G.R. No.

L-17845

April 27, 1967

INTESTATE ESTATE OF VICTOR SEVILLA. SIMEON SADAYA, petitioner,

vs.
FRANCISCO SEVILLA, respondent.
FACTS: On March 28, 1949, Victor Sevilla, Oscar Varona and Simeon Sadaya executed, jointly and severally, in favor of the Bank of the Philippine
Islands, or its order, a promissory note for P15,000.00 with interest at 8% per annum, payable on demand. The entire, amount of P15,000.00, proceeds
of the promissory note, was received from the bank by Oscar Varona alone. Victor Sevilla and Simeon Sadaya signed the promissory note as comakers only as a favor to Oscar Varona. Payments were made on account. As of June 15, 1950, the outstanding balance stood P4,850.00. No
payment thereafter made.
On October 6, 1952, the bank collected from Sadaya the foregoing balance which, together with interest, totalled P5,416.12. Varona failed to reimburse
Sadaya despite repeated demands
Victor Sevilla died. Intestate estate proceedings were started and Francisco Sevilla was the administrator.
Sadaya filed a creditor's claim for the above sum of P5,746.12, plus attorneys fees in the sum of P1,500.00. The administrator resisted the claim upon
the averment that the deceased Victor Sevilla "did not receive any amount as consideration for the promissory note," but signed it only "as surety for
Oscar Varona".
The trial court issued an order admitting the claim of Simeon Sadaya in the amount of P5,746.12, and directing the administrator to pay the same from
any available funds belonging to the estate of the deceased Victor Sevilla.
The motion to reconsider having been overruled, the administrator appealed. The CA reversed the decision of the lower court. disapprove and disallow
"appellee's claim of P5,746.12 against the intestate estate."
Sadaya seeks to be paid 50% of the P5,746.12 against the intestate estate."
ISSUE: Whether or not Sadaya is entitled to compel contribution from the intestate estate of Sevilla as co-guarantors of Varona.
RULING: By Article 18 of the Civil Code in matters not covered by the special laws, "their deficiency shall be supplied by the provisions of this Code".
Nothing extant in the Negotiable Instruments Law would define the right of one accommodation maker to seek reimbursement from another. Perforce,
we must go to the Civil Code.1wph1.t
Because Sevilla and Sadaya, in themselves, are but co-guarantors of Varona, their case comes within the ambit of Article 2073 of the Civil Code which
reads:
ART. 2073. When there are two or more guarantors of the same debtor and for the same debt, the one among them who has paid may
demand of each of the others the share which is proportionally owing from him.
If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer, in the same proportion.
The provisions of this article shall not be applicable, unless the payment has been made in virtue of a judicial demand or unless the
principal debtor is insolvent.10
As Mr. Justice Street puts it: "[T]hat article deals with the situation which arises when one surety has paid the debt to the creditor and is seeking
contribution from his cosureties."
All of the foregoing postulate the following rules: (1) A joint and several accommodation maker of a negotiable promissory note may demand from the
principal debtor reimbursement for the amount that he paid to the payee; and (2) a joint and several accommodation maker who pays on the said
promissory note may directly demand reimbursement from his co-accommodation maker without first directing his action against the
principal debtor provided that (a) he made the payment by virtue of a judicial demand, or (b) a principal debtor is insolvent.
The Court of Appeals found that Sadaya's payment to the bank "was made voluntarily and without any judicial demand," and that "there is an absolute
absence of evidence showing that Varona is insolvent". This combination of fact and lack of fact epitomizes the fatal distance between payment by
Sadaya and Sadaya's right to demand of Sevilla "the share which is proportionately owing from him."
G.R. No. 80599 September 15, 1989

ERNESTINA CRISOLOGO-JOSE, petitioner,

vs.
COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for Sales of Mover Enterprises,
Inc., respondents.
FACTS: In 1980, plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of marketing and sales; and the president of
the said corporation was Atty. Oscar Z. Benares. On April 30, 1980, Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong,
issued Check No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the amount of P45,000.00 payable to defendant Ernestina
Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares,
and the treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed
upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check as an alternate story. Plaintiff Ricardo S. Santos, Jr. did sign the check.
It appears that the check was issu
ed to defendant Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by said defendant over a certain property which the Government
Service Insurance System (GSIS) agreed to sell to the clients of Atty. Oscar Benares, the spouses Jaime and Clarita Ong, with the understanding that
upon approval by the GSIS of the compromise agreement with the spouses Ong, the check will be encashed accordingly. However, since the
compromise agreement was not approved within the expected period of time, the aforesaid check for P45,000.00 (Exh. '1') was replaced by Atty.
Benares with another Traders Royal Bank cheek bearing No. 379299 dated August 10, 1980, in the same amount of P45,000.00 also payable to the
defendant Jose. This replacement check was also signed by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr. When defendant
deposited this replacement check with her account at Family Savings Bank, Mayon Branch, it was dishonored for insufficiency of funds. A subsequent
redepositing of the said check was likewise dishonored by the bank for the same reason. Hence, defendant through counsel was constrained to file a
criminal complaint for violation of Batas Pambansa Blg. 22.
Meanwhile, during the preliminary investigation of the criminal charge against Benares and the plaintiff Ricardo S. Santos, Jr. tendered cashier's check
for P45,000.00 to the defendant Ernestina Crisologo-Jose, the complainant in that criminal case. The defendant refused to receive the cashier's check
in payment of the dishonored check in the amount of P45,000.00. Hence, plaintiff encashed the aforesaid cashier's check and subsequently deposited
said amount of P45,000.00 with the Clerk of Court. Incidentally, the cashier's check adverted to above was purchased by Atty. Oscar Z. Benares and
given to the plaintiff herein to be applied in payment of the dishonored check.
After trial, the court a quo, holding that it was "not persuaded to believe that consignation referred to in Article 1256 of the Civil Code is applicable to
this case," rendered judgment dismissing plaintiff s complaint and defendant's counterclaim. 4
As earlier stated, respondent court reversed and set aside said judgment of dismissal and revived the complaint for consignation, directing the trial
court to give due course thereto.
ISSUE: Whether or not private respondent, one of the signatories of the check issued under the account of Mover Enterprises, Inc., is an
accommodation party under the Negotiable Instruments Law and a debtor of petitioner to the extent of the amount of said check.
RULING: The pertinent provision of said law referred to provides:
Sec. 29. Liability of accommodation party an accommodation party is one who has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a
person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew
him to be only an accommodation party.
Consequently, to be considered an accommodation party, a person must (1) be a party to the instrument, signing as maker, drawer, acceptor, or
indorser, (2) not receive value therefor, and (3) sign for the purpose of lending his name for the credit of some other person.
Based on the foregoing requisites, it is not a valid defense that the accommodation party did not receive any valuable consideration when he executed
the instrument. From the standpoint of contract law, he differs from the ordinary concept of a debtor therein in the sense that he has not received any
valuable consideration for the instrument he signs. Nevertheless, he is liable to a holder for value as if the contract was not for accommodation in
whatever capacity such accommodation party signed the instrument, whether primarily or secondarily. Thus, it has been held that in lending his name
to the accommodated party, the accommodation party is in effect a surety for the latter.
Assuming arguendo that Mover Enterprises, Inc. is the accommodation party in this case, as petitioner suggests, the inevitable question is whether or
not it may be held liable on the accommodation instrument, that is, the check issued in favor of herein petitioner.
We hold in the negative.
The aforequoted provision of the Negotiable Instruments Law which holds an accommodation party liable on the instrument to a holder for value,
although such holder at the time of taking the instrument knew him to be only an accommodation party, does not include nor apply to corporations

which are accommodation parties. 7 This is because the issue or indorsement of negotiable paper by a corporation without consideration and for the
accommodation of another is ultra vires. 8Hence, one who has taken the instrument with knowledge of the accommodation nature thereof cannot
recover against a corporation where it is only an accommodation party. If the form of the instrument, or the nature of the transaction, is such as to
charge the indorsee with knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he cannot
recover against the corporation thereon.
By way of exception, an officer or agent of a corporation shall have the power to execute or indorse a negotiable paper in the name of the corporation
for the accommodation of a third person only if specifically authorized to do so. Corollarily, corporate officers, such as the president and vice-president,
have no power to execute for mere accommodation a negotiable instrument of the corporation for their individual debts or transactions arising from or
in relation to matters in which the corporation has no legitimate concern. Since such accommodation paper cannot thus be enforced against the
corporation, especially since it is not involved in any aspect of the corporate business or operations, the inescapable conclusion in law and in logic is
that the signatories thereof shall be personally liable therefor, as well as the consequences arising from their acts in connection therewith.
The instant case falls squarely within the purview of the aforesaid decisional rules. If we indulge petitioner in her aforesaid postulation, then she is
effectively barred from recovering from Mover Enterprises, Inc. the value of the check. Be that as it may, petitioner is not without recourse.
The fact that for lack of capacity the corporation is not bound by an accommodation paper does not thereby absolve, but should render
personally liable, the signatories of said instrument where the facts show that the accommodation involved was for their personal account,
undertaking or purpose and the creditor was aware thereof.
respondent Santos is an accommodation party and is, therefore, liable for the value of the check. The fact that he was only a co-signatory does not
detract from his personal liability. A co-maker or co-drawer under the circumstances in this case is as much an accommodation party as the other cosignatory or, for that matter, as a lone signatory in an accommodation instrument. Under the doctrine in Philippine Bank of Commerce vs. Aruego,
supra, he is in effect a co-surety for the accommodated party with whom he and his co-signatory, as the other co-surety, assume solidary liability ex
lege for the debt involved. With the dishonor of the check, there was created a debtor-creditor relationship, as between Atty. Benares and respondent
Santos, on the one hand, and petitioner, on the other. This circumstance enables respondent Santos to resort to an action of consignation where his
tender of payment had been refused by petitioner.
G.R. No. 96160 June 17, 1992
STELCO MARKETING CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS and STEELWELD CORPORATION OF THE PHILIPPINES, INC., respondent.
FACTS: Stelco Marketing Corporation is engaged in the distribution and sale to the public of structural steel bars. On seven (7) different occasions in
September and October, 1980, it sold to RYL Construction, Inc. quantities of steels bars of various sizes and rolls of G.I. wire. These bars and wire
were delivered at different places at the indication of RYL Construction, Inc. The aggregate price for the purchases was P126,859.61.
Although the corresponding invoices issued by STELCO stipulated that RYL pay "COD" (cash on delivery), the latter made no payments for the
construction materials thus ordered and delivered despite insistent demands for payment by the former.
On April 4, 1981, RYL gave to Armstrong, Industries described by STELCO as its "sister corporation" and "manufacturing arm" a check drawn
against Metrobank in the amount of P126,129.86 dated April 4, 1981. That check was a company check of another corporation, Steelweld Corporation
of the Philippines, signed by its President, Peter Rafael Limson, and its Vice-President, Artemio Torres.
The check was issued by Limson at the behest of his friend, Romeo Y. Lim, President of RYL. Romeo Lim had asked Limson, for financial
assistance, and the latter had agreed to give Lim a check only by way of accommodation, "only as guaranty but not to pay for anything."
The check was actually issued in said amount of P126, 129.86, and as already stated, was given by R.Y. Lim to Armstrong Industries, 4 in payment of
an obligation. When the latter deposited the check at its bank, it was dishonored because "drawn against insufficient funds." 5 When so deposited, the
check bore two(2) endorsements, that of "RYL Construction," followed by that of "Armstrong Industries."
On account of the dishonor of Metrobank Check No. 765380, and on complaint of Armstrong Industries, Rafael Limson and Artemio Torres were
charged in the Regional Trial Court of Manila with a violation of Batas Pambansa Bilang 22. 7 They were acquitted in a decision rendered on June 28,
1984 "on the ground that the check in question was not issued by the drawer "to apply on account for value," it being merely for accommodation
purposes. 8 The judgment however conditioned the acquittal with the following pronouncement:
This is not however to release Steelweld Corporation from its liability under Sec. 29 of the Negotiable Instruments Law for
having issued it for the accommodation of Romeo Lim.
four (4) years after issuance of the check in question in May, 1985, STELCO filed with the Regional Trial Court at Caloocan City a civil
complaint 9 against both RYL and STEELWELD for the recovery of the valued of the steel bars and wire sold to and delivered to RYL (as already

narrated) in the amount of P126,129.86, "plus 18% interest from August 20, 1980 . . . (and) 25% of the total amount sought to be recovered as and by
way of attorney's fees . . . ." 10 Among the allegations of its complaint was that Metrobank Check No. 765380 above mentioned had been given to it in
payment of RYL's indebtedness, duly indorsed by R.Y. Lim. 11 A preliminary attachment was issued by the trial court on the basis of the averments of
the complaint but was shortly dissolved upon the filing of a counter-bond by STEELWELD.
ISSUE: whether or not STELCO ever became a holder in due course of Check No. 765380, a bearer instrument, within the contemplation of the
Negotiable Instruments Law
RULING: The Court held in the negative. STELCO evidently places much reliance on the pronouncement of the Regional Trial Court in Criminal Case
No. 66571, 21that the acquittal of the two (2) accused (Limson and Torres) did not operate "to release Steelweld Corporation from its liability under Sec.
29 of the Negotiable Instruments Law for having issued . . . (the check) for the accommodation of Romeo Lim." The cited provision reads as follows:
Sec. 29. Liability of accommodation party. An accommodation party is one who has singed the instrument as maker, drawer,
acceptor, or indorser, without receiving valued therefor, and for the purpose of lending his name to some other person. Such a
person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew
him to be only an accommodation party.
It is noteworthy that the Trial Court's pronouncement containing reference to said Section 29 did not specify to whomSTEELWELD, as accommodation
party, is supposed to be liable; and certain it is that neither said pronouncement nor any other part of the judgment of acquittal declared it liable to
STELCO.
"A holder in due course," says the law, 22 "is a holder who has taken the instrument under the following conditions:
(a) That is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was
the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the
persons negotiating it.
To be sure, as regards an accommodation party (such as STEELWELD), the fourth condition, i.e., lack of notice of any infirmity in the instruments or
defect in title of the persons negotiating it, has no application. This is because Section 29 of the law above quoted preserves the right of recourse of a
"holder for value" against the accommodation party notwithstanding that "such holder, at the time of taking the instrument, knew him to be only an
accommodation
party." 23
It is clear from the relevant circumstances that STELCO cannot be deemed a holder of the check for value. It does not meet two of the essential
requisites prescribed by the statute. It did not become "the holder of it before it was overdue, and without notice that it had been previously
dishonored," and it did not take the check "in good faith and for value." 26
Neither is there any evidence whatever that Armstrong Industries, to whom R.Y. Lim negotiated the check accepted the instrument and attempted to
encash it in behalf, and as agent of STELCO. On the contrary, the indications are that Armstrong was really the intended payee of the check and was
the party actually injured by its dishonor; it was after all its representative (a Mr. Young) who instituted the criminal prosecution of the drawers, Limson
and Torres, albeit unsuccessfully.
G.R. No. L-56169 June 26, 1992
TRAVEL-ON, INC., petitioner,
vs.
COURT OF APPEALS and ARTURO S. MIRANDA, respondents.
FACTS: Petitioner Travel-On Inc. is a travel agency from which Arturo Miranda procured tickets on behalf of airline passengers and derived
commissions therefrom. Miranda was sued by petitioner to collect on the six postdated checks he issued which were all dishonored by the drawee
banks. Miranda, however, claimed that he had already fully paid and even overpaid his obligations and that refunds were in fact due to him. He argued
that he had issued the postdated checks not for the purpose of encashment to pay his indebtedness but for purposes of accommodation, as he had in
the past accorded similar favors to petitioner. Petitioner however urges that the postdated checks are per se evidence of liability on the part of private
respondent and further argues that even assuming that the checks were for accommodation, private respondent is still liable thereunder considering
that petitioner is a holder for value.

ISSUE: Whether Miranda is liable on the postdated checks he issued even assuming that said checks were issued for accommodation only.
RULING: There was no accommodation transaction in the case at bar. In accommodation transactions recognized by the Negotiable Instruments Law,
an accommodating party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder
in due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full value which the
accommodated party then must repay to the accommodating party. But the accommodating party is bound on the check to the holder in due course
who is necessarily a third party and is not the accommodated party. In the case at bar, Travel-On was payee of all six (6) checks, it presented these
checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the
checks which bounced. Miranda must be held liable on the checks involved as petitioner is entitled to the benefit of the statutory presumption that it
was a holder in due course and that the checks were supported by valuable consideration.
**In accommodation transactions recognized by the Negotiable Instruments Law, an accommodating party lends his credit to the accommodated party,
by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the accommodated
party. In the case at bar, Travel-On was the payee of all six (6) checks, it presented these checks for payment at the drawee bank but the checks
bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.
G.R. No. 112392

February 29, 2000

BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs.
COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents.
Facts: Private respondent Benjamin Napiza deposited in his foreign current deposit with BPI a dollar check owned by Henry Chan in which he affixed
his signature at the dorsal side thereof. For this purpose, Napiza gave Chan a signed blank withdrawal slip. However, Gayon Jr. got hold of the
withdrawal slip and used it to withdraw the proceeds of the dollar check, even before the check was cleared and without the presentation of the bank
passbook.
Issues: (1) Whether or not petitioner can hold private respondent liable for the proceeds of the check for having affixed his signature at the dorsal side
as indorser; and (2) Whether or not the bank was negligent as the proximate cause of the loss and should be held liable.
RULING: (1) No. Ordinarily, private respondent may be held liable as an indorser of the check or even as an accommodation party. However, to hold
him liable would result in an injustice. The interest of justice thus demands looking into the events that led to the encashment of the check.
Under the rules appearing in the passbook that BPI issued to private respondent, to be able to withdraw under the Philippine foreign currency deposit
system, two requisites must be presented to petitioner BPI by the person withdrawing an amount:
1) A duly filled-up withdrawal slip; and
2) The depositors passbook.
Petitioner bank alleged that had private respondent indicated therein the person authorized to receive the money, then Gayon could not have
withdrawn any amount. However, the withdrawal slip itself indicates a special instruction that the amount is payable to Ramon de Guzman and/or
Agnes de Guzman. Such being the case, petitioners personnel should have been duly warned that Gayon was not the proper payee of the proceeds
of the check. Moreover, the fact that private respondents passbook was not presented during the withdrawal is evidenced by the entries therein
showing that the last transaction that he made was when he deposited the subject check.
(2) Yes. A bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their
relationship. Petitioner failed to exercise the diligence of a good father of a family. In total disregard of its own rules, petitioners personnel negligently
handled private respondents account to petitioners detriment.
The proximate cause of the withdrawal and eventual loss of the amount of $2,500.00 on petitioners part was its personnels negligence in allowing
such withdrawal in disregard of its own rules and the clearing requirement in the banking system. In so doing, petitioner assumed the risk of incurring a
loss on account of a forged or counterfeit foreign check and hence, it should suffer the resulting damage.
G.R. No. 117660

December 18, 2000

AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners,

vs.
THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC., respondents.

FACTSAgro Conglomerates Inc. (Vendor) sold 2 parcels of farmlands to WonderlandFood Industries (vendee), wherein they executed a Memorandum
of Agreement (MOA) where the vendee would pay P5 M as follows: P1M cash,P2M in shares of stock of Vendee Corporation and P2M in installments
+ 18%interest per annum.Afterwhich, the vendor, wendee and respondent Bank executed anAddendum to the previous MOA. The new arrangement
provide that the P1Mcash payment and prepaid interest of P1.36M (18% of P2M) would beincurred as debt from the BANK by the Vendor as
authorized by the Vendee.Provided however, that said loan shall be made for and in the name of theVENDOR. The VENDEE thereby agrees to pay the
full amount of P1.36Mdirectly to the VENDOR. It is understood that while the loan will be securedfrom and in the name of the VENDOR, the VENDEE
will be the one liable topay the entire proceeds thereof including interest and other charges.Petitioner-vendor issued PN payable to the Bank, but the
former failed to paysuch obligation so the Bank filed 3 cases of collection. Thus the Bankendorsed the PN for collection.
ISSUE: 1. Whether or not Petitioner-vendors is solidarily liable with Wonderland (vendee) to paythe bank (creditor). 2. whether or not the Addendum
signed by the Bank, the Vendor and Vendeeconstitutes a novation of the contract by substitution of debtor, whichexempts petitioners-vendor from any
liability to pay the PN they issued to theBank.
RULING.1. NO.A subsidiary contract of suretyship had taken effect since petitioner-vendorssigned the PN as maker and accommodation party for the
benefit of Wonderland (vendee). Petitioners became liable as accommodation party. Anaccommodation party is a person who has signed the
instrument as maker,acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person and is liable
on the instrument to aholder for value, notwithstanding such holder at the time of taking theinstrument knew (the signatory) to be an accommodation
party. He has theright, after paying the holder, to obtain reimbursement from the partyaccommodated, since the relation between them has in effect
become one of principal and surety, the accommodation party being the surety. Suretyship isdefined as the relation which exists where one person has
undertaken anobligation and another person is also under the obligation or other duty tothe obligee, who is entitled to but one performance, and as
between the twowho are bound, one rather than the other should perform.The suretys liability to the creditor or promisee of the principal is said to
bedirect, primary and absolute; in other words, he is directly and equally boundwith the principal. And the creditor may proceed against any one of
thesolidary debtors.
2. NO. The addendum did not effect to a novation of the obligation of petitioner-vendor to pay the PN by substitution of a new debtor,Wonderland
(vendee).Novation is the extinguishment of an obligation by the substitution or changeof the obligation by a subsequent one which extinguishes or
modifies thefirst, either by changing the object or principal conditions, or by substituting another in place of the debtor, or by subrogating a thirdperson
in the rights of the creditor. In order that a novation can take place,the concurrence of the following requisites are indispensable:
1) There must be a previous valid obligation;
2) There must be an agreement of the parties concerned to a new contract;
3) There must be the extinguishment of the old contract; and4) There must be the validity of the new contract.
G.R. No. L-15126

November 30, 1961

VICENTE R. DE OCAMPO & CO., plaintiff-appellee,

vs.
ANITA GATCHALIAN, ET AL., defendants-appellants.
Facts: Anita Gatchalian was interested in buying a car when she was offered by Manuel Gonzales to a car owned by the Ocampo Clinic. Gonzales
claim that he was duly authorized to look for a buyer, negotiate and accomplish the sale by the Ocampo Clinic. Anita accepted the offer and insisted to
deliver the car with the certificate of registration the next day but Gonzales advised that the owners would only comply only upon showing of interest on
the part of the buyer. Gonzales recommended issuing a check (P600 / payable-to-bearer /cross-checked) as evidence of the buyers good faith.
Gonzales added that it will only be for safekeeping and will be returned to her the following day.

The next day, Gonzales never appeared. The failure of Gonzales to appeal resulted in Gatchalian to issue a STOP PAYMENT ORDER on the check. It
was later found out that Gonzales used the check as payment to the Vicente de Ocampo (Ocampo Clinic) for the hospitalization fees of his wife (the
fees were only P441.75, so he got a refund of P158.25). De Ocampo now demands payment for the check, which Gatchalian refused, arguing that de
Ocampo is not a holder in due course and that there is no negotiation of the check.

The Court of First Instance ordered Gatchalian to pay the amount of the check to De Ocampo. Hence this case.

Issue: Whether or not De Ocampo is a holder in due course.

Ruling: NO. De Ocampo is not a holder in due course. De Ocampo was negligent in his acquisition of the check. There were many instances that
arouse suspicion: the drawer in the check (Gatchalian) has no liability with de Ocampo ; it was cross-checked(only for deposit) but was used a payment
by Gonzales; it was not the exact amount of the medical fees. The circumstances should have led him to inquire on the validity of the check. However,
he failed to exercise reasonable prudence and caution.

In showing a person had knowledge of facts that his

action in taking the instrument amounted to bad faith need not prove that he knows the exact fraud. It is sufficient to show that the person had NOTICE
that there was something wrong. The bad faith here means bad faith in the commercial sense obtaining an instrument with no questions asked or no
further inquiry upon suspicion.

The presumption of good faith did not apply to de Ocampo because the defect was apparent on the instruments face it was not payable to Gonzales
or bearer. Hence, the holders title is defective or suspicious. Being the case, de Ocampo had the burden of proving he was a holder in due course, but
failed.
G.R. No. 70145 November 13, 1986
MARCELO A. MESINA, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, HON. ARSENIO M. GONONG, in his capacity as Judge of Regional Trial Court
Manila (Branch VIII), JOSE GO, and ALBERT UY, respondents.

FACTS:
Jose Go purchased from Associated Bank a cashier's check for P800,000.00. Unfortunately, he left said check on the top of the desk of the bank
manager when he left the bank. The bank manager entrusted the check for safekeeping to a bank official, a certain Albert Uy. While Uy went to the
men's room, the check was stolen by his visitor in the person of Alexander Lim. Upon discovering that the check was lost, Jose Go accomplished a
"STOP PAYMENT" order. Two days later, Associated Bank received the lost check for clearing from Prudential Bank. After dishonoring the same
check twice, Associated Bank received summons and copy of a complaint for damages of Marcelo Mesina who was in possession of the lost check
and is demanding payment. Petitioner claims that a cashier's check cannot be countermanded in the hands of a holder in due course.

ISSUE:
Whether or not petitioner can collect on the stolen check on the ground that he is a holder in due course.

RULING:
No. Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or value as shown by the established facts of the
case. Admittedly, petitioner became the holder of the cashier's check as endorsed by Alexander Lim who stole the check. He refused to say how and
why it was passed to him. He had therefore notice of the defect of his title over the check from the start. The holder of a cashier's check who is not a
holder in due course cannot enforce such check against the issuing bank which dishonors the same.

**Apersonwhobecametheholderofacashier'scheckasendorsedbythepersonwhostoleitandwhorefusedtosayhowandwhyitwaspassedtohimisnota
holderinduecourse.
G.R. No. L-39641 February 28, 1983
METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION, plaintiff-appellee,
vs.
SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD., defendants-appellants.

FACTS: On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd., in the amount of P15,939.00
payable in twelve (12) equal monthly instalments, beginning May 18, 1969, with interest at the rate of one percent per month. It is further provided that
in case on non-payment of any of the installments, the total principal sum then remaining unpaid shall become due and payable with an additional
interest equal to twenty-five percent of the total amount due.
On the same date, Sambok Motors Company, a sister company of Ng Sambok Sons Motors Co., Ltd., and under the same management as the former,
negotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment Corporation with the following indorsement:
Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse. Notice of Demand; Dishonor; Protest; and Presentment are
hereby waived.
SAMBOK MOTORS CO. (BACOLOD)
By:
RODOLFO G. NONILLO Asst. General Manager
The maker, Dr. Villaruel defaulted in the payment of his installments when they became due, so on October 30, 1969 plaintiff formally presented the
promissory note for payment to the maker. Dr. Villaruel failed to pay the promissory note as demanded, hence plaintiff notified Sambok as indorsee of
said note of the fact that the same has been dishonored and demanded payment.
Sambok failed to pay, so on November 26, 1969 plaintiff filed a complaint for collection of a sum of money before the Court of First Instance of Iloilo.
Sambok did not deny its liability but contended that it could not be obliged to pay until after its co-defendant Dr. Villaruel has been declared insolvent.
During the pendency of the case in the trial court, defendant Dr. Villaruel died, hence, on October 24, 1972 the lower court, on motion, dismissed the
case against Dr. Villaruel pursuant to Section 21, Rule 3 of the Rules of Court.
n plaintiff's motion for summary judgment, the trial court rendered its decision dated September 12, 1973, the dispositive portion of which reads as
follows:
WHEREFORE, judgment is rendered:
(a) Ordering Sambok Motors Company to pay to the plaintiff the sum of P15,939.00 plus the legal rate of interest from October 30, 1969;
(b) Ordering same defendant to pay to plaintiff the sum equivalent to 25% of P15,939.00 plus interest thereon until fully paid; and
(c) To pay the cost of suit.
Not satisfied with the decision, the present appeal was instituted, appellant Sambok raising a lone assignment of error as follows:
The trial court erred in not dismissing the complaint by finding defendant appellant Sambok Motors Company as assignor and a qualified indorsee of
the subject promissory note and in not holding it as only secondarily liable thereof.
Appellant Sambok argues that by adding the words "with recourse" in the indorsement of the note, it becomes a qualified indorser that being a qualified
indorser, it does not warrant that if said note is dishonored by the maker on presentment, it will pay the amount to the holder; that it only warrants the
following pursuant to Section 65 of the Negotiable Instruments Law: (a) that the instrument is genuine and in all respects what it purports to be; (b) that
he has a good title to it; (c) that all prior parties had capacity to contract; (d) that he has no knowledge of any fact which would impair the validity of the
instrument or render it valueless.
ISSUE: Whether or not the indorsement made by Sambok is qualified
RULING: A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's
signature the words "without recourse" or any words of similar import. Such an indorsement relieves the indorser of the general obligation to pay if the
instrument is dishonored but not of the liability arising from warranties on the instrument as provided in Section 65 of the Negotiable Instruments Law
already mentioned herein. However, appellant Sambok indorsed the note "with recourse" and even waived the notice of demand, dishonor, protest and
presentment.
"Recourse" means resort to a person who is secondarily liable after the default of the person who is primarily liable Appellant, by indorsing the note
"with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed that if
Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the note was indorsed without

qualification. A person who indorses without qualification engages that on due presentment, the note shall be accepted or paid, or both as the case
may be, and that if it be dishonored, he will pay the amount thereof to the holder. Appellant Sambok's intention of indorsing the note without
qualification is made even more apparent by the fact that the notice of demand, dishonor, protest and presentment were an waived. The words added
by said appellant do not limit his liability, but rather confirm his obligation as a general indorser.
Lastly, the lower court did not err in not declaring appellant as only secondarily liable because after an instrument is dishonored by non-payment, the
person secondarily liable thereon ceases to be such and becomes a principal debtor. 5 His liabiliy becomes the same as that of the original obligor.
Consequently, the holder need not even proceed against the maker before suing the indorser.
G.R. No. 130756 January 21, 1999
ESTER B. MARALIT, petitioner,
vs.
JESUSA CORAZON L. IMPERIAL, respondent.
FACTS: Petitioner Ester B. Maralit filed three complaints for estafa three falsification of commercial documents through reckless imprudence against
respondent Jesusa Corazon L. Imperial. Maralit alleged that she was assistant manager of the Naga City branch of the Philippine National Bank,
(PNB); that on May 20, 1992, June 1, 1992, and July 1, 1992 respondent Imperial separately deposited in her savings account at the PNB three United
States treasury warrants and on the same days withdrew their peso equivalent of P59,216.86, P130,743.60, and P130,326.00, respectively; and that
the treasury warrants were subsequently returned one after the other by the United States Treasury, through the Makati branch of the Citibank, on the
ground that the amounts thereof had been altered. Maralit claimed that as a consequence, she was held personally liable by the PNB for the total
amount of P320,287.30.
Respondent claimed that she merely helped a relative, Aida Abengoza, encash the treasury warrants; that she deposited the treasury warrants in her
savings account and then withdrew their peso equivalent with the approval of petitioner; that she gave the money to Aida Abengoza; that she did not
know that the amounts on the treasury warrants had been altered nor did she represent to petitioner that the treasury warrants were genuine; and that
upon being informed of the dishonor of the warrants she immediately contacted Aida Abengoza and signed an acknowledgment of debt promising to
pay the total amount of the treasury warrants.
On September 26, 1996, judgment was rendered as follows:
WHEREFORE, in view of the foregoing considerations, the Court finds no ground to hold the accused criminally liable for which she is charged, hence
Corazon Jesusa L. Imperial is ACQUITTED of all the charges against her. The accused however is civilly liable as indorser of the checks which is (sic)
the subject matter of the criminal action.
The decision having become final and executory, the MTC, on November 11, 1996, ordered the enforcement of the civil liability against the accused
arising from the criminal action.
ISSUE: Whether or not the MTC erred in rendering a decision which reads:" . . . The accused however is civilly liable as indorser of the checks subject
matter of the criminal action."
RULING: Petitioner contends that the phrase "civilly liable" in the judgment part of the MTC's decision also connotes an order to pay on respondent's
part.
It may fairly be assumed that the decision of the MTC was an adjudication of both the criminal and civil liability of respondent inasmuch as it does not
appear that petitioner instituted a separate civil action or reserved or waived the right to bring such action. The question is whether the decision of the
MTC finds respondent civilly liable and, in the affirmative, for how much. As already stated, the RTC held that the MTC did not really find respondent
liable. In reaching that conclusion, the RTC said:
A mere reading of the dispositive portion of the judgment and the writ of execution will readily show that there is variance between the two. Whereas,
the judgment pronounced [respondent herein] to be "civilly liable" as indorser of the checks which is the subject matter of the criminal action," the writ
of execution commanded the Sheriff "to cause the execution of the aforesaid judgment in the amount of THREE HUNDRED TWENTY THOUSAND
TWO HUNDRED EIGHTY SIX & 46/100 (P320,286.46) ONLY, equivalent to the amount of the 3 three US$ checks amounting to $12,621.13, . . . ." In
the judgment, nothing is mentioned about the amount for which [respondent herein] is liable as indorser, but in the writ of execution, the civil liability of
the [respondent herein] has already been fixed at P320,286.46. The variance, therefore, between the judgment and the writ of execution is substantial
because it consists of the addition of the amount of the civil liability of the [respondent herein].
xxx xxx xxx

. . . The [MTC's] findings of facts and conclusions of law as expressed in the body of the decision do not support the dispositive portion of the judgment
that [respondent herein] is civilly liable. On the contrary a reading of the body of the judgment in question will show that [respondent] is not civilly liable.
For three (3) times, the Court stated in the body of its decision that it is [petitioner] Maralit herself who should be faulted and be held responsible for the
payment of the dishonored US Dollar checks.
Hereunder quoted are portions of the body of the decision in question showing that [respondent] herein should be held civilly liable and that it was
[petitioner] Maralit who should be blamed and held responsible:
. . . The Court however is quite intrigue[d] on why the accused was allowed to encash the peso equivalent despite the fact that the check was
deposited for collection and clearing. It is the established procedure of banks that out of town checks and US Treasury Warrants should first be cleared
before the same is to be paid. More so if the holder is a second indorser. The private complainant in this regard explained that [as assistant branch
manager] she has the discretion and that there is no hold order appearing in the savings account of the accused. She likewise explained that she
trusted the accused whom she knew is working in the same building and a depositor. In short she took the risk of approving the withdrawal of the peso
equivalent, without the check being cleared and if the same is dishonored she should be responsible. (page 5, judgment).
The information accuses the accused for disregarding the banking laws and procedure of the PNB. This is a generous statement. In the first place the
accused is not an employee of the bank. She has no control nor supervision over its employees. If there is anyone who has disregarded banking laws,
it is the private complainant for approving withdrawals before the check were cleared. Mrs. Maralit is more knowledgeable of the banking procedures of
the bank of which she is the assistant manager. She knows the risk of approving encashment before clearing. She took the risk therefore she should be
responsible for the outcome of the risk she has taken. (page 6, Judgment).
The Court is of the opinion that there was negligence on both the complainant and the accused but greater responsibility should be borne by the private
complainant. The accused could not have encashed and deposited the checks without her approval. If the complainant was not remiss in her duty in
imposing the banking rules strictly, then these things could not have happened.
This portion of the decision of the MTC actually refers to respondent's criminal liability and not her civil liability. More specially, the portion in question
refers to the allegations in the three informations that respondent committed falsification of commercial documents through reckless imprudence by "1)
taking advantage of [her] position as state auditor of the Commission on Audit assigned at the PNB, Naga Branch, 2) disregard[ing] existing procedure,
banking laws, policies, and circulars of the PNB, 3) . . . not tak[ing] the necessary precaution to determine the genuineness of the Treasury Warrants
and the alteration of the amount[s] therein deposited and [in] encash[ing] the checks, and 4) . . . [her] negligence, carelessness, and imprudence
[which] caused damage and loss to [petitioner]."9 Nevertheless, the MTC held that respondent was civilly liable
Thus, while the MTC found petitioner partly responsible for the encashment of the altered checks, it found respondent civilly liable because of her
indorsements of the treasury warrants, in addition to the fact that respondent executed a notarized acknowledgment of debt promising to pay the total
amount of said warrants.
In this case, to affirm the RTC's decision would be to hold that respondent was absolved from both criminal and civil liability, by the MTC. Such reading
of the MTC decision will not, however, bear analysis. For one, the dispositive portion of the decision of the MTC expressly declares respondent to be
"civilly liable as indorser of the checks which is [sic] the subject matter of the criminal action." To find therefore that there is no declaration of civil liability
of respondent would be to disregard the judgment of the MTC. Worse, it would be to amend a final and executor decision of a court.
For another, that respondent should pay petitioner the amounts of the altered treasury warrants is the logical consequence of the MTC's holding that
private respondent is civilly liable for the treasury warrant subject of the case.
G.R. No. 128927 September 14, 1999
REMEDIOS NOTA SAPIERA, petitioner,
vs.
COURT OF APPEALS and RAMON SUA, respondents.
FACTS: On several occasions petitioner Remedios Nota Sapiera, a sari-sari store owner, purchased from Monrico Mart certain grocery items, mostly
cigarettes, and paid for them with checks issued by one Arturo de Guzman: (a) PCIB Check No. 157059 dated 26 February 1987 for P140,000.00; (b)
PCIB Check No. 157073 dated 26 February 1987 for P28,000.00; (c) PCIB Check No. 157057 dated 27 February 1987 for P42,150.00; and, d)
Metrobank Check No. DAG-045104758 PA dated 2 March 1987 for P125,000.00. These checks were signed at the back by petitioner. When presented
for payment the checks were dishonored because the drawer's account was already closed. Private respondent Ramon Sua informed Arturo de
Guzman and petitioner about the dishonor but both failed to pay the value of the checks. Hence, four (4) charges of estafa were filed against petitioner
with the Regional Trial Court of Dagupan City
On 27 December 1989 the court a quo 2 acquitted petitioner of all the charges of estafa but did not rule on whether she could be held civilly liable for
the checks she indorsed to private respondent. The trial court found Arturo de Guzman guilty of Violation of B.P. Blg. 22 on two (2) counts and

sentenced him to suffer imprisonment of six (6) months and one (1) day in each of the cases, and to pay private respondent P167,150.00 as civil
indemnity.
Private respondent filed a notice of appeal with the trial court with regard to the civil aspect but the court refused to give due course to the appeal on
the ground that the acquittal of petitioner was absolute. Private respondent then filed a petition for mandamus with the Court of Appeals praying that the
court a quo be ordered to give due course to the appeal on the civil aspect of the decision. The Court of Appeals granted the petition and ruled that
private respondent could appeal with respect to the civil aspect the judgment of acquittal by the trial court.
The Court of Appeals rendered the assailed Decision insofar as it sustained the appeal of private respondent on the civil aspect and ordering petitioner
to pay private respondent P335,000.00 representing the aggregate face value of the four (4) checks indorsed by petitioner plus legal interest from the
notice of dishonor.
Petitioner filed a motion for reconsideration of the Decision. On 19 March 1997 the Court of Appeals issued a Resolution noting the admission of both
parties that private respondent had already collected the amount of P125,000.00 from Arturo de Guzman with regard to his civil liability
Thus, the Court of Appeals ruled that private respondent could not recover twice on the same checks. Since he had collected P125,000.00 as civil
indemnity in Crim. Cases Nos. 8733 and 8734, this amount should be deducted from the sum total of the civil indemnity due him arising from the estafa
cases against petitioner. The appellate court then corrected its previous award, which was erroneously placed, at P335,000,00, to P335,150,00 as the
sum total of the amounts of the four (4) checks involved. Deducting the amount of P125,000.00 already collected by private respondent, petitioner was
adjudged to pay P210,150.00 as civil liability to private respondent. Hence, this petition alleging that respondent Court of Appeals erred in holding
petitioner civilly liable to private respondent because her acquittal by the trial court from charges of estafa in Crim. Cases Nos. D-8728, D-8729, D-8730
and D-8731 was absolute, the trial court having declared in its decision that the fact from which the civil liability might have arisen did not exist.
ISSUE: whether respondent Court of Appeals committed reversible error in requiring petitioner to pay civil indemnity to private respondent after the trial
court had acquitted of her of the criminal charges. Section 2, par. (b), of Rule 111 of the Rules of Court, as amended, specifically provides: "Extinction
of the penal action does not carry with it extinction of the civil, unless the extinction proceed from a declaration in a final judgment that the fact from
which the civil might arise did not exist."
RULING: The judgment of acquittal extinguishes the liability of the accused for damages only when it includes a declaration that the fact from which the
civil liability might arise did not exist. Thus, the civil liability is not extinguished by acquittal where: (a) the acquittal is based on reasonable doubt; (b)
where the court expressly declares that the liability of the accused is not criminal but only civil in nature; and, (c) where the civil liability is not derived
from or based on the criminal act of which the accused is acquitted. 3 Thus, under Art. 29 of the Civil Code
When the accused in a criminal prosecution is acquitted on the ground that his guilt has not been proved beyond reasonable doubt, a civil action for
damages for the same act or omission may be instituted. Such action requires only a preponderance of evidence. Upon motion of the defendant, the
court may require the plaintiff to file a bond to answer for damages in case the complaint should be found to be malicious.
In a criminal case where the judgment of acquittal is based upon reasonable doubt, the court shall so declare. In the absence of any declaration to that
effect, it may be inferred from the text of the decision whether or not acquittal is due to that ground.
We affirm the findings of the Court of Appeals that despite the conflicting versions of the parties, it is undisputed that the four (4) checks issued by de
Guzman were signed by petitioner at the back without any indication as to how she should be bound thereby and, therefore, she is deemed to be an
indorser thereof. The Negotiable Instruments Law clearly provides
Sec. 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous, or there are admissions therein, the
following rules of construction apply: . . . . (f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making
the same intended to sign, he is deemed an indorser. . . .
Sec. 63. When person deemed indorser. A person placing his signature upon all instrument otherwise than as maker, drawer or acceptor, is deemed
to be an indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity.
Sec. 66. Liability of general indorser. Every indorser who indorses without qualification, warrants to all subsequent holders in due course: (a) The
matters and things mentioned in subdivisions (a), (b) and (c) of the next preceding section; and (b) That the instrument is, at the time of the
indorsement, valid and subsisting;
And, in addition, he engages that, on due presentment, it shall be accepted or paid or both, as the case may be, 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.
The dismissal of the criminal cases against petitioner did not erase her civil liability since the dismissal was due to insufficiency of evidence and not
from a declaration from the court that the fact from which the civil action might arise did not exist. 4 An accused acquitted of estafa may be

nevertheless be held civilly liable where the facts established by the evidence so warrant. The accused should be adjudged liable for the unpaid value
of the checks signed by her in favor of the complainant.
G.R. No. 112392

February 29, 2000

BANK OF THE PHILIPPINE ISLANDS, petitioner,

vs.
COURT OF APPEALS and BENJAMIN C. NAPIZA, respondents.

FACTS:
A certain Henry Chan owned a Continental Bank Managers Check payable to "cash" in the amount of Two Thousand Five Hundred Dollars
($2,500.00). Chan went to the office of Benjamin Napiza and requested him to deposit the check in his dollar account by way of accommodation and
for the purpose of clearing the same. Private respondent acceded, and agreed to deliver to Chan a signed blank withdrawal slip, with the
understanding that as soon as the check is cleared, both of them would go to the bank to withdraw the amount of the check upon private respondents
presentation to the bank of his passbook. Napiza thus endorsed the check and deposited it in a Foreign Currency Deposit Unit (FCDU) Savings
Account he maintained with BPI. Using the blank withdrawal slip given by private respondent to Chan, one Ruben Gayon, Jr. was able to withdraw the
amount of $2,541.67 from Napiza's FCDU account. It turned out that said check deposited by private respondent was a counterfeit check.

*When BPI demanded the return of $2,500.00, private respondent claimed that he deposited the check "for clearing purposes" only to accommodate
Chan.

**Petitioner claims that private respondent, having affixed his signature at the dorsal side of the check, should be liable for the amount stated therein in
accordance with the provision of the Negotiable Instruments Law on the liability of a general indorser (Sec. 66).

ISSUE:*
Whether private respondent is obliged to return the money paid out by BPI on a counterfeit check even if he deposited the check "for clearing
purposes" only to accommodate Chan.

ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a general indorser.
RULING:
Ordinarily private respondent may be held liable as an indorser of the check or even as an accommodation party. However, petitioner BPI, in allowing
the withdrawal of private respondents deposit, failed to exercise the diligence of a good father of a family. BPI violated its own rules by allowing the
withdrawal of an amount that is definitely over and above the aggregate amount of private respondents dollar deposits that had yet to be cleared. The
proximate cause of the eventual loss of the amount of $2,500.00 on BPI's part was its personnels negligence in allowing such withdrawal in disregard
of its own rules and the clearing requirement in the banking system. In so doing, BPI assumed the risk of incurring a loss on account of a forged or
counterfeit foreign check and hence, it should suffer the resulting damage.
G.R. No. 74886 December 8, 1992
PRUDENTIAL BANK, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, PHILIPPINE RAYON MILLS, INC. and ANACLETO R. CHI, respondents.

FACTS:
Philippine Rayon Mills, Inc. entered into a contract with Nissho Co., Ltd. of Japan for the importation of textile machineries under a five-year deferred
payment plan. To effect payment for said machineries, Philippine Rayon Mills opened a commercial letter of credit with the Prudential Bank and Trust
Company in favor of Nissho. Against this letter of credit, drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through

its correspondent in Japan. Two of these drafts were accepted by Philippine Rayon Mills while the others were not. Petitioner instituted an action for
the recovery of the sum of money it paid to Nissho as Philippine Rayon Mills was not able to pay its obligations arising from the letter of
credit. Respondent court ruled that with regard to the ten drafts which were not presented and accepted, no valid demand for payment can be
made. Petitioner however claims that the drafts were sight drafts which did not require presentment for acceptance to Philippine Rayon.

ISSUE:
Whether presentment for acceptance of the drafts was indispensable to make Philippine Rayon liable thereon.

RULING:
In the case at bar, the drawee was necessarily the herein petitioner. It was to the latter that the drafts were presented for payment. There was in fact
no need for acceptance as the issued drafts are sight drafts. Presentment for acceptance is necessary only in the cases expressly provided for in
Section 143 of the Negotiable Instruments Law (NIL). The said section provides that presentment for acceptance must be made:

(a) Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the
instrument; or
(b) Where the bill expressly stipulates that it shall be presented for acceptance; or
(c) Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee.

In no other case is presentment for acceptance necessary in order to render any party to the bill liable. Obviously then, sight drafts do not require
presentment for acceptance.
G.R. No. 117857
February 2, 2001
LUIS S. WONG, petitioner,
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.

FACTS:
Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. However, petitioner had a history of unremitted collections. Hence,
petitioners customers were required to issue postdated checks before LPI would accept their purchase orders.
In early December 1985, Wong issued 6 postdated checks totaling P18,025, all dated December 30, 1985 and drawn payable to the order of LPI. The
checks were drawn against Allied Banking Corporation.
The checks were initially intended to guarantee the calendar orders of customers who failed to issue post-dated checks. However, following company
policy, LPI refused to accept the checks as guarantees. Instead, the parties agreed to apply the checks to the payment of petitioners unremitted
collections for 1984 amounting to P18,077.07. LPI waived the P52.07 difference.
Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them within 30 days. However,
petitioner reneged on his promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks
were returned for the reason account closed.
On June 20, 1986, complainant notified the petitioner of the dishonor. However, petitioner failed to make arrangements for payment within 5 banking
days.
On November 6, 1987, petitioner was charged with 3 counts of violation of B.P. Blg. 22 under 3 separate Informations for the 3 checks amounting to
P5,500.00, P3,375.00, and P6,410.00.
Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check No. 660143463 in the amount of P3,375.00, and in Criminal Case No.
12058 for ABC Check No. 660143464 for P6,410.00. Both cases were raffled to the same trial court.
The version of the defense is that petitioner issued the 6 checks to guarantee the 1985 calendar bookings of his customers, not as payment for any
obligation. In fact, the face value of the 6 postdated checks tallied with the total amount of the calendar orders of the 6 customers of the accused.
Although these customers had already paid their respective orders, petitioner claimed LPI did not return the said checks to him.
On August 30, 1990, the trial court found petitioner guilty beyond reasonable doubt with 3 counts of Violations of Sec.1 of B.P. Blg. 22.

Petitioner appealed his conviction to the CA. However, it affirmed the trial courts decision in toto on October 28, 1994.
ISSUES:
1. Whether the checks were issued merely as guarantee or for payment of petitioners unremitted collections.
2. Whether or not the prosecution was able to establish beyond reasonable doubt all the elements of the offense penalized under B.P. Blg. 22.
3. Whether or not petitioners penalty may be modified to only payment of fine.
Ruling:
1.This is a factual issue involving as it does the credibility of witnesses. Said factual issue has been settled by the trial court and CA. Its findings of fact
are generally conclusive, and there is no cogent reason to depart from such. In cases elevated from the CA, the SCs review is confined to alleged
errors of law. Absent any showing that the findings by the respondent court are entirely devoid of any substantiation on record, the same must stand.
The lack of accounting between the parties is not the issue in this case. As repeatedly held, the SC is not a trier of facts.
2. There are 2 ways of violating B.P. Blg. 22:
(a) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is not sufficiently funded; and
(b) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein, or credit with, said bank to
cover the full amount of the check when presented to the drawee bank within a period of 90 days.
The elements of B.P. Blg. 22 under the 1st situation, pertinent to the present case, are:
(a) The making, drawing & issuance of any check to apply for account or for value;
(b) 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
(c) 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.
As to the 1st element, the RTC & CA have both ruled that the checks were in payment for unremitted collections, and not as guarantee. What B.P. Blg.
22 punishes is the issuance of a bouncing check, and not the purpose for which it was issued nor the terms and conditions relating to its issuance.
As to the 2nd element, B.P. Blg. 22 creates a presumption juris tantum that the 2nd element prima facie exists when the 1st & 3rd elements of the
offense are present. Thus, the makers knowledge is presumed from the dishonor of the check for insufficiency of funds.
An essential element of the offense is knowledge on the part of the maker/drawer of the check of the insufficiency of his funds in, or credit with, the
bank to cover the check upon its presentment. Since this involves a state of mind difficult to establish, the statute itself creates a prima facie
presumption of such knowledge where payment of the check is refused by the drawee because of insufficient funds in, or credit with, such bank when
presented within 90 days from the date of the check. The statute provides that such presumption shall not arise if within 5 banking days from receipt of
the notice of dishonor, the maker/drawer makes arrangements for payment of the check by the bank or pays the holder the amount of the check.
Nowhere in the said provision does the law require a maker to maintain funds in his bank account for only 90 days. Rather, the clear import of the law
is to establish a prima facie presumption of knowledge of such insufficiency of funds under the following conditions: (1) presentment within 90 days
from date of the check, and (2) the dishonor of the check & failure of the maker to make arrangements for payment in full within 5 banking days after
notice thereof. That the check must be deposited within 90 days is simply one of the conditions for the prima facie presumption of knowledge of lack of
funds to arise. It is not an element of the offense. Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a
reasonable time thereof. Under Sec. 186 of the Negotiable Instruments Law, a check must be presented for payment within a reasonable time after its
issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. By current banking practice, a check
becomes stale after more than 6 months (180 days).
3. Pursuant to the policy guidelines in Administrative Circular No. 12-2000, which took effect on November 21, 2000, the penalty imposed on petitioner
should now be modified to a fine of not less than but not more than double the amount of the checks that were dishonored. The penalty imposed on
him is modified so that the sentence of imprisonment is deleted.
G.R. No. 141968

February 12, 2001

THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES), petitioner,
vs.
SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, respondents.
FACTS: The respondents obtained a loan from the petitioner to purchase a motor vehicle (car). The respondents defaulted in payment of installments.
A civil case was filed by the petitioner which resulted later into negotiations in lowering the remaining unpaid balance from P184,000.00 to

P150,000.00, detaining the car until payment thereof. Respondent delivered a managers check but petitioner insisted on the signing of Joint Motion to
Dismiss, still holding the motor vehicle. Respondent initiated civil action for damages before MTC but the case was dismissed for lack of merit. On
appeal to RTC, the decision of MTC was reversed ordering herein petitioners to indemnify the respondents. The Court of Appeals likewise affirmed the
decision of the RTC.
ISSUE: Whether or not the respondents are entitled of indemnification for damages.
RULING: NO. Petitioners act of requiring respondents to sign the Joint Motion to Dismiss can not be said to be a deliberate attempt on the part of
petitioner to renege on the compromise agreement of the parties. The law presumes good faith. In fact, the act of petitioner bank in lowering the debt of
respondent from P184,000.00 to P150,000.00 is indicative of its good faith and sincere desire to settle the case.
The decision of the Court of Appeals affirming the decision of the RTC was set aside. Respondents were ordered to pay the original obligation
amounting to P150,000.00 to the petitioner upon surrender or cancellation of the managers check in the latters possession, afterwhich, petitioner is to
return the subject motor vehicle in good working condition.
G.R. No. 71694 August 16, 1991
NYCO SALES CORPORATION, petitioner,
vs.
BA FINANCE CORPORATION, JUDGE ROSALIO A. DE LEONREGIONAL TRIAL COURT, BR. II, INTERMEDIATE APPELLATE COURT, FIRST
CIVIL CASES DIVISION, respondents.
FACTS: Nyco Sales has discounting privileges with BA Finance. In 1978, brothers Renato Fernandez and Santiago Renato (officers of Sanshell
Corporation) approached Nyco Sales Corporation for a credit accommodation in order for the brothers make use of Nycos discounting privileges. Nyco
Sales agreed and so on November 15, 1978, Sanshell issued a post-dated (November 17, 1978) BPI check to Nyco Sales in the amount of
P60,000.00. Following the discounting process agreed upon, Nyco Sales, thru its president Rufino Yao, endorsed the check in favor of BA Finance.
Thereafter, BA Finance issued a check payable to Nyco Sales which endorsed it in favor of Sanshell. Sanshell then made use of and/or negotiated the
check. Accompanying the exchange of checks was a Deed of Assignment executed by Nyco Sales (assignor) in favor of BA Finance (assignee) with
the conformity of Sanshell. Under the said Deed, the subject of the discounting was P60k BPI check.
The check bounced. BA Finance notified Sanshell. Sanshell substituted the BPI check with a Security Bank and Trust Company check for P60k. This
check again bounced. BA Finance made repeated demands to Nyco Sales and Sanshell but neither of the two settled the obligation. Hence, BA
Finance sued Nyco Sales. Nyco Sales averred that it received no notice of dishonor when the second check was dishonored.
ISSUE: Whether or not Nyco Sales is liable to pay BA Finance.
RULING: Yes. The relationship between Nyco Sales and BA Finance is one of assignor-assignee. The assignor-vendor warrants both the credit itself
(its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the case at bar. Consequently, if there be any breach of the
above warranties, the assignor-vendor should be held answerable therefor. There is no question then that the assignor-vendor is indeed liable for the
invalidity of whatever he assigned to the assignee-vendee. Considering now the facts of the case at bar, it is beyond dispute that Nyco executed a
deed of assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. BA Finance is actually enforcing said deed and the check
covered thereby is merely an incidental or collateral matter. This particular check merely evidenced the credit which was actually assigned to BA
Finance. Thus, the designation is immaterial as it could be any other check. It is only what is represented by the said checks that Nyco is being asked
to pay.
Nyco Sales pretension that it had not been notified of the fact of dishonor is belied not only by the formal demand letter issued by BA Finance but also
by the fact that Nyco Sales and Sanshell had frequent contacts before, during and after the dishonor. More importantly, as long as the credit remains
outstanding, Nyco Sales shall continue to be liable to BA Finance as its assignor. The dishonor of an assigned check simply stresses its liability and the
failure to give a notice of dishonor will not discharge it from such liability. This is because the cause of action stems from the breach of the warranties
embodied in the Deed of Assignment, and not from the dishonoring of the check alone.
G.R. No. 108052 July 24, 1996
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE COURT OF APPEALS and RAMON LAPEZ, 1 doing business under the name and style SAPPHIRE SHIPPING,respondents.
The Facts
The defendant applied/appropriated the amounts of $2,627.11 and P34,340.38 from remittances of the plaintiff's principals (sic)abroad. The first remittance was made
by the NCB of Jeddah for the benefit of the plaintiff, to be credited to his account at Citibank, Greenhills Branch; the second was from Libya, and was intended to be
deposited at the plaintiff's account with the defendant, No. 830-2410; The plaintiff made a written demand upon the defendant for remittance of the equivalent of

$2,627.11 by means of a letter dated December4, 1986. There were indeed two instances in the past, one in November 1980 and the other in January1981 when the
plaintiff's account No. 830-2410 was doubly credited with the equivalents of $5,679.23 and $5,885.38, respectively, which amounted to an aggregate amount of
P87,380.44. Defendant PNB made a demand upon the plaintiff for refund of the double or duplicated credits erroneously made on plaintiff's account, by means of a
letter dated October 23, 1986 or 5years and 11 months from November 1980, and 5years and 9 months from January 1981. The deduction of P34,340.38 was made by
the defendant not without the knowledge and consent of the plaintiff, who was issued a receipt.
ISSUES:

whether the herein petitioner was legally justified in making the compensation or set-off against the two remittances coursed through it in favor of private respondent
to recover on the double credits it erroneously made in 1980 and1981, based on the principle of solutio indebiti
RULING:
Article 1279 of the Civil Code provides:"'In order that compensation may prosper, it is necessary:(1) That each one of the obligors be bound principally, and that he be
at the same time a principal creditor of the other;(2) That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind, and also
of the same quality if the latter has been stated;(3) That the two debts be due;(4) That they be liquidated and demandable;(5) That over neither of them there by any
retention or controversy, commenced by third persons and communicated in due time to the debtor."'What the petitioner bank is effectively saying is that since the
respondent Court of Appeals ruled that petitioner bank could not do a shortcut and simply intercept funds

being coursed through it, for transmittal to another bank, and eventually to be deposited to the account of an individual who happens to owe some amount of money to
the petitioner, and because respondent Court ordered petitioner bank to return the intercepted amount to said individual, who in turn was found by the appellate Court
to be indebted to petitioner bank, THEREFORE, there must now be legal compensation of the amounts each owes the other, and hence, there is no need for petitioner
bank to actually return the amount, and finally, that petitioner bank ends up in exactly the same position as when it first took the improper and unwarranted shortcut by
intercepting the said money transfer, notwithstanding the assailed Decision saying that this could not be done. We see in this petition a clever ploy to use this Court to
validate or legalize an improper act of the petitioner bank, with the not impossible intention of using this case as a precedent for similar acts of interception in the
future. This piratical attitude of the nation's premier bank deserves a warning that it should not abuse the justice system in its collection efforts, particularly since we
are aware that if the petitioner bank had been in good faith, it could have easily disposed of this controversy in ten minutes flat by means of an exchange of checks
with private respondent for the same amount. The litigation could have ended there, but it did not. Instead, this plainly unmeritorious case had to clog our docket and
take up the valuable time of this Court.
G.R. No. 101163 January 11, 1993
STATE INVESTMENT HOUSE, INC., petitioner,
vs.
COURT OF APPEALS and NORA B. MOULIC, respondents.
Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold on commission, two postdated checks in the amount of fifty thousand each.
Thereafter, Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell the jewellry, she returned it to Victoriano before the maturity
of the checks. However, the checks cannot be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her funds from the bank contesting
that she incurred no obligation on the checks because the jewellery was never sold and the checks are negotiated without her knowledge and consent. Upon
presentment of for payment, the checks were dishonoured for insufficiency of funds.

Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or absence of consideration

RULING: Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows that: on the faces of the post dated checks were complete
and regular; that State Investment House Inc. bought the checks from Victoriano before the due dates; that it was taken in good faith and for value; and there was no
knowledge with regard that the checks were issued as security and not for value. A prima facie presumption exists that a holder of a negotiable instrument is a holder
in due course. Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for which they were issued and therefore is not a holder in due course.
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke paragraphs c and d as possible grounds for the discharge of the
instruments. Since Moulic failed to get back the possession of the checks as provided by paragraph c, intentional cancellation of instrument is impossible. As provided
by paragraph d, the acts which will discharge a simple contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil Code which
enumerates the modes of extinguishing obligation, none of those modes outlined therein is applicable in the instant case. Thus, Moulic may not unilaterally discharge
herself from her liability by mere expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no legal basis to excuse herself from
liability on her check to a holder in due course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no moment. The need for such notice is not
absolute; there are exceptions provided by Sec 114 of NIL.
G.R. No. L-2861

February 26, 1951

ENRIQUE P. MONTINOLA, plaintiff-appellant,

vs.
THE PHILIPPINE NATIONAL BANK, ET AL., defendants-appellees.

FACTS:
Ramos, as a disbursing officer of an army division of the USAFE, made cash advancements w/ the Provincial Treasurer of Lanao. In exchange,
the Provl Treasurer of Lanao gave him a P500,000 check. Thereafter, Ramos presented the check to Laya for encashment.

Laya in his

capacity as Provincial Treasurer of Misamis Oriental as drawer, issued a check to Ramos in the sum of P100000, on the Philippines National
Bank as drawee; the P400000 value of the check was paid in military notes.
Ramos was unable to encash the said check for he was captured by the Japanese. But after his release, he sold P30000 of the check to
Montinola for P90000 Japanese Military notes, of which only P45000 was paid by the latter. The writing made by Ramos at the back of the
check was to the effect that he was assigning only P30000 of the value of the document with an instruction to the bank to pay P30000 to Montinola
and to deposit the balance to Ramos's credit. This writing was, however, mysteriously obliterated and in its place, a supposed indorsement
appearing on the back of the check was made for the whole amount of the check. At the time of the transfer of this check to Montinola, the check
was long overdue by about 2-1/2 years.
Montinola instituted an action against the PNB and the Provincial Treasurer of Misamis Oriental to collect the sum of P100,000, the amount of
the aforesaid check. There now appears on the face of said check the words in parenthesis "Agent, Phil. National Bank" under the signature of
Laya purportedly showing that Laya issued the check as agent of the Philippine National Bank.
ISSUE: Whether or not there is material alteration
RULING:
The words "Agent, Phil. National Bank" now appearing on the face of the check were added or placed in the instrument after it was issued by
the Provincial Treasurer Laya to Ramos. The check was issued by only as Provincial Treasurer and as an official of the Government, which was
under obligation to provide the USAFE with advance funds, and not as agent of the bank, which had no such obligation. The addition of those
words was made after the check had been transferred by Ramos to Montinola. The insertion of the words "Agent, Phil. National Bank,"
which converts the bank from a mere drawee to a drawer and therefore changes its liability, constitutes a material alteration of the instrument
without the consent of the parties liable thereon, and so discharges the instrument
G.R. No. 93048 March 3, 1994
BATAAN CIGAR AND CIGARETTE FACTORY, INC., petitioner,
vs.
THE COURT OF APPEALS and STATE INVESTMENT HOUSE, INC., respondents.

Facts: Bataan Cigar & Cigarette Factory, Inc. engaged one of its suppliers, King Tim Pua George to deliver 2,000 bales of tobacco leaf starting October 1978. BCCFI,
on July13, 1978 issued crossed checks post dated sometime in March 1979 in the total amount of P820,000.00.Relying on the supplier's representation that he would
complete delivery within three months from December 5, 1978, petitioner agreed to purchase additional 2,500 bales of tobacco leaves, despite the supplier's failure to
deliver in accordance with their earlier agreement. Again petitioner issued post dated crossed checks in the total amount of P1,100,000.00, payable sometime in
September 1979. George King failed to deliver the bales of tobacco leaf as agreed despite petitioner's demand, BCCFI issued on March 30, 1979, a stop payment order
on all checks payable to George King Efforts of SIHI to collect from BCCFI failed, the trial court pronounced SIHI as having a valid claim being a holder in due
course. Which was affirmed by the CA
Issue: whether or not SIHI, a second indorser, a holder of crossed checks, is a holder in due course, to be able to collect from the drawer, BCCFI?
Ruling: No. crossing of a check should have the following effects: (a) the check may not been cashed but only deposited in the bank; (b) the check may be negotiated
only once to one who has an account with a bank; (c) and the act of crossing the check serves as 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 BCCFI's defense in stopping payment
is as good to SIHI as it is to George King. Because, really, the checks were issued with the intention that George King would supply BCCFI with the bales of tobacco
leaf. There being failure of consideration, SIHI is not a holder in due course.
G.R. No. 84281 May 27, 1994
CITYTRUST BANKING CORPORATION, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT and EMME HERRERO, respondents.
Facts: The case emanated from a complaint filed by respondent Emme for damages against petitioner. Respondent deposited with petitioner several cash in order to
amply cover the post dated checks she issued. When presented for encashment upon maturity, all checks were dishonored due to insufficiency of funds. Petitioner in
its answer averred that it was respondents fault that her checks were dishonored because the account no. Reflected in the deposit slip which is 2900823 was not her
correct no. Which is 29000823.
Issue: Whether of not petitioner is liable for damages on the dishonoured checks.
Ruling: The depositor expects the bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or of millions. The bank is
engaged in business impressed with public interest and it is its duty to protect in return its many clients and depositors who transact business with it. It is under
obligation to treat the accounts of its depositors with meticulous care having in mind the fiduciary nature of their relationship. Hence, nominal damages may be
awarded in order that a right of the plaintiff, which have been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him
G.R. No. 108555 December 20, 1994
RAMON TAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and RIZAL COMMERCIAL BANKING CORPORATION, respondents.
FACTS: Tan was a businessman who maintained an account with RCBC. To avoid the risk of bringing with him cash, he bought a managers check from PCIB and
deposited it in his account. On the same day, RCBC erroneously sent the check for clearing which was sent back for having been missent or misrouted. This caused
RCBC to debit the account of Tan. Thereafter, without being informed of his account being debited, Tan issued two checks with the same value of the managers check
he deposited. This naturally bounced and this prompted Tan to file an action against RCBC.
HELD: RCBC cannot exculpate itself from liability by claiming that the depositor has implied instructed it to send the check for clearing by filling a local check
deposit slip. Such posture is disingenuous to say the least. First, why would the bank follow a patently erroneous act born of ignorance or inattention or both. Second,
bank transactions pass through a succession of bank personnel whose duty is to check and countercheck transactions for possible errors. As soon as their deposits are
accepted by the bank teller, they wholly repose trust in the bank personnels mastery of banking, their and the banks sworn profession of diligence and meticulousness
in giving irreproachable service.
In the instant case, it was the bank which was remiss in its duties. The two checks were issued 45 days after the cashiers check was deposited. The bank had ample
time to have cleared the cashiers check had it corrected its missending the same upon the return from CB using the correct slip this time so that it can be cleared
properly. Instead, the bank has promptly debited the account of Tan. RCBC insists that immediate payment of a certified check is discretionary on the bank whom the
check was presented and such being the case, its refusal to immediately pay the check in this case is not to be equated with negligence on its part.
This is without merit.
DOCTRINE: 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 transactions. The basis of perception being confidence. Any practice
which destroys this confidence will impair the usefulness of the check.

What was presented in this case was a cashiers check payable to the account of the depositor himself. 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 drawn upon itself, committing in effect its total resources,
integrity and honor behind the check. It is regarded to be as good as the money which it represents. In this case, PCIB by issuing the check created an unconditional
credit in favor of the collecting bank.
G.R. No. 105188 January 23, 1998
MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte, petitioner,
vs.
A.U. VALENCIA and CO. INC., FELIX PEARROYO, SPS. ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents.
Facts: Myron Papa, acting as attorney-in-fact of Angela Butte, allegedly sold a parcel of land in La Loma, Quezon City to Felix Penarroyo. However,
prior to the alleged sale, the land was mortgaged by Butte to Associated Banking Corporation along with other properties and after the alleged sale but
prior to the propertys release by delivery, Butte died. The Bank refused to release the property despite Penarroyos unless and until the other
mortgaged properties by Butte have been redeemed and because of this Penarroyo settled to having the title of the property annotated.
It was later discovered that the mortgage rights of the Bank were transferred to one Tomas Parpana, administrator of the estate of Ramon Papa Jr. and
his since then been collecting rents. Despite repeated demands of Penarroyo and Valencia, Papa refused to deliver the property which led to a suit for
specific performance. The trial court ruled in favor of Penarroyo and Valencia.
On appeal to the CA, and ultimately in relation to negotiable instruments, Papa averred that the sale of the property was not consummated since the
PCIB check issued by Penarroyo for payment worth 40000 pesos was not encashed by him. However, the CA saw the contrary and that Papa in fact
encashed the check by means of a receipt.
Finally on appeal to the SC, Papa cited that according to Art 1249 of the Civil Code, payment of checks only produce effect once they have been
encashed and he insists that he never encashed the check. He further alleged that if check was encashed, it should have been stamped as such or at
least a microfilm copy. It must be noted that the check was in possession of Papa for ten (10) years from the time payment was made to him.
Issue: Whether or not the check was encashed and can be considered effective as payment
Ruling: YES. The Court held that acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is
received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it is given. In this case,
granting that check was never encashed, Papas failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.
After more than ten (10) years from the payment in part by cash and in part by check, the presumption is that the check had been encashed.