Sec 1

CALTEX PHILS INC v CA

12 SCRA 448, Jan 22, 1990
FACTS:
Security bank issued Certificates of Time Deposits to Angel dela Cruz. The
same were given by Dela Cruz to petitioner in connection to his purchase of
fuel products of the latter. On a later date, Dela Cruz approached the bank
manager, communicated the loss of the certificates and requested for
a reissuance. Upon compliance with some formal requirements, he was
issued replacements. Thereafter, he secured a loan from the bank where he
assigned the certificates as security. Here comes the petitioner,
averred that the certificates were not actually lost but were given as
security for payment for fuel purchases. The bank demanded some proof of
the agreement but the petitioner failed to comply. The loan matured
and the time deposits were terminated and then applied to the payment of
the loan. Petitioner demands the payment of the certificates but to
no avail.
SECURITY BANK
AND TRUST COMPANY
6778 Ayala Ave., Makati No. 90101
Metro Manila, Philippines
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT
Rate 16%
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
This is to Certify that B E A R E R has deposited in this Bank the sum of
PESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 &
00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days.
after date, upon presentation and surrender of this certificate, with interest
at the rate of 16% per cent per annum.
(Sgd. Illegible) (Sgd. Illegible)

AUTHORIZED SIGNATURES
HELD:

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

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.
SEC. 3
Metropolitan Bank & Trust Company vs. Court of Appeals
G.R. No. 88866
February, 18, 1991
Cruz, J.:
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 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:
Whether or not treasury warrants are negotiable instruments
Held:
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.
Metrobank then cannot contend that by indorsing the warrants in
general, GS assumed that they were genuine and in all respects what they
purport it to be, in accordance to Section 66 of the NIL. The simple reason is
that the law isnt applicable to the non-negotiable treasury warrants.
The indorsement was made for the purpose of merely depositing them
with Metrobank for clearing. It was in fact Metrobank which stamped
on the back of the warrants: All prior indorsements and/or lack of
endorsements guaranteed
PNB v MANILA OIL REFINING
43 PHIL 444, June 8, 1922
FACTS:
Manila Oil has issued a promissory note in favor of National Bank
which included a provision on a confession of judgment in case of failure to
pay obligation. Indeed, Manila Oil has failed to pay on demand. This
prompted the bank to file a case in court, wherein an attorney associated
with them entered his appearance for the defendant. To this the defendant

objected.
HELD:
Warrants of attorney to confess judgment arent authorized nor
contemplated by our law. Provisions in notes authorizing attorneys to
appear and confess judgments against makers should not be recognized in
our jurisdiction by implication and should only be considered as valid when
given express legislative sanction.
SEC 9
ANG TEK LIAN v CA
L-2516
Bengzon, J.:

September, 1950

Facts:
Ang Tek Lian knowing that he had no funds therefor, drew a check
upon China Banking Corporation payable to the order of cash. He delivered
it toLee Hua Hong in exchange for money. The check was presented by Lee
Hua hong to the drawee bank for payment, but it w3as dishonored for
insufficiency of funds. With this, Ang Tek Lian was convicted of estafa.
Issue:
Whether or not the check issued by Ang Tek Lian that is payable to
the order to cash and not have been indorsed by Ang Tek Lian, making him
not guilty for the crime of estafa.
Held:
No.Under Sec. 9 of NIL a check drawn payable to the order of cash
is a check payable to bearer and the bank may pay it to the person
presenting it for payment without the drawers indorsement. However, if the
bank is not sure of the bearers identity or financial solvency, it has the right
to demand identification or assurance against possible complication, such as
forgery of drawers signature, loss of the check by the rightful owner, raising
of the amount payable, etc. But where the bank is satisfied of the identity or
economic standing of the bearer who tenders the check for collection, it will
pay the instrument without further question; and it would incur no liability to
the drawer in thus acting.
Philippine National Bank v. SPS. Rodriguez
G.R. No. 170325 September 26, 2008
FACTS: Respondents Spouses Rodriguez maintained savings and
demand/checking accounts as well as demand deposits (Checkings/Current

Account) with petitioner PNB. They are also engaged in the informal lending
business of discounting arrangement with Philnabank Employees Savings
and Loan Association (PEMSLA), an association of PNB. PEMSLA regularly
granted loans to its member and Spouses would rediscount the apostate
checks issued to members whenever the association was short of funds. At
the same time, the spouses would replace the postdated checks with their
own checks issued in the same name. PEMSLAs policy would not approve
applications with outstanding debts and in order to subvert this they created
a scheme to obtain additional loans in the names of unknowing members
without their knowledge and consent. PEMSLA checks were then given to
spouses for rediscounting and were carried out by forging the endorsement
of the named payees in the checks. Rodriguez checks were deposited
directly to PEMSLA without any endorsement from the named payees.
Petitioner found out about the fraudulent acts, and took measures by closing
the current account of PEMSLA. Since PEMSLA checks were dishonored and
returned the respondents incurred losses from the rediscounting
transactions. Spouses filed a civil complaint against PEMSLA and PNB, the
court rendering judgment in favor of respondent.
ISSUE/S: Whether or not the disputed checks were payable to bearer and
order making petitioner liable if it is of the latter and respondent liable is it is
the former.
HELD.
The checks were payable to order, making petitioner liable for the losses. As
a rule, if the payee is fictitious or not intended to be the true recipient of the
proceeds of the check it is considered as a bearer instrumentaccording to
Sections 8 and 9 of the Negotiable Instruments Law. The distinction lies in
the manner of their negotiation. An order instrument from the payee or
holder requires endorsement. A bearer instrument does not required
endorsementnegotiable by mere delivery. However, under Section 9 of the
same law, a checks is payable to a specified payee may nevertheless be
considered as a bearer instrument if it is payable to the order of a fictitious
or non-existing person, and such fact is known to the person making it so
payable. According to US jurisprudence, an actual, existing and living payee
may also be fictitious if the maker of the check did not intend for the payee
to receive the check. If such a case happens then the check is a bearer
instrument. In a fictitious-payee situation, the drawee bank is absolved from
liability and the drawer bears the loss. However, if there is showing of
commercial bad faith on the part of the drawee bank, or any transferee of
the check for that matter, will work to strip it of this defense. PNBs failure to
show that the payees were fictitious, the fictitious-payee rule does not

apply making the instrument payable to order. Also, PNB was remiss in its
duty as the drawee bank since its employees were the one who crested the
whole fraudulent scheme.
SEC 12
SAN MIGUEL v. PUZON, JR.
G.R. No. 167567 September 22, 2010
Related law: Sec. 16; Sec. 12; NIL; Delivery for the purpose of giving effect to
an instrument (i.e. for payment)
FACTS:
Puzon was a dealer of San Miguel Corporation (SMC). Puzon purchased SMC
products on credit. SMC requires him to issue postdated checks equivalent to
the value of the products purchased to ensure payment. The checks are to
be return to Puzon once he settles his credit. In one instance, Puzon went to
SMC Sales Office and allegedly requested to see particular checks that he
gave to SMC. When he got hold of them, he allegedly immediately left the
office with the checks. SMC demanded for the return of the checks which
Puzon ignored. As such, SMC filed a complaint against him for theft. The
prosecutor however found no probable cause for theft because of SMC and
Puzons relationship as one of creditor-debtor and recommended dismissal.
Hence, this petition.
ISSUE/S: 1. Was there probable cause for theft?
HELD: 1. None. One of the essential elements of theft is the taking of a
personal property belonging to another. A such, it is necessary to ascertain
whether the ownership of the checks were transferred to SMC. If SMC owns
the checks, then there is probable cause for theft, otherwise, there is none.
According to the Sec. 12 of the NIL, the person to whom an instrument is
delivered acquires the title to it. The delivery mentioned in Sec. 12 must be
read in conjunction with Sec. 16 of the NIL which says that the delivery must
be for the purpose of giving effect to the instrument. Since the checks were
given merely as security and not as payment for the credit, then the checks
were not delivered so as to give effect to them. As such, ownership was not
transferred to SMC. Hence, the checks that Puzon allegedly took were not
properties belonging to another. Consequently, there is no probable cause for
theft.
SEC. 15
G.R. No. 150228 July 30, 2009BANK OF AMERICA NT & SA vs. PHILIPPINE
RACING CLUB INCORPORATEDFacts:

Respondent PRCI is a domestic corporation which maintains several accounts

with differentbanks in the Metro Manila area; among the

accounts maintained was with Bank of America- The authorized signatories

are the president and the vice-president of the corporation, respectively.

Sometime in Dec 1988. The president and the vice-president of the

corporation went abroad.So, in order to insure continuity of business
operation, the president and the vice-president ofthe corporation left a presigned check and entrusted to the accountant;

It turned out that on December 16, 1988, a John Doe presented two (2)
checks to Bank ofAmerica for encashment; the two (2) checks had similar
entries with similar infirmities andirregularities.

Under the line for the payee, the upper line has a typewritten word CASH and the
lower linehas a type written word ONE HUNDRED TEN THOUSAND PESOS ONLY.

Despite the highly irregular entries on the face of the checks bank of America
encashed saidchecks.

The RTC ordered Bank of America to pay respondent PRCI the value of
the two (2) checks, plus
damages and attorneys fees.

Petitioner bank of America contended that since the instrument is incomplete

but delivered orcomplete but undelivered, it could validly presume upon
presentation of the checks, that theparty who filled up the blanks had
authority and that a valid and intentional delivery to the partypresenting the
checks had taken place. And the proximate cause of the encashment was the
respondents negligent practice of delivering pre -signed check to its accountant.
Issue:
Whether or not petitioner bank is obligated to verify said checks to
respondent.
Held:
There is no dispute that the signatures appearing on the subject checks were
genuine signatures of the respondents authorized joint signatories. It is

likewise admitted that neither of the subject checks contains any material
alteration or erasure. However, on the blank space of each check reserved
for the payee, the following typewritten words appear: "ONE HUNDRED TEN
THOUSAND PESOS ONLY." Above the same is the typewritten word, "CASH."
On the blank reserved for the amount, the same amount of One Hundred Ten
Thousand Pesos was indicated with the use of a check writer. The presence
of these irregularities in each check should have alerted the petitioner to be
cautious before proceeding to encash them which it did not do.
It is well-settled that banks are engaged in a business impressed
with public interest, and it is their duty to protect in return their
many clients and depositors who transact business with them. They
have the obligation to treat their clients account meticulously and
with the highest degree of care, considering the fiduciary nature of
their relationship. The diligence required of banks, therefore, is
more than that of a good father of a family.
In the case at bar, extraordinary diligence demands that petitioner should
have ascertained from respondent the authenticity of the subject checks or
the accuracy of the entries therein not only because of the presence of
highly irregular entries on the face of the checks but also of the decidedly
unusual circumstances surrounding their encashment. Respondents witness
testified that for checks in amounts greater than (P20, 000.00) it is the
companys practice to ensure that the payee is indicated by name in the
check. However, the confluence of the irregularities on the face of the checks
and circumstances that depart from the usual banking practice of respondent
should have put petitioners employees on guard that the checks were
possibly not issued by the respondent in due course of its business.
Petitioners subtle sophistry cannot exculpate it from behavior that fell
extremely short of the highest degree of care and diligence required of it as a
banking institution.
SEC. 16
DE OCAMPO v GATCHALIAN
3 SCRA 596), Feb 22, 1968
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.
Held: NO. No. Section 52 of the Negotiable Instruments Law, defines holder
in due course, thus:
A holder in due course is a holder who has taken the instrument under the
following conditions:
(a) That it 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 person negotiating it.
The Supreme Court emphasized that if one is such a holder in due course, it
is immaterial that he was the payee and an immediate party to the
instrument. The Supreme Court however ruled that De Ocampo is not a
holder in due course for his lack of good faith. De Ocampo should have
inquired as to the legal title of Manuel to the said check. The fact that
Gatchalian has no obligation to De Ocampo and yet hes named as the payee
in the check should have apprised De Ocampo; that the check did not
correspond to Matilde Gonzales obligation with the clinic because of the fact
that it was for P600.00 more than the indebtedness; that why was Manuel
in possession of the check all these gave De Ocampo the duty to ascertain

from the holder Manuel Gonzales what the nature of the latters title to the
check was or the nature of his possession.
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 defectiveor suspicious. Being
the case, de Ocampo had the burden of proving he was a holder in due
course, but failed.
SEC 17
SAPIERA v CA
[G.R. No. 128927. September 14, 1999]
FACTS:
Petitioner Remedios Sapiera, a sari-sari store owner, was issued by one
Arturo de Guzman checks as payment for purchases he made at her
store. She used said checks to pay for certain items she purchased from the
grocery store of Ramon Sua. These checks were signed at the back by
petitioner. When presented for payment the checks were dishonored
because the drawers account was already closed. Sua informed Arturo de
Guzman and petitioner about the dishonor but both failed to pay the value of
the checks. Petitioner was acquitted in the charge of estafa filed against her
but she was found liable for the value of the checks.
ISSUE:
Whether petitioner is liable for the value of the checks even if she signed the
subject checks only for the identification of the signature of Arturo de
Guzman.
RULING:
Petitioner is liable for the value of the checks. As she (petitioner) signed the
subject checks on the reverse side without any indication as to how she
should be bound thereby, she is deemed to be an unqualified indorser
thereof. Every indorser who indorses without qualification, warrants to all
subsequent holders in due course that, on due presentment, it shall be

accepted or paid or both, according to its tenor, and that if it be dishonored

and the necessary proceedings on dishonor be duly taken, he will pay the
amount thereof to the holder or to any subsequent indorser who may be
compelled to pay it.
SEC 20
ADALIA FRANCISCO V CA
319 SCRA 354
November 29, 1999
Doctrine: The NIL provides that where any person is under obligation to
endorse in a representative capacity, he may endorse in such terms as to
negative personal liability. An agent, when so signing, should indicate that he
is merely signing on behalf of the principal and must disclose the name of
his principal; otherwise he shall be held personally liable.
Facts: Sometime in 1979, Ong discovered that Diaz and Francisco had
executed and signed seven checks drawn against the Insular Bank of Asia &
America (IBAA) and payable to Herby Commercial & Construction
Corporation (HCCC) for completed and delivered work under the contract.
Ong, however, claims that these checks were never delivered to HCCC.
Upon inquiry with Diaz, Ong learned that the GSIS gave Francisco custody of
the checks since she promised that she would deliver the same to HCCC.
Instead, Francisco forged the signature of Ong, without his knowledge or
consent, at the dorsal portion of the said checks to make it appear that HCCC
had indorsed the checks; Francisco then indorsed the checks for a second
time by signing her name at the back of the checks and deposited the
checks in her IBAA savings account. IBAA credited Franciscos account with
the amount of the checks and the latter withdrew the amount so credited.
Petitioner claims that she was, in any event, authorized to sign Ongs name
on the checks by virtue of the Certification executed by Ong in her favor
giving her the authority to collect all the receivables of HCCC from the GSIS,
including the questioned checks.
Issue: Whether or not petitioner singing in a representative capacity is
liable to the questioned checks.
Held: The Negotiable Instruments Law provides that when a person is
under obligation to indorse in a representative capacity, he may indorse in
such terms as to negative personal liability. An agent, when so signing,
should indicate that he is merely signing as an agent in behalf of the
principal and must disclose the name of his principal. Otherwise, he will
be held liable personally. If Francisco was indeed authorized, she didn't

comply with the requirements of the law. Instead of signing Ongs

name, she should have signed
Philippine Bank of Commerce vs.
Aruego
102 SCRA 530 Doctrine: A
party who signs a bill of exchange as an agent, but failed to disclose his
principal becomes personally liable for the drafts he accepted. Facts: Plaintiff
instituted an action against defendant Aruego for recovery of money signed
by the defendant. The latter interposes that he signed the drafts in a
representative capacity, that he signed only as an accommodation party and
that he is not liable. The court denied the motion and rendered judgment
against the defendant. Hence this petition.
Issue: Whether or not defendant is liable by accepting the instrument?
Held: Yes, an inspection of the drafts accepted by the defendant shows
that nowhere has he disclosed that he was signing as representative of the
Philippine Education Foundation Company. For failure to disclose his principal
as required under Section 20 of the NIL, he is personally liable for the drafts
he accepted.