Chan Wan vs Tan Kim et al

FACTS: Tan Kim and her husband (Chen So) issued 11 checks payable to “cash or bearer” to be drawn against
their account with the Equitable Banking Corporation. The checks were negotiated to the White House Shoe
Supply (company). White House then deposited the checks to their China Bank account. China Bank then
presented the checks to Equitable Bank but the checks were returned because Equitable Bank then had no
funds to cover the checks. China Bank then stamped the checks with “Account Closed” and “Non-negotiable –
China Bank Corporation”.
But somehow, Chan Wan got hold of these checks (Chan Wan was not able to explain in court how he got hold
of the checks). Chan Wan now wants to encash the checks but Equitable Bank refused accept the said checks.

ISSUE: Whether or not Chan Wan is a holder in due course.

HELD: No. As a general rule, a dishonored check/instrument may still be negotiated either by indorsement or
delivery and the holder may be a holder in due course provided that he received no notice regarding the dishonor
of the instrument. In this case, the checks were already crossed on their face hence Chan Wan was properly
notified of the dishonor of the checks at the time of his acquisition.
But may Chan Wan still recover?
Yes. The Negotiable Instruments Law does not provide that a holder who is not a holder in due course, may not
in any case, recover on the instrument. The holder may recover directly from the drawee, in this case Tan Kim
and Chen So, unless the drawees have a valid excuse in refusing payment. The only disadvantage of a holder
who is not a holder in due course is that the negotiable instrument is subject to defense as if it were non-
negotiable. The case was remanded to the lower court for a proper determination as to how Chan Wan acquired
the checks and to determine if he is indeed entitled to payment based on some other transactions involving those
checks.

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Metrobank vs. CA
Metropolitan Bank & Trust Company vs. Court of Appeals
G.R. No. 88866

Facts: Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All
warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its
Savings account in Metrobank branch in Calapan, Mindoro. They were sent for clearance. Meanwhile, Gomez
is not allowed to withdraw from his account, later, however, “exasperated” over Floria repeated inquiries and

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also as an accommodation for a “valued” client Metrobank decided to allow Golden Savings to withdraw from
proceeds of the warrants. In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his
own account. Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau
of Treasury and demanded the refund by Golden Savings of the amount it had previously withdrawn, to make
up the deficit in its account. The demand was rejected. Metrobank then sued Golden Savings.

Issue: 1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount
withdraws to make up with the deficit as a result of the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable instruments

Held: No. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants had been
cleared and that, consequently, it was safe to allow Gomez to withdraw. Without such assurance, Golden
Savings would not have allowed the withdrawals. Indeed, Golden Savings might even have incurred liability for
its refusal to return the money that all appearances belonged to the depositor, who could therefore withdraw it
anytime and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to
its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own services. The proceeds of the warrants were withheld from
Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were
genuine and in all respects what they purport to be,” in accordance with Sec. 66 of NIL. The simple reason that
NIL is not applicable to non negotiable instruments, treasury warrants.
No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the word: non
negotiable.” Moreover, and this is equal significance, it is indicated that they are payable from a particular fund,
to wit, Fund 501. An instrument to be negotiable instrument must contain an unconditional promise or orders to
pay a sum certain in money. As provided by Sec 3 of NIL an unqualified order or promise to pay is unconditional
though coupled with: 1st, an indication of a particular fund out of which reimbursement is to be made or a particular
account to be debited with the amount; or 2nd, a statement of the transaction which give rise to the instrument.
But an order to promise to pay out of particular fund is not unconditional. The indication of Fund 501 as the
source of the payment to be made on the treasury warrants makes the order or promise to pay “not conditional”
and the warrants themselves non-negotiable. There should be no question that the exception on Section 3 of
NIL is applicable in the case at bar.

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G.R. No. L-40824 February 23, 1989GOVERNMENT SERVICE INSURANCE SYSTEM,
petitioner,vs.
COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO,
respondents.

FACTS:
Mr. and Mrs. Racho, together with Mr. and Mrs. Lagasca, executed twodeeds of mortgages, in favor of GSIS
GSIS in connection with two loans granted by the GSIS in the sums of P 11,500.00 and P 3,000.00, respectively.
A parcel of land, co-owned by said spouses, was given as security under the twodeeds. They also executed
a 'promissory note’ which stated in part that they “JOINTLY, SEVERALLY and SOLIDARILY, promise to pay
the GSIS the sum ofP11,500.00 with interest at the rate of 6% per centum compounded monthly payable in . .
. (120) equal monthly installments of . . . (P 127.65) each. ”Later, the Lagasca spouses executed an instrument
denominated "Assumption of Mortgage" wherein they obligated themselves to: (1) assume the obligation to the
GSIS; and (2) secure the release of the mortgage covering that portion of the land belonging to the Racho
spouses and which was mortgaged to the GSIS. This undertaking was not fulfilled. Upon failure of the Lagasca
spouses to comply with the conditions of the mortgage, particularly the payment of the amortizations due, GSIS
extrajudicially foreclosed the mortgage and caused the mortgaged property to be sold at public auction.

After 2 years, the Racho spouses filed a complaint against GSIS and the Lagasca spouses praying that the
extrajudicial foreclosure be declared null and void. They alleged that they signed the mortgage contracts not
as sureties or guarantors for the Lagasca spouses. They merely gave their common property to the said co-
owners who were solely benefited by the loans from the GSIS.

ISSUE:
WON the promissory note and mortgage deeds are negotiable.

HELD:
No.

RATIO:
In submitting their case to this Court, both parties relied on the provisions of Section 29 of Act No. 2031, otherwise
known as the Negotiable Instruments Law, which provide that an accommodation party is one who has signed

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an instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held liable on the
instrument to a holder for value although the latter knew him to be only an accommodation party.

This approach of both parties appears to be misdirected and their reliance misplaced. The promissory note
hereinbefore quoted, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments.
These documents do not comply with the fourth requisite to be considered as such under Section 1 of Act No.
2031 because they are neither payable to order nor to bearer. The note is payable to a specified party, the GSIS.
Absent the aforesaid requisite, the provisions of Act No. 2031 would not apply; governance shall be afforded,
instead, by the provisions of the Civil Code and special laws on mortgages.

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Kauffman vs PNB,
GR No. 16454

Facts: Plaintiff was entitled to the sum of P98,000 from the surplus earnings of Philippine Fiber & Produce
Company (PFPC) which was placed to his credit on the company’s books. The PFPC treasurer requested from
PNB Manila that a telegraphic transfer of S45,000 should be made to the plaintiff in NY upon account of PFPC.
The treasurer drew and delivered a check for the amount of P90,355 on the PNB which is the total costs o said
transfer. As evidence, a document was made out and delivered to the PFPC treasurer which is referred to by
the bank’s assistant cashier as it’s official receipt. On the same day the Philippine National Bank dispatched to
its New York agency a cablegram to the following effect:

Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE
NATIONAL BANK, Manila.

Upon receipt of the telegraphic message, the bank’s representative advised the withholding of the money from
Kauffman, in view of his reluctance to accept certain bills of the PFPC. The PNB agreed and sent to its NY
agency another message to withhold the payment as suggested.

Upon advice of the PFPC treasurer that $45, 000 had been placed to his credit, he presented himself at the PNB
NY and demanded the money but was refused due to the direction of the withholding of payment.

Issue: WON plaintiff has a right over the money withhold.

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Held: No. Provisions of the NIL can come into operation there must be a document in existence of the character
described in section 1 of the Law; and no rights properly speaking arise in respect to said instrument until it is
delivered. The order transmitted by PNB to its NY branch, for the payment of a specified sum of money to the
plaintiff was not made payable “to order” or “to bearer”, as required in subsection (d) of that Act; and inasmuch
as it never left he possession of the bank, or its representative in NY, there was no delivery in the sense intended
in section 16 of the same Law. In connection, it is unnecessary to point out that the official receipt delivered by
the bank to the purchaser of the telegraphic order cannot itself be viewed in the light of a negotiable instrument,
although it affords complete proof of the obligation actually assumed by the bank.

FEDERICO O. BORROMEO v. AMANCIO SUN

G.R. NO. 75908

FACTS: Private respondent Amancio Sun filed an action against Lourdes O. Borromeo (in her capacity as
corporate secretary), Federico O. Borromeo and Federico O. Borromeo (F.O.B.), Inc., to compel the transfer to
his name in the books of F.O.B., Inc., 23,223 shares of stock registered in the name of Federico O. Borromeo,
as evidenced by a Deed of Assignment.
Private respondent averred that all the shares of stock of F.O.B. Inc. registered in the name of Federico
O. Borromeo belong to him, as the said shares were placed in the name of Federico O. Borromeo only to give
the latter personality and importance in the business world. He alleged that Federico O. Borromeo executed in
his favor a Deed of Assignment with respect to the said 23,223 shares of stock.
On the other hand, petitioner Federico O. Borromeo disclaimed any participation in the execution of the
Deed of Assignment, theorizing that his supposed signature thereon was forged.
The lower court rendered a decision declaring as genuine the signature of Borromeo. On appeal by
petitioners, the Court of Appeals adjudged as forgery the controverted signature of Federico O. Borromeo.
Amancio Sun interposed a motion for reconsideration of the said decision, contending that Segundo
Tabayoyong, petitioners' expert witness, is not a credible witness. Acting on the aforesaid motion for
reconsideration, the Court of Appeals reconsidered its decision

ISSUE: Whether or not the Deed of Assignment is genuine.

HELD: YES. That the Deed of Assignment is dated January 16, 1974 while the questioned signature was found
to be circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily mean, that the deed is a
forgery. Pertinent records reveal that the subject Deed of Assignment is embodied in a blank form for the
assignment of shares with authority to transfer such shares in the books of the corporation. It was
clearly intended to be signed in blank to facilitate the assignment of shares from one person to another
at any future time. This is similar to Section 14 of the Negotiable Instruments Law where the blanks may

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be filled up by the holder, the signing in blank being with the assumed authority to do so. Indeed, as the
shares were registered in the name of Federico O. Borromeo just to give him personality and standing in the
business community, private respondent had to have a counter evidence of ownership of the shares involve.
Thus the execution of the deed of assignment in blank, to be filled up whenever needed. The same
explains the discrepancy between the date of the deed of assignment and the date when the signature was
affixed thereto.
WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed Resolution, dated March 13,
1986, AFFIRMED. No pronouncement as to costs. SO ORDERED.

RAUL SESBREÑO vs HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS
BANK
G.R. No. 89252

FACTS: Raul Sesbreno made a money market placement in the amount of P300, 000 with PhilFinance, with a
term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor
Corporation Promissory Note (DMC PN No. 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. Philfinance delivered to petitioner
Denominated Custodian Receipt (DCR).
Petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, and handed her a demand
letter informing the bank that his placement with Philfinance in the amount reflected in the DCR had remained
unpaid and outstanding, and that he in effect was asking for the physical delivery of the underlying promissory
note. Petitioner then examined the original of the DMC PN No. 2731 and found: that the security had been issued
on 10 April 1980; that it would mature on 6 April 1981; that it had a face value of P2,300,833.33, with the
Philfinance as “payee” and private respondent Delta Motors Corporation (“Delta”) as “maker;” and that on face
of the promissory note was stamped “NON NEGOTIABLE.” Pilipinas did not deliver the Note, nor any certificate
of participation in respect thereof, to petitioner.
Petitioner later made similar demand letters again asking private respondent Pilipinas for physical
delivery of the original of DMC PN No. 2731.
Petitioner also made a written demand upon private respondent Delta for the partial satisfaction of DMC
PN No. 2731, explaining that Philfinance, as payee thereof, had assigned to him said Note to the extent of
P307,933.33. Delta, however, denied any liability to petitioner on the promissory note.

6|Page
As petitioner had failed to collect his investment and interest thereon, he filed an action for damages against
private respondents Delta and Pilipinas.

ISSUE: WON DMC PN No. 2731 marked as non-negotiable may be assigned?

HELD: YES. 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 where the negotiable
instrument is in bearer form. A negotiable instrument may, however, instead of being negotiated, also
be assigned or transferred. The legal consequences of negotiation as distinguished from assignment of a
negotiable instrument are, of course, different. A non-negotiable instrument may, obviously, not be negotiated;
but it may be assigned or transferred, absent an express prohibition against assignment or transfer written in the
face of the instrument:
The words “not negotiable,” stamped on the face of the bill of lading, did not destroy its assignability, but
the sole effect was to exempt the bill from the statutory provisions relative thereto, and a bill, though not
negotiable, may be transferred by assignment; the assignee taking subject to the equities between the original
parties. 12
DMC PN No. 2731, while marked “non-negotiable,” was not at the same time stamped “non-transferable” or
“non-assignable.” It contained no stipulation which prohibited Philfinance from assigning or transferring, in whole
or in part, that Note.

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Benjamin Abubakar vs The Auditor General

81 Phil. 359

FACTS: In 1941, a treasury warrant was issued in favor of Placido Urbanes, a government employee in the
province of La Union. The said treasury warrant was meant to augment the Food Production Campaign in the
said province. It was then negotiated by Urbanes to Benjamin Abubakar, a private individual. When Abubakar
sought to have the treasury warrant encashed, the Auditor General denied payment because first of, it is against
the appropriating law (Republic Act 80) to authorize payments to private individuals when it comes to treasury
warrants. Abubakar then contends that he is entitled to encash as he was a holder in good faith.

ISSUE: Whether or not a treasury warrant is a negotiable instrument.

HELD: No. A treasury warrant is not a negotiable instrument. One of the requirements of a negotiable instrument
is that it must be unconditional. In Section 3 of the Negotiable Instruments Law, an order or promise to pay out

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of a particular fund makes the instrument conditional. A treasury warrant, like the one in this case, comes from
a particular fund, a particular appropriation. In this case, it was written on the face of the treasury warrant that it
is “payable from the appropriation for food administration”. Thus, it is not negotiable for being conditional.

NOTE the difference: However, an instrument is negotiable if it merely mentions/indicates a particular fund out
of which reimbursement is to be made. This does not make the instrument conditional because it does not say
that such particular fund is the source of payment. It is only a notice to the drawee that he can reimburse himself
out of that particular fund after paying the payee. As to the source of payment to the payee, there is no mention
of it.

Jimenez v. Bucoy
103 Phil. 40

FACTS: During the Japanese occupation, Pacita Young issued three promissory notes to Pacifica Jimenez. The
total sum of the notes was P21k. All three promissory notes were couched in this manner:

Received from Miss Pacifica Jimenez the total amount of ___________ payable six months after the war, without
interest.

When the promissory notes became due, Jimenez presented the notes for payment. Pacita and her husband
died and so the notes were presented to the administrator of the estate of the spouses (Dr. Jose Bucoy). Bucoy
manifested his willingness to pay but he said that since the loan was contracted during the Japanese occupation
the amount should be deducted and the Ballantyne Schedule should be used, that is peso-for-yen (which would
lower the amount due from P21k). Bucoy also pointed out that nowhere in the not can be seen an express
“promise” to pay because of the absence of the words “I promise to pay…”

ISSUE: Whether or not Bucoy is correct.

HELD: No. The Ballantyne schedule may not be used here because the debt is not payable during the Japanese
occupation. It is expressly stated in the notes that the amounts stated therein are payable “six months after the

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war”. Therefore, no reduction could be effected, and peso-for-peso payment shall be ordered in Philippine
currency.
The notes also amounted in effect to a promise to pay the amounts indicated therein. An acknowledgment may
become a promise by the addition of words by which a promise of payment is naturally implied, such as,
“payable,” “payable” on a given day, “payable on demand,” “paid . . . when called for,” . . . To constitute a good
promissory note, no precise words of contract are necessary, provided they amount, in legal effect, to a promise
to pay. In other words, if over and above the mere acknowledgment of the debt there may be collected from the
words used a promise to pay it, the instrument may be regarded as a promissory note.

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Philippine Education Co. vs. Soriano

L-22405

Facts: Enrique Montinola sought to purchase from Manila Post Office ten money orders of 200php each payable
to E. P. Montinola. Montinola offered to pay with the money orders with a private check. Private check were not
generally accepted in payment of money orders, the teller advised him to see the Chief of the Money Order
Division, but instead of doing so, Montinola managed to leave the building without the knowledge of the teller.
Upon the disappearance of the unpaid money order, a message was sent to instruct all banks that it must not
pay for the money order stolen upon presentment. The Bank of America received a copy of said notice. However,
The Bank of America received the money order and deposited it to the appellant’s account upon clearance.
Mauricio Soriano, Chief of the Money Order Division notified the Bank of America that the money order deposited
had been found to have been irregularly issued and that, the amount it represented had been deducted from the
bank’s clearing account. The Bank of America debited appellant’s account with the same account and give notice
by mean of debit memo.

Issue: Whether or not the postal money order in question is a negotiable instrument

Held: No. It is not disputed that the Philippine postal statutes were patterned after similar statutes in force in
United States. The Weight of authority in the United States is that postal money orders are not negotiable
instruments, the reason being that in establishing and operating a postal money order system, the government
is not engaged in commercial transactions but merely exercises a governmental power for the public benefit.
Moreover, some of the restrictions imposed upon money orders by postal laws and regulations are inconsistent
with the character of negotiable instruments. For instance, such laws and regulations usually provide for not
more than one endorsement; payment of money orders may be withheld under a variety of circumstances.

9|Page
---------------------------------------------------------------------------------------------------------------------------------------------------

Caltex (Phils.) Inc. V. CA And Security Bank And Trust Co. (1992)
G.R. No. 97753

FACTS: Security Bank and Trust Company (Security Bank), a commercial banking institution, through its Sucat
Branch issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz who deposited with Security
Bank the total amount of P1,120,000

Angel delivered the CTDs to Caltex for his purchase of fuel products

March 18, 1982: Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost all CTDs, submitted the
required Affidavit of Loss and received the replacement

March 25, 1982: Angel dela Cruz negotiated and obtained a loan from Security Bank in the amount of P875,000
and executed a notarized Deed of Assignment of Time Deposit

November, 1982: Mr. Aranas, Credit Manager of Caltex went to the Sucat branch to verify the CTDs declared
lost by Angel

November 26, 1982: Security Bank received a letter from Caltex formally informing it of its possession of the
CTDs in question and of its decision to pre-terminate the same.

December 8, 1982: Caltex was requested by Security Bank to furnish:

a copy of the document evidencing the guarantee agreement with Mr. Angel dela Cruz

the details of Mr. Angel's obligation against which Caltex proposed to apply the time deposits

Security Bank rejected Caltex demand for payment bec. it failed to furnish a copy of its agreement w/ Angel

April 1983, the loan of Angel dela Cruz with Security Bank matured

August 5, 1983: CTD were set-off w/ the matured loan

Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest

10 | P a g e
CA affirmed RTC to dismiss complaint

ISSUE: W/N the CTDs are negotiable

W/N Caltex as holder in due course can rightfully recover on the CTDs

HELD: Petition is Denied and appealed decision is affirmed.

1. YES.
Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an
instrument to become negotiable, viz:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and -check
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with
reasonable certainty.
The documents provide that the amounts deposited shall be repayable to the depositor

depositor = bearer

If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with
facility so expressed that fact in clear and categorical terms in the documents, instead of having the word
"BEARER" stamped on the space provided for the name of the depositor in each CTD

negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the
instrument itself

2. NO.
although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement
between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement.

CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel products

11 | P a g e
There was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner in which
situation, for obvious reasons, mere delivery of the bearer CTDs would have sufficed.

Where the holder has a lien on the instrument arising from contract, he is deemed a holder for value to the extent
of his lien.

As such holder of collateral security, he would be a pledgee but the requirements therefor and the effects thereof,
not being provided for by the Negotiable Instruments Law, shall be governed by the Civil Code provisions on
pledge of incorporeal rights:

Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The instrument
proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed.
Art. 2096. A pledge shall not take effect against third persons if a description of the thing pledged and the date
of the pledge do not appear in a public instrument.
Art. 1625. An assignment of credit, right or action shall produce no effect as against third persons, unless it
appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment
involves real property.

EN BANC
G.R. No. L-39815 April 28, 1934

EULALIO BELISARIO, plaintiff-appellant,

vs.
PAZ NATIVIDAD VIUDA DE ZULUETA, defendant-appellee.
Jose V. Claravall for appellant.
Jose C. Zulueta for appellee.

BUTTE, J.:
This is an appeal from a judgment of the Court of First Instance of Nueva Ecija in an action for the recovery of
two tracts of land situated in the barrio of San Francisco, municipality of Lupao, in said province, and described

12 | P a g e
in certificates of transfer Nos. 3357 and 3358 issued by the register of deeds of the Povince of Pangasinan (in
which the lands were formerly situated) in favor of the defendant.
It appears from Exhibit A that the plaintiff sold the said lands absolutely and without reservation to the defendant
for the consideration of P37,000, which was duly paid, and the agreement on the part of the grantee to assume
an indebtedness secured by a lien for 4, 500, which was likewise duly paid. The deed recites that the sale is
absolute and in perpetuity and the grantor warrants to defend the title. The deed bears the date of April 29, 1927.
On the same date the defendant executed and delivered in favor of the plaintiff Exhibit B which, after reciting
that the defendant is the plaintiff an option to repurchase the lands on or before the end of May, 1931, for the
sum of P37,000.
These two instruments are very clear in their terms, were duly signed by both parties in the presence of two
witnesses and acknowledge before a notary public and recorded. we see no reason whatever for varying the
terms thereof.
On the 28th of May, 1931, the plaintiff appeared at the house of the defendant and offered to exercise his option
of repurchase under said Exhibit B by tendering to the defendant a check in the sum of P37,000, drawn by
Rosendo Santiago against his account in the Peoples Bank and Trust Company. the books of the disclosed that
at the time said check was tendered to the defendant the drawer thereof had on deposit in the said bank subject
to check the sum of P5.85. Even if the check had been good, the defendant was not legally bound to accept it
because such a check does not satisfy the requirements of a legal tender.
Finding no merit in this appeal, the judgment of the court below is affirmed with costs against the appellant.
Abad Santos, Imperial, Goddard, and Diaz, JJ., concur.

PHILIPPINE BANK OF COMMERCE vs. ARUEGO

Facts: Jose Aruego obtained a credit accommodation from the Philippine Bank of Commerce to facilitate the
payment of printing of “World Current Events”, the periodical he is publishing. Thus, for every printing of the
periodical, the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft against
the plaintiff, said draft being sent later to the defendant for acceptance. As an added security for the payment of
the amounts advanced to Encal Press and Photo-Engraving, the plaintiff bank also required defendant Aruego
to execute a trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the
periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the sale of said
publication to answer for the payment of all obligations arising from the draft. The Philippine Bank of Commerce
instituted an action against Aruego to recover the cost of printing of the latter’s periodical. Aruego however
argues that he signed the supposed bills of exchange only as an agent of the Philippine Education Foundation
Company where he is president.

13 | P a g e
Issue: Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange
only as an agent of Philippine Education Foundation Company.

Held: Yes. Aruego did not disclose in any of the drafts that he accepted that he was signing as representative
of the Philippine Education Foundation Company. Aruego contends that he signed the supposed bills of
exchange as an agent of the Philippine Education Foundation Company where he is president. Section 20 of the
Negotiable Instruments Law provides that "Where the instrument contains or a person adds to his signature
words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on
the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filing
a representative character, without disclosing his principal, does not exempt him from personal liability." An
inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as
a representative of the Philippine Education Foundation Company. He merely signed as follows: "JOSE
ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is personally liable
for the drafts he accepted.

EN BANC
G.R. No. L-31025 August 15, 1929

FRANCISCO GUTIERREZ, ET AL., Plaintiffs-Appellees, v. JUAN CARPIO, Defendant-Appellant.

Eusebio Orense and Marcelino Aguas for appellant.
Gutierrez David, Dizon & David for appellee.

ROMUALDEZ, J.:

14 | P a g e
 The litigants herein compromised a civil case on July 13, 1928, agreeing that if within one month from
the date thereof the plaintiffs failed to repurchase certain land, its ownership would vest in the defendant.
The question now raised is whether or not the plaintiffs duly tendered the amount of the reimbursement agreed
upon in the proper form of money to the defendant.
The court below held in the affirmative, but the defendant, appealing from such judgment, maintains that
on August 13, when the plaintiffs tendered it, the stipulated period had already elapsed; that the tender of
reimbursement made by check is insufficient; and that the holding of the trial court that the land in question is
valued at P27,000 is groundless.
When did the stipulated month terminate? This is the first point in controversy, the determination of which
depends upon the kind of month agreed upon by the parties, and on the day from its should be counted.
As to the kind of month, it is to be noted that, according to the ruling in the case of Guzman vs. Lichauco (42
Phil., 291), article 7 of the Civil Code had been modified by section 13 of the Administrative Code, according to
which "month" now means the civil or calendar month and not the regular thirty-day month.
And the civil or calendar month is defined as follows :

The civil or solar month is that which agrees with the Gregorian calendar; and these months are known
by the names of January, February, March, etc. They are composed of unequal portions of time . . . (Bouvier's
Law Dictionary.)

A calendar month is a month as designated in the calendar, without regard to the number of days it may
contain. In commercial transactions it means a month ending on the day in the succeeding month corresponding
to the day in the preceding month from which the computation began, and if the last month have not so many
days, then on the last day of that month. Daley vs. Anderson, 48 Pac., 839, 840; 7 Wyo., 1; 75 Am. St. Rep., 870
(citing Migotti vs. Colvill, 4 C.P. Div., 233). (1 Words and Phrases, 943.)
Hence, this court held in the case of Villegas vs. Capistrano (9 Phil., 416), that the period of three months
counted from February 13 did not expire on the 12th of the following May. law library
As to when said month began, said section 13 of the Administrative Code provides as follows:
In computing any fixed period of time, with reference to the performance of an act required by law or contract to
be done at a certain time or within a certain limit of time, the day of date, or day from which the time is reckoned,
is to be excluded and the date of performance included, unless otherwise provided. (Emphasis ours)
Similar provisions may be found in article 1130 of the Civil Code, and in section 4 of the Code of Civil
Procedure.
There is nothing in the agreement under discussion providing otherwise, and according to the phrase
therein contained, "one month from this date," said date, which was July 13, 1928, is exactly the date which must
be excluded being the "day from which the time is reckoned," according to the words of the aforementioned
section 13 of the Administrative Code, which we have italicized above.

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 Wherefore, that civil month of thirty-one days began on July 14 and terminated with the end of the
thirteenth day of the following August. And as it has been proved without discussion that the plaintiffs offered to
repurchase the land from the defendant on August 13th, it follows that such offer was made within the period
stipulated.
But the defendant alleges that the offer to repurchase made by check was legally insufficient. We agree
that the payment by check does not per se have the effect of such payment. (Section 189, Act No. 2031, on
Negotiable Instruments; article 1170, Civil Code; Bryan, Landon Co. vs. American Bank, 7 Phil., 255; and Tan
Sunco vs. Santos, 9 Phil., 44; 21 R.C.L., 60, 61.) But it appears from Felipe Gutierrez's testimony that the
defendant told him on August 12th that he would accept the repurchase by check. Felipe Gutierrez is not very
explicit about it, but we deem this to be the drift of his testimony. The defendant must have so understood it,
seeing that he thought it necessary to rebut said detail in his testimony which, notwithstanding the defendant's
denial, we hold to be established by a preponderance of evidence, considering all the circumstances of the case.
The defendant having thus consented to the repurchase by check and having signified that by reason of such
repurchase the plaintiffs could return to their home, said defendant was in estoppel, and could not, on the
following day, refuse to accept such payment by check, because he induced the plaintiffs to act upon the belief
that he had consented to said manner of payment.
From this it follows that by virtue of the defendant's having consented to that payment by check, which
was neither alleged nor proved to be in any way defective, that offer to repurchase was legally effective and
sufficient to compel the defendant to accept it.
We conclude that the offer to repurchase was made within the stipulated period and in the form of money
accepted by the defendant, from whose refusal to allow the repurchase in such terms originates the plaintiffs'
right of action herein.
The last assignment of error touching the value of the land, cannot be a cause for the reversal of the
judgment appealed from for under the circumstances of the case, it has no bearing on the decision of the case
nor affects the result thereof.
The judgment appealed from is modified, and it is hereby ordered that the plaintiffs may, within ten days
from the date on which this judgment becomes final, repurchase the land, the subject matter of these
proceedings, through the delivery to the defendant at the latter's residence in the municipality of Santa Rita,
Pampanga, of the sum of fourteen thousand six hundred forty three pesos and forty-three centavos (P14,643.43),
Philippine currency (in coin or paper money). The judgment appealed from is affirmed in all other respects, with
costs against the appellant. So ordered.
Avancea, C.J., Johnson, Street, Villamor, Johns and Villa-Real, JJ., concur.
New Pacific Timber & Supply Co, Inc vs Seneris
GR No. L-41764,

Doctrine:

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Cashier’s check deemed as cash.
Certification of check by drawee bank equivalent to acceptance.

Facts: In a complaint for a collection of sum of money, petitioner failed to comply with his judgment obligation in
an amicable settlement with the respondent. Hence, a writ of execution was issued for the amount of P63, 140.00
pursuant to which, petitioner’s properties were levied and was set for an auction sale. Prior to the set date for
the auction sale, petitioner deposited with the Clerk of Court, CFI, in his capacity as Ex-Officio Sheriff, the sum
of P63, 130.00 for payment of the judgment obligation, consisting of P50, 000.00 Cashier’s Check and
P13,130.00 in cash.
Private respondent refused to accept the check as well as the cash deposit and requested the scheduled
auction sale. Respondent judge uphold private respondent’s claim that he has the right to refuse payment by
means of a check and cited Section 63 of the Central Bank Act:

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

And Article 1249 of the New Civil Code which provides for payment of debts in money shall be made in
the currency stipulated or the currency that is legal tender in the Philippines.
Likewise, respondent judge sustained the contention of the private respondent that he has a right to
refuse payment of the amount of P13, 130 in cash because the said amount is less than the judgment obligation,
which is a partial payment as provided in Article 1248 of the New Civil Code.
Petitioner filed an ex-parte motion for issuance of certificate of satisfaction of judgment after his levied
properties were all sold during the auction sale. Petitioner question the order of the judge for denial of the said
motion alleging that said judge capriciously and whimsically abused his discretion on the ground that there was
already a full satisfaction of the judgment before the auction sale was conducted.

Issue: WON there was a valid refusal to accept the payment of the judgment obligation made by the petitioner
consisting of P50, 000.00 in Cashier’s Check and P13, 130.00 in cash.

Held: No. A cashier’s check of the Equitable Bank Corporation is not an ordinary check. It is a well-known and
accepted practice in the business sector that a Cashier’s Check is deemed as cash.
Where a check is certified by the bank on which it is drawn, the certification is equivalent to
acceptance. By the certification of drawee bank, the funds represented by the check are transferred from the
credit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the

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depositor of the drawee bank. Said certification implies that the check is drawn upon sufficient funds in the hands
of the drawee that they have been set apart for its satisfaction, that they shall be so applied whenever the check
is presented for payment. The object of certifying a check, as regards to both parties, is to enable the holder to
use it as money. When the holder procures the check to be certified, the check operates as an assignment of a
part of the funds to the creditors. Certification of a check is an exception to the rule enunciated under Sec 63 of
the CB Act.
Considering that the whole amount deposited by the petitioner consisting of Cashier’s Check of P50,
000.00 and P13, 130.00 in cash covers the judgment obligation of P63,000.00 as mentioned in the writ of
execution, then, we see no valid reason for the private respondent to have refused acceptance of the payment
of the obligation in his favor.

---------------------------------------------------------------------------------------------------------------------------------------------------

LETICIA CO, assisted by her husband MUI YUK KONG, in substitution of CITADEL INSURANCE &
SURETY CO., INC., plaintiff-appellee, vs. PHILIPPINE NATIONAL BANK, defendant-appellant. No. L-
51767. June 29, 1982

FACTS: Appeal from the decision of the CFI. In 1962, Standard Parts Manufacturing Corporation (Standard)
executed a real estate mortgage covering properties situated in Baguio City, in favor of PNB, as security for a
P500, 000.00 loan. In 1963, Standard amended the real estate mortgage to include a property in Makati as
security to the increased loan amount of P1, 000,000.00. In the same year, it also executed a chattel mortgage
for its personal properties. The total loan of Standard amounted to P4, 296,803.56. Standard defaulted on its
loan obligations thus PNB foreclosed the mortgages. PNB purchased the foreclosed properties (July 19, 1974
for the Baguio properties; August 8, 1974 for the Makati property). It also consolidated titles to the properties
located in Baguio when Standard failed to redeem the properties within the redemption period. The title was
issued on May 5, 1976. On May 14, 1976, title to the Makati property was also transferred to PNB. In the
meantime, on March 5, 1976, Citadel wrote PNB a letter expressing its desire to redeem the Makati property, it
alleging to be assignee of the right of redemption of Standard (assignment was made on February 20, 1976)
with respect to the said property. PNB refused considering that its total claim of P3, 366,546.42 is much higher
than Citadel’s offer of only P1, 621,970 as redemption price. On March 11, 1076, Citadel consigned the payment
to the trial court in an instant action. The trial court ruled in favor of Citadel thus this appeal.

ISSUE: Whether Citadel exercised its right to redemption within the redemption period.

RULING: Yes. The court was constrained to use the date of the registration of the certificate of sale (March 11,
1975) due to the ambiguity in the allegations of the parties.

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 The provision of the PNB Charter are deemed included in mortgage loan contracts of PNB by virtue of
express contractual incorporation: Going by the literal terms of this quoted provision, STANDARD/CITADEL
stand bound by the same. In other words, paragraph (g) of the mortgage contract made the provisions of Act
No. 3135 or Act 2933, which amended Act No. 1612, or Republic Act 1300, as amended, known as the new
Charter part and parcel of the mortgage contract.
Now, what is the legal import or consequence of such express incorporation of and submission to Act
3135 and Republic Act 1300 by STANDARD/CITADEL?
Indeed, conventional legal and banking business sense dictates that it must have been because of such
omission that paragraph (g) above had to expressly incorporate Act 3135 which provides for extrajudicial
foreclosure. We cannot, therefore, escape the conclusion that what STANDARD agreed to in respect to the
possible foreclosure of its mortgage was to subject the same to the provisions of Act 3135 should the PNB opt
to utilize said law instead of Republic Act 1300.
Tender of RCBC manager’s check by way of mortgage loan redemption is a valid tender, the RCBC being
a bank of good repute: From all the foregoing, we are of the considered opinion and so hold that
STANDARD’s/CITADEL’s period of redemption was up to March 10, 1976. That CITADEL filed its complaint to
compel PNB to accept its redemption only on March 11, 1976 is of no moment. The unequivocal tender of
redemption was made in the letter of Francisco S. Corpus, its President, of March 5, 1976 accompanied by a
manager’s check of the Rizal Commercial Banking Corporation, 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. The Court,
therefore, holds that the redemption was made on time, that is, within one year (or even twelve months) from the
date appearing as the date of the registration of the certificate of sale. P.D. 694, otherwise known as the new
PNB Charter, which requires that redemption of PNB foreclosed properties should be made by payment in full
of all PNB claims on the loan cannot be applied retroactively to loan contracts executed prior to its taking into
effect on May 8, 1975 as otherwise the non-impairment of contracts clause will be violated for P.D. 694âs
requirements are more stringent on the borrower: Stated otherwise, by virtue of the provision of the mortgage
contract precisely cited by PNB, namely, its paragraph (g), quoted earlier, PNB had the contractually acquired
option to resort either to its Charter, Republic Act 1300 or to Act 3135. When it foreclosed the mortgage at issue,
it chose Act 3135.
That was an option it freely exercised without the least intervention of appellee. And it was exercised
before P.D. 694 came into being. In fact, the foreclosure sales took place in 1974 yet. And so, to make the
redemption subject to a subsequent law would be obviously prejudicial to the party exercising the right to redeem.
Without considering the date the loan was secured and the date of the mortgage contract, and taking into account
only the dates of the foreclosures and auction sales, it is quite obvious that any change in the law governing
redemption that would make it more difficult than under the law at the time of the sale cannot be given retroactive
effect. Under the terms of the mortgage contract, the terms and conditions under which redemption may be

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exercised are deemed part and parcel thereof whether the same be merely conventional or imposed by law. To
alter those terms in a manner prejudicial to the mortgagor or the person redeeming the property as his successor-
in-interest after the foreclosures and sales would definitely come within the constitutional proscription against
impairment of the obligations of contracts. WHEREFORE, the judgment of the trial court against the Philippine
National Bank herein on appeal is hereby modified and another one is hereby rendered in favor of the said
defendant-appellant bank in accordance with the formula hereinabove stated, and, accordingly, upon payment
by LETICIA CO of the amount due it pursuant to the above computation, PNB is hereby ordered to transfer the
title to the property in question to LETICIA CO. This payment must be made within ten (10) days from the finality
of this judgment.

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