Section 24
dela Rama
Travel-on v. CA
Facts:
Travel-On. Inc. is a travel agency selling airline tickets on commission basis for and
in behalf of different airline companies
Arturo S. Miranda had a revolving credit line with petitioner. He procured tickets
from petitioner on behalf of airline passengers and derived commissions therefrom.
Travel-On filed suit before the Court of First Instance ("CFI") of Manila to collect on
six (6) checks issued by private respondent with a total face amount of P115,000.00.
Travel-On alleged that Miranda procured tickets from them which he paid with
cash and checks but the checks were dishonored upon presentment to the bank.
Miranda, on the other hand, argued that he actually paid for his obligations,
even in the excess; that the checks were for accommodation purposes only.
Issue/Held:
WON Miranda shoud be liable? YES.
Ruling:
Court finds that the checks are the all important evidence of petitioner's case; that
these checks clearly established private respondent's indebtedness to petitioner;
that private respondent was liable thereunder.
There is a prima facie presumption that a check was issued for valuable
consideration and the provision puts the burden upon the drawer to disprove this
presumption. Miranda was unable to relieve himself of this burden.
The fact that all the checks issued by private respondent to petitioner were
presented for payment by the latter would lead to no other conclusion than that
these checks were intended for encashment. There is nothing in the checks
themselves (or in any other document for that matter) that states otherwise.
Pineda v.
Facts:
Dela Rama is a practising lawyer whose services were retained by Pineda, to stop or
delay the institution of criminal charges against Pineda by the NARIC.
Pineda borrowed P9,300 from Dela Rama
Dela Rama sued Pineda for collection of the loan evidenced by the matured
promissory note.
CFI ruled in favor of Pineda, believing that he signed the promissory note for
P9,300.00 only because Dela Rama had told him that this amount had already been
advanced to grease the palms of the 'Chairman and General Manager of NARIC in
order to save Pineda from criminal prosecution.
CA The Court of Appeals reversed the decision of the trial court on a finding that
Pineda, being a person of more than average intelligence, astute in business, and
wise in the ways of men would not "sign any document or paper with his name
unless he was fully aware of the contents and important thereof, knowing as he
must have known that the language and practices of business and of trade and
commerce call to account every careless or thoughtless word or deed."
Issue/Held:
WON Dela Rama has the right to collect? NO.
Ruling:
The note reads - "This represents the cash advances made by him in connection
with my case for which he is my attorney-in- law."
The terms of the note sustain the version of Pineda that he signed the P9,300.00
promissory note because he believed Dela Rama's story that these amounts had
already been advanced by Dela Rama and given as gifts for NARIC officials.
SC believed that the promissory note was executed for an illegal consideration,
citing Arts. 1409 and 1412 of the Civil Code.
Section 29 Caneda v. Ca

Clark v. Sellner Facts:

Facts:
Sellner, with two other persons, signed a promissory note solidarily binding
themselves to pay to the order of R.N Clark.
Eventually, the note matured, but the amount was not paid.
Sellner argues that:
1. He did not receive in that transaction either the whole or any part of the
amount of the debt;
2. Instrument was not presented to him for payment;
3. And, being an accommodation party, he is not liable unless the note is
negotiated, which was not done, as shown by the evidence.
Issue/Held:
WON Sellner is liable? YES.
Ruling:
1. The liability of Sellner as one of the signers of the note, is not dependent on
whether he has or has not, received any part of the debt. Sellner is really
and expressly one of the joint and several debtors of the note and as
such he is liable under the provisions of Section 60 of the Negotiable
Instruments Law.
Buenaventra Gueson executed a promissory note to Gregorio Caneda Jr. for
P18,960.00 with chattel mortgage using a Toyota Jiffy jeep as collateral. The note
was then assigned by Caneda to Investors Finance Corporation (FNCB) with a note
“with recourse to Buenaventura Gueson in case of default. Gueson defaulted, and
then, allegedly, failed and refused to pay even with repeated demands. FNCB filed
an action against Caneda for replevin and collection of money. Gueson filed his
answer with third party complaint claiming that he is only an accommodation
party to Caneda who is the real debtor.
RTC ruled that only Caneda is liable. CA affirmed the RTC’s decision.
Issue/Held:
WON Gueson is liable even as an accommodation party? Yes.
Ruling:
Gueson is also liable as a holder for value. Gueson and Caneda may have an
agreement between them, but FNCB’s concern is only the payment of the loan. The
agreement between the two is not binding to FNCB. Further, FNCB has the
discretion to go after either of the two. Of course, Gueson may request for
reimbursement from Caneda.

2. Presentation of Payment is not necessary in order to charge the person

primarily liable, as is the defendant Sellner.

3. By putting his signature to the note, Sellner lent his name, not to the
creditor, but to those who signed with him placing himself with respect to
the creditor in the same position and with the same liability as the said
signers.

It is immaterial as far as the creditor is concerned, whether one of the

signers has or has not received anything in payment for the use of his name.
In this case, the legal situation of Sellner is that of a joint surety who upon
the maturity of the note, pay the debt, demand the collateral.security
and dispose of it to his benefit.
Town Savings and Loan Bank v. CA PNB v. Maza & Mecenas

Facts: Facts:

Town Savings and Loan Bank (TSLB) granted loan of P700,000.00 to the Hipolitos. Ramon Maza and Francisco Mecenas issued 5 promissory notes for P10,000.00 each
Which, then, they executed and delivered a promissory note to accommodate in favor of PNB. They then defaulted in payment, thus PNB filed an action for
Pilarita H. Reyes, sister of Miguel Hipolito. collection through CFI-Iloilo. Maza and Mecenas claim that the promissory notes
The note became due, and they defaulted. Demands for payment were ignored. were sent in blank to them by Enrique Echaus with the request that they sign them
so that he might negotiate them with the PNB. They further claimed that they did
TSLB filed an action against the Hipolitos for the P700,000.00 they executed.
not receive any consideration and therefore mere accommodation parties.
Hipolitos are now claiming that they are not liable because they are not the real
debtors since they did not receive any amount, for they were mere guarantors for
Issue/Held:
Pilarita. They added that it was the President of TSLB who convinced them to
execute the accommodation.
WON Maza and Mecenas are liable? Yes.
RTC held the Hipolitos liable. CA however were relieved from any liability to TSLB.
Ruling:
Issue/Held:
Both of them are liable as the drawers of the instruments. Even though they are
WON the Hipolitos are liable as an accommodation party? Yes.
mere accommodation parties, they are still liable since an accommodation party can
claim no benefit, but still be held liable to the face of his undertaking.
Ruling:
Again, they may recourse against the accommodated party, Echaus, for them to be
The Hipolitos are liable. SC maintained that the Hipolitos accommodated Pilarita,
reimbursed.
and not the bank by signing the half of the debt. It is unlikely that the bank would
want so much to lend money that it would go out of its way to convince another
person to accommodate the borrower. Pilarita would have requested her brother to
accommodate her. Thus, they should be held liable as accommodation parties to
Pilarita.
Sadaya v. Sevilla
Decision date: April 27, 1967
Facts:
 Sevilla, Varona, and Sadaya executed, solidarily, in favor of the BPI or its
order, a promissory note for P15,000 with interest at 8% p.a., payable on
demand.
 The P15,000.00 proceeds was received by Varona alone.
 Sevilla and Sadaya signed the promissory note as co-makers only as a favor
to Oscar Varona.
 A year after, there was still an outstanding balance of P4,850. No payment
was thereafter made.
 The bank collected from Sadaya total of P5,700 (balance + interest)
 Varona failed to reimburse Sadaya despite repeated demands.
 Victor Sevilla died Francisco Sevilla was named administrator.
 Sadaya filed a creditor's claim for the sum of P5,700.
 The Administrator resisted the claim upon the claim that the deceased
Victor Sevilla "did not receive any amount as consideration for the
promissory note," but signed it only "as surety for Varona"
 Trial Court ordered the administrator to pay from estate.
 CA reversed the decision.
Issue/Held:
W/N Sadaya can claim against the estate of Sevilla as co-accomodation
party (when Verona as principal debtor is not yet insolvent)?
Ruling: NO. It is Varona who has to reimburse Sadaya.
As accommodation makers of the P15k Promissory Note, Sevilla and Sadaya's
individual obligation is the same as that contracted by Varona, no greater or lesser.
Although they did not receive value on the PN, they executed the same with and for
the same purpose of lending their names to Varona. Their liability to the bank is
explicitly joint and several. The bank could have gone against Sevilla or Sadaya for
the unpaid balance. The fact is Sadaya paid the balance.
Sadaya could have asked for reimbursement from Varona for the full amount since
he was the one who received the full value of the PN. Between Varona and Sadaya,
there was an implied contract of indemnity and Varona had the obligation to
reimburse Sadaya.
Amongst the three, the obligation of Varona and Sadaya to Sevilla who paid cannot
be joint and solidary.
However, if payment was made by Varona, he cannot seek reimbursement from
Sadaya or Sevilla, since he was the one who received the full amount.
A accommodation maker — who made payment — has the right to contribution,
from his co-accommodation maker, in the absence of agreement to the contrary
between them, and subject to conditions imposed by law.
 The right springs from an implied promise between the accommodation
makers to share equally the burden that may arise from signing the PN,
becoming mere joint guarantors of the principal debtor.
The NIL doesn't state the right of the accommodation maker to seek reimbursement
from another. Hence, we refer to the CC.
 Because Sevilla and Sadaya are both mere co-guarantors of Varona, Art.
2073 of the CC applies.
 This article applies when a surety has paid the debt to the creditor and is
seeking contribution from his co-sureties.
o ART. 2073. When there are two or more guarantors of the same
debtor and for the same debt, the one among them who has paid
may demand of each of the others the share which is proportionally
owing from him.
o If any of the guarantors should be insolvent, his share shall be borne
by the others, including the payer, in the same proportion.
From that, we can conclude the following rules (requisites before an accommodation
maker can seek reimbursement from a co-accommodation maker):
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:
o he made the payment by virtue of a judicial demand, OR
o a principal debtor is insolvent.
Here, no judicial demand was made on Sadaya; he paid voluntarily. And
Varona is not insolvent. Because of this, Sadaya has no right to demand
from Sevilla his proportionate share.
Crisologo-Jose v. CA
Decision date: September 15, 1989.
Facts:
Oscar Benares and Ricardo Santos are the president and vice-president,
respectively, of Mover Enterprises, Inc. To accommodate his clients, Spouses Ong,
Benares issued a check payable to Ernestina Crislogo-Jose (Ernestina). Since the
check was under the account of Mover Enterprise, it was signed by Benares and
Santos in their capacity as officers.
The check was issued to Ernestina in consideration of her waiver over a certain
property which the GSIS agreed to sell to the spouses Ong. It was agreed that the
check would be encashed after GSIS approves of the compromise agreement with
Ong. Said agreement was not approved within the agreed period. Benares replaced
the check, and said replacement check was also signed by Benares and Santos.
When Ernestina deposited this replacement check in her bank, it was dishonored
for insufficiency of funds. She filed an action against the corporation for
accommodation party, pointing out that the accommodation party is the enterprise
and not Santos.
As an 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.
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 the accommodation paper cannot be enforced against the corporation,
especially since it is not involved in any aspect of the business, the logical
conclusion is that the signatories of the instrument shall be personally liable
for the amount as well as the consequences if the facts show that the
accommodation was for their personal account, undertaking, or purpose
and the creditor was aware thereof.
Ernestina knew that the cheek was issued at the instance and for the personal
account of Benares who merely asked Santos co-sign in accordance with the
arrangement of the corporation with its depository bank. The fact that it was a
personal undertaking of said corporate officers was clear to petitioner since she
actually had no transaction directly with said corporation.

It was dismissed; thus, the petition to the SC. Estertina has every right to personally direct her claims Benares and
Santos, president and vice-president, of Mover Enterprises.
Issue/Held:

Whether Mover Enterprises is an accommodation party?

Ruling:

NO. A corporation cannot be an accommodation party liable on the

instrument to a holder for value.

The law on accommodation parties does not include corporations because the issue
or indorsement of negotiable paper by a corporation without consideration and for
the accommodation of another is beyond their powers or legal authority.

Thus, if one knows and takes an instrument that was accommodated by a

corporation, he/she cannot recover against the corporation.

If the form of the instrument or the nature of the transaction is such to give the
indorsee knowledge that the issue or indorsement of the instrument by the
corporation is for the accommodation of another, he cannot recover against the
corporation.
Section 30
Caltex vs. CA and Security Bank and Trust Company
Facts:
 Security Bank issued 280 certificates of time deposit (CTDs) in favor of
Angel dela Cruz who deposited with the same the aggregate amount of
P1,120,000
 Angel dela Cruz delivered the said certificates (CTDs) to Caltex in
connection with his purchase of fuel products.
 Angel dela Cruz then informed the Branch Manager of Security Bank that
he lost the CTDs. Dela Cruz was advised to execute a notarized Affidavit of
Loss to replace the CTDs.
 Angel dela Cruz executed and delivered the Affidavit of Loss. 280
replacement CTDs were issued in his favor.
 Angel dela Cruz negotiated and obtained a loan from Security Bank
amounting to P875,000.00. On the same day, dela Cruz executed a notarized
Deed of Assignment of Time Deposit which stated, among others, that he
surrenders to defendant bank "full control of the indicated time deposits
from and after date" of the assignment and further authorizes said bank to
pre-terminate, set-off and "apply the said time deposits to the payment of
whatever amount or amounts may be due" on the loan upon its maturity
 Mr. Aranas, Credit Manager of Caltex, went to the defendant bank's and
presented for verification the CTDs declared lost by Angel dela Cruz
alleging that the same were delivered to herein plaintiff "as security for
purchases made with Caltex" by said depositor
 Defendant bank rejected the plaintiff's demand and claim for payment of
the value of the CTDs in a letter dated February 7, 1983.
 In April 1983, the loan of Angel dela Cruz with the defendant bank matured
and fell due, the latter set-off and applied the time deposits in question to
the payment of the matured loan.
 Caltex then filed the instant complaint, praying that defendant bank be
ordered to pay the aggregate value of the CTDs: P1,120,000.00 + accrued
interest and compounded interest therein at 16% per annum, moral and
exemplary damages, as well as attorney's fees.
TC&CA RULING: Respondent court ruled that the CTDs in question are non-
negotiable instruments, rationalizing:
While it may be true that the word "bearer" appears rather boldly in the
CTDs issued, it is important to note that after the word "BEARER" stamped
on the space provided supposedly for the name of the depositor, the words
"has deposited" a certain amount follows. The document further provides
that the amount deposited shall be "repayable to said depositor" on the
period indicated. Therefore, the text of the instrument(s) themselves
manifest with clarity that they are payable, not to whoever purports to be
the "bearer" but only to the specified person indicated therein, the depositor.
In effect, the appellee bank acknowledges its depositor Angel dela Cruz as
the person who made the deposit and further engages itself to pay said
depositor the amount indicated thereon at the stipulated date.
Issue/Held:
1. WON the CTD’s are negotiable instruments: YES
2. WON CALTEX can rightfully recover on the CTDs: NO
Ruling:
1. Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law,
enumerates the requisites for an instrument to become negotiable:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
 The CTDs in question undoubtedly meet the requirements of the law for
negotiability.
 The negotiability or non-negotiability of an instrument is determined from
the writing from the face of the instrument itself. In the construction of a
bill or note, THE INTENTION OF THE PARTIES IS TO CONTROL, if it
can be legally ascertained.
 Contrary to what respondent court held, the CTDs are negotiable
instruments. The documents provide that the amounts deposited shall be
repayable to the depositor. And who, according to the document, is the
depositor? It is the "bearer." The documents do not say that the depositor is
Angel de la Cruz and that the amounts deposited are repayable specifically
to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of
presentment.
 If it was really the intention of respondent bank to pay the amount to Angel
de la Cruz only, it could have with facility so expressed that fact in clear and
categorical terms in the documents, instead of having the word "BEARER"
stamped on the space provided for the name of the depositor in each CTD.
 Angel de la Cruz is merely the depositor "insofar as the bank is concerned."
2. Angel de la Cruz delivered the CTDs amounting to P1,120,000.00 to Caltex  The requirement under Article 2096 aforementioned is a rule of substantive
without informing respondent bank. Although the CTDs are bearer instruments, a law prescribing a condition without which the execution of a pledge contract
valid negotiation requires both delivery and indorsement. cannot affect third persons adversely.
 The CTDs were delivered as a SECURITY for De la Cruz' purchases of its  On the other hand, the assignment of the CTDs made by Angel de la Cruz in
fuel products, as resolved by the petitioner's own authorized representative: favor of respondent bank was embodied in a public instrument. With regard
In a letter dated November 26, 1982 addressed to respondent to this other mode of transfer, the Civil Code specifically declares:
Security Bank, J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . Art. 1625. An assignment of credit, right or action shall produce no
These certificates of deposit were negotiated to us by Mr. Angel dela effect as against third persons, unless it appears in a public
Cruz to guarantee his purchases of fuel products" instrument, or the instrument is recorded in the Registry of
 In Intergrated Realty Corporation v. Philippine National Bank, the Property in case the assignment involves real property.
character of the transaction between the parties is to be determined by their  Respondent bank duly complied with this requirement. The petitioner
intention, regardless of what language was used or what the form of the neither proved the amount of its credit, the extent of its lien, nor the
transfer was. IF IT WAS INTENDED TO SECURE THE PAYMENT OF execution of any public instrument which could affect or bind private
MONEY, IT MUST BE CONSTRUED AS A PLEDGE; but if there was some respondent. Therefore, as between petitioner and respondent bank, the
other intention, it is not a pledge. latter has definitely the better right over the CTDs in question.
 Petitioner's insistence that the CTDs were negotiated to it begs the
question. Under the Negotiable Instruments Law, an instrument is
negotiated when it is transferred from one person to another in such a
manner as to constitute the transferee the holder thereof, and a holder may
be the payee or indorsee of a bill or note, who is in possession of it, or the
bearer thereof.
 In the present case, there was no negotiation in the sense of a transfer of
the legal title to the CTDs in favor of petitioner. The delivery thereof only as
security for the purchases of Angel de la Cruz could at the most constitute
petitioner only as a holder for value by reason of his lien.
 Where the holder has a lien on the instrument arising from contract, he is
deemed a holder for value to the extent of his lien. As such holder of
collateral security, he would be a pledgee but the requirements therefor and
the effects thereof, not being provided for by the Negotiable Instruments
Law, shall be governed by the following Civil Code provisions on pledge of
incorporeal rights:
Art. 2095. Incorporeal rights, evidenced by negotiable instruments,
. . . may also be pledged. The instrument proving the right pledged
shall be delivered to the creditor, and if negotiable, must be
indorsed.
Art. 2096. A pledge shall not take effect against third persons if a
description of the thing pledged and the date of the pledge do not
appear in a public instrument.
 Aside from the fact that the CTDs were only delivered but not indorsed, the
petitioner failed to produce any document evidencing any contract of pledge
or guarantee agreement between it and Angel de la Cruz.
 The mere delivery of the CTDs did not legally vest in petitioner any right
effective against and binding upon respondent bank.
Manuel Lim v. CA
Decision date: December 19, 1995
Facts:
 Manuel Lim and his spouse Rosita Lim are the president and treasurer,
respectively, of Rigi Bilt Industries (RIGI).
 LINTON is a company in the steel business and they have been supplying
RIGI for years.
o Basically, RIGI builds steel structures and LINTON supplies them
the steel.
o Usually, the spouses were allowed up to 90 days credit since they
were habitual customers.
 The spouses made two separate orders of mild steel plates (1st order – 100
pcs at P51.8k, 2nd order – 65 pcs at P63.5k).
o The spouses issued two separate SOLIDBANK checks as payment.
o These were delivered to the spouses on the same day.
 The spouses also ordered 2600 pcs of “Z purlins” worth P241.8k.
o They issued 7 SOLIDBANK checks to cover payment.
o The items were delivered to them in subsequent dates.
 When the VP and Sales Manager of LINTON, Mr. Bin, tried to deposit the
checks in RCBC, they were dishonoured by reason of “Payment Stopped” or
“Drawn Against Insufficient Fund”.
o Despite demand, the spouses failed to pay.
 The Lim spouses alleged that his company had sufficient funds to cover the
amounts, as evidenced by a bank ledger showing a balance of P65.7k in his
account.
o They also alleged that he ordered SOLIDBANK to stop payment
because the supplies delivered by LINTON were not in accordance
with the specifications in the purchase orders.
 RTC: Held that the spouses were guilty of estafa and violation of B.P. 22.
o Spouses Lim appealed saying that they were not liable for estafa
since the seven checked issued by them were issued several weeks
after the delivery of goods.
o They also said that the RTC of Malabon had no jurisdiction since
the offenses charged were committed outside the territory.
o They also said that they can’t held liable for violating B.P. Blg. 22 as
they ordered payment of the checks to be stopped because the goods
delivered were not those specified by them, besides they had
sufficient funds to pay the checks.
 CA: Acquitted the accused of estafa because the checks “were not made in
payment of an obligation contracted at the time of their issuance.
o However, it affirmed the finding of the RTC that they were guilty of
violation of B.P. 22.
Issue/Held:
 (1) W/N spouses Lim violated B.P. 22.
 (2) W/N the RTC of Malabon had jurisdiction.
 (3) W/N spouses Lim could validly order the bank to stop payment because
of the irregularities in the deliveries of LINTON.
Ruling:
(1) YES.
 The gravamen of the offense is knowingly issuing a worthless check.
o Thus, a fundamental element is knowledge on the part of the
drawer of the insufficiency of his funds in or credit with the drawee
bank for the payment of such check in full upon presentment.
 Another essential element is subsequent dishonor of the check by the
drawee bank for insufficiency of funds or credit or would have been
dishonored for the same reason had not the drawer, without any valid
reason, ordered the bank to stop payment.
 The prima facie evidence has not been overcome by petitioners in the cases
before us because they did not pay LINTON the amounts due on the checks;
neither did they make arrangements for payment in full by the drawee bank
within five (5) banking days after receiving notices that the checks had not
been paid by the drawee bank.
(2) YES.
 Rules of Court, Sec. 14: Place where action is to be instituted. — (a) In all
criminal prosecutions the action shall be instituted and tried in the court of
the municipality or province wherein the offense was committed or anyone
of the essential ingredients thereof took place.
o A person charged with a transitory crime such as B.P. 22, may be
validly tried in any municipality or territory where the offense was
in part committed.
 Sec. 191 of the Negotiable Instruments Law: the term "issue" means the
first delivery of the instrument complete in form to a person who takes it as
a holder.
o On the other hand, the term "holder" refers to the payee or indorsee
of a bill or note who is in possession of it or the bearer thereof.
 The delivery of the instrument is the final act essential to its consummation
as an obligation. An undelivered bill or note is inoperative. Until delivery,
the contract is revocable.
 o And the issuance as well as the delivery of the check must be to a
person who takes it as a holder, which means "the payee or indorsee
of a bill or note, who is in possession of it, or the bearer thereof."
o Delivery of the check signifies transfer of possession, whether actual
or constructive, from one person to another with intent to transfer
title thereto.
 Although LINTON sent a collector who received the checks from petitioners
at their place of business in Kalookan City, they were actually issued and
delivered to LINTON at its place of business in Balut, Navotas.
o The receipt of the checks by the collector of LINTON is not the
issuance and delivery to the payee in contemplation of law.
o The collector was not the person who could take the checks as a
holder, i.e., as a payee or indorsee thereof, with the intent to
transfer title thereto.
o Neither could the collector be deemed an agent of LINTON with
respect to the checks because he was a mere employee.
(3) NO.
 In another case brought by petitioners against LINTON in the Regional
Trial Court of Kalookan City, LINTON was held liable for actual damages
because of the delivery of goods of inferior quality.
o But the supplies involved in that case were those of B.I. pipes, while
the purchases made by accused-appellants, for which they issued
the checks in question, were purchases of mild steel plates and "Z"
purlins.
 The two letters which they claim they sent to LINTON complaining against
the quality of the goods did not refer to the delivery of mild steel plates and
"Z" purlins, for which the checks in question were issued.
 Rather, the letters referred to B.1. Lally columns which were the subject of
other purchase orders.
Section 38
Metropol v. Sambok Motors Co.
Decision date: February 28, 1983
Facts:
(15 Apr 1969) Dr. Javier Villaruel executed a promissory note in favor of Ng
Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable in 12 equal
monthly installments, from May 18, 1969, with interest (1% per month). In case of
non-payment of any of the installments, the total principal sum unpaid will become
due and payable with an additional interest (25% of the total amount due).
On the same date, Sambok Motors Company, a sister company of Ng Sambok Sons
Motors Co., Ltd., negotiated and indorsed the note in favor of plaintiff Metropol
Financing & Investment Corporation.
The PN was read as follows:
“Pay to the order of Metropol Bacolod Financing & Investment
Corporation with recourse. Notice of Demand; Dishonor; Protest; and
Presentment are hereby waived.
SAMBOK MOTORS CO. (BACOLOD)
By:
RODOLFO G. NONILLO Asst. General Manager”
Dr. Villaruel later defaulted and was made to pay the PN on 30 Oct 1969. On
demand, he failed to pay the PN, thus, Metropol notified Sambok, as the indorsee,
of the fact that the PN was dishonoured. Sambok was also unable to pay for the PN
thus Metropol filed a complaint for collection of a sum of money.
During the pendency of the trial, Dr. Villaruel died and the case against him was
dismissed by the TC.
TC: Ruled in favor of Metropol and ordered Sambok to pay the PN.
Sambok contends that by writing “with recourse” on the PN, he became a qualified
indorser. And being a qualified indorser, he shall be relieved from paying the
instrument in case it is dishonoured with the exceptions to liabilities arising from
warranties as mentioned in Sec. 65, NIL.
Issue/Held:
WON Sambok Motors Company is a qualified indorsee of the PN – NO.
Ruling:
"Recourse" means resort to a person who is secondarily liable after the default of the
person who is primarily liable. Sambok, by indorsing the note "with recourse" does
not make itself a qualified indorser but a general indorser who is secondarily liable,
because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note,
Metropol can go after Sambok. The effect of such indorsement is that the note was
indorsed without qualification. A person who indorses without qualification engages
that on due presentment, the note shall be accepted or paid, or both as the case may
be, and that if it be dishonored, he will pay the amount thereof to the
holder. Sambok's intention of indorsing the note without qualification is made even
more apparent by the fact that the notice of demand, dishonor, protest and
presentment were waived. The words added by said appellant do not limit his
liability, but rather confirm his obligation as a general indorser.
TC did not err in not declaring Sambok as only secondarily liable because after an
instrument is dishonored by non-payment, the person secondarily liable thereon
ceases to be such and becomes a principal debtor. His liabiliy becomes the same as
that of the original obligor. Consequently, the holder need not even proceed against
the maker before suing the indorser.
Metropol won the case.
Doctrine: A person who indorses without qualification engages that on due
presentment, the note shall be accepted or paid, or both as the case may be, and that
if it be dishonored, he will pay the amount thereof to the holder.
NOTE: Sambok should have written “without recourse” instead of “with recourse” to
make him a qualified indorser.
Section 41
Metrobank v. BA Finance Corp.
Decision date: December 4, 2009
Facts:
Lamberto Bitanga obtained from respondent BA Finance a P329k loan to secure
which he mortgaged his car to respondent BA Finance.
Bitanga then had the mortgaged car insured by Malayan Insurance which issued a
policy.
The car was stolen, On Bitangas claim, Malayan Insurance issued a check payable
to the order of BA Finance and Lamberto Bitanga for P224k drawn against China
Bank. The check was crossed with the notation for Deposit Payees Account Only.
Without the indorsement or authority of his co-payee BA Finance, Bitanga
deposited the check to his account with the Asianbank Corporation (Asianbank),
now merged with herein petitioner Metropolitan Bank and Trust Company
(Metrobank). Bitanga subsequently withdrew the entire proceeds of the check.
In the meantime, Bitangas loan became past due, but despite demands, he failed to
settle it.
BA Finance eventually learned of the loss of the car and of Malayan Insurances
issuance of a crossed check payable to it and Bitanga, and of Bitangas depositing it
in his account at Asianbank and withdrawing the entire proceeds thereof.
BA Finance thereupon demanded the payment of the value of the check from
Asianbank but to no avail, prompting it to file a complaint before the Regional Trial
Court (RTC) of Makati for sum of money and damages against Asianbank and
Bitanga alleging that, it is entitled to the entire proceeds of the check.
Asianbank alleged that Malayan Insurance was grossly negligent in issuing the
check payable to both Bitanga and BA Finance and delivering it to Bitanga without
the consent of BA Finance.
The Trial Court found Asianbank and Bitanga jointly and severally liable to BA
Finance following Section 41 of the Negotiable Instruments Law and Associated
Bank v. Court of Appeals.
Issue/Held:
1) Whether Bitanga by himself endorse the check - NO
2) Whether the collecting back Asianbank is liable and how much - YES, in full
amount
Ruling:
1) Whether Bitanga by himself endorse the check-NO
Section 41 of the Negotiable Instruments Law provides: Where an instrument is
payable to the order of two or more payees or indorsees who are not partners, all
must indorse unless the one indorsing has authority to indorse for the others.
Bitanga alone endorsed the crossed check, and petitioner allowed the deposit and
release of the proceeds thereof, despite the absence of authority of Bitangas co-
payee BA Finance to endorse it on its behalf.
Clearly, petitioner, through its employee, was negligent when it allowed the deposit
of the crossed check, despite the lone endorsement of Bitanga, ostensibly ignoring
the fact that the check did not, it bears repeating, carry the indorsement of BA
Finance.
2) Whether the collecting back Asianbank is liable and how much-YES, in full
amount.
Petitioner, as the collecting bank or last indorser, generally suffers the loss because
it has the duty 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
prior indorsements.
Accordingly, one who credits the proceeds of a check to the account of the indorsing
payee is liable in conversion to the non-indorsing payee for the entire amount of the
check.
Moreover, granting Asianbank appeal for partial liability would run counter to the
existing principles on the liabilities of parties on negotiable instruments,
particularly on Section 68 of the Negotiable Instruments Law which instructs that
joint payees who indorse are deemed to indorse jointly and severally.
Recall that when the maker dishonors the instrument, the holder thereof can turn
to those secondarily liable the indorser for recovery. And since the law explicitly
mandates a solidary liability on the part of the joint payees who indorse the
instrument, the holder thereof (assuming the check was further negotiated) can
turn to either Bitanga or BA Finance for full recompense.
Section 49
BPI v. CA
Decision date: January 25, 2007
Facts:
 Salazar had in her possession three crossed checks with an aggregate
amount of P267, 692.50. These checks were payable to the order of JRT
Construction and Trading which was the name of Templonuevo’s business.
 Despite lack of knowledge and endorsement of Templonuevo, Salazar was
able to deposit the checks in her personal savings account with BPI and
encash the same.
 The three checks were deposited in three different occasions over the span
of eight months.
 A year after the last encashment, Templonuevo protested the purportedly
unauthorized encashments and demanded from BPI the aggregate amount
of the checks. BPI complied with Templonuevo’s demand.
 Since the money could no longer be debited from the account of Salazar
where she deposited the checks, they froze her other account with them.
 BPI issued a cashier’s check in favor of Templonuevo for the aggregate
amount and debited P267, 707.70 from Salazar’s account representing the
aggregate amount and the bank charges for the cashier’s check.
 Salazar filed a complaint against BPI.
 Trial court ruled in favor of her which was affirmed by CA.
Issue/Held:
1. Did BPI have the authority to unilaterally withdraw from Salazar’s account
the amount it has previously paid upon certain unendorsed order
instrument?
2. Did BPI act judiciously in debiting Salazar’s account?
Ruling:
1. Yes.
 Records show that no prior arrangement existed between Salazar and
Templonuevo regarding the transfer of ownership of the checks. This fact is
crucial as Salazar’s entitlement to the value of the instruments is based on
the assumption that she is a transferee within the contemplation of Section
49 of the NIL.
 Section 49 of the NIL contemplates a situation where the payee or endorsee
delivers a negotiable instrument for value without endorsing it. The
underlying premise of this provision, however, is that a valid transfer of
 ownership of the negotiable instrument in question has taken place.
Transferees in this situation do not enjoy the presumption of ownership in
favor of holders since they are neither payees nor endorsees of such
instruments. Mere possession of a negotiable instrument does not in itself
conclusively establish either the right of the possessor to receive payment,
or of the right of one who has made payment to be discharged from liability.
Something more than mere possession is necessary to authorize payment to
such possessor.
 The one-year delay of Templonuevo in asserting ownership over the checks
is not enough to prove that there has a valid transfer of ownership has
taken place. Salazar failed to discharge the burden of presumption of
ownership in Templonuevo’s favor as the designated payee. Thus, the return
of the check proceeds to Templonuevo was therefore warranted.
 It is immaterial that the account debited by BPI was different from the
original account to which the proceeds of the check were credited because
both belonged to Salazar anyway.
2. No.
 Solely upon the prompting of Templonuevo, BPI debited the account of
Salazar without even serving due notice upon her. Consequently, this
caused damage to Salazar such as having checks she issued dishonored
because she was not given prior notice of the deduction from her account. As
such, the award of damages must be sustained.