2015 BAR QUESTION & SUGGESTED ANSWER

NEGOTIABLE INSTRUMENT LAW

Prepared by:
IAN SATURN V. SAN JOSE, PhD.

A. Nadine has a checking account with Fair & Square Bank. One day, she lost her checkbook and
the finder was able to forge her signature and encash the forged check. Will Nadine be able to
recover the amount debited from her checking account from Fair & Square Bank? Justify your
answer. (3%).

Yes. Nadine may recover the amount debited from her checking account from Fair and Square
Bank.

The Bank is liable to Nadine and must bear the loss because it is its prime duty to ascertain the
genuineness of the signature of the drawer or depositor of the check being encashed. It is
expected to use reasonable business prudence in accepting and encasing a check presented to
it, and is based on a presumed negligence of the drawee in failing to meet its obligation to know
the signature of its depositor.

In this case, Fair and Square Bank was negligent in not detecting the forgery of Nadine’s
signature and paying the check. Under the circumstances, there was no negligence on the part
of Nadine which would preclude her from invoking forgery. (Philippine National Bank vs
Quimpo, 158 SCRA 582)

B. Is a manager’s check as good as cash? Why or why not? (2%)

Yes.

A manager’s check is like a cashier’s check and certified check both as to effect and use, which,
in the commercial world, is deemed as cash (New Pacific Timber & Supply Co., Ins. vs. Seneris,
101 SCRA 680 [1980].) and regarded substantially to be as good as the money it represents. (Tan
v. Court of Appeals, 239 SCRA 310 [1994].)

A manager’s check is a check drawn by the bank against itself and is deemed pre-accepted by
the bank from the moment of issuance. It becomes the primary obligation of the bank and is
deemed accepted in advance by the act of its issuance, committing its total resources, integrity
and honor behind it and constitutes its written promise to pay. (Tan vs Court of Appeals, supra;
Bank of the Phil. Islands vs. Court of Appeals, 326 SCRA 641 [2000]; International Corporate
Bank vs Gueco, 351 SCRA 516 [2001]; Rizal Commercial Banking Corp. vs. Security Bank & Trust
Co., 577 SCRA407 [2009]; Philippine National Bank vs. Tria, 671 SCRA 740 [2012]; Metrobank
and Trust Company vs Chiok, 743 SCRA 435 [2014].)

Alternative answer:
 No, it is not legal tender because it does not produce the effect of payment until encashed or
through the fault of the creditor, their value has been impaired (Article 1249, Civil Code).

Moreover, under the Central Bank Act, the debtor can not compel the creditor to accept checks
in payment of a debt whether public or private ( Article 60 of RA 7653 ).

In the same manner, a creditor may validly refuse payment by check, whether it be a manager’s,
cashier’s, or personal check (Tibaja, Jr. vs. Court of Appeals, 223 SCRA 163 [1993].)

C. When can you treat a bill of exchange as a promissory note? (3%)

A bill of exchange may be treated as a promissory note in the following instances:

1. When the drawer and the drawee are one and the same person (Sec. 130, Negotiable
Instruments Law); or
2. When the drawee is a fictitious person or a person not having the capacity to contract
(Sec. 130, Negotiable Instruments Law); and
3. Where the instrument is so ambiguous that there is a doubt as to whether the instrument
is a bill or a note, the holder may treat it either as either at his election. (Section 17 [e],
Negotiable Instruments Law)