non negotiable.‖
Moreover, and this is equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501. An
instrument to be negotiable instrument must contain an unconditional promise or orders to pay a sum certain in money.
As provided by Sec 3 of NIL an unqualified order or promise to pay is unconditional though coupled with: 1st, an
indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the
amount; or 2nd, a statement of the transaction which give rise to the instrument. But an order to promise to pay out of
particular fund is not unconditional. The indication of Fund 501 as the source of the payment to be made on the treasury
warrants makes the order or promise to pay ―not conditional‖ and the warrants themselves non-negotiable. There should
be no question that the exception on Section 3 of NIL is applicable in the case at bar.
(4) SESBRENO VS. CA
222 SCRA 466

FACTS:

On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000 with the Philippine
Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of
Confirmation of Sale of a Delta Motor Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt
indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks
drawn against the Insular Bank of Asia and America for P304,533.33 payable on 13 March 1981. The checks were
dishonored for having been drawn against insufficient funds.
Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; but Sesbreno learned that the
security was issued 10 April 1980, maturing on 6 April 1981, has a face value of P2,300,833.33 with PhilFinance as payee
and Delta Motors as maker; and was stamped ―non-negotiable‖ on its face. As Sesbreno was unable to collect his
investment and interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.

ISSUE:

Whether non-negotiability of a promissory note prevents its assignment.

HELD:
Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiated either by
indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form. A negotiable instrument, instead of
being negotiated, may also be assigned or transferred. The legal consequences of negotiation and assignment of the
instrument are different. A negotiable instrument may not be negotiated but may be assigned or transferred, absent an
express prohibition against assignment or transfer written in the face of the instrument. herein, there was no prohibition
stipulated.

(5) FIRESTONE TIRE and RUBBER CO. vs. CA

353 SCRA 601

FACTS:

The check was intended as part of the payment of Ines Chaves‘ debt. When presented to the SecurityBank and Trust Co.
by Firestone, the check was returned for insufficiency of funds. Despite repeated demands, Ines Chaves failed to settle its
account; hence, the suit.

ISSUE:

Whether good faith is required in the issuance of a check.

HELD:

Everyone must in the performance of his duties, observe honesty and good faith. Where a person issuesa postdated
check without funds to cover it and informs the payee of this fact, he cannot be held guilty ofestafa because there is no
deceit. Herein, there is nothing in the record to show that Firestone knew that therewere no funds when it accepted the
check, much less that Firestone agreed to take the check with knowledgeof the lack of funds. As Ines Chavez is guilty
of fraud (bad faith) in the performance of its obligation, it isliable for damages. Its conduct wanting in good faith, the
award of attorney‘s fees was warranted.

(6) ANG TEK LIAN vs. CA

87 SCRA 383

FACTS:

In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He said that he meant to
withdraw from the bank but the bank‘s already closed. In exchange, he gave Lee Hua a check which is ―payable to the
order of ‗cash‘‖. The next day, Lee Hua presented the check for payment but it was dishonored due to insufficiency of
funds. Lee Hua eventually sued Ang Tek Lian. In his defense, Ang Tek Lian argued that he did not indorse the check to
Lee Hua and that when the latter accepted the check without Ang tek Lian‘s indorsement, he had done so fully aware of
the risk he was running thereby.

ISSUE:

Whether or not Ang Tek Lian is correct.

HELD:

No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to the order of ―cash‖ is a check payable
to bearer hence a bearer instrument, and the bank may pay it to the person presenting it for payment without the
drawer‘s indorsement. Where a check is made payable to the order of ‗cash‘, the word ―cash‖ does not purport to be the
name of any person, and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement
of the check, but may pay it to the person presenting it without any indorsement.

(7) DEVELOPMENT BANK OF RIZAL vs. SIMA WEI

219 SCRA 383

FACTS:

Sima Wei acquired a loan from Development Bank of Rizal. He executed and delivered to the former a promissory note,
engaging to pay the petitioner Bank or order the amount of P1,820,000.00 on or before June 24, 1983 with interest at
32% per annum.

Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. On November 18, 1983, Sima Wei
issued two crossed checks payable to petitioner Bank drawn against China Banking Corporation, bearing respectively the
serial numbers 384934, for the amount of P550,000.00 and 384935, for the amount of P500K. The said checks were
allegedly issued in full settlement of the drawer‘s account evidenced by the promissory note.

These two checks were not delivered to the Development Bank. For reasons not shown, these checks came into the
possession of respondent Lee Kian Huat, who deposited the checks without the Development‘s indorsement (forged or
otherwise) to the account of respondent Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers
Bank. The Branch Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent Samson
Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of Producers
Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that
the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter. Hence, Development filed
the complaint for sum of money against Wei and/or Kian Huat, Uy, Tung, Plastic Corporation and the Producers Bank.

Bank alleged that its cause of action was not based on collecting the sum of money evidenced by the negotiable
instruments stated but on quasi-delict — a claim for damages on the ground of fraudulent acts and evident bad faith of
the alternative respondents.

ISSUE:

WON Development Bank has a cause of action against the respondents?

HELD:

No. Unless respondent Sima Wei proves that she has been relieved from liability on the promissory note by some other
cause, petitioner Bank has a right of action against her for the balance due thereon.
The normal parties to a check are the drawer, the payee and the drawee bank. Courts have long recognized the business
custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount
payable and the drawer‘s signature. All the drawer has to do when he wishes to issue a check is to properly fill up the
blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and
unless the check is delivered to the payee or his representative.

A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of
property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable
instrument be delivered to the payee in order to evidence its existence as a binding contract.
Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him. Delivery of
an instrument means transfer of possession, actual or constructive, from one person to another. Without the initial
delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such
delivery must be intended to give effect to the instrument. Without the delivery of said checks to petitioner-payee, the
former did not acquire any right or interest therein and cannot therefore assert any cause of action, founded on said
checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents.
However, insofar as the other respondents are concerned, petitioner Bank has no privity with them. Since petitioner Bank
never received the checks on which it based its action against said respondents, it never owned them (the checks) nor
did it acquire any interest therein.

(8) PHILIPPINE BANK OF COMMERCE vs. ARUEGO

102 SCRA 530

FACTS:

To facilitate payment of the printing of a periodical called ―World Current Events.‖, Aruego, its publisher, obtained a credit
accommodation from the Philippine Bank of Commerce. For every printing of the periodical, the printer collected the cost
of printing by drawing a draft against the bank, said draft being sent later to Aruego for acceptance. As an added security
for the payment of the amounts advanced to the printer, the bank also required Aruego to execute a trust receipt in favor
of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to sell the same with the promise
to turn over to the bank the proceeds of the sale to answer for the payment of all obligations arising from the draft. The
bank instituted an action against Aruego to recover the cost of printing of the latter‘s periodical. Aruego however argues
that he signed the supposed bills of exchange only as an agent of the Philippine Education Foundation Company where
he is president.

ISSUES:

Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange only as an agent
of Philippine Education Foundation Company.

HELD:

Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of the Philippine
Education Foundation Company. For failure to disclose his principal, Aruego is personally liable for the drafts he accepted,
pursuant to Section 20 of the NIL which provides that when a person adds to his signature words indicating that he signs
for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized;
but the mere addition of words describing him as an agent or as filing a representative character, without disclosing his
principal, does not exempt him from personal liability.

(9) FRANCISCO vs. CA

319 SCRA 354

FACTS:

A. Francisco Realty & Development Corporation (AFRDC), of which petitioner Francisco is the president, entered into a
Land Development and Construction Contract with private respondent Herby Commercial & Construction Corporation
(HCCC), represented by its President and General Manager private respondent Ong. Under the contract, HCCC was to be
paid on the basis of the completed houses and developed lands delivered to and accepted by AFRDC and the GSIS.
Sometime in 1979, Ong discovered that Diaz and Francisco, the Vice-President of GSIS, had executed and signed seven
checks of various dates and amounts payable to HCCC for completed and delivered work under the contract. Ong,
however, claims that these checks were never delivered to HCCC. It turned out that Francisco forged the indorsement of
Ong on the checks and indorsed the checks for a second time by signing her name at the back of the checks, petitioner
then deposited said checks in her savings account. A case was brought by private respondents against petitioner to
recover the value of said checks. Petitioner however claims that she was authorized to sign Ong's name on the checks by
virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from
the GSIS, including the questioned checks.
ISSUE:

Whether petitioner cannot be held liable on the questioned checks by virtue of the Certification executed by Ong giving
her the authority to collect such checks from the GSIS.
HELD:

Petitioner is liable. The Negotiable Instruments Law provides that where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as to negative personal liability. An agent, when so signing, should
indicate that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall
be held personally liable. Even assuming that Francisco was authorized by HCCC to sign Ong's name, still, Francisco did
not indorse the instrument in accordance with law. Instead of signing Ong's name, Francisco should have signed her own
name and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by
Francisco to validate her act of forgery.

(10) JAI-ALAI CORP. vs BPI

66 SCRA 29

FACTS:

Petitioner deposited 10 checks in its current account with BPI. The checks which were acquired by petitioner from
Ramirez, a sales agent of the Inter-Island Gas were all payable to Inter-Island Gas Service, Inc. or order. After the
checks had been submitted to Inter-bank clearing, Inter-Island Gas discovered that all the indorsements made on the
checks purportedly by its cashiers were forgeries. BPI thus debited the value of the checks against petitioner's current
account and forwarded to the latter the checks containing the forged indorsements which petitioner refused to accept.

ISSUE:

Whether BPI had the right to debit from petitioner's current account the value of the checks with the forged
indorsements.

HELD:

BPI acted within legal bounds when it debited the petitioner's account. Having indorsed the checks to respondent bank,
petitioner is deemed to have given the warranty prescribed in Section 66 of the NIL that every single one of those checks
"is genuine and in all respects what it purports to be." Respondent which relied upon the petitioner's warranty should not
be held liable for the resulting loss.

**The depositor of a check as indorser warrants that it is genuine and in all respects what it purports to be. Having
indorsed the checks to respondent bank, petitioner is deemed to have given the warranty prescribed in Section 66 of the
NIL that every single one of those checks " is genuine and in all respects what it purports to be."

(11) REPUBLIC V. EBRADA

65 SCRA 680

FACTS:

Ebrada encashed a ―Back Pay Check‖ issued by the Bureau of Treasury at the Republic Bank in Escolta Manila. The
Bureau of Treasury advised the Republic Bank that the instrument was forged. It informed the bank that the original
payee of the check died 11 years before the check was issued. Therefore, there was a forgery of his signature.

This is the sequence:

Martin Lorenzo The deceased person, original ―payee‖, where the forgery happened
Ramon Lorenzo
Delia Dominguez
Mauricia Ebrada Defendant-appelant

Ebrada refuses to return the proceeds of the check claiming that she already gave it to Delia Dominguez. She also claims
that she is a HDC (holder in due course) and that the bank is already estopped.
HELD:

Ebrada should return the proceeds of the check to Republic Bank. As an indorser of the check, she was supposed to have
warranted that she has good title to said check. See Section 65.

Section 23: When the 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 instruments, or to give a discharge 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.

It is only the negotiation based on the forged or unauthorized signature which is inoperative. Therefore:

Martin Lorenzo Signature inoperative

Ramon Lorenzo To Dominguez: operative
Delia Dominguez To Ebrada: operative
Mauricia Ebrada

Drawee bank can collect from the one who encashed the check. If Ebrada performed the duty of ascertaining the
genuiness of the check, in all probability, the forgery wouyld have been detected and the fraud defeated.

(12) MWSS vs. CA

143 SCRA 20

FACTS:

Metropolitan Waterworks and Sewerage System (MWSS) had an account with PNB. When it was still called
NAWASA, MWSS made a special arrangement with PNB so that it may have personalized checks to be printed Mesina
Enterprises. These personalized checks are the ones being used by MWSS in its business transactions.
From March to May 1969, MWSS issued 23 checks to various payees in the aggregate amount of P320,636.26. During the
same months, another set of 23 checks containing the same check numbers earlier issued were forged. The aggregate
amount of the forged checks amounted to P3,457,903.00. This amount was distributed to the bank accounts of three
persons: Arturo Sison, Antonio Mendoza, and Raul Dizon.
MWSS then demanded PNB to restore the amount of P3,457,903.00. PNB refused. The trial court ruled in favor of MWSS
but the Court of Appeals reversed the trial court‘s decision.

ISSUE:

Whether or not PNB should restore the said amount.

HELD:

No. MWSS is precluded from setting up the defense of forgery. It has been proven that MWSS has been negligent in
supervising the printing of its personalized checks. It failed to provide security measures and coordinate the same with
PNB. Further, the signatures in the forged checks appear to be genuine as reported by the National Bureau of
Investigation so much so that the MWSS itself cannot tell the difference between the forged signature and the genuine
one. The records likewise show that MWSS failed to provide appropriate security measures over its own records thereby
laying confidential records open to unauthorized persons. Even if the twenty-three (23) checks in question are considered
forgeries, considering the MWSS‘s gross negligence, it is barred from setting up the defense of forgery under Section 23
of the Negotiable Instruments Law.
The Supreme Court further emphasized that forgery cannot be presumed. It must be established by clear, positive, and
convincing evidence. This was not done in the present case.
(13) BANCO DE ORO SAVING V. EQUITABLE
157 SCRA 188

FACTS:

BDO drew checks payable to member establishments. Subsequently, the checks were deposited in Trencio‘s account with
Equitable. The checks were sent for clearing and was thereafter cleared. Afterwards, BDO discovered that the
indorsements in the back of the checks were forged. It then demanded that Equitable credit its account but the latter
refused to do so. This prompted BDO to file a complaint against Equitable and PCHC. The trial court and RTC held in favor
of the Equitable and PCHC.

HELD:

First, PCHC has jurisdiction over the case in question. The articles of incorporation of PHHC extended its operation to
clearing checks and other clearing items. No doubt transactions on non-negotiable checks are within the ambit of its
jurisdiction. Further, the participation of the two banks in the clearing operations is submission to the jurisdiction of the
PCHC. Petitioner is likewise estopped from raising the non-negotiability of the checks in issue. It stamped its guarantee at
the back of the checks and subsequently presented it for clearing and it was in the basis of these endorsements by the
petitioner that the proceeds were credited in its clearing account. The petitioner cannot now deny its liability as it
assumed the liability of an indorser by stamping its guarantee at the back of the checks. Furthermore, the bank cannot
escape liability of an indorser of a check and which may turn out to be a forged indorsement. Whenever a bank treats the
signature at the back of the checks as indorsements and thus logically guarantees the same as such there can be no
doubt that said bank had considered the checks as negotiable. A long line of cases also held that in the matter of forgery
in endorsements, it is the collecting bank that generally suffers the loss because it had the dutyh to ascertain the
genuineness of all prior indorsements considering that the act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done its duty to ascertain the genuineness of the indorsements.

(14) GEMPESAW vs. CA, PNB

218 SCRA 682

FACTS:

Gempesaw was the owner of many grocery stores. She paid her suppliers through the issuance of checks drawn against
her checking account with respondent bank. The checks were prepared by her bookkeeper Galang. In the signing of the
checks prepared by Galang, Gempensaw did not bother in verifying to whom the checks were being paid and if the
issuances were necessary. She did not even verity 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 did not receive the
amount of the checks. This prompted Gempensaw 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:

Is the drawer precluded from setting up forgery or want of authority as a defense?

HELD:

Yes. AS a general rule forgery is a defense. The applicable rule is found under Sec. 23 of NIL. A party whose signature
was forged was never a party and never gave his consent to the instrument. The instrument can not even be enforced
against him even by a holder in due course. The drawee bank can not charge the account of the drawer whose signature
was forged because he never gave the bank the order to pay. However, the petitioner Gempesaw falls under the
exception. Gempesaw was guilty of such negligence which causes the bank to honor such checks.
In the case at bar, the agent (Galang) was the one who perpetrated the series of forgeries. Had the petitioner been more
prudent under the circumstances, she could have discovered the fraud earlier.
(15) ASSOCIATED BANK V. CA
252 SCRA 620

FACTS:

The province of Tarlac maintains an account with PNB-Tarlac. Part of its funds is appropriated for the benefit of
Concepcion Emergency Hospital. During a post-audit done by the province, it was found out that 30 of its checks weren‘t
received by the hospital. Upon further investigation, it was found out that the checks were encashed by Pangilinan who
was a former cashier and administrative officer of the hospital through forged indorsements. This prompted the provincial
treasurer to ask for reimbursement from PNB and thereafter, PNB from Associated Bank. As the two banks didn't want to
reimburse, an action was filed against them.

HELD:

There is a distinction on forged indorsements with regard bearer instruments and instruments payable to order.
With instruments payable to bearer, the signature of the payee or holder is unnecessary to pass title to the instrument.
Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery
against holder in due course.

In instruments payable to order, the signature of the rightful holder is essential to transfer title to the same instrument.
When the holder‘s signature is forged, all parties prior to the forgery may raise the real defense of forgery against all
parties subsequent thereto. In connection to this, an indorser warrants that the instrument is genuine. A collecting bank
is such an indorser. So even if the indorsement is forged, the collecting bank is bound by his warranties as an indorser
and cannot set up the defense of forgery as against the drawee bank.

Furthermore, in cases involving checks with forged indorsements, such as the case at bar, the chain of liability doesn't
end with the drawee bank. The drawee bank may not debit the account of the drawer but may generally pass liability
back through the collection chain to the party who took from the forger and of course, the forger himself, if available. In
other words, the drawee bank can seek reimbursement or a return of the amount it paid from the collecting bank or
person. The collecting bank generally suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the
party making the presentment has done its duty to ascertain the genuineness of the indorsements.

With regard the issue of delay, a delay in informing the bank of the forgery, which deprives it of the opportunity to go
after the forger, signifies negligence on the part of the drawee bank and will preclude it from claiming reimbursement. In
this case, PNB wasn't guilty of any negligent delay. Its delay hasn't prejudiced Associated Bank in any way because even
if there wasn't delay, the fact that there was nothing left of the account of Pangilinan, there couldn't be any more
reimbursement.

(16) METROBANK V. FNCB

118 SCRA 537

FACTS:

 August 25, 1964: Check dated July 8, 1964 for P50,000.00, payable to CASH, drawn by Joaquin Cunanan &
Company on First National City Bank (FNCB) was deposited with Metropolitan Bank and Trust Company (Metro
Bank) by Salvador Sales.
 Earlier that day, Sales had opened a current account with Metro Bank depositing P500.00 in cash
 Metro Bank immediately sent the cash check to the Clearing House of the Central Bank with the following words
stamped at the back of the check:
 Metropolitan Bank and Trust Company Cleared (illegible) office All prior endorsements and/or Lack of
endorsements Guaranteed.
 The check was cleared the same day. Private respondent paid petitioner through clearing the amount of
P50,000.00, and Sales was credited with the said amount in his deposit with Metro Bank.
 August 26, 1964: Sales made his 1st withdrawal of P480.00 from his current account
 August 28, 1964: he withdrew P32,100.00
 August 31, 1964: he withdrew the balance of P17,920 and closed his account with Metro Bank
 September 3, 1964: FNCB returned cancelled Check to drawer Joaquin Cunanan & Company, together with the
monthly statement of the company's account with FNCB.
  Notified FNCB that the check had been altered
 Actual amount of P50.00 was raised to P50,000.00
 Name of the payee, Manila Polo Club, was superimposed the word CASH.
 September 10, 1964: FNCB wrote Metro Bank asking for reimbursement
 June 29, 1965: FNCB filed for recovery
 CA affirmed Trial Court: Metro Bank to reimburse FNCB

ISSUE:

W/N Metrobank should reimsburse FNCB for the altered amount as indorser

HELD:

NO. FNCB liable. Under the procedure prescribed, the drawee bank receiving the check for clearing from the Central Bank
Clearing House must return the check to the collecting bank within the 24-hour period if the check is defective for any
reason. FNCB failed to do so.

Also, indorsement must be read together with the 24-hour regulation on clearing House Operations of the Central Bank.
Metro Bank cannot be held liable for the payment of the altered check.

Moreover, FNCB did not deny the allegation of Metro Bank that before it allowed the withdrawal of the balance of
P17,920.00 by Salvador Sales, Metro Bank withheld payment and first verified, through its Assistant Cashier Federico Uy,
the regularity and genuineness of the check deposit from Marcelo Mirasol, Department Officer of FNCB, because its
(Metro Bank) attention was called by the fast movement of the account.

(17) REPUBLIC BANK vs. CA

196 SCRA 100

FACTS:

San Miguel Corporation issued a dividend check for P240 in favor of J. Roberto Delgado, a stockholder. Delgado altered
the amount of the check to P9,240. The check was indorsed and deposited by Delgado 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 indorsements guaranteed. Relying on the 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. Hence, the present action.

ISSUE:

Who shall bear the loss resulting from the altered check.

HELD:

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. Thus, when the drawee bank fails to return a forged or altered check to the collecting bank within the 24-hour
clearing period (as provided by Section 4c of Central Bank Circular 9, as amended), the collecting bank is absolved from
liability. The drawee bank, FNCB, should bear the loss for the payment of the altered check for its failure to detect and
warn Republic Bank of the fraudulent character of the check within the 24-hour clearing house rule.

(18) PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. CA

350 SCRA 446

FACTS:

Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as payments of itstaxes, through the
depository bank Insular Bank of Asia and America (later PCIBank). Proceeds of the checkswere never received by the
Commissioner, but were encashed and diverted to the accounts of members of asyndicate, to which Ford‘s General
Ledger Accountant Godofredo Rivera belongs. Upon demand of theCommissioner anew, Ford was forced to make second
payment of its taxes. Thus, Ford instituted actions torecover the amounts from the collecting (depository) and drawee
banks.

ISSUE:

Whether Ford has the right to recover from the collecting bank (PCI Bank) and/or the drawee bank(Citibank) the value of
the checks.

HELD:

The mere fact that forgery was committed by a drawer-payor‘s confidential employee or agent, who byvirtue of his
position had unusual facilities to perpetrate the fraud and imposing the forged paper upon the bank, does not entitle the
bank to shift the loss to the drawer-payor, in the absence of some circumstanceraising estoppel against the drawer. The
rule applies to checks fraudulently negotiated or diverted by theconfidential employees who hold them in
their possession.In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to negotiate the
checks.Furthermore, PCIBank‘s clearing stamp which guarantees prior or lack of indorsements render PCIBankliable as it
allowed Citibank without any other option but to pay the checks. PCIBank, being a depository /collecting bank of the BIR,
had the responsibility to make sure that the crossed checks were deposited in―Payee‘s account only‖ as found in
the instrument.In GR 128604, on the other hand, the switching operation involving the checks, while in transit for
clearing,were the clandestine or hidden actuations performed by the members of the syndicate in their own
personal,covert and private capacity; without the knowledge nor official or conscious participation of PCIBank in
theprocess of embezzlement. Central Bank Circular 580 (1977), however, provide d that any theft affecting itemsin transit
for clearing are for the account of the sending bank (herein PCIBank). Still, Citibank was likewisenegligent in the
performance of its duties as it failed to establish its payment of Ford‘s checks were made indue course and legally in
order. The fact that drawee bank did not discover the irregularity seasonablyconstitutes negligence in carrying out
the bank‘s duty to its depositors.

(19) ILLUSORIO vs. CA

393 SCRA 89

FACTS:

Petitioner was a prominent businessman who, because of different business commitments, entrusted to 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 the petitioner. Upon knowledge of her acts, she was fired
immediately and criminal actions were filed against her. Thereafter, petitioner requested the bank to restore his money
but the bank refused to do so.

ISSUE:

Can petitioner recover his money by contending that his signature was forged thus the instrument was inoperative the
moment it was presented to the bank?

HELD:

No. It is true that Sec. 23 of NIL provides that a forged check is inoperative and would give no authority to the drawee
bank to pay the forged check. It is also a rule that when a signature is forged or made without the authority of the
person whose signature it purports to be, the check is wholly inoperative. No right to retain the instrument, or to give a
discharge therefor, or to enforce payment thereof against any party, can be acquired through or under such signature.
However, the rule does provide for an exception, namely: "unless the party against whom it is sought to enforce such
right is precluded from setting up the forgery or want of authority."
In the instant case, it is the exception that applies. In our view, petitioner is precluded from setting up the forgery,
assuming there is forgery, due to his own negligence in entrusting to his secretary his credit cards and checkbook
including the verification of his statements of account. He failed to examine his bank statements and this was the
proximate case of his own damage.
(20) SAMSUNG CONSTRUCTION CO. vs. FEBTC and CA
GR. No. 129015, August 13, 2004

FACTS:

Samsung Construction held an account with Far East Bank. One day a check worth 900,000, payable to cash, was
presented by one Roberto Gonzaga in the Makati Branch of Far East Bank. The check was certified to be true by Jose
Sempio, the assistant accountant of Samsung, who was also present during the time the check was cashed. Later
however it was discovered that no such check was ever approved by the Samsung‘s head accountant, the president of
the company also never signed any such check.

ISSUES:

Whether or not Far East Bank is liable to reimburse Samsung for cashing out the forged check, which was drawn from the
accountof Samsung

HELD:

Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable Instrument Law states that a forged signature makes
the instrument ―wholly inoperative‖. If payment is made the drawee (Far East) cannot charge it to the drawer‘s account
(Samsung). The fact that the forgery is clever is immaterial. The forged signature may so closely resemble the genuine as
to defy detection by the depositor himself. And yet, if the bank pays the check, it is paying out with its own money and
not of the depositor‘s. This rule of liability can be stated briefly in these words: ―A bank is bound to know its depositor‘s
signature.‖ The accusation of negligence on the part of Samsung was not clearly proven. Absence of proof to the
contrary, the presumption is that the ordinary course of business was followed.

(21) PNB V. CA
256 SCRA 491

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.
PBCOM followed suit by doing the same against PNB. Demands unheeded, it filed an action against PBCOM and the latter
filed a third-party complaint against petitioner.

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. PNB alleges that the alteration was material since it is an
accepted concept that a TCAA check by its very nature is the medium of exchange of governments, instrumentalities and
agencies. As a safety measure, every government office or agency is assigned checks bearing different serial numbers.
But this contention has to fail. The check‘s serial number is not the sole indicia of its origin. The name of the government
agency issuing the check is clearly stated therein. Thus, the check‘s drawer is sufficiently identified, rendering redundant
the referral to its serial number.

Therefore, there being no material alteration in the check committed, PNBcould not return the check to PBCOM. It should
pay the same.
(22) MONTINOLA V. PNB
88 PHIL 178

FACTS:

Ramos, as a disbursing officer of an army division of the USAFE, made cash advancements w/ the Provincial Treasurer of
Lanao. In exchange, the Prov‘l Treasurer of Lanao gave him a P500,000 check. Thereafter, Ramos presented the check to
Laya for encashment. Laya in his capacity as
Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in the sum of P100000, on the Philippines
National Bank as drawee; the P400000 value of the check was paid in military notes.
Ramos was unable to encash the said check for he was captured by the Japanese. But after his release, he sold P30000
of the check to Montinola for P90000 Japanese Military notes, of which only P45000 was paid by the latter. The writing
made by Ramos at the back of the check was to the effect that he was assigning only P30000 of the value of the
document with an instruction to the bank to pay P30000 to Montinola and to deposit the balance to Ramos's credit. This
writing was, 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. At the time of the transfer of this check to Montinola, the check was long overdue by about 2-1/2 years.

Montinola instituted an action against the PNB and the Provincial Treasurer of Misamis Oriental to collect the sum of
P100,000, the amount of the aforesaid check. There now appears on the face of said check the words in parenthesis
"Agent, Phil. National Bank" under the signature of Laya purportedly showing that Laya issued the check as agent of the
Philippine National Bank.

HELD:

The words "Agent, Phil. National Bank" now appearing on the face of the check were added or placed in the instrument
after it was issued by the Provincial Treasurer Laya to Ramos. The check was issued by only as Provincial Treasurer and
as an official of the Government, which was under obligation to provide the USAFE with advance funds, and not as agent
of the bank, which had no such obligation. The addition of those words was made after the check had been transferred
by Ramos to Montinola. The insertion of the words "Agent, Phil. National Bank," which converts the bank from a mere
drawee to a 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.

(23) SADAYA VS SEVILLA

19 SCRA 924

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. The trial court admitted the claim of
Sadaya though this was reversed by the CA.

HELD:

Sadaya could have sought reimbursement from Varona, which is right and just as the latter was the only one who
received value for the note executed. There is an implied contract of indemnity between Sadaya and Varona upon the
former‘s payment of the obligation to the bank.

Surely enough, the obligations of Varona and Sevilla to Sadaya cannot be joint and several. For indeed, had payment
been made by Varona, Varona couldn't had reason to seek reimbursement from either Sadaya or Sevilla. After all, the
proceeds of the loan went to Varona alone.

On principle, 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 that may ensue from their having consented to
stamp their signatures on the promissory note.
The following are the rules:

1. A joint and several accommodation maker of a negotiable promissory note may demand from the
principal debtor reimbursement for the amount that he paid to the payee.

2. A joint and several accommodation maker who pays on the said promissory note may directly demand
reimbursement from his co-accommodation maker without first directing his action against the principal debtor
provided that:
a. He made the payment by virtue of a judicial demand
b. A principal debtor is insolvent.

It was never shown that there was a judicial demand on Sadaya to pay the obligation and also, it was never proven that
Varona was insolvent. Thus, Sadaya cannot proceed against Sevilla for reimbursement.

(24) CRISOLOGO JOSE v CA

177 SCRA 594

FACTS:

Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of marketing and sales; and the
president of the said corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation of his clients, the spouses
Jaime and Clarita Ong, issued check against Traders Royal Bank, payable to defendant Ernestina Crisologo-Jose. Since the
check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z.
Benares, and the treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was
not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check. The check was
issued to defendant Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by said defendant over a certain
property which the Government Service Insurance System (GSIS) agreed to sell to the spouses Jaime and Clarita Ong,
with the understanding that upon approval by the GSIS of the compromise agreement with the spouses Ong, the check
will be encashed accordingly. Since the compromise agreement was not approved within the expected period of time, the
aforesaid check was replaced by Atty. Benares. This replacement check was also signed by Atty. Oscar Z. Benares and by
the plaintiff Ricardo S. Santos, Jr. When defendant deposited this replacement check with her account at Family Savings
Bank, Mayon Branch, it was dishonored for insufficiency of funds. The petitioner filed an action against the corporation for
accommodation party.

ISSUE:

WON the corporation can be held liable as accommodation party?

HELD:

No. Accommodation party liable on the instrument to a holder for value, although such holder at the time of taking the
instrument knew him to be only an accommodation party, does not include nor apply to corporations which are
accommodation parties. This is because the issue or indorsement of negotiable paper by a corporation without
consideration and for the accommodation of another is ultra vires. Hence, one who has taken the instrument with
knowledge of the accommodation nature thereof cannot recover against a corporation where it is only an accommodation
party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee with knowledge
that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he cannot
recover against the corporation thereon. By way of exception, an officer or agent of a corporation shall have the power to
execute or indorse a negotiable paper in the name of the corporation for the accommodation of a third person only if
specifically authorized to do so. Corollarily, corporate officers, such as the president and vice-president, have no power to
execute for mere accommodation a negotiable instrument of the corporation for their individual debts or transactions
arising from or in relation to matters in which the corporation has no legitimate concern. Since such accommodation
paper cannot thus be enforced against the corporation, especially since it is not involved in any aspect of the corporate
business or operations, the inescapable conclusion in law and in logic is that the signatories thereof shall be personally
liable therefor, as well as the consequences arising from their acts in connection therewith.
(25) STELCO MARKETING vs. CA
210 SCRA 51

FACTS:

Stelco Marketing Corporation sold steel bars and GI wires to RYL Construction Inc. worthP126,859.61. RYL gave Stelco‘s ―
sister corporation,‖ Armstrong Industries, a MetroBank check fromSteelweld Corporation (The check was issued
apparently by Steelweld‘s President Peter Rafael Limson toRomeo Lim, President of RYL and Limson‘ friend, by way of
accommodation, as a guaranty and not inpayment of an obligation). When Armstrong deposited the check at its bank, it
was dishonored because it wasdrawn against insufficient funds. When so deposited, the check bore 2 indorsements,
i.e. RYL and Armstrong.A criminal case was instituted against Limson, etc. for violation of BP 22, Subsequently, Stelco
filed a civilcase against RYL and Steelweld to recover the value of the steel products.

ISSUE:

Whether Stelco was a holder in due course of the check issued by Steelweld.

HELD:
The records do not show any intervention or participation by Stelco in any manner or form whatsoeverin the transaction
involving the check, or any communication of any sort between Steelweld and Stelco, orbetween either of them and
Armstrong Industries, at any time before the dishonor of the check. The recorddoes show that after the check was
deposited and dishonored, Stelco came into possession of it in some way.Stelco cannot thus be deemed a holder of the
check for value as it does not meet two essential requisitesprescribed by the statute, i.e. that it did not become ―the
holder of it before it was overdue, and without noticethat it had been previously dishonored,‖ and that it did not take the
check ―in good faith and for value.‖

(26) TRAVEL-ON vs. CA

210 SCRA 352

FACTS:

Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on behalf of airline passengers
and derived commissions therefrom. Miranda was sued by petitioner to collect on the six postdated checks he issued
which were all dishonored by the drawee banks. Miranda, however, claimed that he had already fully paid and even
overpaid his obligations and that refunds were in fact due to him. He argued that he had issued the postdated checks not
for the purpose of encashment to pay his indebtedness but for purposes of accommodation, as he had in the past
accorded similar favors to petitioner. Petitioner however urges that the postdated checks are per se evidence of liability
on the part of private respondent and further argues that even assuming that the checks were for accommodation,
private respondent is still liable thereunder considering that petitioner is a holder for value.

ISSUE:

Whether Miranda is liable on the postdated checks he issued even assuming that said checks were issued for
accommodation only.

HELD:

There was no accommodation transaction in the case at bar. In accommodation transactions recognized by the
Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party, by issuing or indorsing
a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the
accommodated party. The latter, in other words, receives or realizes full value which the accommodated party then must
repay to the accommodating party. But the accommodating party is bound on the check to the holder in due course who
is necessarily a third party and is not the accommodated party. In the case at bar, Travel-On was payee of all six (6)
checks, it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not
an accommodated party; it realized no value on the checks which bounced. Miranda must be held liable on the checks
involved as petitioner is entitled to the benefit of the statutory presumption that it was a holder in due course and that
the checks were supported by valuable consideration.
**In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his
credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in due
course, who gave full value therefor to the accommodated party. In the case at bar, Travel-On was the payee of all six
(6) checks, it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was
not an accommodated party; it realized no value on the checks which bounced.

(27) BANK OF PHILIPPINE ISLANDS vs. CA

326 SCRA 641

FACTS:

Benjamin Napiza maintains an account with the Bank of the Philippine Islands (BPI). In 1987, Napiza was approached by
Henry Chan and the latter gave him a $2,500 Continental Bank Manager‘s check. Chan asked if Napiza can deposit the
check to his (Napiza‘s BPI account) by way of accommodation and for the purpose of clearing the said check. Napiza
agreed and so he deposited the check on September 3, 1987. Napiza then delivered a signed blank withdrawal slip to
Chan with the condition that the $2,500.00 may only be withdrawn if the check cleared. For some reason, the withdrawal
slip ended up in the hands of one Ruben Gayon who went to BPI and successfully withdrew the $2,500.00. At the time of
the withdrawal, the check was not yet cleared. Then days later, BPI was notified by the drawee bank named in the check
that the check is actually a counterfeit.

ISSUE:

Whether or not Napiza may be held liable to refund the amount of the check.

HELD:

No.

The Supreme Court ruled that ordinarily, Napiza would have been liable because he is an accommodation indorser. But
due to the attendant circumstances, Napiza is discharged from liability.

The withdrawal slip indicates as well as the rules promulgated by BPI that withdrawal from the bank should be
accompanied by the presentment of the account holder‘s (Napiza‘s) savings bankbook. This was not done so in the case
at bar because Gayon was able to withdraw without it. Further, BPI allowed the withdrawal even before the check
cleared. BPI already credited the $2,500.00 to Napiza‘s account even without the drawee bank clearing the check. This is
contrary to common banking practices and because of such negligence and lack of diligence, BPI, as the collecting bank,
shall suffer the loss.

(28) AGRO CONGLOMERATES vs. CA

348 SCRA 450

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 thebalance would be payable
in monthly installments. Thereafter, an addendum was executed between them, qualifying the cash payment. Instead of
cash payment, the vendee authorized the vendor to obtain a loan from the financier on which the vendee bound itself to
pay for. This loan was to cover for the payment of P1,000,000. This addendum was not notarized.

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.

The trial court held in favor of the bank. It didn't find merit to the contention that Wonderland was the one to be held
liable for the promissory notes.
HELD:

First, there was no contract of sale that materialized. The original agreement was that Wonderland would pay cash and
petitioner would deliver possession of the farmlands. But this was changed through an addendum, that petitioner would
instead secure a loan and the settlement of the same would be shouldered by Wonderland.

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 oneof 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 ofthe principal debtor and
surety. The addendum thereon likewise lost its efficacy.

(29) DE OCAMPO vs. GATCHALIAN

3 SCRA 596

FACTS:

Matilde Gonzales was a patient of the De Ocampo Clinic. She incurred a debt amounting to P441.75. Her husband,
Manuel Gonzales designed a scheme in order to pay off this debt: In 1953, Manuel went to a certain Anita Gatchalian.
Manuel purported himself to be selling the car of De Ocampo. Gatchalian was interested in buying said car but Manuel
told her that De Ocampo will only sell the car if Gatchalian shows her willingness to pay for it. Manuel advised Gatchalian
to draw a check of P600.00 payable to De Ocampo so that Manuel may show it to De Ocampo and that Manuel in the
meantime will hold it for safekeeping. Gatchalian agreed and gave Manuel the check. After that, Manuel never showed
himself to Gatchalian.

Meanwhile, Manuel gave the check to his wife who in turn gave the check to De Ocampo as payment of her bills with the
clinic. De Ocampo received the check and even gave Matilde her change (sukli). On the other hand, since Gatchalian
never saw Manuel again, she placed a stop-payment on the P600.00 check so De Ocampo was not able to cash on the
check. Eventually, the issue reached the courts and the trial court ordered Gatchalian to pay de Ocampo the amount of
the check.

Gatchalian argued that De Ocampo is not entitled to payment because there was no valid indorsement. De Ocampo
argued tha he is a holder in due course because he is the named payee.

ISSUE:

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

HELD:

No. Section 52 of the Negotiable Instruments Law, defines holder in due course, thus:
A holder in due course is a holder who has taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it had been previously
dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect
in the title of the person negotiating it.

The Supreme Court emphasized that if one is such a holder in due course, it is immaterial that he was the payee and an
immediate party to the instrument. The Supreme Court however ruled that De Ocampo is not a holder in due course for
his lack of good faith. De Ocampo should have inquired as to the legal title of Manuel to the said check. The fact that
Gatchalian has no obligation to De Ocampo and yet he‘s named as the payee in the check hould have apprised De
Ocampo; that the check did not correspond to Matilde Gonzales‘ obligation with the clinic because of the fact that it was
for P600.00 – more than the indebtedness; that why was Manuel in possession of the check – all these gave De Ocampo
the duty to ascertain from the holder Manuel Gonzales what the nature of the latter‘s title to the check was or the nature
of his possession.
(30) MESINA vs. IAC
145 SCRA 497

FACTS:

Jose Go maintains an account with Associated Bank. He needed to transfer P800,000.00 from Associated Bank to another
bank but he realized that he does not want to be carrying that cash so he bought a cashier‘s check from Associated Bank
worth P800,000.00. Associated Bank then issued the check but Jose Go forgot to get the check so it was left on top of the
desk of the bank manager. The bank manager, when he found the check, entrusted it to Albert Uy for the later to safe
keep it. The check was however stolen from Uy by a certain Alexander Lim.
Jose Go learned that the check was stolen son he made a stop payment order against the check. Meanwhile, Associated
Bank received the subject check from Prudential Bank for clearing. Apparently, the check was presented by a certain
Marcelo Mesina for payment. Associated Bank dishonored the check.When asked how Mesina got hold of the check, he
merely stated that Alfredo Lim, who‘s already at large, paid the check to him for ―a certain transaction‖.

ISSUE:

Whether or not Mesina is a holder in due course.

HELD:

No.

Admittedly, Mesina became the holder of the cashier‘s check as endorsed by Alexander Lim who stole the check. Mesina
however refused to say how and why it was passed to him. Mesina 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. The check in question suffers from the infirmity of not having been properly
negotiated and for value by Jose Go who is the real owner of said instrument.

(31) METROPOL vs. SAMBOK MOTORS CO.

120 SCRA 864

FACTS:

Dr. Villareal issued a promissory note in favor of Sambok, which waspayable in monthly installments. The promissory note
was then indorsedto Metropol. Villareal defaulted payment and this prompted Metropol torun after Sampol. Sampol
alleged that it is not liable since it was aqualified indorser through the wordings it inserted in its indorsement—
withrecourse.

HELD:

A qualified indorsement constitutes the indorser a mere assignor of the titleto the instrument. It may be made by adding
to the indorser's signaturethe words "without recourse" or any words of similar import. Such anindorsement relieves the
indorser of the general obligation to pay if theinstrument is dishonored but not of the liability arising from warranties
onthe instrument as provided in Section 65 of the Negotiable InstrumentsLaw already mentioned herein. However,
appellant Sambok indorsed thenote "with recourse" and even waived the notice of demand, dishonor,protest and
presentment.

"Recourse" means resort to a person who is secondarily liable after thedefault of the person who is primarily liable.
Appellant, by indorsing thenote "with recourse" does not make itself a qualified indorser but a generalindorser who is
secondarily liable, because by such indorsement, it agreedthat if Dr. Villaruel fails to pay the note, plaintiff-appellee can
go after saidappellant. The effect of such indorsement is that the note was indorsedwithout qualification. A person who
indorses without qualification engagesthat on due presentment, the note shall be accepted or paid, or both as thecase
may be, and that if it be dishonored, he will pay the amount thereof to the holder. Appellant Sambok's intention of
indorsing the note withoutqualification is made even more apparent by the fact that the notice ofdemand, dishonor,
protest and presentment were an waived. The wordsadded by said appellant do not limit his liability, but rather confirm
hisobligation as a general indorser.
(32) MARALIT vs. IMPERIAL
301 SCRA 605

FACTS:

Maralit filed three complaints for estafa through falsification of commercial documents through reckless imprudence
against respondent Imperial. Maralit alleged that she was assistant manager of the Naga City branch of the Philippine
National Bank (PNB); that on May 20, 1992, June 1, 1992, and July 1, 1992 respondent Imperial separately deposited in
her savings account at the PNB three United States treasury warrants and on the same days withdrew their peso
equivalent of P59,216.86, P130,743.60, and P130,326.00, respectively; and that the treasury warrants were subsequently
returned one after the other by the United States Treasury, on the ground that the amounts thereof had been altered.
Maralit claimed that, as a consequence, she was held personally liable by the PNB for the total amount of P320,287.30.

Judgment of the MTC was rendered as follows:

WHEREFORE, in view of the foregoing considerations, the Court finds no ground to hold the accused criminally
liable for which she is charged, hence Corazon Jesusa L. Imperial is ACQUITTED of all the charges against
her. The accused however is civilly liable as indorser of the checks which is (sic) the subject matter of the
criminal action.

The decision having become final and executory, the MTC ordered the enforcement of the civil liability against the
accused arising from the criminal action.
Imperial moved to quash the writ of execution on the that the judgment did not order the accused to pay a specific
amount of money to a particular person as it merely adjudicated the criminal aspect but not the civil aspect hence there
was no judgment rendered which can be the subject of execution.

ISSUE:

Is Imperial liable to pay the amount in the treasury warrant?

HELD:

Yes. The loss is chargeable to the accused 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. (Sec. 66 Negotiable
Instrument Law)

It is argued that the decision of the MTC did not order respondent, as accused in the case, to pay a specific amount of
money to any particular person such that it could not be an adjudication of respondent‘s civil liability. However, the
ambiguity can easily be clarified by a resort to the text of the decision or, what is properly called, the opinion part. Doing
so, it is clear that it can only be to petitioner that respondent was made liable as the former was the offended party in the
case. As for what amount respondent is liable, it can only be for the total amount of the treasury warrants subject of the
case, determined according to their peso equivalent, in the decision of the MTC.

(33) SAPIERA vs. CA

314 SCRA 370

FACTS:

Remedios Nota Sapiera, a sari-sari store owner, on several occasions, purchased from Monrico Mart grocery items, mostly
cigarettes and paid for them with checks issued by one Arturo de Guzman. These checks were signed by Sapiera on the
back. When they were presented for payment, the checks were dishonoured because the drawer‘s account was already
closed. Respondent Ramon Samua informed Arturo de Guzman and petitioner but both failed to pay. Hence, four charges
of Estafa were filed against Sapiera while two counts of BP 22 was filed against Arturo de Guzman. These cases were
consolidated. On December 27 1999, the RTC Dagupan city acquitted Sapiera of all charges of Estafa but did not rule on
the civil aspect of the case. Arturo de Guzman was held liable for the 2 BP 22 cases and was ordered to pay Sua 167,150
Php as civil indemnity and was sentenced for imprisonment of 6 months and 1 day. Respondent Sua appealed regarding
the civil aspect of Sapiera‘s case but the courtdenied it saying that the acquittal of petitioner was absolute. Respondent
filed a petition for mandamus with the Court of Appeals praying that the appeal be given due course, this was granted.
On January 1996, CA rendered a decision ordering Sapiera to pay 335000 php to Sua. Sapiera filed a motion for
reconsideration. The CA the issued a resolution noting that the admission of both parties that Sua already collected
125000 for the 2 check paid by De Guzman on the BP 22 cases. It appears that the payment should be deducted on her
liability as they involved the same two checks which Sapiera was involved in. the CA deducted the liability to 210,000 Php.
Hence this petition by Sapiera claiming that the CA erred in rendering such decision because she was acquitted and the
fact from which the civil liability exists did not exist.

ISSUE:

Whether or not Sapiera could be held civilly liable when she was acquitted in the criminal charges against her.

HELD:

Yes. Sec. 2 of rule 111 of the rules of court provides that extinction of the penal action does not carry with it the
extinction of the civil, unless this shows that the fact from which the civil liability is based is proven to not have existed
because of such acquittal. Civil liability is not extinguished where: (a) the acquittal is not based on reasonable doubt. (b)
Where the court expressly declares that the liability is not criminal but only civil, (c) where the civil liability is not derived
from or based on the criminal act. The decision of the case would show that the acquittal was based on failure of the
prosecution to present sufficient evidence showing conspiracy between her and De Guzman. Since all checks were signed
by Sapiera on the back, sec 17 of Negotiable instruments law says that she would be considered an indorser of the bill of
exchange and under section 66 thereof would be held liable for breach of warranty and is held liable to pay the holder
who may be compelled to pay the instrument.

(34) BPI vs. CA and Napiza

326 SCRA 641

FACTS :

Benjamin Napiza maintains an account with the Bank of the Philippine Islands (BPI). In 1987, Napiza was approached by
Henry Chan and the latter gave him a $2,500 Continental Bank Manager‘s check. Chan asked if Napiza can deposit the
check to his (Napiza‘s BPI account) by way of accommodation and for the purpose of clearing the said check. Napiza
agreed and so he deposited the check on September 3, 1987. Napiza then delivered a signed blank withdrawal slip to
Chan with the condition that the $2,500.00 may only be withdrawn if the check cleared. For some reason, the withdrawal
slip ended up in the hands of one Ruben Gayon who went to BPI and successfully withdrew the $2,500.00. At the time of
the withdrawal, the check was not yet cleared. Then days later, BPI was notified by the drawee bank named in the check
that the check is actually a counterfeit.

ISSUE:

Whether or not Napiza may be held liable to refund the amount of the check.

HELD:

No. The Supreme Court ruled that ordinarily, Napiza would have been liable because he is an accommodation indorser.
But due to the attendant circumstances, Napiza is discharged from liability.
The withdrawal slip indicates as well as the rules promulgated by BPI that withdrawal from the bank should be
accompanied by the presentment of the account holder‘s (Napiza‘s) savings bankbook. This was not done so in the case
at bar because Gayon was able to withdraw without it. Further, BPI allowed the withdrawal even before the check
cleared. BPI already credited the $2,500.00 to Napiza‘s account even without the drawee bank clearing the check. This is
contrary to common banking practices and because of such negligence and lack of diligence, BPI, as the collecting bank,
shall suffer the loss.

(35) PRUDEBTIAL BANK vs. IAC

216 SCRA 257

FACTS:

Salvador B. Chaves drew a check on the Philippine National Bank for P11,000 in favor of La Insular. This check was
indorsed by the limited partners of La Insular, and then deposited by Salvador B. Chaves in his current account with the
plaintiff, Asia Banking Corporation. Another check was drawn and deposited in similar fashion. The amount represented
by both checks was used by Salvador B. Chaves after they were deposited in the plaintiff bank, by drawing checks on the
plaintiff. Subsequently these checks were presented by the plaintiff to the Philippine National Bank for payment, but the
latter refused to pay on the ground that the drawer, Salvador B. Chaves, had no funds therein. The lower court sentenced
the defendant, as indorser, to pay the plaintiff P11,000. From this judgment the defendant appealed.

ISSUE:

Whether or not the defendant‘s liability as an indorser is extinguished for lack of notice

HELD:

Yes. Section 89 of the Negotiable Instruments Law provides that, when a negotiable instrument is dishonored for non-
acceptance or non-payment, notice thereof must be given to the drawer and each of the indorsers, and those who are
not notified shall be discharged from liability, except where this act provides otherwise. According to this, the indorsers
are not liable unless they are notified that the document was dishonored. Then, under the general principle of the law of
procedure, it will be incumbent upon the plaintiff, who seeks to enforce the defendant‘s liability upon these checks as
indorser, to establish said liability by proving that notice was given to the defendant within the time, and in the manner,
required by the law that the checks in question had been dishonored. If these facts are not proven, the plaintiff has
not sufficiently established the defendant‘s liability. There is no proof in the record tending to show that plaintiff gave any
notice whatsoever to the defendant that the checks in question had been dishonored, and there it has not established its
cause of action

(36) WONG vs. CA

351 SCRA 100

FACTS:

Wong is a collector of Limtong Press, Inc., a company which prints calendars. Wong was assigned to collect check
payments from LPI‘ clients. One time, 6 of LPI‘s clients were not able to give the check payments to Wong. Wong then
made arrangement with LPI so that for the meantime, Wong can use his personal checks to guarantee the calendar
orders of the LPI‘s clients. LPI however has a policy of not accepting personal checks of its agents. LPI instead proposed
that the personal checks should be used to cover Wong‘s debt with LPI which arose from unremitted checks by Wong in
the past. Wong agreed. So he issued 6 checks dated December 30, 1985.
Before the maturity of the checks, Wong persuaded LPI not to deposit the checks because he said he‘ll be replacing them
within 30 days. LPI complied however Wong reneged on the payment. On June 5, 1986 or 157 days from date of issue,
LPI presented the check to RCBC but the checks were dishonored (account closed). On June 20, 1986, LPI sent Wong a
notice of dishonor. Wong failed to make good the amount of the checks within 5 banking days from his receipt of the
notice. LPI then sued Wong for violations of Batas Pambansa Blg. 22.
Among others, Wong argued that he‘s 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.

ISSUE:

Whether or not Wong is guilty of the crime charged.

HELD:

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 nnder 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.

(37) THE INTERNATIONAL CORPORATE BANK vs. SPS. GUECO

351 SCRA 516

FACTS:

Respondent spouses, obtained a loan from petitioner bank for the purchase of a car secured by chattel mortgage. Unable
to pay the monthly amortizations, the bank sued for collection. Thru negotiations, the amount was reduced and payment
would release the car.

Respondent spouses delivered a manager‘s check in the said amount but petitioner bank refused to release the car for
respondents‘ refusal to sign the joint motion to dismiss. Unable to recover possession of the car, respondent filed an
action for damages against petitioner based on fraud. Respondents alleged that delivery of the check produced the effect
of payment.

Petitioner, however, did not encash the check because of the present case and the said check became stale.

ISSUE:

Whether the bank was negligent in opting not to deposit or use the manager‘s check.

HELD:

NO.

A check must be presented for payment within a reasonable period of time after its issue. In the case at bar, the check
involved is a manager‘s check and is accepted in advance by the act of issuance. Assuming that presentment is needed,
failure to present on time will result to the discharge of the drawer only to the extent of the loss caused by the delay.

If a check had become stale, it becomes imperative that the circumstances that caused its non-presentment be
determined. In the case at bar, there is no doubt that the petitioner bank held on the check and refused to encash the
same because of the controversy surrounding the signing of the joint Motion to Dismiss. The Court sees no bad faith or
negligence on this position taken by the bank.

(38) STATE INVESTMENT HOUSE vs. CA

217 SCRA 32

FACTS:

Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on commission, two postdated
checks in the amount of fifty thousand each. Thereafter, Victoriano negotiated the checks to State Investment House,
Inc. When Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity of the checks. However, the
checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her funds from the
bank contesting that she incurred no obligation on the checks because the jewellery was never sold and the checks are
negotiated without her knowledge and consent. Upon presentment of for payment, the checks were dishonoured for
insufficiency of funds.
ISSUES:

1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of consideration

HELD:

(1)Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows that: on the faces of
the postdated checks were complete and regular; that State Investment House Inc. bought the checks from Victoriano
before the due dates; that it was taken in good faith and for value; and there was no knowledge with regard that the
checks were issued as security and not for value. A prima facie presumption exists that a holder of a negotiable
instrument is a holder in due course. Moulic failed to prove the contrary.

(2)No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which they were
issued and therefore is not a holder in due course.

Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke paragraphs c and d as possible
grounds for the discharge of the instruments. Since Moulic failed to get back the possession of the checks as provided by
paragraph c, intentional cancellation of instrument is impossible. As provided by paragraph d, the acts which will
discharge a simple contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil Code
which enumerates the modes of extinguishing obligation, none of those modes outlined therein is applicable in the instant
case. Thus, Moulic may not unilaterally discharge herself from her liability by mere expediency of withdrawing her funds
from the drawee bank. She is thus liable as she has no legal basis to excuse herself from liability on her check to a holder
in due course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no moment. The need for such
notice is not absolute; there are exceptions provided by Sec 114 of NIL.

(39) BATAAN CIGAR vs. CA

230 SCRA 640

FACTS:

Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its suppliers, Kim Tim Pua George(George King), to
deliver bales of tobacco leaf. In consideration thereof, BCCFI issued postdated crosschecks to King. King sold the checks,
at a discount, to the State Investment House Inc. (SIHI). As King failedto deliver the bales of tobacco leaf despite
demand, BCCFI issued stop payment orders on the checks. Effortsby SIHI to collect from BCCFI failed. SIHI filed suit.

ISSUE:

Whether SIHI can recover the value of the checks, premised on the issue whether SIHI is a holder indue course.

HELD:

The facts of the case are on all fours to the case of SIHI vs. Intermediate Appellate Court. The crossingof the checks
should put the holder on inquiry and upon him devolves the duty to ascertain the indorser‘s titleto the check or the nature
of his possession. Failing in this respect, the holder is declared guilty of grossnegligence amounting to legal absence
of good faith, contrary to Section 52 (c) of the Negotiable InstrumentsLaw, and as such the consensus of authority is to
the effect that the holder of the check is not a holder in duecourse. BCCFI cannot be obliged to pay the checks as there is
a failure of consideration (King being unable tosupply the bales of tobacco leaf, for which the checks were intended for).
Still, SIHI -- a holder not in duecourse -- can collect from the immediate indorser, George King. Such is the disadvantage
of a holder not indue course, i.e. the instrument is subject to defenses as if it were non-negotiable.

(40) CITYTRUST BANKING CORP. vs. IAC

232 SCRA 643

FACTS:

This case emanated from a complaint filed by private respondent Emme Herrero for damages against petitioner Citytrust
Banking Corporation. In her complaint, private respondent averred that she, a businesswoman, made regular deposits,
starting September of 1979, with petitioner Citytrust Banking Corporation at its Burgos branch in Calamba, Laguna. On 15
May 1980, she deposited with petitioner the amount of Thirty One Thousand Five Hundred Pesos, in cash, in order to
amply cover six postdated checks she issued.

When presented for encashment upon maturity, all the checks were dishonored due to "insufficient funds." The last check
No. 007400, however, was personally redeemed by private respondent in cash before it could be redeposited.
Petitioner, in its answer, asserted that it was due to private respondent's fault that her checks were dishonored. It
averred that instead of stating her correct account number was 29000823, in her deposit slip, she inaccurately wrote
2900823.

ISSUE:

Whether petitioner was at fault when the check was dishonored.

HELD:

We cannot uphold the position of defendant. For, even if it be true that there was error on the part of the plaintiff in
omitting a "zero" in her account number, yet, it is a fact that her name, "Emme E. Herrero", is clearly written on said
deposit slip. This is controlling in determining in whose account the deposit is made or should be posted. This is so
because it is not likely to commit an error in one's name than merely relying on numbers which are difficult to remember,
especially a number with eight digits as the account numbers of defendant's depositors. We view the use of numbers as
simply for the convenience of the bank but was never intended to disregard the real name of its depositors. 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 should not be a matter of the bank alone receiving deposits, lending out money and
collecting interests. It is also its obligation to see to it that all funds invested with it are properly accounted for and duly
posted in its ledgers.

In the case before Us, We are not persuaded that defendant bank was not free from blame for the fiasco. In the first
place, the teller should not have accepted plaintiff's deposit without correcting the account number on the deposit slip
which, obviously, was erroneous because, as pointed out by defendant, it contained only seven digits instead of eight.
Second, the complete name of plaintiff depositor appears in bold letters on the deposit slip. There could be no mistaking
in her name, and that the deposit was made in her name, "Emma E. Herrero." In fact, defendant's teller should not have
fed her deposit slip to the computer knowing that her account number written thereon was wrong as it contained only
seven digits. As it happened, according to defendant, plaintiff's deposit had to be consigned to the suspense accounts
pending verification. This, indeed, could have been avoided at the first instance had the teller of defendant bank
performed her duties efficiently and well. For then she could have readily detected that the account number in the name
of "Emma E. Herrero" was erroneous and would be rejected by the computer. That is, or should be, part of the training
and standard operating procedure of the bank's employees. On the other hand, the depositors are not concerned with
banking procedure. That is the responsibility of the bank and its employees. Depositors are only concerned with the
facility of depositing their money, earning interest thereon, if any, and withdrawing therefrom, particularly businessmen,
like plaintiff, who are supposed to be always "on-the-go". Plaintiff's account is a "current account" which should
immediately be posted. After all, it does not earn interest. At least, the forbearance should be commensurated with
prompt, efficient and satisfactory service.

Bank clients are supposed to rely on the services extended by the bank, including the assurance that their deposits will be
duly credited them as soon as they are made. For, any delay in crediting their account can be embarrassing to them as in
the case of plaintiff.

(41) TAN vs. CA, RCBC

239 SCRA 310

FACTS:

Tan, who was a businessman from Palawan, secured a cashier check from PCIB Puerto Princesa branch. Upon arriving in
Mania, he deposited the said cashier check to RCBC Binondo branch which he has an existing account. Petitioner Tan
used a local check deposit slip instead of using a regional deposit slip. Respondent RCBC sent the same cashier check to
the Central Bank for clearing. The Central Bank returned the same check for having been misspent by RCBC. No
notification was sent by RCBC to petitioner Tan.
Believing that the cashier check has been cleared, Tan issued two personal checks in favor of two different business
entities. Subsequently, the two personal checks bounced due to insufficiency of funds in his RCBC account. He learned
that the cashier check was not credited to his account. Due to intense humiliation, Tan filed a civil suit for damages
against respondent RCBC.

ISSUE:

(1) Was respondent bank liable for damages even if it was petitioner Tan who erroneously used the wrong check deposit
slip?
(2) Was RCBC correct in not applying its discretion on the immediate payment of the cashier check to the account of Tan,
pending the clearance of the check?

HELD:

Yes. The respondent bank cannot exculpate itself from liability by claiming that its depositor "impliedly instructed" the
bank to clear his check with the Central Bank by filling a local check deposit slip. Bank clients are supposed to rely on the
services extended by the bank, including the assurance that their deposits will be duly credited them as soon as they are
made.

In the instant case, the teller should not have accepted the local deposit slip with the cashier's check that on its face was
clearly a regional check without calling the depositor's attention to the mistake at the very moment this was presented to
her. Neither should everyone else down the line who processed the same check for clearing have allowed the check to be
sent to Central Bank.

No. What was presented for deposit in the instant cases was not just an ordinary check but a cashier's check payable to
the account of the depositor himself. A cashier's check is a primary obligation of the issuing bank and accepted in
advance by its mere issuance. By its very nature, a cashier's check is the bank's order to pay drawn upon itself,
committing in effect its total resources, integrity and honor behind the check. A cashier's check by its peculiar character
and general use in the commercial world is regarded substantially to be as good as the money which it represents. In this
case, therefore, PCIB by issuing the check created an unconditional credit in favor of any collecting bank.
All these considered, petitioner's reliance on the layman's perception that a cashier's check is as good as cash is not
entirely misplaced, as it is rooted in practice, tradition, and principle. We see no reason thus why this so-called discretion
was not exercised in favor of petitioner, especially since PCIB and RCBC are members of the same clearing house group
relying on each other's solvency. RCBC could surely rely on the solvency of PCIB when the latter issued its cashier's
check.

(42) PAPA vs. A.U. VALENCIA AND CO.

284 SCRA 643

FACTS:

Myron Papa is the administrator of the estate of Angela Butte. In 1973, he sold a portion of said estate to Felix Peñarroyo
through A.U. Valencia and Co. Inc. Peñarroyo gave Papa P5,000.00 plus a check worth P40,000.00. However, Papa was
not able to deliver the certificate of title to Peñarroyo. A litigation ensued and ten years after, Papa argued that the sale
between him and Peñarroyo was never consummated because he did not encash the P40,000.00 check and that the
P5,000.00 cash was merely earnest money.

ISSUE: Whether or not Papa is correct.

HELD: No. After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that
the check had been encashed. Granting that Papa had never encashed the check, his failure to do so for more than ten
(10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay. While it
is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Article 1249 of the
Civil Code, the rule is otherwise if the debtor (Peñarroyo) is prejudiced by the creditor‘s (Papa‘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.