Caltex (Philippines), Inc. vs Court of Appeals 212 SCRA 448.

August 10, 1992

Facts:
                The defendant, Security Bank and Trust Company, a commercial banking institution issued 280
Certificate of time deposit (CTDs) in favor of Angel Dela Cruz who deposited with the Security Bank the
total amount of P1.2 Million. Angel delivered the CTDs to Caltex, in connection with his purchased of
fuel products from the latter.
                Subsequently, Angel informed the bank that he lost all the CTDs, and thus executed an affidavit
of loss to facilitate the issuance of the replacement CTDs. Angel negotiated and obtained a loan from
Security Bank in the amount of P875, 000 and executed a notarized Deed of Assignment of Time Deposit.
                When Caltex presented said CTDs for verification with the bank and formally informed the
bank of its decision to pre-terminate the same, the bank rejected Caltex’ claim and demand as Caltex
failed to furnish copies of certain requested documents.  In 1983, dela Cruz’ loan matured and the bank
set-off and applied the time deposits as payment for the loan. Caltex filed a complaint which was
dismissed on the ground that the subject certificates of deposit are non-negotiable.

Issue:
1.       Whether or not the subject CTDs are negotiable.
2.       Whether or not petitioner is a holder in due course of the CTDs.

Ruling:
1.       Yes.
The CTDs in question are negotiable instruments as they meet the requirements of the law for
negotiability as provided for in Section 1 of the Negotiable Instruments Law.  The documents provide that
the amounts deposited shall be repayable to the depositor. And according to the document, the depositor is
the "bearer." The documents do not say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts are to be repayable to the bearer of the
documents or, for that matter, whosoever may be the bearer at the time of presentment.  However,
petitioner cannot recover on the CTDs.   Although the CTDs are bearer instruments, a valid negotiation
thereof for the true purpose and agreement between it and dela Cruz, as ultimately ascertained, requires
both delivery and indorsement.  In this case, there was no indorsement as  the CTDs were delivered not as
payment but only as a security for dela Cruz' fuel purchases.
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
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.

2.       No.
The records reveal that Angel de la Cruz, whom petitioner chose not to implead in this suit for reasons of
its own, delivered the CTDs amounting to P1,120,000.00 to petitioner without informing respondent bank
thereof at any time. Unfortunately for petitioner, 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. For, although petitioner seeks to deflect this fact, the
CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel products.

Any doubt as to whether the CTDs were delivered as payment for the fuel products or as a security has
been dissipated and resolved in favor of the latter by petitioner's own authorized and responsible
representative himself.

HSBC vs. CIR, G.R. No. 166018, June 04, 2014

 
Full text 
Facts: HSBC performs custodial services on behalf of its investor-clients with respect to their passive
investments in the Philippines, particularly investments in shares of stocks in domestic corporations. As a
custodian bank, HSBC serves as the collection/payment agent.
HSBC’s investor-clients maintain Philippine peso and/or foreign currency accounts, which are managed
by HSBC through instructions given through electronic messages. The said instructions are standard
forms known in the banking industry as SWIFT, or “Society for Worldwide Interbank Financial
Telecommunication.”
Pursuant to the electronic messages of its investor-clients, HSBC purchased and paid Documentary Stamp
Tax (DST) from September to December 1997 and also from January to December 1998 amounting to
P19,572,992.10 and P32,904,437.30, respectively.
BIR, thru its then Commissioner, issued BIR Ruling to the effect that instructions or advises from abroad
on the management of funds located in the Philippines which do not involve transfer of funds from abroad
are not subject to DST. A documentary stamp tax shall be imposed on any bill of exchange or order for
payment purporting to be drawn in a foreign country but payable in the Philippines.
a. While the payor is residing outside the Philippines, he maintains a local and foreign currency account
in the Philippines from where he will draw the money intended to pay a named recipient. The instruction
or order to pay shall be made through an electronic message.
Consequently, there is no negotiable instrument to be made, signed or issued by the payee.
b. Such electronic instructions by the non-resident payor cannot be considered as a transaction per se
considering that the same do not involve any transfer of funds from abroad or from the place where the
instruction originates.
Under the Documentary Stamp Tax Law, the mere withdrawal of money from a bank deposit, local or
foreign currency account, is not subject to DST, unless the account so maintained is a current or checking
account, in which case, the issuance of the check or bank drafts is subject to the documentary stamp tax.
c. Likewise, the receipt of funds from another bank in the Philippines for deposit to the payee’s account
and thereafter upon instruction of the non-resident depositor-payor, through an electronic message, the
depository bank to debit his account and pay a named recipient shall not be subject to documentary stamp
tax.
With the above BIR Ruling as its basis, HSBC filed on an administrative claim for the refund of allegedly
representing erroneously paid DST to the BIR
As its claims for refund were not acted upon by the BIR, HSBC subsequently brought the matter to the
CTA, which favored HSBC and ordered payment of refund or issuance of tax credit.
However, the CA reversed decisions of the CTA and ruled that the electronic messages of HSBC’s
investor-clients are subject to DST.
a. DST is levied on the exercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legal relationships through the execution of specific instruments,
independently of the legal status of the transactions giving rise thereto.

ISSUE: Whether or not the electronic messages are considered transactions  pertaining to negotiable
instruments that warrant the payment of DST.
HELD:  NO.
The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the
acceptance or payment of “a bill of exchange purporting to be drawn in a foreign country but payable in
the Philippines” and that “a bill of exchange is an unconditional order in writing addressed by one person
to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand
or at a fixed or determinable future time a sum certain in money to order or to bearer.”
The Court further agrees with the CTA that the electronic messages of HSBC’s investor-clients
containing instructions to debit their respective local or foreign currency accounts in the Philippines and
pay a certain named recipient also residing in the Philippines is not the transaction contemplated under
Section 181 of the Tax Code as such instructions are “parallel to an automatic bank transfer of local funds
from a savings account to a checking account maintained by a depositor in one bank.” The Court
favorably adopts the finding of the CTA that the electronic messages “cannot be considered negotiable
instruments as they lack the feature of negotiability, which, is the ability to be transferred” and that
the said electronic messages are “mere memoranda” of the transaction consisting of the “actual
debiting of the [investor-client-payor’s] local or foreign currency account in the Philippines” and
“entered as such in the books of account of the local bank,” HSBC.
The instructions given through electronic messages that are subjected to DST in these cases are not
negotiable instruments as they do not comply with the requisites of negotiability under Section 1 of the
Negotiable Instruments Law.
The electronic messages are not signed by the investor-clients as supposed drawers of a bill of exchange;
they do not contain an unconditional order to pay a sum certain in money as the payment is supposed to
come from a specific fund or account of the investor-clients; and, they are not payable to order or bearer
but to a specifically designated third party. Thus, the electronic messages are not bills of exchange. As
there was no bill of exchange or order for the payment drawn abroad and made payable here in the
Philippines, there could have been no acceptance or payment that will trigger the imposition of the DST
under Section 181 of the Tax Code.
DST-is an excise tax on the exercise of a right or privilege to transfer obligations, rights or properties
incident thereto.
Presentment for payment is the presentation of the instrument to the person primarily liable for the
purpose of demanding and obtaining payment thereof

Rivera vs. Chua, G.R. No. 184458 January 14, 2015

FACTS: The parties were friends and kumpadres for a long time already. Rivera obtained a loan from the
Spouses Chua evidenced by a Promissory Note. The relevant parts of the note are the following:
(a) FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA
and VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine Currency
(_120,000.00) on December 31, 1995.
(b) It is agreed and understood that failure on my part to pay the amount of (_120,000.00) One Hundred
Twenty Thousand Pesos on December 31, 1995. I agree to pay the sum equivalent to FIVEPERCENT
(5%) interest monthly from the date of default until the entire obligation is fully paid for.
Three years from the date of payment stipulated in the promissory note, Rivera, issued and delivered to
Spouses Chua two (2) checks drawn against his account at Philippine Commercial International Bank
(PCIB) but upon presentment for payment, the two checks were dishonored for the reason “account
closed.” As of 31 May 1999, the amount due the Spouses Chua was pegged at P366,000.00 covering the
principal of P120,000.00 plus five percent (5%) interest per month from 1 January 1996 to 31 May 1999.
The Spouses Chua alleged that they have repeatedly demanded payment from Rivera to no avail. Because
of Rivera’s unjustified refusal to pay, the Spouses Chua were constrained to file a suit before the MeTC,
Branch 30, Manila.
The MeTC ruled against Rivera requiring him to pay the spouses Chua P120,000.00 plus stipulated
interest at the rate of 5% per month from 1 January 1996, and legal interest at the rate of 12% percent per
annum from 11 June 1999 and was affirmed by the RTC of Manila. The Court of Appeals further
affirmed the decision upon appeal of the two inferior courts but with modification of lowering the
stipulated interest to 12% per annum and reduced attorney’s fees. Hence, a petition at the Supreme Court.
ISSUES:
1. Whether or not the Promissory Note executed as evidence of loan falls under Negotiable Instruments
Law.
2. Whether or not a demand from spouses Chua is needed to make Rivera liable.
3. Whether or not the stipulated interest is unconscionable and should really be lowered.
Held: 1. NO, the Promissory Note executed as evidence of loan does not fall under Negotiable
Instruments Law. The instrument is still governed by the Civil Code as to interpretation of their
obligations. The Supreme Court held that the Instrument was not able to meet the requisites laid down by
Section 1 of the Negotiable Instruments Law as the instrument was made out to specific persons, herein
respondents, the Spouses Chua, and not to order or to bearer, or to the order of the Spouses Chua as
payees.
It is not a negotiable instrument and therefore outside the coverage of Section 70 of the NIL which
provides that presentment for payment is not necessary to charge the person liable on the instrument,
Rivera is still liable under the terms of the Promissory Note that he issued. Article 1169 of the Civil Code
explicitly provides that the demand by the creditor shall not be necessary in order that delay may exist
when the obligation or the law expressly so declare. The clause in the Promissory Note containing the
stipulation of interest (letter B in the above facts) which expressly requires the debtor (Rivera) to pay a
5% monthly interest from the “date of default” until the entire obligation is fully paid for. The parties
evidently agreed that the maturity of the obligation at a date certain, 31 December 1995, will give rise to
the obligation to pay interest.
3. YES, the stipulated interest is unconscionable and should really be lowered. The Supreme Court held
that as observed by Rivera, the stipulated interest of 5% per month or 60% per annum in addition to legal
interests and attorney’s fees is, indeed, highly iniquitous and unreasonable and stipulated interest rates if
illegal and are unconscionable the Court is allowed to temper interest rates when necessary. Since the
interest rate agreed upon is void, the parties are considered to have no stipulation regarding the interest
rate, thus, the rate of interest should be 12% per annum computed from the date of judicial or
extrajudicial demand. However, the 12% per annum rate of legal interest is only applicable until 30 June
2013, before the advent and effectivity of Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of
2013 reducing the rate of legal interest to 6% per annum. Pursuant to our ruling in Nacar v. Gallery
Frames,30 BSP Circular No. 799 is prospectively applied from 1 July 2013.
*Rivera argues that it was grave error on the part of the appellate court to apply Section 70 of the
Negotiable Instruments Law (NIL).
*The Promissory Note in this case is made out to specific persons, herein respondents, the Spouses Chua,
and not to order or to bearer, or to the order of the Spouses Chua as payees.
People v. Wagas
G.R. No. 157943, 4 September 2013
FACTS:
Wagas was charged with estafa for issuing a postdated check in the amount of ₱200,000.00, which check
was issued in payment of an obligation for 200 bags of rice, but which check when presented for
encashment with the bank, was dishonored for the reason “drawn against insufficient funds” and inspite
of notice and several demands made upon said accused to make good said check or replace the same with
cash, he had failed and refused and up to the present time still fails and refuses to do so, to the damage
and prejudice of Alberto Ligaray in the amount aforestated.
On cross-examination, Ligaray admitted that he did not personally meet Wagas because they transacted
through telephone only; that he released the 200 bags of rice directly to Robert Cañada, the brother-in-law
of Wagas, who signed the delivery receipt upon receiving the rice. In his defense, Wagas himself
testified.
He admitted having issued BPI Check No. 0011003 to Cañada, his brother-in-law, not to Ligaray. He
denied having any telephone conversation or any dealings with Ligaray. He explained that the check was
intended as payment for a portion of Cañada’s property that he wanted to buy, but when the sale did not
push through, he did not anymore fund the check.
ISSUE:
Whether or not Respondent Wagas is liable on the postdated check that he had issued.
RULING:
Yes, Wagas as the admitted drawer of the check was legally liable to pay the amount of it to Ligaray, a
holder in due course. The check delivered to Ligaray was made payable to cash. Under the Negotiable
Instruments Law, this type of check was payable to the bearer and could be negotiated by mere delivery
without the need of an indorsement.
This rendered it highly probable that Wagas had issued the check not to Ligaray, but to somebody else
like Cañada, his brother-in-law, who then negotiated it to Ligaray. Relevantly, Ligaray confirmed that he
did not himself see or meet Wagas at the time of the transaction and thereafter, and expressly stated that
the person who signed for and received the stocks of rice was Cañada. Consequently, we pronounce and
hold him fully liable to pay the amount of the dishonored check, plus legal interest of 6% per annum from
the finality of this decision.