Abubakar vs Auditor General ruling on treasury warrants

[1]
Abubakar vs. Auditor General

GR L-1405, 31 July 1948
First Division, Bengzon (J)
Facts: Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on 10 December
1941 for P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to authorize
the payment of the treasury warrant. Abubakar contends he is a holder in good faith and for
value and thus, entitled to the rights and privileges of a holder in due course.
Issue: Whether Abubakar is a holder in due course.
Held: A treasury warrant is not a negotiable instrument; it being an order for payment out of a
particular fund, and is not unconditional and does not fulfill one of the essential requirements
of a negotiable instrument. Therefore, a holder of a treasury warrant cannot argue that he is a
holder in good faith and for value of a negotiable instrument and thus entitled to the rights and
privileges of a holder in due course, free from defenses.
[2]
Ang Tiong vs. Ting
GR L-26767, 22 February 1968
En Banc, Castro (J)
Facts: Lorenzo Ting issued a check for P4,000 payable to cash or bearer. With Felipe Angs
signature (indorsement in blank) at the back thereof, the instrument was received by Ang Tiong
who thereafter presented it to the bank for payment. The drawee bank dishonored it. Ang Tiong
made written demands on both Ting and Ang to make good the amount represented by the
check. These demands unheeded. Ang Tiong filed suit for collection. The trial court adjudged for
Ang Tiong. Only Ang appealed, maintaining that he is only an accommodation party.
Issue: Whether Felipe Ang is an accommodation party.
Held: Felipe Ang is a general indorser (Section 63, Negotiable Instruments Law), in the absence
of any indication by appropriate words his intention to be bound in some other capacity. Even on
the assumption that Ang is a mere accommodation party, he is liable on the instrument to a
holder for value notwithstanding that such holder at the time of taking the instrument knew him
to be only an accommodation party (Section 29, Negotiable Instruments Law). Assuming further
that Ang is an accommodation indorser, the fact that Ang may obtain security from the maker to
protect himself against the danger of insolvency of the latter cannot in any manner affect his
liability to Ang Tiong, as the said remedy is a matter of concern exclusively between an
accommodation indorser and an accommodated party. The liability of Felipe Ang remains primary
and unconditional.
[3]
Arrieta vs. National Rice & Corn Corporation (NARIC)
GR L-15645, 31 January 1964
En Banc, Regala (J)
Facts: On 19 May 1952, Paz and Vitaliado Arrieta participated in the public bidding called by
NARIC for the supply of 20,000 metric tons of Burmese rice. Ad her bid of $203 per metric ton
was the lowest, she was awarded the contract for the same. As a result of the delay in the
opening of the letter of credit by NARIC, the allocation of Arrietas supplier in Rangoon was
cancelled and the 5% deposit amounting to an equivalent of P200,000 was forfeited. Arrieta
endeavored but failed to restore the cancelled Burmese rice allocation, and thus offered Thailand
rice instead. Such offer was rejected by NARIC. Subsequently, Arrieta sent a letter to NARIC,
demanding compensation for the damages caused her in the sum of US$286,000 representing
unrealized profit. The demand having been rejected, she instituted the case.
Issue: Whether the rate of exchange to be applied in the conversion is that prevailing at the
time of breach, or at the time the obligation was incurred, or on the promulgation of the decision.
Held: As pronounced in Eastboard Navigation vs. Ismael, if there is any agreement to pay an
obligation in the currency other than Philippine legal tender, the same is null and void as
contrary to public policy (RA 529), and the most that could be demanded is to pay said obligation
in Philippine currency to be measured in the prevailing rate of exchange at the time the
obligation was incurred. Herein, the rate of exchange to be applied is that of 1 July 1952, when
the contract was executed.
[4]
Associated Bank vs. CA
GR 89802, 7 May 1992
First Division, Cruz (J)
Facts: Melissas RTWs customers issued cross checks payable to Melissas RTW, which its
proprietor Merle Reyes did not receive. It was learned that the checks had been deposited with
the Associated Bank by one Rafael Sayson. Sayson was not authorized by Reyes to deposit and
encash said checks. Reyes filed an action for the recovery of the total value of the checks plus
damages.
Issue: Whether the bank was negligent for the loss.
Held: Crossing a check means that the drawee bank should not encash the check but merely
accept it for deposit, that the check may be negotiated only once by one who has an account in
a bank, and that the check serves as warning that it was issued for a definite purpose so that he
must inquire if he has received the check pursuant to that purpose. The effect, thus, relate to the
mode of its presentment for payment, in accordance with Section 72 of the Negotiable
Instruments Law. The bank paid the checks notwithstanding that title had not passed to the
indorser, as the checks had been crossed and issued for payees account only. It did so in its
own peril and became liable to the payee for the value of the checks. The failure of the bank to
make an inquiry as to Saysons authority was a breach of its duty. The bank is negligent and is
thus liable to Reyes.
[5]
Associated Bank vs. CA
GR 107382, 31 January 1996
Second Division, Romero (J)
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
hospitals administrative officer and cashier (Fausto Pangilinan). Pangilinan, through the help of
Associated Bank but after forging the signature of the hospitals 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.
[6]
Bataan Cigar and Cigarette Factory vs. CA
GR 93048, 3 March 1994
Second Division, Nocon (J)
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 indorsers title 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 disadvantage of a
holder not in due course, i.e. the instrument is subject to defenses as if it were non-negotiable.
[7]
Caltex (Philippines) Inc. vs. CA
GR 97753, 10 August 1992
Second Division, Regalado (J)
Facts: On various dates, Security Bank and Trust Co. (SEBTC), through its Sucat branch, issued
280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who deposited with the
bank the aggregate amount of P1.12 million. Anger de la Cruz delivered the CTDs to Caltex in
connection with his purchase of fuel products from the latter. Subsequently, dela Cruz informed
the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance
of the replacement CTDs. De la Cruz was able to obtain a loan of P875,000 from the bank, and in
turn, he executed a notarized Deed of Assignment of Time Deposit in favor of the bank.
Thereafter, Caltex presented for verification the CTDs (which were declared lost by de la Cruz)
with the bank. Caltex formally informed the bank of its possession of the CTDs and its decision to
preterminate the same. The bank rejected Caltex claim and demand, after Caltex failed to
furnish copy of the requested documents evidencing the guarantee agreement, etc. In 1983, de
la Cruz loan matured and the bank set-off and applied the time deposits as payment for the
loan. Caltex filed the complaint, but which was
dismissed.
Issue [1]: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments.
Held [1]: The CTDs in question meet the requirements of the law for negotiability. Contrary to
the lower courts findings, the CTDs are negotiable instruments (Section 1). Negotiability or nonnegotiability of an instrument is determined from the writing, i.e. from the face of the instrument
itself. The documents provided that the amounts deposited shall be repayable to the depositor.
The amounts are to be repayable to the bearer of the documents, i.e. whosoever may be the
bearer at the time of presentment.
Issue [2]: Whether the CTDs negotiation require delivery only.
Held [2]: Although the CTDs are bearer instruments, a valid negotiation thereof for the true
purpose and agreement between it (Caltex) and de la Cruz requires both delivery and
indorsement; as the CTDs were delivered to it as security for dela Cruz purchases of its fuel
products, and not for payment. Herein, there was no negotiation in the sense of a transfer of
title, or legal title, to the CTDs in which situation mere delivery of the bearer CTDs would have
sufficed. The delivery thereof as security for the fuel purchases at most constitutes Caltex as a
holder for value by reason of his lien. Accordingly, a negotiation for such purpose cannot be
effected by mere delivery of the instrument since the terms thereof and the subsequent
disposition of such security, in the event of non-payment of the principal obligation, must be
contractually provided for.
[8]
Caram Resources vs. Contreras
AM MTJ0830849, 26 October 1994
First Division, Davide Jr. (J)
Facts: Teresita Dizon obtained a loan from Caram Resources payable in installments. She issued
a promissory note and postdated BPI checks, four of which were dishonored when presented to
the bank as the account against which they were drawn had been closed. Caram charged Dizon
for violation of BP22, but where Judge Contreras acquitted Dizon on the ground of reasonable
doubt. Subsequently, Caram charged Judge Maximo Contreras with gross ignorance of the law
and gross misconduct committed in Dizons criminal case.
Issue: Whether malice is an essential element in BP 22.
Held: In the 4 criminal cases before Judge Contreras, Dizon as accused admitted that a loan was
granted to her and in connection therewith she executed a promissory note wherein she bound
herself to pay the loan in 12 installments. She issued the postdated checks to cover the
installments as they fall due. The checks were drawn against her BPI current account, which she
closed in the same months she obtained the loan, so that when the checks were presented for
payment they were dishonored. Malice and intent in issuing a worthless check are immaterial.
The offense is committed by the very fact of its performance, i.e. the mere act of issuing a
worthless check. The offense is malum prohibitum. An act may not be considered by society as
inherently wrong, hence, not malum in se, but because of the harm that it inflicts on the
community, it can be outlawed and criminally punished as malum prohibitum, pursuant to the
States exercise of police power.
[9]
City Trust Banking vs. CA
GR 92591, 30 April 1991
Third Division, Gutierrez Jr. (J)
Facts: William Samara purchased from Citytrust Bank Draft 23681 for US$ 40,000 the payee
being Thai International Airways and the corresponding drawee bank in the United States is
Marine Midland. Samara executed a stop-payment order of the bank draft instructing Citytrust to
inform Marine Midland about the order through telex. Marine Midland noted the order, and thus
Citytrust credited Samaras account. Seven months later, Citytrust re-debited Samaras account
upon discovery that Marine Midland had already debited Citytrusts account.
Issue: Who shall be liable for the amount.
Held: Citytrust and Marine Midland were not in privity with each other in a transaction involving
payment through a bank draft. A bank draft is a bill of exchange drawn by a bank upon its
correspondent bank issued at the solicitation of a stranger who purchases and pays therefor. It is
an order for payment of money. Citytrust was the drawer of the draft through which it ordered
Marine Midland, the drawee bank, to pay Thai Airways. The drawee bank acting as payor bank is
solely liable for acts not done in accordance with the instructions of the drawer bank or the
purchaser of the draft. The drawee bank has the burden of proof that it did not so violate.
Meanwhile, the drawer, if sued by the purchaser of the draft, is liable for the act of debiting the
customers account despite an instruction to stop payment. The drawer has the duty to prove
that he complied with the order to inform the drawee.
[10]
Clark vs. Sellner
GR 16477, 22 November 1921
First Division, Romualdez (J)
Facts: George Sellner, with WH Clarke and John Mave, signed a note in favor of RN Clark dated 1
July 1914 in Manila for the amount of P12,000. The note matured, but its amount was not paid.
Action was filed in court. Sellners counsel allege that Sellner did not receive anything of value
for the transaction, that the instrumnet was not presented to sellner for payment, and that
Sellner, being an accommodation party is not liable unless the note is negotiated, which was
allegedly not done.
Issue: Whether Sellner is an accommodation party liable for the note.
Held: Sellner, as one of the signers of the note, is one of the joint and several debtors on the
note, and as such he is liable under Section 60 of the Negotiable Instruments Law/ 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; and thus is a
joint surety rather than an accommodation party. As to the presentment for payment, such
action is not necessary in order to charge the person primarily liable, as is Sellner (Section 70,
Negotiable Instruments Law).
[11]
Negotiable Instruments Law, 2004 ( 5 )
Digests (Berne Guerrero)
Co vs. PNB
GR L-51767, 29 June 1982
Second Division, Barredo (J)
Facts: Standard Parts Manufacturing Corporation mortgaged properties to PNB. When Standard
failed to pay
its obligation (P4,296,803,56 secured by said properties), PNB extra-judicially foreclosed the
mortgages.
Standard, meanwhile, transferred its rights in the mortgages to Citadel Insurance and Surety Co.,
which wrote
PNB its interest to redeem the Makati property (one of the property mortgaged) for P1,621,970.
PNB rejected
the offer. Citadel filed suit against PNB, where the complaint was accompanied by an RCBC
managers check
and which was deposited under a savings bank account with RCBC by order of the trial court.
Issue: Whether there was a valid and effective tender of payment.
Held: The unequivocal tender of redemption was made, through a managers check of RCBC (a
well-known,
big and reputable banking institution) for the amount it believed it should pay as redemption
price. PNB
rejected it on the sole and only ground that it considered the amount insufficient. Redemption
was made on
time, i.e. 1 year from the date appearing as the date of the registration of the certificate of sale.
Tender by
managers check was not inefficacious as the Court has already sanctioned redemption by check
(See
Javellana vs. Mirasol).
[12]
Cruz vs. CA
GR 108738, 17 June 1994
First Division, Kapunan (J)
Facts: Andrea Mayor is engaged in the business of granting interest-bearing loans and in
rediscounting
checks. Roberto Cruz, on the other hand, is engaged in selling ready to wear clothes at the Pasay
Commercial
Center. Cruz frequently borrows money from Mayor. In 1989, Cruz borrowed P176,000 from
mayor, which
Mayor delivered. In turn, Cruz issued a Premiere Bank check for the same amount. When the
check matured,
Mayor presented it to the bank but was dishonored and marked account closed. When notified
of the
dishonor, Cruz promised to pay in cash. No payment was made, and thus the criminal action for
violation of
BP 22 was instituted.
Issue: Whether Cruz is liable for violating BP 22, even upon the claim that the check was issued
to serve a
mere evidence of indebtedness, and not for circulation or negotiation.
Held: A check issued as an evidence of debt, though not intended to be presented for payment
has the same
effect of an ordinary check, hence, it falls within the ambit of BP 22. When a check is presented
for payment,
the drawee bank will generally accept the same regardless of whether it was issued in payment
of an
obligation or merely to guarantee the said obligation. What the law punishes is the issuance of a
bouncing
check, not the purpose for which it was issued nor the term and conditions relating to its
issuance. The mere
act of issuing a worthless check is malum prohibitum.
[13]
Crystal vs. CA
GR L-35767, 18 June 1976
Resolution of the Second Division, Barredo (J)

Facts: The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the Court
of Appeals,
holding that Raymundo Crystals redemption of the property acquired by Pelagia Ocang, Pacita,
Teodulo,
Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was invalid as the check
which
Crystal used in paying the redemption price has been either dishonored or had become stale
(Ergo, the value
of the check was never realized). Crystal filed a motion for reconsideration.
Issue: Whether the conflicting circumstances of the check being dishonored and becoming stale
affect the
validity of the redemption sale.
Held: For a check to be dishonored upon presentment and to be stale for not being presented at
all in time are
incompatible developments that have variant legal consequences. If indeed the questioned
check was
dishonored, the redemption was null and void. If it had only become state, it becomes imperative
that the
circumstances that caused its non-presentment be determined, for if it was not due to the fault
of the drawer, it
would be unfair to deprive him of the rights he had acquired as redemptioner. Herein, it appears
that there is a
strong showing that the check was not dishonored, although it became stale, and that Pelagia
Ocang had
actually been paid the full value thereof. The Supreme Court, thus, reconsidered its decision and
remanded
the case to the trial court for further proceedings.
[14]
Dela Victoria vs. Burgos
GR 111190, 27 June 1995
First Division, Bellosillo (J)
Facts: Raul Sesbreno filed a complaint for damages against Assistant City Fiscal Bienvenido
Mabanto before
the RTC of Cebu City. After trial, judgment was rendered ordering Mabanto to pay Sesbreno
P11,000. The
decision having become final and executory, the trial court ordered its execution upon
Sesbrenos motion. The
writ of execution was issued despite Mabantos objection. A notice of garnishment was served
upon Loreto de
la Victoria as City Fiscal of Mandaue City where Mabanto was then detailed. De la Victoria moved
to quash
the notice of garnishment claiming that he was not in possession of any money, funds, etc.
belonging to
Mabanto until delivered to him, and as such are still public funds which could not be subject of
garnishment..
Issue: Whether the checks subject of garnishment belong to Mabanto or whether they still
belong to the
government.
Held: Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable
instrument is
incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto.
As
ordinarily understood, delivery means the transfer of the possession of the instrument by the
maker or drawer
with the intent to transfer title to the payee and recognize him as the holder thereof. Herein, the
salary check
of a government officer or employee does not belong to him before it is physically delivered to
him. Inasmuch
as said checks had not yet been delivered to Mabanto, they did not belong to him and still had
the character of
public funds. As a necessary consequence of being public fund, the checks may not be garnished
to satisfy the
judgment.
[15]
Firestone Tire and Rubber vs. Ines Chaves & Co.
GR L-17106, 19 October 1966
En Banc, Regala (J)
Facts: The check was intended as part of the payment of Ines Chaves debt. When presented to
the Security
Bank and Trust Co. by Firestone, the check was returned for insufficiency of funds. Despite
repeated
demands, Ines Chaves failed to settle its account; hence, the suit.
Issue: Whether good faith is required in the issuance of a check.
Held: Everyone must in the performance of his duties, observe honesty and good faith. Where a
person issues
a postdated check without funds to cover it and informs the payee of this fact, he cannot be held
guilty of
estafa because there is no deceit. Herein, there is nothing in the record to show that Firestone
knew that there
were no funds when it accepted the check, much less that Firestone agreed to take the check
with knowledge
of the lack of funds. As Ines Chavez is guilty of fraud (bad faith) in the performance of its
obligation, it is
liable for damages. Its conduct wanting in good faith, the award of attorneys fees was
warranted.
[16]
Gempesaw vs. CA
GR 92244, 9 February 1993
Second Division, Campos Jr. (J)
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 drawers 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.
[17]
Hongkong & Shanghai Bank vs. Peoples Bank and Trust
GR L-28226, 30 September 1970
First Division, Fernando (J)
Facts: The Philippine Long Distance Telephone Company (PLDT) drew a check on the Hongkong
&

Shanghai Banking Corporation (HSBC) in the latters favor for P14,608.05, and sent it through
mail. The
check fell into the hands of Florentino Changco, who was able to erase the name of the payee
and substituted
his own, and deposited the altered check in his current account with the Peoples Bank and Trust
Co. (PBTC).
The check was cleared by HSBC, and PBTC credited Changco the amount. The alteration was
known when
the cancelled check was returned to PLDT. HSBC requested PBTC to refund the amount, but the
latter
refused.
Issue: Whether HSBC can claim reimbursement from PBTC.
Held: A person who presents fro payment checks guarantees the genuineness of the check, and
the drawee
bank need to concern itself with nothing but the genuineness of the signature, and the state of
the account with
it of the drawee. If at all, whatever remedy, whatever remedy HSBC has would lie not against
PBTC but as
against the party responsible for changing the name of the payee (i.e. Changco). Its failure to call
the attention
of PBTC as to such alteration until after the lapse of 27 days would, in the light of Central Bank
Circular 9
(24-hour clearing house rule), negate whatever right it might have had against PBTC.
[18]
Ibasco vs. CA
GR 117488, 5 September 1996
Third Division, Davide Jr. (J)
Facts: The Ibasco spouses requested credit accommodation fro the supply of ingredients in the
manufacture
of animal feeds from the Trivinio spouses. Ibasco issued 3 checks for 3 deliveries of darak. The
checks
bounced and the Ibasco spouses were notified of the dishonor. Ibasco instead offered a property
in Daet. The
property, being across the sea, the Trivinio spouses did not inspect the property. For the failure of
the Ibasco
spouses to settle their account, the Trivinio spouses filed criminal cases against the former for
violation of
BP22.
Issue: Whether the checks were for accommodation or guarantee to acquire the benefits of the
interpretation
of Ministry Circular 4 of the Department of Justice in relation to BP 22.
Held: Ministry Circular 4, issued 1 December 1981 by the Department of Justice, provides that
where a check
is issued as part of an arrangement to guarantee or secure the payment of the obligation, preexisting or not,
the drawer is not criminally liable for either estafa or violation of BP 22. Incidents however
indicate that the
checks were issued as payment and for value, and not for accommodation (i.e. pertaining to an
arrangement
made a favor to another, not upon a consideration received). as the checks failed to bear any
statement for
accommodation and for guarantee to show Ibascos intent. ( It must be noted, however, that
BP22 does not
distinguish and applies even in cases where dishonored checks were issued as a guarantee or for
deposit only.
The erroneous interpretation of Ministry Circular 4 was rectified by the repealing Ministry Circular
12, issued
on 8 August 1984).
[19]
Jimenez vs. Bucoy
GR L-10221, 28 February 1958
En Banc, Bengzon (J)
Facts: In the proceedings in the intestate of Luther Young and Pacita Young who died in 1954
and 1952,
respectively, Pacifica Jimenez presented for payment 4 promissory notes signed by Pacita for
different
amounts totalling P21,000. Acknowledging receipt by Pacita during the Japanese occupation, in
the currency
then prevailing, the Administrator manifested willingness to pay provided adjustment of the
sums be made in
line with the Ballantyne schedule. The claimant objected to the adjustment insisting on full
payment in
accordance with the notes. The court held that the notes should be paid in the currency
prevailing after the
war, and thus entitling Jimemez to recover P21,000 plus P2,000 as attorneys fees. Hence, the
appeal.
Issue: Whether the amounts should be paid, peso for peso; or whether a reduction should be
made in
accordance with the Ballantyne schedule.
Held: If the loan was expressly agreed to be payable only after the war, or after liberation, or
became payable
after those dates, no reduction could be effected, and peso-for-peso payment shall be ordered in
Philippine
currency. The Ballantyne Conversion Table does not apply where the monetary obligation, under
the contract,
was not payable during the Japanese occupation. Herein, the debtor undertook to pay six
months after the
war, peso for peso payment is indicated.
[20]
Kalalo vs. Luz
GR L-27782, 31 July 1970
En Banc, Zaldivar (J)
Facts: On 17 November 1959, Octavio Kalalo entered into an agreement with Alfredo Luz where
he was to
render engineering design services for a fee. On 11 December 1961, Kalalo sent Luz a statement
of account
where the balance due for services rendered was P59,505. On 18 May 1962, Luz sent Kalalo a
resume of fees
due to the latter, and a check for P10,861.08. Kalalo refused to accept the check as full payment
of the balance
of the fees due him. On 10 August 1962, Kalalo filed a complaint containing 4 causes of action,
i.e. $28,000
(representing 20% of the amount paid to Luz in the International Research Institute project) and
the balance
of P30,881.25 as fees; P17,0000 as consequential and moral damages; P55,000 as moral
damages, attorneys
fees and litigation expenses; and P25,000 as actual damages, attorneys fees and litigation
expenses). The trial
court ruled in favor of Kalalo. Luz filed an appeal directly with the Supreme Court raising only
questions of
law.
Issue: Whether the rate of exchange of dollar to peso are those at the time of the payment of
the judgment or
at the time when the research institute project became due and demandable.
Held: Luz obligation to pay Kalalo the sum of US$28,000 accrued on 25 August 1961, or after
the enactment
of RA 529 (16 June 1950). Thus, the provision of the statute which requires payment at the
prevailing rate of
exchange when the obligation was incurred cannot be applied. RA 529 does not provide for the
rate of
exchange for the payment of obligation incurred after the enactment of the Act, and thus the
rate of exchange
should be that prevailing at the time of payment. The view finds support in the ruling of the
Court in Engel vs.
Velasco & Co. The trial court did not err in holding the rate of exchange is that at the time of
payment.
[21]
Lao vs. CA
GR 119178, 20 June 1997
Third Division, Panganiban (J)
Facts: Lim Lim Lao was a junior officer of Premier Investment House in its Binondo branch. She
was
authorized to sign checks for and in behalf of the corporation. In the course of business, she met
Fr. Artelijo
Palijo, provincial treasurer of the Society of the Divine Word. Fr. Palijo was authorized to invest
donations of
the society and had been investing the societys money with Premiere. Fr. Palijo was issued
checks in
payment of interest for the societys investments. The checks were dishonored for insufficiency
of funds.
Fr. Palijo was only able to acquire P5,000 for his efforts in demanding the payment of the checks.
Premiere,
subsequently, was placed under receivership. Fr. Palijo filed a suit against Lim Lao and his cosignatory,
Teodulo Asprec, head of operations for violation of BP 22.
Issue: Whether an employee who, as part of her regular duties, signs blank corporate check, be
held for
violation of BP22.
Held: The checks co-signed by Lim Lao were signed in advance and in blank, delivered to the
head of
operations, who subsequently filled in the name of he payee, the amounts and corresponding
dates of
maturity; this procedure followed in keeping with her duties as a junior officer. Though BP 22
provides the
presumption that a drawer is knowledgeable of the fact of insufficiency of funds, such
presumption may be
debunked by contrary evidence. Herein, Lim Lao does not have the power, duty or responsibility
to monitor
and assess the balances against the issuance, nor to make sure that the checks were funded.
Such
responsibility devolved upon the corporations Treasury Department in Cubao, Quezon City.
Furthermore, no
notice of dishonor was actually sent or received by Lim Lao to support the prima facie evidence
of knowledge
of insufficient funds. She was thus acquitted.
[22]
Lazaro vs. CA
GR 105461, 11 November 1993
Second Division, Padilla (J)
Facts: Marlyn Lazaro received from Rudy Chua the amount of P90,000 as advanced payment for
deliveries
of sugar, etc. Lazaro was only able to deliver partial delivery. To refund the undelivered goods,
she issued a
check for P72,000. When deposited, the check was dishonored and stamped account closed. To
make up for
the dishonor, Lazaro indorsed a check issued by one Lolita Soriano, payable to Cash. It was
likewise
dishonored and marked account closed. Chua sent a demand letter asking for the payment of
the amount
covered by the first check within days from receipt of letter. For failure of the accused to pay the
amount,
Chua filed cases for estafa and violation of BP 22.
Issue: Whether damage or prejudice is an element of BP 22 violation.
Held: The clear intention of the framers of BP 22 is to make the mere act of issuing a check that
is worthless
malum prohibitum. The law does not require that there be damage or prejudice to the individual
complainant
by reason of the issuance of the check. The fine provided for in BP 22 was intended as an
additional penalty
for the act of issuing a worthless check. BP 22 provides that a fine of not less than but not more
than double
the amount of the dishonored check may be imposed by the court.
[23]
Lim vs. CA
GR 107898, 19 December 1995
Facts: Spouses Manuel and Rosita Lim are the president and treasurer, respectively, of RIGI Built
Industries
Inc. RIGI had been transacting business with Linton Commercial Company for years, the latter
supplying the
former with steel plates, steel bars, flat bars and purlin sticks which the company uses in the
fabrication,
installation and building of steel structures. The Lims ordered steel plates from Linton
Commercial,
delivering checks to the latters collector as payment. The checks were dishonored for
insufficiency of
funds with the additional notation payment stopped (The Lims claimed that the supplies
delivered by
Linton Commercial were not in accordance with the specifications of purchase orders). Despite
demands, the
Lims refused to make good the checks or to pay value of the deliveries.
Issue: Whether the receipt of the checks by the collector of Linton is the issuance and delivery
to the payee
within the contemplation of the law (as prelude to jurisdiction issue).
Held: Issue means the first delivery of the instrument complete in form to a person who takes
it as a holder.
Holder refers to the payee or indorsee of a note or who is in possession of it or the bearer
thereof. The
issuance as well as the delivery of the check must be to a person who takes it as a holder.
Delivery of the
checks signifies transfer of possession (actual or constructive) from one person to another with
intent to
transfer title thereto; the delivery being the final act essential to its consummation as an
obligation. The
collector was not the person who could take the checks as a holder. Neither could the collector
be deemed an
agent of Linton Commercial with respect to the checks because he was a mere employee.
[24]
Lim vs. People
GR 130038, 18 September 2000
En Banc, Pardo (J)
Facts: Rosa Lim bought various kinds of jewelry worth P300,000 from the store of Maria Antonia
Seguan, by
issuing a check payable to cash drawn against MetroBank. The next day, Lim again purchased
jewelry
valued at P241,668 by issuing another check payable to cash likewise drawn against MetroBank.
Seguan
deposited the checks with her bank. The checks were returned with a notice of dishonor as Lims
accounts in
said bank were already closed. Upon demand, Lim promised to pay Seguan the amounts of the
two
dishonored checks. She never did. Rosa Lim was charge for two counts of violation of BP 22,
where she was
found guilty, and sentenced to 1 year imprisonment with fine (P200,000).
Issue: Whether Lim has knowledge of the insufficiency of funds when issuing the checks.
Held: The elements of BP22 are (1) the making, drawing and issuance of any check to apply for
account or
for value, (2) the knowledge of the maker, drawer or issuer that at the time of issue he does not
have sufficient
funds in or credit with the drawee bank for the payment of such check in full upon its
presentment, and (3) the
subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or
dishonor for the
same reason had not the drawer, without any valid cause, ordered the bank to stop payment.
Lim never denied
issuing the check. Section 2 of BP 22 creates a presumption juris tantum that the second
element prima facie
exists when the first and third elements are present. If not rebutted, it suffices to sustain a
conviction.
It must be noted that similar to the Vaca case, the Court deleted the prison sentences imposed
upon Lim,
holding that the two fines imposed for each of the violation (P200,000 each ) are appropriate and
sufficient.
Subsidiary imprisonment not exceeding 6 months is provided in case of insolvency or nonpayment of the
fines as decreed.
[25]
Lim vs. Rodrigo
GR 76974, 18 November 1988
Third Division, Fernan (J)
Facts: Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in payment of a
certain obligation
to Benito Lim. Said checks were handed to Lims brother, Vicente, at Ko Hus office in Nueva
Street, Manila
for delivery to Benito Lim in Baguio City. When presented at Lims depository bank in Baguio City,
the
checks were dishonored for having been drawn against a closed account. Lim filed a suit against
Ko Hu for
violation of BP 22 in Baguio City.
Issue: Whether the delivery of the checks to Benito Lims brother is the delivery contemplated
by law
(prelude to juridictional issue)
Held: The venue of the offense lies at the place where the check was executed and delivered to
the payee and
that the place where a check was written, signed or dated does not fix the place where it was
executed, as
what is of decisive importance is the delivery thereof which is the final act essential to its
consummation as an
obligation. The delivery contemplated by law must be to a person who takes the check as a
holder, i.e.
the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. Vicente
Lim,
Benitos brother, cannot be said to have taken the checks in the concept of a holder for he is
neither the payee
or indorsee thereof. Neither could he be deemed to be Benitos agent with respect thereto, for he
was
purposely sent to Ko Hu to get certain stock certificates and not the checks in question (This is
similar to the
People vs. Yabut case).
[26]
Llamado vs. CA
GR 99032, 26 March 1997
Second Division, Torres Jr. (J)
Facts: Ricardo Llamado and Jacinto Pascual were Treasurer and President of Pan Asia Finance
Corporation.
Leon Gaw delivered P180,000 to Llamado with assurance that the amount would be repaid on 4
November
1983 with 12% interest and a share of the profits of the corporation. On said date, Gaw deposited
the check
but it was dishonored. Informing Llamado of the dishonor, Llamado offered in writing to pay Gaw
a portion
of the amount equivalent to 10% thereof on 14 or 15 November and the balance rolled over for a
period of 90
days. Llamado failed to do so. Gaw filed a complaint against Llamado and Pascual for violation of
BP 22.
Pascual remains at large. Llamado contends he signed the check in blank.
Issue: Whether Llamado is personally liable for the bounced check.
Held: Llamados claim that he signed the check in blank is hardly a defense. By signing the
check, he made
himself prone to being charged with violation of BP 22. It became incumbent upon him to prove
his defenses.
As treasurer of the corporation who signed the check in his capacity as corporate officer, lack of
involvement
in the negotiation for the transaction is not a defense. Llamado is personally liable even if the
check was in
the name of the corporation. Third paragraph of Section 1, BP 22, states that where the check is
drawn by a
corporation, company or entity, the person(s) who actually signed the check in behalf of such
drawer shall be
liable under this Act.
It must be noted that the check was issued for a valuable consideration (P180,000). Had the
money been
intended to be returned when the investment was successful, the check need not be issued. A
receipt and their
written agreement would have sufficed.
[27]
Lozano vs. Martinez
GR L-63419, 18 December 1986
En Banc, Yap (J)
Facts: Lozano vs. Martinez (GR L-63419), Lobaton vs. Cruz (GR L-66839-42), Datuin vs. Pano (GR
71654),
Violago vs. Pano (GR 74524-25), Abad vs. Gerochi (GR 75122-49), Aguiliz vs. Presiding Judge of
Branch
154 (GR 75812-13), Hojas vs. Penaranda (GR 75765-67) and People vs. Nitafan (GR 75789) are
cases
involving prosecution of offenses under BP 22 which were consolidated herein as the parties
(defendants)
thereto question the constitutionality of the statute, BP 22.
Issue: Whether BP 22 is constitutional.
Held: The language of BP22 is broad enough to cover all kinds of checks, whether present dated
or post
dated, whether issued in payment of pre-existing obligations or given in mutual or simultaneous
exchange for
something of value. BP 22 is aimed to put a stop or to curb the practice of issuing worthless
checks, which is
proscribed by the State because of the injury it causes to public interests. The gravamen of the
offense
punished by BP 22 is the act of making or issuing a worthless check or a check which is
dishonored upon its
presentation for payment. it is not the non-payment of an obligation which the law punishes. The
law
publishes the act not as an offense against property but an offense against public order. The
enactment of BP
22 is a valid exercise of police power and is not repugnant to the constitutional inhibition against
imprisonment for debt. The statute is not unconstitutional.
[28]
Magno vs. CA
GR 96132, 26 June 1992
Second Division, Paras (J)
Facts: Oriel Magno lacked funds to purchase necessary equipment to make his car repair shop
business
operational. He approached Corazon Teng, who in turn referred LS Finance and Management
Corporation,
who could accommodate him and provide him credit facilities. LS Finance required a warranty
deposit (30%
of the total value of the pieces of equipment to be purchased), which Teng advanced, unknown
to Magno.
When the equipment were delivered to Magno, he issued a postdated check to LS Finance, which
delivered it
to Teng. When the check matured, Magno requested that the check not to be deposited as he no
longer banks
with Pacific Bank. To replace the check, Magno issued 6 postdated checks, 2 of which were
deposited and
cleared, the other 4 were held momentarily by Teng, on the request of Magno for they are not
covered with
sufficient funds. As Magno cannot pay the monthly rentals fro the equipment, the same were
pulled out. Only
then did Magno learned that Teng was the one who advanced the deposit. Magno promised to
pay her but
payment never came. When the checks were deposited, they were dishonored. Magno was found
guilty of
violation of BP22 when the cases were adjudicated.
Issue: Whether there was a violation of BP 22.
Held: The crux of the matter rest upon the reason for the drawing of the postdated checks by
Magno, i.e.
whether they were drawn or issued to apply on account or for value, as required under Section
1 of BP 22.
When viewed against the definitions of warranty and deposit, for which the postdated checks
were issued
or drawn, the alleged crime could not have been committed by Magno. Furthermore, the element
of knowing
at the time of issue that he does not have sufficient funds in or credit with the drawee bank....:
is inversely
applied in the case. From the beginning, Magno never hid the fact that he had no funds. Magno,
thus, was
acquitted of the crime charged.
[29]
Manila Lighter Transportation vs. CA
GR L-50373, 15 February 1990
First Division, Grino-Aquino (J)
Facts: 49 checks were issued by Manila Lighter Transportations customers in payment of
brokerage /
lighterage services and were all delivered to its collector, Augusto Perez. Upon forged
indorsements of the
companys General Manager, Luis Gaskell, the checks found their way to the accounts of third
persons and
were later withdrawn. A complaint to recover the value of the checks were filed against China
Bank. Bank
denied liability.
Issue: Whether the bank is negligent as to bear the loss resulting from the checks with forged
indorsements.
Held: Since Manila Lighter Transportation was not a client of the bank, the latter had no way of
ascertaining
the authenticity of its indorsements on the checks which were deposited in the accounts of third
persons (Ko
Lit and Cao Pek) in said bank. The bank was not negligent because, in accordance with banking
practice, it
caused the checks to pass through the clearing house before it allowed their proceeds to be
withdrawn by the
depositors.
[30]
Moran vs. CA
GR 105836, 7 March 1994
Second Division, Regalado (J)
Facts: George and Librada Moran maintained 3 joint accounts with CityTrust Banking
Corporation. The
Morans issued checks in favor of Petrophil Corporation, which were dishonored for insufficiency of
funds.
Moran deposited the amount that would cover the checks the day after the checks clearing.
Petrophil did not
deliver the Morans fuel orders for their Wack-Wack Petron Gasoline station, prompting the latter
to
temporarily stop business operations. The Morans sued the bank for damages.
Issue: Whether a bank is liable for its refusal to pay a check on account of insufficient funds,
notwithstanding
the fact the fact that a deposit was made later in the day.
Held: A check is a bill of exchange drawn on a bank payable on demand. Where the bank
possesses funds of
a depositor, it is bound to honor his checks to the extent of the amount of the deposits. Failure to
do so, when
deposit is sufficient, entitles the drawer to substantial damages without proof of actual damages.
Herein,
however, the balance of the account maintained in the bank was not enough to cover either of
the two checks
when they were dishonored. A check, as distinguished from an ordinary bill of exchange, is
supposed to be
drawn against a previous deposit of funds. As such, a drawer must remember his responsibilities
every time
he issues a check. He must personally keep track of his available balance in the bank and not
rely on the bank
to notify him of the necessity to fund the checks he previously issued. A bank is under no
obligation to make
part payment on a check, up to only the amount of the drawers funds, where the check is drawn
for an
amount larger than what the drawer has on deposit. A check is intended not only to transfer a
right to the
amount named in it, but to serve the further purpose of affording evidence for the bank of the
payment of such
amount when the check is taken up. Clearly, a bank is not liable for its refusal to pay a check on
account of
insufficient funds, notwithstanding the fact that a deposit may be made later in the day. Before a
bank
depositor may maintain a suit to recover a specific amount from his bank, he must first show that
he had on
deposit sufficient funds to meet his demand.
[31]
MWSS vs. CA
GR L-62943, 14 July 1986
Second Division, Gutierrez Jr. (J)
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.
[32]
Navarro vs. CA
GR 112389, 1 August 1994
Facts: Mercedes D. Navarro was convicted of violating Batas Pambansa Bilang 22 (BP 22) in the
Regional
Trial Court of Pangasinan. She failed to file her brief on appeal. She claimed to have made
payment to the
original complainants saleslady when she filed a motion for new trial on the ground of newly
discovered
evidence. Such motion was denied.
Issue: Whether Navarro is indeed guilty of violating the bouncing check law.
Held: Payment of the value of the check either by the drawer or by the drawee bank within 5
banking days
from notice of dishonor given to the drawer is a complete defense. The prima facie presumption
that the
drawer had knowledge of the insufficiency of funds or credit at the time of the issuance and on
its presented
for payment would be rebutted by such payment. This defense lies regardless of the strength of
the evidence
offered by the prosecution to prove the elements of the offense (i.e. violation of BP 22). Herein,
Navarro
failed to overcome the presumption by substantiating her allegation of payment. There is no
proof that the
payment, if it was really made at all, was done within 5 days from the notice of dishonor.
[33]
People vs. Grospe
GR L-74053-54, 20 January 1988
Second Division, Melencio-Herrera (J)
Facts: Manuel Parulan issued a check to the San Miguel Corporation, which was received by the
latters
finance officer in Guiguinto, Bulacan, and which was forwarded and deposited in SMCs BPI
account in San
Fernando, Pampanga. Another check was issued by Parulan as direct payment for the spot sale of
beer, which
was similarly received, forwarded and deposited as above. Both were dishonored for
insufficiency of funds.
Parulan was charged with violation of Batas Pambansa Bilang 22 and for estafa under Article 315,
paragraph
2 (d) of the Revised Penal Code. Tried jointly, the court dismissed the cases for lack of
jurisdiction.
Issue: Whether the checks were issued in Bulacan or Pampanga.
Held: While the subject check was issued in Bulacan, it was not completely drawn thereat, but in
San
Fernando, Pampanga, where it was uttered and delivered. The place where the bills were written,
signed or
dated does not fix or determine the place where they were executed. What is of decisive
importance is the
delivery thereof, as it is the final act essential to its consummation as an obligation. The issuance
and the
delivery of the check must be to a person who takes it as a holder, i.e. the payee or indorsee of a
bill or note,
who is in possession of it or the bearer thereof. Both estafa by postdating or issuing a bad check
a transitory or
continuing offense. Thus, as jurisdiction or venue is determined by the allegations in the
information, i.e. San
Fernando, Pampanga, the venue was properly laid. Case is remanded to the trial court for proper
disposition.
[34]
People vs. Maniego
GR L-30910, 27 February 1987
First Division, Narvasa (J)
Facts: Julia Maniego was an indorser of several checks drawn by her sister, Milagros Pamintuan,
which were
dishonored after they had been exchange with cash belonging to the Government, then in the
official custody
of Lt. Rizalino Ubay. Ubay, Pamintuan and Maniego were indicted for the crime of malversation.
Ubay and
Maniego were arraigned, while Pamintuan fled to the United States. Ubay was found guilty while
Maniego
was acquitted. Both, however, were ordered to pay in solidum the amount of P57,434.50 to the
government.
Maniego appealed.
Issue: Whether Maniego is liable even if she is a mere indorser.
Held: Under the law, the holder or last indorsee of a negotiable instrument has the right to
enforce payment of
the instrument for the full amount thereof against all parties liable thereon. Among the parties
liable thereon is
an indorser of the instrument. Such an indorser who indorses without qualification, inter alia,
engaged that on
due presentment, the instrument shall be accepted or paid, or both, according to its tenor, and
that if it be
dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount
thereof to the
holder, or to any subsequent indorser who may be compelled to pay it. Maniego may also be
deemed an
accommodation party in the light of the facts (i.e. without receiving value for the same). As
such, she is
liable on the instrument to a holder for value, notwithstanding such holder at the time of taking
the instrument
knew her to be only an accommodation party, although she has the right, after paying the
holder, to obtain
reimbursement from the party accommodated.
[35]
People vs. Reyes
GR 101127-31, 18 November 1993
Facts: Lorie Garcia delivered rice to Cresencia Reyes, as accommodation to her friend Manny
Cabrera who
had no more stock to sell. Reyes issued 6 checks for 6 orders delivered in different dates. Only 3
of the 6
checks were made good, the other 3 were returned by the bank due to insufficient funds.
Garcia notified
Reyes of the dishonor and the latter promised to pay her their total value. Despite demands,
Reyes failed to
make good the checks or replace them with cash. 3 criminal cases for violation of BP 22 and 2
criminal cases
for estafa were filed against Reyes.
Issue: Whether a single act of issuing a check may entail criminal liability of both violation of BP
22 and
Article 315 of the Revised Penal Code (Estafa).
Held: A single criminal act may give rise to a multiplicity of offenses and where there is a
variance or
differences between the elements of an offense in one law and another law. The gravamen of the
offense
punished by BP 22 is the act of making and issuing a worthless check or a check that is
dishonored upon its
presentment for payment; and act deemed pernicious and inimical to public welfare. BP 22
applies even
where the dishonored checks were issued merely in the form of a deposit or a guaranty and not
as actual
payment, as the law does not make any distinction. On the other hand, the checks were not
payment for a preexisting
obligation nut as consideration for each shipment of rice. The checks were issued as an
inducement
for the surrender by the party deceived of her property. Reyes made good 3 of the checks, giving
assurance to
Garcia that the remaining checks were fully funded. Her failure to make good the checks raised
the prima
facie inference of deceit.
[36]
People vs. Tuanda
AC 3360, 30 January 1990
Resolution En Banc, Per Curiam
Facts: In 1983, Atty. Fe Tuanda received from one Herminia A. Marquez several pieces of jewelry
with a
total value of P36,000 for sale on commission bases. In 1984, instead of returning the unsold
pieces of
jewelry worth P26,250, she issued 3 checks. These checks were dishonored by the drawee bank,
Traders
Royal Bank, for insufficiency of funds. Notwithstanding receipt of the notice of dishonor, Tuanda
made no
effort to settle her obligation. Criminal cases were filed, wherein she was acquitted of estafa but
was found
guilty of violation of BP 22. The appellate court affirmed the decision of the trial court and
imposed further
suspension against Tuanda in the practice of law, on the ground that the offense involves moral
turpitude.
Issue: Whether violation of BP 22 involves moral turpitude to allow the suspension of a member
of the bar
from the practice of law.
Held: Conviction of a crime involving moral turpitude relates to and affects the good moral
character of a
person convicted of such offense. Herein, BP 22 violation is a serious criminal offense which
deleteriously
affects public interest and public order. The effects of the issuance of a worthless check
transcends the private
interest of parties directly involved in the transaction and touches the interest of the community
at large.
Putting valueless commercial papers in circulation, multiplied a thousand fold, can very well
pollute the
channels of trade and commerce, injure the banking system and eventually hurt the welfare of
society and the
public interest. The Court affirmed the suspension of Tuanda from the practice of law.
[37]
Philippine Bank of Commerce vs. Aruego
GR L-25836-37, 31 January 1981
First Division, Fernandez (J)
Facts: Jose Aruego publishes a periodical called World Current Events. To facilitate payment of
the
printing, Aruego obtained a credit accommodation from the Philippine Bank of Commerce. For
every printing
of the periodical, the printer (Encal Press and Photo-Engraving) collected the cost of printing by
drawing a
draft against the bank, said draft being sent later to Aruego for acceptance. As an added security
for the
payment of the amounts advanced to the printer, the bank also required Aruego to execute a
trust receipt in
favor of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to
sell the same
with the promise to turn over to the bank the proceeds of the sale to answer for the payment of
all obligations
arising from the draft. The bank instituted an action against Aruego to recover the cost of
printing of the
latters periodical for the period of 28 August 1950 to 14 March 1951.
Issue [1]: Whether the drafts were bills of exchange or mere pieces of evidence of
indebtedness.
Held [1]: Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in
writing
addressed by one person to another, signed by the person giving it, requiring the person to
whom it is
addressed to pay on demand or at a fixed or determinable future time a sum certain in money to
order or to
bearer. As long as a commercial paper conforms with the definition of a bill of exchange, that
paper is
considered a bill of exchange. The nature of acceptance is important only in the determination of
the kind of
liabilities of the parties involved, but not in the determination of whether a commercial paper is a
bill of
exchange or not.
Issue [2]: Whether Aruego is an agent of Philippine Education Foundation Company when he
signed the
supposed bills of exchange.
Held [2]: Nowhere in the drafts accepted by Aruego that he disclosed that he was signing as
representative of
the Philippine Education Foundation Company. For failure to disclose his principal, Aruego is
personally
liable for the drafts he accepted, pursuant to Section 20 of the Negotiable Instruments Law.
Issue [3]: Whether Aruego is primarily liable.
Held [3]: An accommodation party is one who has signed the instrument as maker, drawer,
acceptor, indorser,
without receiving value therefor and for the purpose of lending his name to some other person.
Herein,
Aruego signed as a drawee / acceptor. Under the Negotiable Instruments Law, a drawee is
primarily liable. If
Aruego intended to be secondarily liable only, he should not have signed as an acceptor /
drawee. In doing so,
he became primarily and personally liable for the drafts.
[38]
Philippine Commercial Industrial Bank vs. CA
GR 121413, 29 January 2001
Second Division, Quisumbing (J)
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 Fords 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-payors 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, PCIBanks 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
Payees 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 Fords 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 banks duty to its depositors.
[39]
Philippine Education Co. vs. Soriano
GR L-22405, 30 June 1971
En Banc, Dizon (J)
Facts: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders (P200
each),
offering to pay for them with a private check. Montinola was able to leave the building with his
check and the
10 money orders without the knowledge of the teller. Upon discovery, message was sent to all
postmasters
and banks involving the unpaid money orders. One of the money orders was received by the
Philippine
Education Co. as part of its sales receipt. It was deposited by the company with the Bank of
America, which
cleared it with the Bureau of Post. The Postmaster, through the Chief of the Money Order Division
of the
Manila Post Office informed the bank of the irregular issuance of the money order. The bank
debited the
account of the company. The company moved for reconsideration.
Issue: Whether postal money orders are negotiable instruments.
Held: Philippine postal statutes are patterned from those of the United States, and the weight of
authority in
said country is that Postal money orders are not negotiable instruments inasmuch as the
establishment of a
postal money order is an exercise of governmental power for the publics benefit. Furthermore,
some of the
restrictions imposed upon money order by postal laws and regulations are inconsistent with the
character of
negotiable instruments. For instance, postal money orders may be withheld under a variety of
circumstances,
and which are restricted to not more than one indorsement.
[40]
Pineda vs. dela Rama
GR L-31831, 28 April 1983
First Division, Gutierrez (J)
Facts: Jose V. dela Rama is a lawyer whose services were retained by Jesus Pineda for the
purpose of making
representations with the chairman and general manager of the National Rice and Corn
Administration to stop
and delay the institution of criminal charges against Pineda who allegedly misappropriated
11,000 cavans of
palay deposited at his ricemill in Concepcion, Tarlac. Subsequently, Dela Rama filed suit to collect
a P9,300
loan, evidenced by the matured promissory note, and P5,000 as attorneys fees. The Court of
First Instance
ruled in favor of Pineda, which was reversed by the Court of Appeals.
Issue: Whether the promissory note is void for lack of consideration.
Held: The presumption that a negotiable instrument is issued for a valuable consideration
(Section 24,
Negotiable Instruments Law) is only prima facie. It can be rebutted by proof to the contrary. The
term of the
note sustains the version of Pineda that he signed the promissory note because he believed dela
Ramas story
that these amounts had already been advanced by dela Rama and given as gifts for NARIC
officials. The
promissory note was thus executed for an illegal consideration; and thus is void like any other
contract as per
Article 1409 of the Civil Code. The consideration for the promissory note -- to influence public
officers in the
performance of their duties -- is contrary to law and public policy. The promissory note is void ab
initio and
no cause of action for the collection cases can arise from it.
[41]
PNB vs. CA
GR L-26001, 29 October 1968
En Banc, Concepcion (J)
Facts: One Augusto Lim deposited in his current account with PCI Bank (Padre Faura Branch) a
GSIS check
drawn against PNB. The signatures of the General Manager and Auditor of GSIS were forged.
PCIBank
stamped at the back of the check All prior indorsements or lack of indorsements guaranteed,
PCI Bank.
PCIBank sent the check to PNB through the Central Bank. PNB did not return the check to
PCIBank; and
thus PCIBank credited Lims account. As GSIS has informed PNB that the check was lost two
months before
said transaction, its account was recredited by PNB upon its demand (due to the forged check).
PNB
requested for refund with PCI Bank. The latter refused.
Issue: Who shall bear the loss resulting from the forged check.
Held: The collecting bank is not liable as the forgery existing are those of the drawers and not
of the
indorsers. The indorsement of the intermediate bank does not guarantee the signature of the
drawer. PNBs
failure to return the check to the collecting bank implied that the check was good. In fact, PNB
even honored
the check even if GSIS has reported two months earlier that the check was stolen and the bank
thus should
stop payment. PNBs negligence was the main and proximate cause for the corresponding loss.
PNB thus
should bear such loss. Upon payment by PNB, as drawee, the check ceased to be a negotiable
instrument, and
became a mere voucher or proof of payment.
[42]
PNB vs. National City Bank
GR 43596, 31 October 1936
En Banc, Recto (J)
Facts: An unknown person or persons negotiated with Motor Service Co. checks purportedly
issued by the
Pangasinan Transportation Co. by JL Klar, Manager and Treasurer, against PNB and in favor of
International
Auto Repair Shop for P144.50 and P215.75. Said checks were indorsed by said unknown persons
in the
manner indicated at the back thereof. The checks were indorsed fro deposit at the National City
Bank of New
York (NCBNY) and Motor Service Co. was credited with the amounts thereof. Said checks were
cleared at
the clearing house and PNB credited NCBNY for the amounts thereof, believing that the
signatures of the
drawer are genuine, etc. PNB found that the signature were forged when so informed by the
Pangasinan
Transportation Co. It demanded reimbursement from NCBNY and Motor Service Co. Both refused.
Pangasinan Transportation objected to its deduction of its deposit.
Issue [1]: Whether the payment of the checks made by the drawee bank constitutes an
acceptance.
Held [1]: 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 (Section 185). The fact that acceptance is a step
unnecessary insofar as
bills of exchange payable on demand are concerned, it follows that the provisions relative to
acceptance are
without application to checks. There is nothing in law, however, against the presentation of
checks for
acceptance before they are paid. Certification is equivalent to acceptance (Section 187). When
certified, the
drawer will perform his promise by any other means than the payment of money (Section 132).
When
certified, the drawer and all indorsers are discharged from liability thereon (Section 188), and
then the check
operates as an assignment of a part of the funds to the credit of the drawer with the bank
(Section 189).
Acceptance has a technical meaning in the Negotiable Instruments Law. With few exceptions,
payment
neither includes or implies payment. Payment of the check, cashing it on presentment is not
acceptance.
Issue [2]: Whether the drawee bank is liable for the amount in a forged check for its failure to
detect the
forgery.
Held [2]: In determining the relative rights of a drawee who, under a mistake of fact, has paid,
and a holder
who has received such payment, upon a check to which the name of the drawer is forged, it is
only fair to
consider the question of diligence or negligence contributed to the success of the fraud or to
mislead the
drawee. 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. Under the
circumstance of
the case, if the PNB is allowed to recover, there will be no change of position as to the injury or
prejudice of
the Motor Service Co.
[43]
PNB vs. Quimpo
GR L-53194, 14 March 1988
First Division, Gancayco (J)
Facts: Francisco Gozon was a depositor of the Philippine National Bank (PNB Caloocan City
branch).
Ernesto Santos, Gozons friend, took a check from the latters checkbook which was left in the
car, filled it up
for the amount of P5,000, forged Gozons signature, and encashed it. Gozon learned about the
transaction
upon receipt of the banks statement of account, and requested the bank to recredit the amount
to his account.
The bank refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the forged check.
Held: The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or
the depositor
on the check being encashed. It is expected to use reasonable business prudence in accepting
and cashing a
check being encashed or presented to it. Payment in neglect of duty places upon him the result
of such
negligence. Still, Gozons act in leaving his checkbook in the car, where his trusted friend
remained in, cannot
be considered negligence sufficient to excuse the bank from its own negligence. The bank bears
the loss.
[44]
Ponce vs. CA
GR L-49444, 31 May 1979
First Division, Melencio-Herrera (J)
Facts: On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora Dino executed
a
promissory note in favor of Nelia Ponce in the sum of P814,868.42 payable without interest on or
before 31
July 1969, subject to an interest of 12% per annum if not paid at maturity, and an additional sum
equivalent to
10% of total amount due as attorneys fees in case it is necessary to bring suit, and the
execution of a first
mortgage on their properties or the Carmen Planas Memorial Inc. in the event of failure to pay
the
indebtedness in accordance with the terms. Upon failure of the debtors to pay, a complaint was
filed against
them for the recovery of the principal sum, plus interest and damages. The trial court rendered
judgment in
favor of Ponce. The Court of Appeals affirmed the decision of the trial court. On the second
motion for
reconsideration, however, the appellate court reversed the judgment and opined that the intent
of the parties
was that the note was payable in US dollars which is illegal, with neither party entitled to recover
under the
in pari delicto rule.
Issue: Whether an agreement to pay in dollars defeat a creditors claim for payment.
Held: If there is an agreement to pay an obligation in a currency other than Philippine legal
tender, the same
is illegal / null and void as contrary to public policy, pursuant to RA 529, and the most that can be
demanded
is to pay the said obligation in Philippine currency. It cannot defeat a creditors claim for
payment, for such
will allow a person to enrich himself inequitably at anothers expense. What RA 529 prohibits is
the payment
of an obligation in dollars. A creditor cannot oblige the debtor to pay in dollars, even if the loan
was given in
said currency. In such case, the indemnity is expressed in Philippine currency on the basis of the
current rate
of exchange at the time of payment.
[45]
Prudencio vs. CA
GR L-34539, 14 July 1986
Second Division, Gutierrez Jr. (J)
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 (Prudencios
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
the whole obligation and such extension does not release him because as far 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.
[46]
Que vs. People
GR 75217-18, 21 September 1987
Resolution of the Second Division, Paras (J)
Facts: The Regional Trial Court convicted Victor Que of the crime of violation of BP 22. Said
judgment was
affirmed by the Court of Appeals and the Supreme Court. In its motion for consideration, Que
alleged that the
RTC Quezon City does not have jurisdiction as the element of the place of the issuance of the
check was
absent.
Issue [1]: Whether the place of issuance or the place or the place of deposit determines
jurisdiction / venue of
BP 22 cases.
Held [1]: The findings of the trial court reveal that the checks were issued in Quezon City (as
admitted by
Que himself in his answer). It is of no moment whether the checks were deposited by the
complainant in a
bank outside of Quezon City. The determinative factor is the place of issuance.
Issue [2]: Whether BP 22 applies to dishonored checks issued as guarantee.
Held [2]: BP 22 applies even in cases where dishonored checks are issued merely in the form of
a deposit or
guarantee. The enactment does not make any distinction as to whether the checks within its
contemplation are
issued in payment of an obligation or merely to guarantee the said obligation. The history of the
enactment
evinces the definite legislative intent to make the prohibition all-embracing without making any
exception
from the operation thereof in favor of a guarantee.
[47]
Republic Bank vs. CA
GR 42725, 22 April 1991
First Division, Grino Aquino (J)
Facts: San Miguel Corporation issued a dividend check for P240 in favor of J. Roberto Delgado, a
stockholder. Delgado altered the amount of the check to P9,240. The check was indorsed and
deposited by
Delgado with Republic Bank. Republic Bank endorsed the check to First National City Bank
(FNCB), the
drawee bank, by stamping on the back of the check all prior and / or lack of indorsements
guaranteed.
Relying on the endorsement, FNCB paid the amount to Republic Bank. Later on, San Miguel
informed FNCB
of the material alteration of the amount. FNCB recredited the amount to San Miguels account,
and
demanded refund from Republic Bank. Republic Bank refused. Hence, the present action.
Issue: Who shall bear the loss resulting from the altered check.
Held: When an indorsement is forged, the collecting bank or last indorser, as a general rule,
bears the loss.
But the unqualified indorsement of the collecting bank on the check should be read together with
the 24-hour
regulation on clearing house operation. Thus, when the drawee bank fails to return a forged or
altered check to
the collecting bank within the 24-hour clearing period (as provided by Section 4c of Central Bank
Circular 9,
as amended), the collecting bank is absolved from liability. The drawee bank, FNCB, should bear
the loss for
the payment of the altered check for its failure to detect and warn Republic Bank of the
fraudulent character
of the check within the 24-hour clearing house rule.
[48]
Republic Bank vs. Ebrada
GR L-40796, 31 July 1975
First Division, Martin (J)
Facts: Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta
Branch). The
Bureau of Treasury, which issued the check advised the bank that the alleged indorsement of the
check by one
Martin Lorenzo was a forgery as the latter has been dead since 14 July 1952; and requested
that it be
refunded he sum deducted from its account. The bank refunded the amount to the Bureau and
demanded upon
Ebrada the sum in question, who refused. Hence, the present action.
Issue: Whether the bank can recover from the last indorser.
Held: According to Section 23 of the Negotiable Instruments Law, where the signature on a
negotiable
instrument is forged, the negotiation of the check is without force or effect. However, following
the ruling in
Beam vs. Farrel (US case), where a check has several indorsements on it, only the negotiation
based on the
forged or unauthorized signature which is inoperative. The last indorser, Ebrada, was duty-bound
to ascertain
whether the check was genuine before presenting it to the bank for payment. Her failure to do so
makes her
liable for the loss and the Bank may recover from her the money she received for the check. Had
she
performed her duty, the forgery would have been detected and fraud defeated. Even if she
turned over the
amount to Dominguez immediately after receiving the cash proceeds of the check, she is liable
as an
accommodation party under Section 29 of the Negotiable Instruments Law.
[49]
Republic Planters Bank vs. CA
GR 93073, 21 December 1992
Second Division, Campos Jr. (J)
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.
[50]
San Carlos Milling vs. BPI
GR 37467, 11 December 1933
Second Division, Hull (J)
Facts: Joseph Wilson, the principal employee of San Carlos Milling Co. Ltd. in the Manila Office,
conspired
with one Alfredo Dolores, a messenger-clerk in the same office, in sending a cablegram in code
to the
company in Honolulu requesting a telegraphic transfer of $100,000 to China Bank of Manila.
Upon receipt of
the money, China Bank sent an exchange contract to San Carlos Milling offering the sum of
P201,000, which
was then the current rate of exchange. On this contract was forged the name of Newland
Baldwin. A
managers check on China Bank payable to San Carlos Milling or order was receipt for by Dolores.
The check
was deposited with BPI indorsed by a spurious signature of Baldwin. After clearing, BPI received a
letter,
purportedly signed by Baldwin, directing the shipment and delivery of P201,000. Dolores
witnessed the
packing of the money and returned with the check for P201,000 purportedly signed by Baldwin.
Dolores
turned the money over to Wilson and received as his share P10,000. When the crime was
discovered, BPI
refused to credit San Carlos Millings account with the amount withdrawn by the forged checks.
Issue: Who shall be liable for the value of the forged check.
Held: A bank that cashes a check must know to whom it pays. It is an elementary principle both
in banking
and of the Negotiable Instruments Law that a bank is bound to know the signatures of its
customers; and if it
pays a forged check, it must be considered as making the payment out of its own funds, and
cannot ordinarily
charge the amount so paid to the account of the depositor whose name was forged. As the
proximate cause of
loss was due to the negligence of BPI in honoring and cashing the forged checks, it is liable for
the amount of
P201,000 with legal interest thereon from 23 December 1928, until payment.
[51]
Sesbreno vs. CA
GR 89252, 24 May 1993
Third Division, Feliciano (J)
Facts: On 9 February 1981, Raul Sesbreno made a money market placement in the amount of
P300,000 with
the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance
issued to
Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note
(2731), the
Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said
security was in
the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and
America for
P304,533.33 payable on 13 March 1981. The checks were dishonored for having been drawn
against
insufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto, to
Sesbreno; but
Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a
face value of
P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was stamped nonnegotiable on
its face. As Sesbreno was unable to collect his investment and interest thereon, he filed an action
for damages
against Delta Motors and Pilipinas Bank.
Issue: Whether non-negotiability of a promissory note prevents its assignment.
Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may
be negotiated
either by indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form. A
negotiable
instrument, instead of being negotiated, may also be assigned or transferred. The legal
consequences of
negotiation and assignment of the instrument are different. A negotiable instrument may not be
negotiated but
may be assigned or transferred, absent an express prohibition against assignment or transfer
written in the
face of the instrument. herein, there was no prohibition stipulated.
[52]
State Investment House vs. CA
GR 101163, 11 January 1993
Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry sold
on
commission. Victoriano negotiated the checks to the State Investment House Inc. (SIHI). Moulic
failed to sell
the pieces of jewelry, so he returned them to the payee before the maturity of the checks. The
checks,
however, could not be retrieved as they had already been negotiated. Before the checks
maturity dates,
Moulic withdrew her funds from the drawee bank. Upon presentment of the checks for payment,
they were
dishonored for insufficiency of funds. SIHI sued to recover the value of the checks.
Issue: Whether the personal defense of failure or absence of consideration is available, or
conversely, whether
SIHI is a holder in due course.
Held: On their faces, the post-dated checks were complete and regular; SIHI bought the checks
from the
payee (Victoriano) before their due dates; SIHI took the checks in good faith and for value, albeit
at a
discounted price; and SIHI was never informed not made aware that the checks were merely
issued to payee
as security and not for value. Complying with the requisites of Section 52 of the Negotiable
Instruments Law,
SIHI is a holder in due course. As such, it holds the instruments free from any defect of title of
prior parties,
and from defenses available to prior parties among themselves. SIHI may enforce full payment of
the checks.
The defense of failure or absence of consideration is not available as SIHI was not privy to the
purpose for
which the checks were issued.

That the post-dated checks were merely issued as security is not a ground for the discharge of
the instrument
as against a holder in due course. It is not one of the grounds outlined in Section 119 of the
Negotiable
Instrument Law, for the instrument to be discharged.
It must be noted that the drawing and negotiation of a check have certain effects aside from the
transfer of
title or the incurring of liability in regard to the instrument by the transferor. The holder who
takes the
negotiated paper makes a contract with the parties on the face of the instrument. There is an
implied
representation that funds or credit are available for the payment of the instrument in the bank
upon which it is
drawn. Consequently, the withdrawal of the money from the drawee bank to avoid liability on the
checks
cannot prejudice the rights of holders in due course.
The drawer, Moulic, is liable to the holder in due course, SIHI.
[53]
State Investment House vs. IAC
GR 72764, 13 July 1989
Third Division, Fernan (J)
Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harris Chua, who
issued 3
crossed checks. Subsequently, NSWI entered in an agreement with the State Investment House
Inc. (SIHI),
under a deed of sale, where the former assigned and discounted 11 postdated checks including
the 3 issued by
Chua. When the 3 checks were allegedly deposited by SIHI, the checks were dishonored by
reason of
insufficient funds, stop payment and account closed. SIHI made demands upon Chua to
make good
said checks, Chua failed to do so.
Issue: Whether SIHI is a holder in due course so as to recover the amounts in the checks from
Chua, the
drawer.
Held: The Negotiable Instruments Law does not mention crossed checks but the Court has
recognized the
practice that crossing the check (by two parallel lines in the upper left portion of the check)
means that the
check may only be deposited in the bank and that the check may be negotiated only once (to
one who has an
account with a bank). The act of crossing a check serves as a warning to the holder that the
check has been
issued for a definite purpose so that he must inquire if he has received the check pursuant to
that purpose,
otherwise he is not a holder in due course. Herein, SIHI rediscounted the check knowing that it
was a crossed
check. His failure to inquire from the holder (NSWI) the purpose for which the checks were
crossed prevents
him from being considered in good faith, and thus, as a holder in due course. SIHI, therefor is
subject to
personal defenses, such as the lack of consideration between the NSWI and Chua, i.e. resulting
from the nonconsummation
of the loan.
[54]
Stelco Marketing vs. CA
GR 96160, 17 June 1992
Second Division, Narvasa (J)
Facts: Stelco Marketing Corporation sold steel bars and GI wires to RYL Construction Inc. worth
P126,859.61. RYL gave Stelcos sister corporation, Armstrong Industries, a MetroBank check
from
Steelweld Corporation (The check was issued apparently by Steelwelds President Peter Rafael
Limson to
Romeo Lim, President of RYL and Limson friend, 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 2 indorsements, i.e. RYL and
Armstrong.
A criminal case was instituted against Limson, etc. for violation of BP 22, Subsequently, Stelco
filed a civil
case against RYL and Steelweld to recover the value of the steel products.
Issue: Whether Stelco was a holder in due course of the check issued by Steelweld.
Held: The records do not show any intervention or participation by Stelco in any manner or form
whatsoever
in the transaction involving the check, or any communication of any sort between Steelweld and
Stelco, or
between either of them and Armstrong Industries, at any time before the dishonor of the check.
The record
does show that after the check was deposited and dishonored, Stelco came into possession of it
in some way.
Stelco cannot thus be deemed a holder of the check for value as it does not meet two essential
requisites
prescribed by the 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.
[55]
Tan vs. CA
GR 108555, 20 December 1994
First Division, Kapunan (J)
Facts: Ramon Tan, a businessman from Puerto Princesa, secured a Cashiers Check from
Philippine
Commercial Industrial Bank (PCIBank) to P30,000 payable to his order to avoid carrying cash
while enroute
to Manila. He deposited the check in his account in Rizal Commercial Banking Corporation (RCBC)
in its
Binondo Branch. RCBC sent the check for clearing to the Central Bank which was returned for
having been
missent or misrouted. RCBC debited Tans account without informing him. Relying on
common
knowledge that a cashiers check was as good as cash, and a month after depositing the check,
he issued two
personal checks in the name of Go Lak and MS Development Trading Corporation. Both checks
bounced due
to insufficiency of funds. Tan filed a suit for damages against RCBC.
Issue: Whether a cashiers check is as good as cash, so as to have funded the two checks
subsequently drawn.
Held: An ordinary check is not a mere undertaking to pay an amount of money. There is an
element of
certainty or assurance that it will be paid upon presentation; that is why it is perceived as a
convenient
substitute for currency in commercial and financial transactions. Herein, what is involved is more
than an
ordinary check, but a cashiers check. A cashiers check is a primary obligation of the issuing
bank and
accepted in advance by its mere issuance. By its very nature, a cashiers check is a banks order
to pay what is
drawn upon itself, committing in effect its total resources, integrity and honor beyond the check.
Herein,
PCIB by issuing the check created an unconditional credit in favor any collecting bank. Reliance
on the
laymans perception that a cashiers check is as good as cash is not entirely misplaced, as it is
rooted in
practice, tradition and principle.
[56]
Tibajia vs. CA
GR 100290, 4 June 1993
Second Division, Padilla (J)
Facts: A suit for collection of sum of money was ruled in favor of Eden Tan and against the
spouses Norberto
Jr. and Carmen Tibajia. After the decision was made final, Tan filed a motion for execution and
levied upon
the garnished funds which were deposited by the spouses with the cashier of the Regional Trial
Court of
Pasig. The spouses, however, delivered to the deputy sheriff the total money judgment in the
form of
Cashiers Check (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon
the
garnished funds to satisfy the judgment obligation. The spouses filed a motion to lift the writ of
execution on
the ground that the judgment debt had already been paid. The motion was denied.
Issue: Whether the spouses have satisfied the judgment obligation after the delivery of the
cashiers check
and cash to the deputy sheriff.
Held: A check, whether a managers check or ordinary check, is not legal tender, and an offer of
a check in
payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or
creditor
(Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate
Appellate
Court). The court is not, by decision, sanctioning the use of a check for the payment of
obligations over the
objection of the creditor (Fortunado vs. Court of Appeals).
[57]
Travel On vs. CA
GR 56169, 26 June 1992
Third Division, Feliciano (J)
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.
[58]
Uy vs. CA
GR 119000, 28 June 1997
Facts: Rosa Uy and Consolacion Leong, who are friends, formed a partnership; with Consolacion
contributing additional capital for the expansion of Rosas lumber business. The friendship
between the two
soured when the partnership documents were never processed. Consolacion asked for the return
of her
investments. Rosa issued check which were dishonored for insufficiency of funds. Uy was
charged for estafa
and violation of BP 22.
Issue: Whether knowledge of insufficiency of funds is transitory or simultaneous with the
issuance of the
instrument.
Held: Even if it is true that BP 22 is a transitory or continuing offense and as such a person
indicted with a
transitory offense may be validly tried in any jurisdiction where the offense was in part
committed,
knowledge by the maker or drawer of the fact that he has no sufficient funds to cover the check
or of having
sufficient funds is simultaneous to the issuance of the instrument. None of the essential
ingredients of BP 22
was committed in the City of Manila; i.e. Consolacion was a resident of Makati while Uy was a
resident of
Caloocan City; the place of business of the alleged partnership is in Malabon; the drawee bank
was located in
Malabon; and the checks were all deposited for collection in Makati.
[59]
Vaca vs. CA
GR 43596, 31 October 1936
En Banc, Recto (J)
Facts: Eduardo Vaca is the president and owner of Ervine International while Fernando Nieto,
Vacas son-inlaw,
is the firms purchasing manager. They issued a check for P10,000 to the General Agency for
Reconnaissance, Detection and Security (GARDS) and drawn against China Bank. When
deposited with
PCIBank, the check was dishonored for insufficiency of funds. GARDS sent a demand letter but
the drawers
failed to pay within the time given (7 days from notice). A few days later, however, Vaca issued a
check to
GARDS for P19,866.16, drawn against Associated Bank, replacing the dishonored check. GARDS
did not
return the dishonored check. Later on, GARDS Acting Operations Manager filed a criminal suit
against Vaca
and Nieto for violation of BP 22. The trial court sentenced each to 1 year imprisonment and to
pay a fine of
P10,000 and costs.
Issue [1]: Whether the drawers had knowledge of insufficient funds in issuing the check.
Held [1]: Section 2 of BP 22 provides a presumption of knowledge of insufficiency of funds if the
drawer
fails to maintain sufficient funds within 90 days after the date of the check, or to make
arrangement for
payment in full by the drawee of such check within 5 days after receiving notice that such check
has not been
paid by the drawee. Herein, the second check supposedly replacing the dishonored check is
actually the
payment of two separate bills, and was issued 15 days after notice. Such replacement cannot
negate the
presumption that the drawers knew of the insufficiency of funds.
Issue [2]: Whether the absence of damages incurred by the payee absolves the drawers from
liability.
Held [2]: The claim -- that the case was simply a result of a misunderstanding between GARDS
and the
drawers and that the security agency did not suffer any damage from the dishonor of the check
-- is flimsy.
Even if the payee suffered no damage as a result of the issuance of the bouncing check, the
damage to the
integrity of the banking system cannot be denied. Damage to the payee is not an element of the
crime
punished in BP 22.
Note: In this case, the Court recognized the contribution of Filipino entrepreneurs to the national
economy;
and that to serve the ends of criminal justice, instead of the 1 year imprisonment, a fine of
double the amount
of the check involved was imposed as penalty. This was made to redeem valuable human
material and prevent
unnecessary deprivation of personal liberty and economic usefulness with due regard to the
protection of the
social order.
[60]
Vda. de Eduque vs. Ocampo
GR L-222, 26 April 1950
Second Division, Moran (CJ)
Facts: On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon,
Dona
Escolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000 and P15,000, both
payable
within 20 years with interest of 5% per annum. Payment of the loans was guaranteed by
mortgage on real
property. On 6 December 1943, Salvacion F. Vda de Eduque, as administratrix of the estate of Dr.
Jose
Eduque, tendered payment by means of a cashiers check representing Japanese War notes to
Jose M.
Ocampo, who refused payment. By reason of such refusal, an action was brought and the
cashiers check was
deposited in court. After trial, judgment was rendered against Ocampo compelling him to accept
the amount,
to pay the expenses of consignation, etc. Ocampo accepted the judgment as to the second loan
but appealed as
to the first loan.
Issue: Whether there is a tender of payment by means of a cashiers check representing war
notes.
Held: Japanese military notes were legal tender during the Japanese occupation; and Ocampo
impliedly
accepted the consignation of the cashiers check when he asked the court that he be paid the
amount of the
second loan (P15,000). It is a rule that a cashiers check may constitute a sufficient tender where
no objection
is made on this ground.
Negotiable

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Abubakar vs Auditor General ruling on treasury warrants

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[1]

Abubakar vs. Auditor General

Resolution of the Second Division, Barredo (J)

Digests (Berne Guerrero)

which the checks were issued.

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