1. Republic Planters Bank vs.
CA completed houses and developed lands delivered to and accepted by
Facts: Republic Planters Bank issued 9 promissory notes signed by Shozo
Yamaguchi (President) and
Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc.
Yamaguchi and Canlas were authorized
by the corporation to apply for credit facilities with the bank in form of
export advances and letters of credit
or trust receipts accommodations. Three years after, the bank filed an action
to recover the sums of money
covered by the promissory notes. Worldwide Garment Manufacturing
changed its name to Pinch
Manufacturing Corp. Canlas alleged he was not liable personally for the
corporate acts that he performed, and
that the notes were still blank when he signed them.
Issue: Whether the corporate treasurer is liable for the amounts in the
promissory notes.
Held: Canlas is a co-maker of the promissory notes, under the law, and
cannot escape liability arising
therefrom. Inasmuch as the instrument contained the words “I promise to
pay” and is signed by two or more
persons, said persons are deemed to be jointly and severally liable thereon.
As the promissory notes are
stereotype ones issued by the bank in printed form with blank spaces filled
up as per agreed terms of the loan,
following customary procedures, leaving the debtors to do nothing but read
the terms and conditions therein
and to sign as makers or co-makers. Section 14 of the Negotiable Instruments
Law, therefore, does not apply.
Canlas is solidarily liable with the corporation for the amount of the 9
promissory notes.
2. Francisco vs CA
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
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.
Ruling: 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.
3. Jai-alai Corp vs BPI
FACTS: Jai-Alai Corp. deposited 10 checks with BPI. The checks
were from Ramirez, a sales agent of the Inter-Island Gas were all
payable to Inter-Island Gas Service, Inc. or order. Inter-Island Gas
discovered that all the indorsements made on the checks purportedly
by its cashiers were forgeries. BPI debited Jai-Alai's current account
and forwarded to it the checks containing the forged indorsements 
ISSUE: W/N BPI had the right to debit.
HELD: YES. Having indorsed the checks to BPI, Jai-Alai 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." The depositor of a check as indorser warrants that it is
genuine and in all respects what it purports to be. Jai Alai Corporation
negligent in accepting the checks without question from Antonio
Ramirez notwithstanding that the payee was the Inter-Island Gas
Services, Inc. and it did not appear that he was authorized to indorse
it.
4. MWSS vs CA
Facts: By special arrangement with PNB, MWSS used personalized
checks in drawing from its account. The
checks were printed by its printer, F. Mesina Enterprises. 23 checks were
paid and cleared by PNB, and
debited against MWSS’ account from March to May 1969. The checks were
deposited by payees Raul Dizon,
Arturo Sison, and Antonio Mendoza in their account with PCIBank. Said
persons were later found to be fictitious. MWSS requested PNB to restore the
amount debited due to the 23 checks, allegedly forged, to its
account. The bank refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the alleged forged checks.
Held: There was no express and categorical finding that the 23 checks were
forged or signed by persons other
than the authorized MWSS signatories. Forgery is not presumed but should
be established by clear, positive
and convincing evidence. MWSS is barred from setting up defense of forgery
under Section 23 of the
Negotiable Instruments Law as MWSS committed gross negligence in the
printing of its personalized checks,
failed to reconcile its bank statements with its own records, and failed to
provide appropriate security
measures over its own record. PNB, the drawee bank, had taken necessary
measures in the detection of forged checks and the prevention of their
fraudulent encashment through constant reminders to all its current account
bookkeepers informing them of the activities of forgery syndicates. MWSS’
gross negligence was the
proximate cause of the loss (P3 million), and should bear the loss.
5. Gempesaw vs. CA
Facts: Natividad Gempesaw issued checks, prepared by her bookkeeper, a
total of 82 checks in favor of
several supplies. Most of the checks for amounts in excess of actual
obligations as shown in their corresponding invoices. It was only after the
lapse of more than 2 years did she discovered the fraudulent
manipulations of her bookkeeper. It was also learned that the indorsements of
the payee were forged, and the
checks were brought to the chief accountant of Philippine Bank of
Commerce (the Drawee Bank, Buendia
Branch) who deposited them in the accounts of Alfredo Romero and Benito
Lam. Gempesaw made demand
upon the bank to credit the amount charged due the checks. The bank
refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the forged indorsements.
Held: As a rule, a drawee bank who has paid a check on which an
indorsement has been forged cannot charge the drawer’s account for the
amount of said check. An exception to the rule is where the drawer is guilty
of such negligence which causes the bank to honor such checks. Gempesaw
did not exercise prudence in taking steps that a careful and prudent
businessman would take in circumstances to discover discrepancies in her
account. Her negligence was the proximate cause of her loss, and under
Section 23 of the Negotiable
Instruments Law, is precluded from using forgery as a defense.
On the other hand, the banking rule banning acceptance of checks for deposit
or cash payment with more than one indorsement unless cleared by some
bank officials does not invalidate the instrument; neither does it invalidate
the negotiation or transfer of said checks. The only kind of indorsement
which stops the further negotiation of an instrument is a restrictive
indorsement which prohibits the further negotiation thereof, pursuant to
Section 36 of the Negotiable Instruments Law. In light of any case not
provided for in the Act that is to be governed by the provisions of existing
legislation, pursuant to Section 196 of the Negotiable Instruments Law, the
bank may be held liable for damages in accordance with Article 1170 of the
Civil Code. The drawee bank, in its failure to discover the fraud committed
by its employee and in contravention banking rules in allowing a chief
accountant to deposit the checks bearing second indorsements, was adjudged
liable to share the loss with Gempesaw on a 50:50 ratio.
6. Associated Bank vs CA
Facts: The Province of Tarlac maintains a current account with the
Philippine National Bank (PNB Tarlac
Branch) where the provincial funds are deposited. Portions of the funds were
allocated to the Concepcion
Emergency Hospital. Checks were issued to it and were received by the
hospital’s administrative officer and
cashier (Fausto Pangilinan). Pangilinan, through the help of Associated Bank
but after forging the signature of
the hospital’s chief (Adena Canlas), was able to deposit the checks in his
personal account. All the checks
bore the stamp “All prior endorsement guaranteed Associated Bank.”
Through post-audit, the province discovered that the hospital did not receive
several allotted checks, and sought the restoration of the debited
amounts from PNB. In turn, PNB demanded reimbursement from Associated
Bank. Both banks resisted
payment. Hence, the present action.
Issue: Who shall bear the loss resulting from the forged checks.
Held: PNB is not negligent as it is not required to return the check to the
collecting bank within 24 hours as
the banks involved are covered by Central Bank Circular 580 and not the
rules of the Philippine Clearing
House. Associated Bank, and not PNB, is the one duty-bound to warrant the
instrument as genuine, valid and
subsisting at the time of indorsement pursuant to Section 66 of the
Negotiable Instruments Law. The stamp
guaranteeing prior indorsement is not an empty rubric; the collecting bank is
held accountable for checks
deposited by its customers. However, due to the fact that the Province of
Tarlac is equally negligent in
permitting Pangilinan to collect the checks when he was no longer connected
with the hospital, it shares the
burden of loss from the checks bearing a forged indorsement. Therefore, the
Province can only recover 50%
of the amount from the drawee bank (PNB), and the collecting bank
(Associated Bank) is liable to PNB for
50% of the same amount.
7. PCIB vs CA
Facts: Ford issued Citibank checks in favor of the Commissioner of
Internal Revenue as payments of its
taxes, through the depository bank Insular Bank of Asia and America
(later PCIBank). Proceeds of the checks
were never received by the Commissioner, but were encashed and
diverted to the accounts of members of a
syndicate, to which Ford’s General Ledger Accountant Godofredo
Rivera belongs. Upon demand of the
Commissioner anew, Ford was forced to make second payment of its
taxes. Thus, Ford instituted actions to
recover 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 by
virtue 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 circumstance
raising estoppel against the drawer. The rule applies to checks
fraudulently negotiated or diverted by the
confidential 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 PCIBank
liable 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 the
process of embezzlement. Central Bank Circular 580 (1977),
however, provide d that any theft affecting items
in transit for clearing are for the account of the sending bank (herein
PCIBank). Still, Citibank was likewise
negligent in the performance of its duties as it failed to establish its
payment of Ford’s checks were made in
due course and legally in order. The fact that drawee bank did not
discover the irregularity seasonably
constitutes negligence in carrying out the bank’s duty to its depositors.
8. BPI vs CASA Montessori
Facts: CASA Montessori International opened a Current Account with
BPI with CASA’s President Ms. Lebron as one of its authorized
signatories. In 1991, CASA discovered that 9 of its checks had been
encashed by a certain Sonny D. Santos since 1990 in the total
amount of ₱782,000.00 It turned out that ‘Sonny D. Santos’ with
account at BPI’s Greenbelt Branch [was] a fictitious name used by
Leonardo T. Yabut who worked as external auditor of CASA. Yabut
voluntarily admitted that he forged the signature of Ms. Lebron and
encashed the checks. A Complaint for Collection with Damages
against BPI to reinstate the amount of ₱782,500.00 in the current and
savings accounts of CASA with interest at 6% per annum. The RTC
rendered a decision in favor of the CASA. Modifying the Decision of
the RTC, the CA apportioned the loss between BPI and CASA. The
appellate court took into account CASA’s contributory negligence that
resulted in the undetected forgery.
Issue: Whether or not CASA is precluded from setting up forgery as a
defense.
Ruling: Forged Signature Wholly Inoperative
Section 23 of the NIL provides:
“Section 23. Forged signature; effect of. — 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 x x x 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.”
Under this provision, a forged signature is a real or absolute defense,
and a person whose signature on a negotiable instrument is forged is
deemed to have never become a party thereto and to have never
consented to the contract that allegedly gave rise to it.
The counterfeiting of any writing, consisting in the signing of another’s
name with intent to defraud, is forgery.
In the present case, we hold that there was forgery of the drawer’s
signature on the check.
Forgery “cannot be presumed.” It must be established by clear,
positive and convincing evidence.
Having established the forgery of the drawer’s signature, BPI — the
drawee — erred in making payments by virtue thereof. The forged
signatures are wholly inoperative, and CASA — the drawer whose
authorized signatures do not appear on the negotiable instruments —
cannot be held liable thereon.
In this jurisdiction, the negligence of the party invoking forgery is
recognized as an exception to the general rule that a forged signature
is wholly inoperative. Contrary to BPI’s claim, however, we do not find
CASA negligent in handling its financial affairs. CASA, we stress, is
not precluded from setting up forgery as a real defense.
9. Samsung Construction Co. vs Far East Bank and Trust
Co.
Facts: Samsung Construction maintained a current account with Far
East Bank and Trust Bank (FETBC) in its Bel-Air Makati Branch, with
Jong Kyu Lee who is the Project Manager as the sole signatory and
Kyu Yong Lee having the checks in his custody as the company’s
accountant. A certain Roberto Gonzaga presented an FETBC Check
on the same branch. The check was payable to cash and drawn
against the account of Samsung Construction amounting to P995,
500.00. The teller and the bank officers were satisfied with the
genuineness of the signature in the check and confirmed the identity
of Gonzaga with the assistant accountant of Samsung Construction
who was also familiar and known to them, the latter being present at
the bank premises at that time. In the end, the check was authorized
to be encashed. The Project Manager and the Accountant of the
company found out the next day that the last blank check was missing
and that the check was encashed with Jong’s signature being forged.
Samsung Construction demanded reimbursement of the amount
encashed and when it was not heeded immediately, it filed a
Complaint against the bank for violation of Sec. 23 of Negotiable
Instruments Law.
In the RTC, it held that Jong’s signature on the check was forged and
ordered the bank to pay company for the amount plus interest. During
appeal in CA, this decision was reversed by stating that even
assuming there was forgery, it occurred due to the negligence of
Samsung Construction specifically the accountant for lack of care in
keeping the checks. The decision was appealed to SC, based on the
grounds that the CA misapprehended the facts and erred when it said
that the company has been negligent in safekeeping the check.
Issue: Is bank liable to reimburse the amount encashed through
forgery?
Ruling: Yes, the bank is liable to pay Samsung Construction.
Therefore, the decision of CA is set aside.
Under Sec. 23 of Negotiable Instruments Law, forgery is a real or
absolute defense by the party whose signature is forged. The general
rule remains that the drawee who has paid upon the forged signature
bears the loss. The exception to this rule arises only when negligence
can be traced on the part of the drawer whose signature was forged,
and the need arises to weigh the comparative negligence between the
drawer and the drawee to determine who should bear the burden of
loss. The Court finds no basis to conclude that Samsung Construction
was negligent in the safekeeping of its checks especially that
Samsung Construction reported the forgery almost immediately upon
discovery. The general rule imputing liability on the drawee who paid
out on the forgery holds in this case.
The circumstances should have aroused the suspicion of the bank, as
it is not ordinary business practice for a check for such large amount
to be made payable to cash or to bearer, instead of to the order of a
specified person. Extraordinary diligence dictates that FEBTC should
have ascertained from Jong personally that the signature in the
questionable check was his. Still, even if the bank performed with
utmost diligence, the drawer whose signature was forged may still
recover from the bank as long as he or she is not precluded from
setting up the defense of forgery. After all, Section 23 of the
Negotiable Instruments Law plainly states that no right to enforce the
payment of a check can arise out of a forged signature. Since the
drawer, Samsung Construction, is not precluded by negligence from
setting up the forgery, the general rule should apply. Consequently, if
a bank pays a forged check, it must be considered as paying out of its
funds and cannot charge the amount so paid to the account of the
depositor. A bank is liable, irrespective of its good faith, in paying a
forged check.
10. Montinola vs PNB
Facts: Ubaldo D. Laya was the Provincial Treasurer of Misamis
Oriental and the ex officio agent of the Philippine National Bank
branch in the province. Mariano V. Ramos worked under him as
assistant agent in the bank branch The currency being used in
Mindanao was the emergency currency. Ramos was inducted into the
United States Armed Forces in the Far East (USAFFE) as disbursing
officer of an army division. Ramos,disbursing officer, went to Province
Lanao to procure a cash advance in the amount of P800K for the use
of the USAFFE. Provincial Treasurer of Lanao did not have that
amount in cash so he gave Ramos P300,000 in emergency notes and
a check for P500,000 Ramos went to the office of Provincial Treasurer
Laya at Misamis Oriental to encash the check for P500,000 which he
had received from the Provincial Treasurer of Lanao. Laya did not
have enough cash to cover the check so he gave Ramos P400,000 in
emergency notes and a check No. 1382 for P100,000 drawn on the
Philippine National Bank. According to Laya he had previously
deposited P500,000 emergency notes in the Philippine National Bank
branch in Cebu and he expected to have the check issued by him
cashed in Cebu against said deposit. The USAFFE forces to which he
was attached surrendered. Ramos was made a prisoner of war
Ramos allegedly indorsed the check to Enrique P.
Montinola. Montinola filed a complaint to collect the sum of P100,000,
the amount of Check issued by the Provincial Treasurer of Misamis
Oriental to Mariano V. Ramos and supposedly indorsed to Montinola
Issue: a. W/N Montinola cannot hold PNB liable because there
is "Agent, Phil. National Bank" is an alteration – YES. "Agent, Phil.
National Bank" now appearing under the signature of the Provincial
Treasurer on the face of the original check - 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.
(Section 124 of the Negotiable Instruments Law). Montinola may
therefore not be regarded as an indorsee. At most he may be
regarded as a mere assignee of the P30,000 sold to him by Ramos, in
which case, as such assignee, he is subject to all defenses available
to the drawer Provincial Treasurer of Misamis Oriental and against
Ramos. 
W/N Montinola is a holder in due course – NO. Neither can Montinola
be considered as a holder in due course because section 52 of said
law defines a holder in due course as a holder who has taken the
instrument under certain conditions, one of which is that he became
the holder before it was overdue. When Montinola received the check,
it was long overdue. Neither could it be said that he took it in good
faith. He has not paid the full amount of P90,000 for which Ramos
sold him P30,000 of the value of the check.  the whole obligation and such extension does not release him because as far
11. PNB vs CA
12. Prudencio vs CA
Facts: Eulalio and Elisa Prudencio are the registered owners of a parcel of
land located in Sampaloc, Manila.
The property was mortgaged to PNB to guarantee a loan of P1,000 extended
to one Domingo Prudencio.
Sometime in 1955, Concepcion & Tamayo Construction Co., through Jose
Toribio (Prudencio’s relative),
persuaded the Prudencios to mortgage their property to secure the loan of
P10,000 which the company was
negotiating with the PNB. The Prudencios signed the “Amendment of Real
Estate Mortgage.” The promissory
note covering the P10,000 loan was signed by Toribio. The Prudencios also
signed the portion of the note
indicating that they are requesting the PNB to issue the check covering the
loan to the Company. Jose Toribio
executed the “Deed of Assignment” assigning all payments made by the
Bureau to the company on account of
the Puerto Princesa building project in favor of PNB. The Bureau, however,
conditioned that the payment
should be for labor and materials. The Prudencios wrote PNB that since PNB
authorized payments to the
Company where there were changes in the conditions of the contract without
their knowledge, they seek to
cancel the mortgage contract. Failing to cancel the mortgage, they filed suit
to cancel the same.
Issue: Whether the Prudencios were solidary co-debtors or sureties as a
result of being accommodation
makers.
Held: In lending his name to the accommodated party, the accommodation
party is in effect a surety.
However, unlike in a contract of suretyship, the liability of the
accommodation party remains not only
primary but also unconditional to a holder for value such that even if the
accommodated party receives an
extension of the period of payment without the consent of the
accommodation party, the latter is still liable for
as the holder for value is
concerned, he is a solidary co-debtor. Consequently, the Prudencios cannot
claim to have been released from
their obligation simply because the time of payment of such obligation was
temporarily deferred by PNB
without their knowledge and consent. To be freed of obligation, it is thus
necessary to determine if PNB, the
payee of the promissory note, is a holder in due course. Herein, PNB was an
immediate party or in privy to
the note, besides that it dealt directly with the Prudencios knowing fully well
that they are accommodation
makers. The general rule that a payee may be considered a holder in due
course does not apply to PNB.
 13. Travel-on vs 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 Travel-On. He procured tickets
on behalf of airline passengers and derived commissions therefrom. Miranda
apparently owed Travel-On the
amount of P278,201.57 (the value of airline tickets sold to the former), to
which Miranda paid various
amounts in cash and in kind. He thereafter issued 6 post-dated checks
amounting to P115,000 which were all
dishonored by the drawee bank. Travel-On filed suit to recover the value of
the checks. Miranda countered
that he instead overpaid his obligations, and that he merely issued the checks
for purposes of accommodation
as he allegedly had in the past accorded Travel-On.
Issue: Whether Miranda is indebted to Travel-On, or whether he is an
accommodation party.
Held: A check which is regular on its face is deemed prima facie to have
been issued for a valuable
consideration and every person whose signature appears thereon is deemed to
have become a party thereto for value. Thus, the mere introduction of the
instrument sued on, in evidence prima facie, entitles the plaintiff to
recovery. Such presumption subsists unless otherwise contradicted by other
competent evidence. The checks,
being presented for payment, were thus intended for encashment. There is
nothing in the checks (nor in other
documents) that stated otherwise. Travel-On was a payee, not an
accommodated party for the checks, as it
realized no value on the checks which bounced. Travel-On, thus, is entitled
to the benefit of the presumption
that it is a holder in due course.
14. Agro Conglomerates vs CA
Facts: Petitioner sold to Wonderland Food Industries two parcels of
land. They stipulated under a Memorandum of Agreement that the
terms of payment would be P1,000,000 in cash, P2,000,000 in
shares of stock, and the balance would be payable in monthly
installments. 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 one of principal
and surety.
Furthermore, the contract of surety between Woodland and
petitioner was extinguished by the rescission of the contract of sale of
the farmland. With the rescission, there was confusion in the persons
of the principal debtor and surety. The addendum thereon likewise
lost its efficacy.
15. Lim vs Saban
Facts: The late Eduardo Ybanez entered i nto an Agreement and
Authority to Negotiate and Sell (Agency Agreement) with respondent
Florencio Saban (Saban) on February 8, 1994. Under the Agency
Agreement, Ybañez authorized Saban to look for a buyer of the lot for
Two Hundred Thousand Pesos P 200,000.00) and to mark up the
selling price to include the amounts needed for payment of taxes,
transfer of title and other expenses incident to the sale, as well as
Saban’s commission for the sale. Through Saban's effort, he sold said
lot to Spouses Lim and Genevieve L im. He sold the lot for Php600,
000.00. Saban gave Ybanez Php230, 000.00. However, Ybanez
found out that the lot was being sold for Php600, 000.00 and asked
Lim to directly pay him the balance. Lim cancelled all checks issued to
Saban and paid directly to Ybanez. Saban said that Lim and Ybanez
did it to deprive him of the commission due tohim.
Issue: Whether or not Lim is liable on the checks because she issued
them as an accommodation party.
Ruling: Section 29 of the Negotiable Instruments Law defines an
accommodation party as a person "who has signed the negotiable
instrument as maker, drawer, acceptor or indorser, without receiving
value therefor, for the purpose of lending his name to some other
person." The accommodation party is liable on the instrument to a
holder for value even though the holder at the time of taking the
instrument knew him or her to be merely an accommodation party.
The accommodation party may of course seek reimbursement from
the party accommodated.
As gleaned from the text of Section 29 of the Negotiable Instruments
Law, the accommodation party is one who meets all these three
requisites, viz: (1) he signed the instrument as maker, drawer,
acceptor, or indorser; (2) he did not receive value for the signature;
and (3) he signed for the purpose of lending his name to some other
person. In the case at bar, while Lim signed as drawer of the checks
she did not satisfy the two other remaining requisites.
The absence of the second requisite becomes pellucid when it is
noted at the outset that Lim issued the checks in question on account
of her transaction, along with the other purchasers, with Ybañez which
was a sale and, therefore, a reciprocal contract. Specifically, she drew
the checks in payment of the balance of the purchase price of the lot
subject of the transaction. And she had to pay the agreed purchase
price in consideration for the sale of the lot to her and her co-vendees.
In other words, the amounts covered by the checks form part of the
cause or consideration from Ybañez’s end, as vendor, while the lot
represented the cause or consideration on the side of Lim, as vendee.
Ergo, Lim received value for her signature on the checks.
Neither is there any indication that Lim issued the checks for the
purpose of enabling Ybañez, or any other person for that matter, to
obtain credit or to raise money, thereby totally debunking the
presence of the third requisite of an accommodation party.
16. BPI vs Roxas
FACTS: Gregorio Roxas, as trader, delivered stocks of vegetable oil
to Spouses Rodrigo and Marissa Cawili. As payment, they issued a
personal check amounting to PHP348,805.50which was dishonored
by the drawee bank when respondent tried to encash it. The Spouses
Cawili replaced the check with a cashier's check from Bank of the
Philippine Island (Petitioner). The cashier's check was drawn against
the account of Marissa Cawili. The Cashier Check was handed to
respondent by Rodrigo Cawili. When respondent tried to encash the
Cashier Check, it was dishonored on the ground that the account of
Marissa was closed on the same date that respondent tried to encash
such check. Respondent thereafter filed a complaint with the Regional
Trial Court for a sum of money praying that petitioner pay him the
amount of the check, damages and cost of the suit. The RTC in its
decision held that Petitioner is liable to pay the face value of the
cashier's check amounting to PHP 384, 805.50. On appeal, the CA
affirmed the decision of the RTC. Hence, the filing of the Petition for
Certiorari by the petitioner.
ISSUE:(1) Whether or not the respondent is a holder in due course?
(2) Whether or not petitioner is liable to respondent for the
amount of the cashier’s check?
HELD: The petition is DENIED. The assailed Decision of the Court of
Appeals (Fourth Division) is AFFIRMED.
Held [1]: Petitioner contends that the element of "value" is not
present, therefore, respondent could not be a holder in due course.
There is no dispute that respondent received Rodrigo Cawili’s
cashier’s check as payment for the former’s vegetable oil. The fact
that it was Rodrigo who purchased the cashier’s check from petitioner
will not affect respondent’s status as a holder for value since the
check was delivered to him as payment for the vegetable oil he sold to
spouses Cawili. Verily, the Court of Appeals did not err in concluding
that respondent is a holder in due course of the cashier’s check.
 [2]: BPI is liable to Respondent. It bears emphasis that the
disputed check is a cashier’s check. A cashier’s check is really the
bank’s own check and may be treated as a promissory note with the
bank as the maker. The check becomes the primary obligation of the
bank which issues it and constitutes a written promise to pay upon
demand. The mere issuance of a cashier’s check is considered
acceptance thereof. Petitioner bank became liable to respondent from
the moment it issued the cashier’s check. Having been accepted by
respondent, subject to no condition whatsoever, petitioner should
have paid the same upon presentment by the former.
17. Dino vs Judal-loot
18. Hi-Cement Corp vs Insular Bank of Asia and America
FACTS:
 Enrique Tan and Lilia Tan (spouses Tan) were the controlling
stockholders of E.T. Henry & Co., Inc. (E.T. Henry), a
company engaged in the business of processing and
distributing bunker fuel.
 E.T. Henry's customers were Hi-Cement Corporation (Hi-
Cement), Riverside Mills Corporation (Riverside) and Kanebo
Cosmetics Philippines, Inc. (Kanebo) who issued postdated
checks for their purchases
 Sometime in 1979:  Insular Bank of Asia and America (turned
PCIB then Equitable PCI-Bank) granted E.T. Henry a credit
facility known as “Purchase of Short Term Receivables.” (re-
discounting arrangement)
 Through this, E.T. Henry was able to encash, with pre-
deducted interest, the postdated checks of its clients.  
 For every transaction, E.T. Henry had to execute a
promissory note and a deed of assignment  
 1979-1981: E.T. Henry was able to re-discount its clients'
checks 
 February 1981: 20 checks of Hi-Cement (which were crossed
and which bore the restriction “deposit to payee’s account
only”) were dishonored. So were the checks of Riverside and
Kanebo.
 Bank filed a complaint for sum of money in CFI against E.T.
Henry, the spouses Tan, Hi-Cement (including its general
manager and its treasurer as signatories of the postdated
crossed checks), Riverside and Kanebo
 CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-
Cement, Riverside and Kanebo, jointly and severally, to pay
bank damages represented by the face value of the postdated
checks plus interests, services, charges and penalties until
fully paid
 G.R. 132403: RTC & CA
 Hi-Cement authorized its general manager and
treasurer to issue the subject postdated crossed
checks
  Hi-Cement was already estopped from denying such
authority since it never objected to the signatories'
issuance of all previous checks to E.T. Henry 
ISSUE: 
1. W/N bank was a holder in due course - NO
2. W/N Hi-Cement can still be made liable for the checks - NO
HELD:  CA AFFIRMED with MODIFICATION remanded to RTC for
recomputation
1. NO.
 Section 191
 Section 52
Bank was all too aware that subject checks were crossed and
bore restrictions that they were for deposit to payee's account
only; hence, they could not be further negotiated to it
 irregularity - only the treasurer's signature appeared on the
deed of assignment
  As a banking institution, it behooved respondent to act with
extraordinary diligence in every transaction
 Its business is impressed with public interest, thus, it was not
expected to be careless and negligent, specially so where the
checks it dealt with were crossed.
 It is then settled that crossing of checks should put the holder
on inquiry and upon him devolves the duty to ascertain the
indorser’s title to the check or the nature of his possession. -
failure: guilty of gross negligence amounting to legal absence
of good faith  disadvantage of a holder not in
     2. NO.  negotiable.
 the drawer of the postdated crossed checks was not liable to
the holder who was deemed not a holder in due course
 may recover from the party who indorsed/encashed the
checks “if the latter has no valid excuse for refusing
payment - E.T. Henry had no justification to refuse
payment, it should pay 
to the check or the nature of his possession. Failing in this respect, the holder
is declared guilty of gross
negligence amounting to legal absence of good faith, contrary to Section 52
(c) of the Negotiable Instruments
Law, and as such the consensus of authority is to the effect that the holder of
the check is not a holder in due
course. BCCFI cannot be obliged to pay the checks as there is a failure of
consideration (King being unable to
supply the bales of tobacco leaf, for which the checks were intended for).
Still, SIHI -- a holder not in due
course -- can collect from the immediate indorser, George King. Such is the
due course, i.e. the instrument is subject to defenses as if it were non-
20. Atrium Management Corp. vs. CA

19. Bataan Cigar vs CA

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 cross
checks to King. King sold the checks, at a discount, to the State Investment
House Inc. (SIHI). As King failed
to deliver the bales of tobacco leaf despite demand, BCCFI issued stop
payment orders on the checks. Efforts
by 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 in
due course.

Held: The facts of the case are on all fours to the case of SIHI vs.
Intermediate Appellate Court. The crossing
of the checks should put the holder on inquiry and upon him devolves the
duty to ascertain the indorser’s title