CHECKS

1. A check is a bill of exchange drawn on a bank payable on demand.

2. Check
 Ordinary Check
 Crossed Check
 Certified check – one drawn by a depositor upon funds to his credit in a bank which a proper officer of the bank
certifies will be paid when duly presented for payment.
 Memorandum Check
 Managers Check -- one drawn by a bank manager’s manager upon the bank itself
 Cashiers check – the check becomes the primary obligation of the bank which issues it and constitutes a written
promise to pay upon demand.
3. Certified check vs Draft
 CC does not operate as an assignment of funds in the hands of the drawee who is not liable on the instrument
until he accepts it; primary obligation of the bank
 Draft – open letter of request from, and an order by, one person on another to pay a sum of money therein
mentioned to a third person, on demand or at a future time specified therein.
4. Cashier’s, manager’s, certified checks – disallows the issuance of cashier’s, manager’s, certified checks that are payable to
bearer

1)

New Pacific Timber v Seneris (Negotiable Instruments)

NEW PACIFIC TIMBER & SUPPLY COMPANY, INC. v SENERIS G.R. No. L-41764 December 19, 1980

FACTS:

Petitioner, New Pacific Timber & Supply Co. Inc. was the defendant in a complaint for collection of money filed by private respondent,
Ricardo A. Tong. In this complaint, respondent Judge rendered a compromise judgment based on the amicable settlement entered by
the parties wherein petitioner will pay to private respondent P54,500.00 at 6% interest per annum and P6,000.00 as attorney's fee of
which P5,000.00 has been paid. Upon failure of the petitioner to pay the judgment obligation, a writ of execution worth P63,130.00
was issued levied on the personal properties of the petitioner. Before the date of the auction sale, petitioner deposited with the Clerk
of Court in his capacity as the Ex-Officio Sheriff P50,000.00 in Cashier's Check of the Equitable Banking Corporation and P13,130.00 in
cash for a total of P63,130.00. Private respondent refused to accept the check and the cash and requested for the auction sale to
proceed. The properties were sold for P50,000.00 to the highest bidder with a deficiency of P13,130.00.

Petitioner subsequently filed an ex-parte motion for issuance of certificate of satisfaction of judgment which was denied by the
respondent Judge. Hence this present petition, alleging that the respondent Judge capriciously and whimsically abused his discretion
in not granting the requested motion for the reason that the judgment obligation was fully satisfied before the auction sale with the
deposit made by the petitioner to the Ex-Officio Sheriff.

In upholding the refusal of the private respondent to accept the check, the respondent Judge cited Article 1249 of the New Civil Code
which provides that payments of debts shall be made in the currency which is the legal tender of the Philippines and Section 63 of the
Central Bank Act which provides that checks representing deposit money do not have legal tender power. In sustaining the contention
of the private respondent to refuse the acceptance of the cash, the respondent Judge cited Article 1248 of the New Civil Code which
provides that creditor cannot be compelled to accept partial payment unless there is an express stipulation to the contrary.

APPLICABLE LAWS: Section 63 of the Central Bank Act:

Sec. 63. Legal Character. — Checks representing deposit money do not have legal tender power and their acceptance in payment of
debts, both public and private, is at the option of the creditor, Provided, however, that a check which has been cleared and credited to
the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his
account.

Article 1249 of the New Civil Code:

Art. 1249. — The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency,
then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of
payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the
action derived from the original obligation shall be held in abeyance.

Art. 1248. Unless there is an express stipulation to that effect, the creditor cannot be compelled partially to receive the presentations in
which the obligation consists. Neither may the debtor be required to make partial payment.

However, when the debt is in part liquidated and in part unliquidated, the creditor may demand and the debtor may effect the
payment of the former without waiting for the liquidation of the latter.

ISSUE: Can the check be considered a valid payment of the judgment obligation?

RULING: (directly in SC for a special action of certiorari) YES. It is to be emphasized that it is a well-known and accepted practice in the
business sector that a Cashier's Check is deemed cash. Moreover, since the check has been certified by the drawee bank, this
certification implies that the check is sufficiently funded in the drawee bank and the funds will be applied whenever the check is
presented for payment. The object of certifying a check is to enable the holder to use it as money. When the holder procures the check
to be certified, it operates as an assignment of a part of the funds to the creditors. Hence, the exception provided in Section 63 of the
Central Bank Act which states that checks which have been cleared and credited to the account of the creditor shall be equivalent to a
delivery to the creditor in cash the amount equal to that which is credited to his account. The Cashier's Check and the cash are valid
payment of the obligation of the petitioner. The private respondent has no valid reason to refuse the acceptance of the check and cash
as full payment of the obligation.

PNB V. National City Bank New York (1936)

G.R. No. L-43596 October 31, 1936

Lessons Applicable: Forgery (Negotiable Instruments)

FACTS:
 April 7 & 9, 1933: unknown person or persons purchased tires and paid Motor Service Company, Inc.(MSCI) checks purporting
to have been issued by the "Pangasinan Transportation Co., Inc. (Pantranco) by J. L. Klar, Manager and Treasurer" against PNB
and in favor of International Auto Repair Shop.
 MSCI indorsed for deposit at the National City Bank of New York and MSCI was accordingly credited with the amounts thereof,
or P144.50 and P215.75
 April 8 & 10, 1933: Checks were cleared and PNB credited the National City Bank
 PNB found out that the signatures of J. L. Klar, Manager and Treasurer were forged and demanded from MSCI and National City
Bank New York
 PNB filed the case in the municipal court of Manila against National City Bank and MSCI.
 Pantranco objected to have the proceeds of said check deducted from their deposit.
 RTC: Favored PNB
 MSCI appealed
ISSUES:
1. W/N acceptance = payment
2. W/N law or business practice prevents the presentation of checks for acceptance before they are paid.
3. W/N MSCI was negligent and therefore PNB should recover
4. W/N the drawee bank should be allowed recovery, as MSCI's position would not become worse than if the drawee had refused
the payment of these checks upon their presentation.
HELD: Affirmed
1. NO.
 A check is a bill of exchange payable on demand and only the rules governing bills of exchange payable on demand are
applicable to it, according to section 185 of the Negotiable Instruments Law
 Acceptance is a step unnecessary for bills of exchange payable on demand (sec. 143)
 Acceptance implies, subsequent negotiation of the instrument
 From the moment a check is paid it is withdrawn from circulation.
 That the payment of a check does not include or imply its acceptance in the sense that this word is used in section 62 of the
Negotiable Instruments Law
 Payment (in checks) - final act which extinguishes a bill.
 Acceptance (in certified checks) - a promise to pay in the future and continues the life of the bill.
2. NO
 section 187, which provides that "where a check is certified by the bank on which it is drawn, the certification is equivalent to an
acceptance", and it is then that the warranty under section 62 exists
 That if a drawee bank pays a forged check which was previously accepted or certified by the said bank it cannot recover from a
holder who did not participate in the forgery and did not have actual notice thereof
3. YES.
 Circumstances:
 check number 637023-D was dated April 6, 1933, whereas check number 637020-D and is dated April 7, 1933. (later check had
prior number)
 accepted the 2 checks from unknown persons
 check 637023-D was indorsed by a subagent of the agent of the payee, International Auto Repair Shop and cross generally
 Section 23 of the Negotiable Instruments Act provides that "when a signature is forged or made without the authority of the
person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge
therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the
party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
 PNB did not warrant to MCSI the genuineness of the checks in question, by its acceptance thereof, nor did it perform any act
which would have induced MSCI to believe in the genuineness
 PNB is NOT precluded from setting up the forgery
4. NO.
 A drawee of a check, who is deceived by a forgery of the drawer's signature may recover the payment back, unless his mistake
has placed an innocent holder of the paper in a worse position than he would have been in if the discover of the forgery had been
made on presentation.
 MSCI has lost nothing by anything which the drawee has done. It had in its hands some forged worthless papers. It did not
purchase or acquire these papers because of any representation made to it by the drawee
Court concluded:

1. That where a check is accepted or certified by the bank on which it is drawn, the bank is estopped to deny the genuineness of the
drawer's signature and his capacity to issue the instrument;
2. That if a drawee bank pays a forged check which was previously accepted or certified by the said bank it cannot recover from a
holder who did not participate in the forgery and did not have actual notice thereof;
3. That the payment of a check does not include or imply its acceptance in the sense that this word is used in section 62 of the
Negotiable Instruments Law;
4. That in the case of the payment of a forged check, even without former acceptance, the drawee can not recover from a holder in due
course not chargeable with any act of negligence or disregard of duty;
5. That to entitle the holder of a forged check to retain the money obtained thereon, there must be a showing that the duty to ascertain
the genuineness of the signature rested entirely upon the drawee, and that the constructive negligence of such drawee in failing to
detect the forgery was not affected by any disregard of duty on the part of the holder, or by failure of any precaution which, from his
implied assertion in presenting the check as a sufficient voucher, the drawee had the right to believe he had taken;
6. That in the absence of actual fault on the part of the drawee, his constructive fault in not knowing the signature of the drawer and
detecting the forgery will nor preclude his recovery from one who took the check under circumstances of suspicion and without proper
precaution, or whose conduct has been such as to mislead the drawee or induce him to pay the check without the usual scrutiny or
other precautions against mistake or fraud;
7. That on who purchases a check or draft is bound to satisfy himself that the paper is genuine, and that by indorsing it or presenting it
for payment or putting it into circulation before presentation he impliedly asserts that he performed his duty;
8. That while the foregoing rule, chosen from a welter of decisions on the issue as the correct one, will not hinder the circulation of
two recognized mediums of exchange by which the great bulk of business is carried on, namely, drafts and checks, on the other hand,
it will encourage and demand prudent business methods on the part of those receiving such mediums of exchange;
9. That it being a matter of record in the present case, that the appellee bank in no more chargeable with the knowledge of the drawer's
signature than the appellant is, as the drawer was as much the customer of the appellant as of the appellee, the presumption that a
drawee bank is bound to know more than any indorser the signature of its depositor does not hold;
10. That according to the undisputed facts of the case the appellant in purchasing the papers in question from unknown persons
without making any inquiry as to the identity and authority of the said persons negotiating and indorsing them, acted negligently and
contributed to the appellee's constructive negligence in failing to detect the forgery;
11. That under the circumstances of the case, if the appellee bank is allowed to recover, there will be no change of position as to the
injury or prejudice of the appellant.

Negotiable Instruments Case Digest: Bataan Cigar V. CA (1994)

G.R. No. 93048 March 3, 1994

Lessons Applicable: Rights of a holder (Negotiable Instruments Law)

FACTS:
 Bataan Cigar & Cigarette Factory, Inc. (BCCFI), a corporation involved in the manufacturing of cigarettes purchased from
King Tim Pua George (George King) 2,000 bales of tobacco leaf to be delivered starting October 1978.
 July 13, 1978: it issued crossed checks post dated sometime in March 1979 in the total amount of P820K
 George represented that he would complete delivery w/in 3 months from Dec 5 1978 so BCCFI agreed to purchase
additional 2,500 bales of tobacco leaves, despite the previous failure in delivery
 It issued post dated crossed checks in the total amount of P1.1M payable sometime in September 1979.
 July 19, 1978: George sold to SIHI at a discount check amounting to P164K, post dated March 31, 1979, drawn by BCCFI
w/ George as payee.
 December 19 and 26, 1978: George sold 2 checks both in the amount of P100K, post dated September 15 & 30, 1979
respectively, drawn by BCCFI w/ George as payee
 Upon failure to deliver, BCCFI issued on March 30, 1979 and September 14 & 28, 1979 a stop payment order for all checks
 SIHI failing to claim, filed a claim against BCCFI
 RTC: SIHI = holder in due course. Non-inclusion of Gearoge as party is immaterial to the case
ISSUE: W/N SIHI is a holder in due course beign a second indorser and a holder of crossed checks
HELD: YES. GRANTED. RTC reversed.
 Sec. 52
1. That it is complete and regular upon its face
2. 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
3. That he took it in good faith and for value
4. 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
 Sec. 59
 every holder is deemed prima facie a holder in due course
 However, when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on
the holder to prove that he or some person under whom he claims, acquired the title as holder in due course.
 effect of crossing of a check

1. check may not be encashed but only deposited in the bank

2. check may be negotiated only once — to one who has an account with a bank
3. act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose - he must inquire
if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course

 crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorser's title to the
check or the nature of his possession - failure = guilty of gross negligence amounting to legal absence of good faith,
contrary to Sec. 52(c) of the Negotiable Instruments Law
 SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks. However, that SIHI could not
recover from the checks. The only disadvantage of a holder who is not a holder in due course is that the instrument is
subject to defenses as if it were non-negotiable. Hence, SIHI can collect from the immediate indorser, George

Stelco vs CA

Stelco Marketing vs. CA

GR 96160, 17 June 1992, 210 scra 51
--accommodation party

FACTS:
Stelco Marketing Corporation sold structural steel bars to RYL Construction Inc. RYL gave Stelco’s “sister corporation,”
Armstrong Industries, a MetroBank check from Steelweld Corporation. The check was issued by Steelweld’s President to
Romeo Lim, President of RYL, by way of accommodation, as a guaranty and not in payment of an obligation. When
Armstrong deposited the check at its bank, it was dishonored because it was drawn against insufficient funds. When so
deposited, the check bore two indorsements, i.e. RYL and Armstrong. Subsequently, Stelco filed a civil case against RYL
and Steelweld to recover the value of the steel products.

ISSUE:
Whether Steelweld as an accommodating party can be held liable by Stelco for the dishonored check.

RULING:
Steelweld may be held liable but not by Stelco. Under Section 29 of the NIL, Steelweld Corp. can be held liable for having
issued the subject check for the accommodation of Romeo Lim. An accommodation party is one who has singed the
instrument as maker, drawer, acceptor, or indorser, without receiving valued therefor, and for the purpose of lending his
name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder,
at the time of taking the instrument, knew him to be only an accommodation party. Stelco however, cannot be deemed a
holder of the check for value as it does not meet two essential requisites prescribed by statute, i.e. that it did not become
“the holder of it before it was overdue, and without notice that it had been previously dishonored,” and that it did not take
the check “in good faith and for value.

Papa v. Valencia Digest

Papa v. Valencia
G.R. No. 105188 January 23, 1998

Banking; Checks

Facts:
1. The case arose from a sale of a parcel of land allegedly made to private respondent Penarroyo by petitioner acting as
attorney-in-fact of Anne Butte. The purchaser, through Valencia, made a check payment in the amount of P40,000 and in
cash, P5,000. Both were accepted by petitioner as evidenced by various receipts. It appeared that the said property has
already been mortgaged to the bank previously together with other properties of Butte.

2. When Butte passed away, the private respondent Penarroyo now demanded that the title to the property be conveyed
to him, however the bank refused. Hence, the filing of a suit for specific performance by private respondents against the
petitioner. The lower court ruled in favor of the private respondents and ordered herein petitioner the conveyance or the
property or if not, its payment. The petitioner appealed the lower court's decision alleging that the sale was not
consummated as he never encashed the check given as part of the purchase price.

3. The Court of Appeals affirmed with modifications the lower court's decision. It held that there was a consummated sale
of the subject property despite.

Issue: Whether or not the check is a valid tender of payment/Whether or not there was a valid sale of the subject
property

RULING: Yes. While it is true that the delivery of check produces payment only when encashed (pursuant to Art. 1249,
Civil Code), the rule is otherwise if the debtor is prejudiced by the delay in presentment. (Here in this case, the petitioner
now alleges that he did not present the check, ten years after the same was paid to him as part of the purchase price of
the property.)

Check acceptance implied an undertaking of due diligence in presenting it for payment. If the person who receives it
sustains loss by want of this diligence, this will operated as actual payment of the debt or obligation for which the check
was given. The debtor cannot now be held liable if non-presentment of the check was through the fault of the creditor.

Negotiable Instruments Case Digest: Villanueva V. Nite (2006)

G.R. No. 148211 July 25, 2006

Lessons Applicable: Liabilities of Parties (Negotiable Instruments Law)

FACTS:
 Nite loaned from Villanueva P409,000
 as a sceurity he issued an Asian Bank Corporation (ABC) check of P325,500 dated February 8, 1994
 it was consented to be changed to June 8, 1994
 check was dishonored due to a material alteration
 August 24, 1994: Nite while abroad partially paid P235K through her representative Emily P. Abojada
 The balance of P174K was due on or before December 8, 1994.
 August 24, 1994: Villanueva filed an action for a sum of money and damages against ABC for the full amount of the dishonored
check (despite the loan not being due and Nite away)
 RTC: favored Villanueva
 June 30, 1997: Nite went to ABC to withdraw but she was not able to because of the RTC order
 August 25, 1997: ABC remitted to the sheriff a manager’s check amounting to P325,500 drawn on Nite's account
 CA: favored Nite's appeal
ISSUE: W/N ABC should be liable to Villanueva

HELD: NO. DENIED

 Negotiable Instruments Law
 SEC. 185. Check, defined. – A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise
provided, the provisions of this Act applicable to a bill of exchange payable on demand apply to a check
 SEC. 189. When check operates as an assignment. – A check of itself does not operate as an assignment of any part of the funds
to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check
 Rule 3, Sec. 7 of the Rules of Court states:

Sec. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants.
 The contract of loan was between Villanueva and Nite. No collection suit could prosper without Nite who was an indispensable
party

Negotiable Instruments Case Digest: Equitable PCI Bank V. Ong (2006)

G.R. No. 156207 September 15, 2006

Lessons Applicable: Promissory Notes and Checks (Negotiable Instruments Law)

FACTS:
 Warliza Sarande deposited in her account at Philippine Commercial International (PCI) Bank a PCI
Bank TCBT Check of P225K.

 December 5 1991: Upon inquiry by Serande at PCI Bank on whether the TCBT Check had been
cleared, she received an affirmative answer.

 Relying on this assurance, she issued 2 checks drawn against the proceeds of TCBT Check.

 PCI Bank Check No. 073661 dated 5 December 1991 for P132K which Sarande issued to respondent
Rowena Ong owing to a business transaction.
 On the same day, Ong presented to PCI Bank requesting PCI Bank to convert the proceeds into a
manager's check, which the PCI Bank obliged.

 December 6 1991: Ong deposited PCI Bank Manager's Check in her account with Equitable Banking
Corporation

 December 9 1991: she received a check return-slip informing her that PCI Bank had stopped the
payment of the check on the ground of irregular issuance.

 Despite several demands made, it was refused

 Ong was constrained to file a Complaint for sum of money, damages and attorney's fees against PCI
Bank

 CA affirmed RTC: favored Ong

ISSUE: W/N Ong can hold PCI liable

HELD: YES. Petition is DENIED. CA affirmed.

 By admitting it committed an error, clearing the check of Sarande and issuing in favor of Ong not just
any check but a manager's check for that matter, PCI Bank's liability is fixed

 certification = acceptance,

 Equitable PCI as drawee bank is bound on the instrument upon certification and it is immaterial to
such liability in favor of Ong who is a holder in due course whether the drawer (Warliza Sarande) had
funds or not with the Equitable PCI Bank

 No unjust enrichment

SECTION 52. What constitutes a holder in due course. – 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 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 same law provides further:
Sec. 24. Presumption of consideration. – Every negotiable instrument is deemed prima facie to have been
issued for a valuable consideration; and every person whose signature appears thereon to have become a
party thereto for value.
Sec. 26. What constitutes holder for value. – Where value has at any time been given for the instrument,
the holder is deemed a holder for value in respect to all parties who become such prior to that time.
Sec. 28. Effect of want of consideration. – Absence or failure of consideration is a matter of defense as
against any person not a holder in due course; and partial failure of consideration is a defense pro tanto,
whether the failure is an ascertained and liquidated amount or otherwise.
 manager's check

 an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and
honor behind its issuance

 regarded substantially to be as good as the money it represents

 same footing as a certified check

 The object of certifying a check, as regards both parties, is to enable the holder to use it as money.

 check operates as an assignment of a part of the funds to the creditors

Sec. 187. Certification of check; effect of. – Where a check is certified by the bank on which it is drawn,
the certification is equivalent to an acceptance

Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the
amount credited to his account

Sec. 62. Liability of acceptor. – The acceptor by accepting the instruments engages that he will pay it
according to the tenor of his acceptance; and admits –
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw
the instrument; and
(b) The existence of the payee and his then capacity to indorse.

Salazar vs JY Brothers Marketing Corporation 634 SCRA 95. October 20, 2010
Facts:
J.Y. Brothers Marketing (J.Y. Bros., for short) is a corporation engaged in the business of selling sugar, rice and other
commodities. On October 15, 1996, Anamer Salazar, a freelance sales agent, was approached by Isagani Calleja and Jess
Kallos.Salazar with Calleja and Kallos procured from J. Y. Bros. 300 cavans of rice worth P214,000.00. As payment,
Salazar negotiated and indorsed to J.Y. Bros. Prudential Bank Check No. 067481 dated October 15, 1996 issued by Nena Jaucian
Timario in the amount of P214,000.00 with the assurance that the check is good as cash. On that assurance, J.Y. Bros. parted
with 300 cavans of rice to Salazar. However, upon presentment, the check was dishonored due to closed account.

Informed of the dishonor of the check, Calleja, Kallos and Salazar delivered to J.Y. Bros. a replacement cross Solid Bank
Check No. PA365704 dated October 29, 1996 again issued by Nena Jaucian Timario in the amount of P214,000.00 but which, just the
same, bounced due to insufficient funds. When despite the demand letter dated February 27, 1997, Salazar failed to settle the amount
due J.Y. Bros., the latter charged Salazar and Timario with the crime of estafa before the RTC.
Issue:
1. Whether or not there is novation
2. Whether or not petitioner is liable as an accommodation indorser for the payment of the dishonored Prudential Bank Check

Ruling:
1. No.
Section 119 of the Negotiable Instrument Law provides, thus:
SECTION 119. Instrument; how discharged. A negotiable instrument is discharged:
(a) By payment in due course by or on behalf of the principal debtor;
(b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation;
(c) By the intentional cancellation thereof by the holder;
(d) By any other act which will discharge a simple contract for the payment of money;
(e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right.
There are only two ways which indicate the presence of novation and thereby produce the effect of extinguishing an obligation by
another which substitutes the same. First, novation must be explicitly stated and declared in unequivocal terms as novation
is never presumed. Secondly, the old and the new obligations must be incompatible on every point. The test of
incompatibility is whether or not the two obligations can stand together, each one having its independent existence. If they
cannot, they are incompatible and the latter obligation novates the first.
In this case, respondents acceptance of the Solid Bank check, which replaced the dishonored Prudential Bank
check, did not result to novation as there was no express agreement to establish that petitioner was already discharged from
his liability to pay respondent the amount of P214,000.00 as payment for the 300 bags of rice. As we said, novation is never
presumed, there must be an express intention to novate. In fact, when the Solid Bank check was delivered to respondent,
the same was also indorsed by petitioner which shows petitioners recognition of the existing obligation to respondent to pay
P214,000.00 subject of the replaced Prudential Bank check. Moreover, respondents acceptance of the Solid Bank check did not
result to any incompatibility, since the two checks − Prudential and Solid Bank checks − were precisely for the purpose of paying
the amount of P214,000.00, i.e., the credit obtained from the purchase of the 300 bags of rice from respondent. Indeed, there was no
substantial change in the object or principal condition of the obligation of petitioner as the indorser of the check to pay the amount of
P214,000.00. It would appear that respondent accepted the Solid Bank check to give petitioner the chance to pay her obligation.

2. Yes.

Among the different types of checks issued by a drawer is the crossed check. The Negotiable Instruments Law is silent with respect to
crossed checks, although the Code of Commerce makes reference to such instruments. We have taken judicial cognizance of the
practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and could
not be converted into cash. Thus, the effect of crossing a check relates to the mode of payment, meaning that the drawer
had intended the check for deposit only by the rightful person, i.e., the payee named therein. The change in the mode of paying
the obligation was not a change in any of the objects or principal condition of the contract for novation to take place. Considering that
when the Solid Bank check, which replaced the Prudential Bank check, was presented for payment, the same was again
dishonored; thus, the obligation which was secured by the Prudential Bank check was not extinguished and the Prudential
Bank check was not discharged. Thus, the court held petitioner liable as an accommodation indorser for the payment of the dishonored
Prudential Bank check.