NEGO CONSOLIDATED DIGESTED CASES Page47

Atty ReyesGEORGE A. KAUFFMAN,plaintiff-appellee,vs.THE PHILIPPINE NATIONAL BANK,defendant-appellant.

G.R. No. 16454/ 42 Phil 182 September 29, 1921

FACTS:

Plaintiff- appellee George A. Kauffman, was the president of Philippine Fiber and Produce Company. He was entitled to the sum of P98,000 out of the dividend of P100,000 from the companys surplus earnings for the year 1917.

On October 9, 1918, George B. Wicks, treasurer of said company, requested from PNB-Manila that a telegraphic transfer of $45,000.00 be made to Kauffman in New York City, upon the account of the Philippine Fiber and Produce Company. Wicks then drew and delivered a check for the amount of P90,355.50 on PNB-Manila which was accepted by the officer selling the exchange in payment of the transfer in question.However, the payment to Kauffman was withheld by the PNB-Manila upon the suggestion of PNB-New York, in view of his reluctance to accept certain bills of the Philippine Fiber and Produce Company. Hence, when Kauffman went to PNB-New York City to get the money, payment to him was refused.Moreover, at the time of the transaction above-mentioned, the Philippines Fiber and Produce Company did not have on deposit in the Philippine National Bank money adequate to pay the check for P90,355.50 even though the company have credit to that extent and the check in question was charged as an overdraft against the Philippine Fiber and Produce Company and has remained on the books of the bank as an interest-bearing item in the account of said company.ISSUE:WON Negotiable Instruments Law is applicable in the case.RULING:For the Negotiable Instruments Law can come into operation, there must be a document in existence of the character described in section 1 of said Law and no rights arise in respect to said instrument until it is delivered. In this case, there was an order transmitted by the defendant bank to its New York branch, for the payment of a specified sum of money to plaintiff Kauffman. But this order was not made payable "to order or "to bearer," as required in subsection (d), Sec. 1 of the Negotiable Instruments Law; and inasmuch as it never left the possession of the bank, or its representative in New York City, there was no delivery in the sense intended in section 16 of the same Law. With this, 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.

GOVERNMENT SERVICE INSURANCE SYSTEM,petitioner,vs.COURT OF APPEALS and MR. & MRS. ISABELO R. RACHO,respondents.

G.R. No. L-40824/ 170 SCRA 533 February 23, 1989FACTS:Private respondents, Mr. and Mrs. Racho, with the spouses Mr. and Mrs Flaviano Lagasca, executed 2 deed of mortgage on a parcel of land in Quezon City co-owned by said mortgagor spouses in favor of petitioner GSIS to secure 2 loans granted by the latter.They also executed a promissory note which states in part:... for value received, we the undersigned ... JOINTLY, SEVERALLY and SOLIDARILY, promise to pay the GOVERNMENT SERVICE INSURANCE SYSTEM the sum of . . . (P 11,500.00) Philippine Currency, with interest at the rate of six (6%) per centum compounded monthly payable in . . . (120)equal monthly installments of . . . (P 127.65) each.On July 11, 1961, the Lagasca spouses executed an instrument "Assumption of Mortgage" under which they obligated themselves to assume the aforesaid obligation to the GSIS and to secure the release of the mortgage covering that portion of the land belonging to herein private respondents.This undertaking was not fulfilled.Upon failure of the mortgagors to comply with the conditions of the mortgage on the payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the mortgaged property to be sold at public auction. On August 23, 1965, private respondents filed a complaint against the petitioner and the Lagasca spouses in the former Court of First Instance of Quezon City,praying for the declaration of the extrajudicial foreclosure made on their property be declared null and void arguing that they did not benefited the loans from the GSIS. ISSUE:WON Negotiable Instruments Law is applicable.

RULING:No. The promissory note 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.

NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA,petitioners,vs.THE HONORABLE COURT OF APPEALS and EDEN TAN,respondents.

G.R. No. 100290/ 223 SCRA 163 June 4, 1993FACTS:Private respondent Tan filed a suit for collection of a sum of money against petitioners, spouses Tibajia. The RTC of Pasig, Metro Manila favored Tan. When the decision became final, Eden Tan filed a motion for execution and thereafter, the garnished funds which by then were on deposit with the cashier of the RTC of Pasig, Metro Manila, were levied upon.On 14 December 1990, the Tibajia spouses delivered to Deputy Sheriff the total money judgment in BPI Cashier's Check with the amount of P262,750.00 and a cash of 135,733.70. However, private respondent, Eden Tan, refused to accept the payment made by the Tibajia spouses and insisted that the garnished funds deposited with the cashier of the RTC of Pasig be withdrawn to satisfy the judgment obligation. Thereafter, petitioners filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid. The motion was denied by the trial court and was dismissed by the appellate court holding that payment by cashier's check is not payment in legal tender as required by Republic Act No. 529. ISSUE:

WON the payment by cashier's check is payment in legal tender.

RULING:No. In the cases of Philippine Airlines, Inc. vs. Court of Appeals 4 and Roman Catholic Bishop of Malolos, Inc. vs. Intermediate Appellate Court, the Supreme Court ruled that a check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Moreover, Article 1249 of the Civil Code provides that the payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. In the meantime, the action derived from the original obligation shall be held in abeyance.Also, Section 1 of Republic Act No. 529, as amended, provides that, every provision contained in, or made with respect to, any obligation which purports to give the obligee the right to require payment in gold or in any particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, shall be as it is hereby declared against public policy null and void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation thereafter incurred. Every obligation heretofore and hereafter incurred, whether or not any such provision as to payment is contained therein or made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts.Likewise, Section 63 of Republic Act No. 265, as amended (Central Bank Act) provides that, checks representing deposit money do not have legal tender power and their acceptance in the 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 of cash in an amount equal to the amount credited to his account.

PHILIPPINE AIRLINES, INC.,petitioner,vs.HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and AMELIA TAN, respondents.G.R. No. L-49188 January 30, 1990FACTS:Private respondent Amelia Tan, under the name and style of Able Printing Press commenced a complaint for damages before the Court of First Instance of Manila against PAL. The trial court favoured private respondent Tan. When the judgment became final, the trial court issued an order of execution, upon motion by private respondent. Four months later, private respondent Tan moved for the issuance of an alias writ of execution stating that the judgment rendered by the trial court remained unsatisfied.On March 1, 1978, the petitioner filed an opposition to the motion for the issuance of an alias writ of execution stating that it had already fully paid its obligation to plaintiff as evidenced by cash vouchers properly signed and receipted by the deputy sheriff Emilio Z. Reyes. However, said Deputy Sheriff Reyes had absconded or disappeared.On April 19, 1978, private respondent Tan filed another motion for Alias Writ of Execution which was granted by the trial court of Manila. Subsequently, petitioner filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as yet been made by Deputy Sheriff Reyes and that the judgment debt had already been fully satisfied by the petitioner.ISSUE:

WON the checks issued to the absconding sheriff is deemed as payment as to extinguish the judgment debt.

RULING:No. The checks issued by petitioner to the absconding sheriff did not extinguish the judgment debt because they are neither cash nor a legal tender. In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of his debt. Consequently, unless authorized to do so by law or by consent of the obligee a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. The acceptance by the sheriff of the petitioner's checks, in the case at bar, does not,per se, operate as a discharge of the judgment debt.Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as a discharge of the judgment debt. A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.

RAUL SESBREO,petitioner,vs.HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS BANK,respondents.G.R. No. 89252/ 222 SCRA 466 May 24, 1993FACTS:Petitioner Raul Sesbreo made a money market placement in the amount of P300,000.00 with the Philippine Underwriters Finance Corporation ("Philfinance") with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note 2731, the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and America for P304, 533.33 payable on 13 March 1981. Upon its maturity, petitioner sought to encash the postdated checks but they were dishonored for having insufficient funds.Petitioner then issued a demand letter to private respondent Pilipinas Bank, but the note was never released nor any instrument related thereto. Petitioner also made a written demandupon private respondent Delta as maker for the partial satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee thereof, had assigned to him said Note. Delta, however, denied any liability to petitioner on the promissory note.As petitioner had failed to collect his investment and interest thereon, he filed an action for damages with the RTC against private respondents Delta and Pilipinas. The complaint was dismissed and was affirmed by the CA on appeal. ISSUE:

WON a non-negotiable promissory note be assigned.

RULING:Only an instrument qualifying as a negotiable instrument under the relevant statute may benegotiatedeither 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 beassignedortransferred. 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.In this case, while the promissory note was marked "non-negotiable," it wasnotat the same time stamped "non-transferable" or "non-assignable." Hence, there is no stipulation which prohibited the promissory notes assigning or transferring, in whole or in part.METROPOLITAN BANK & TRUST COMPANY,petitioner,vs.COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO,respondents.G.R. No. 88866/ 194 SCRA 169 February 18, 1991

FACTS:

Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants with a total value of P1, 755,228.37. All these warrants were indorsed by the cashier of Golden Savings, and deposited it to its savings account in Metrobank branch in Calapan, Mindoro. They were then sent for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing."Exasperated" over Gloria Castillos repeated inquiries on whether the warrants have been cleared and also as an accommodation for a "valued client, the branch manager allowed the withdrawal of the warrants, only to find out later on that the treasury warrants have been dishonoured by the Bureau of Treasury. Metrobank demanded the refund by Golden Savings of the amount it had previously withdrawn. The demand was rejected. ISSUE:

WON the treasury warrants are negotiable instruments.

HELD:The treasury warrants were not negotiable instruments. Clearly stamped on their face is the word "non-negotiable and this is of equal significance, it is indicated that they are payable from a particular fund, to wit, Fund 501. This indication as the source of the payment to be made on the treasury warrants makes the order or promise to pay "not unconditional" and the warrants themselves non-negotiable.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 Section 66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but merely to deposit them with Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on the back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch."CALTEX (PHILIPPINES), INC.,petitioner,vs.COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY,respondents.G.R. No. 97753/ 212 SCRA 448 August 10, 1992FACTS:Private respondent, a commercial banking institution issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz who deposited an aggregate amount of P1,120,000.00. Angel dela Cruz delivered the said CTDs to petitioner, Caltex, in connection with his purchased of fuel products.On March 1982, Angel dela Cruz informed the Sucat Branch Manger of private respondent that he lost all the certificates of time deposit. Subsequently, Angel dela Cruz executed and delivered to private respondent the required Affidavit of Loss for the replacement of the 280 CTDs.On November 1982, the Credit Manager of petitioner went to petitioner's Sucat branch and presented the CTDs declared lost by Angel dela Cruz alleging that the same were delivered to petitioner as security for purchases made to it. However, private respondent bank rejected the petitioner's demand and claim for payment of the value of the CTDs. In view of the foregoing, petitioner filed a complaint against private respondent bank. The trial court and the CA dismissed the case. ISSUE:

WON the certificates of time deposit (CTDs) are negotiable.

RULING:The CTDs in question are negotiable instruments. 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.The CTDs in question undoubtedly meet the requirements of the law for negotiability. The documents provide that the amounts deposited shall be repayable to the depositor. And according to the document, it is the bearer who is the depositor. 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.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. On the wordings of the documents, therefore, the amounts deposited are repayable to whoever may be the bearer thereof.BANCO DE ORO SAVINGS AND MORTGAGE BANK,petitioner,vs.EQUITABLE BANKING CORPORATION, PHILIPPINE CLEARING HOUSE CORPORATION, AND REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH XCII (92),respondents.G.R. No. 74917/ 157 SCRA 188 January 20, 1988FACTS:On 1983, private respondent bank through its Visa Card Department, drew six crossed Manager's check having an aggregate amount of P45, 982.23 payable to certain member establishments of Visa Card. The Checks were deposited with the petitioner. Following normal procedures, and after stamping at the back of the Checks the usual endorsements. All prior and/or lack of endorsement guaranteed the petitioner sent the checks for clearing through the Philippine Clearing House Corporation (PCHC).Thereafter, private respondent bank discovered that the endorsements appearing at the back of the Checks and purporting to be that of the payees were forged or otherwise belong to persons other than the payees. Pursuant to the PCHC Clearing Rules and Regulations, private respondent bank presented the Checks directly to the petitioner for the purpose of claiming reimbursement from the latter. However, petitioner refused to accept such direct presentation and to reimburse private respondent for the value of the Checks.The dispute was presented for Arbitration. The Arbitrator and the Board of Directors of the PCHC favored the plaintiff. A petition for review was filed with the Regional Trial Court but to no avail. Petitioner now assails the negotiability of the said checks and PCHCs jurisdiction to hear cases with regard to non-negotiable checks.ISSUE:

WON the disputed checks are negotiable.

RULING:The disputed checks are considered as negotiable. Petitioner is estopped from raising the defence of non-negotiability of the checks in question. It stamped its guarantee on the back of the checks and subsequently presented these checks for clearing and it was on the basis of these endorsements by the petitioner that the proceeds were credited in its clearing account.The petitioner by its own acts and representation cannot now deny liability because it assumed the liabilities of an endorser by stamping its guarantee at the back of the checks.The petitioner having stamped its guarantee of "all prior endorsements and/or lack of endorsements" is now estopped from claiming that the checks under consideration are not negotiable instruments. The checks were accepted for deposit by the petitioner stamping thereon its guarantee, in order that it can clear the said checks with the respondent bank. By such deliberate and positive attitude of the petitioner it has for all legal intents and purposes treated the said cheeks as negotiable instruments and accordingly assumed the warranty of the endorser when it stamped its guarantee of prior endorsements at the back of the checks. It led the said respondent to believe that it was acting as endorser of the checks and on the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks are not negotiable instrument.Although the subject checks are non-negotiable the responsibility of petitioner as indorser thereof remains. To countenance a repudiation by the petitioner of its obligation would be contrary to equity and would deal a negative blow to the whole banking system of this country.

THE PHILIPPINE BANK OF COMMERCE,plaintiff-appellee,vs.JOSE M. ARUEGO,defendant-appellant.G.R. Nos. L-25836-37/ 102 SCRA 530 January 31, 1981

FACTS:

Plaintiff instituted an action against defendant for the recovery of the total sum of money plus interests and attorneys fees. The complaint filed by the Philippine Bank of Commerce contains twenty-two (22) causes of action referring to twenty-two (22) transactions entered into by the said Bank and Aruego on different dates. The sum sought to be recovered represents the cost of the printing of World Current Events, a periodical published by the defendant. To facilitate the payment of the printing the defendant obtained a credit accommodation from the plaintiff. Thus, for every printing of the World Current Events, the printer 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 printer, 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.Defendant filed an answer interposing for his defense that he signed the drafts in a representative capacity that he signed only as accommodation party and that the drafts signed by him were not really bills of exchange but mere pieces of evidence of indebtedness because payments were made before acceptance.ISSUES:WON the drafts Aruego signed were bills of exchange.RULING: YES. Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writting addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of exchange. The nature of acceptance is important only in the determination of the kind of liabilities of the parties involved, but not in the determination of whether a commercial paper is a bill of exchange or not.Moreover, 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.Secondly, an accommodation party is one who has signed the instrument as maker, drawer, indorser, without receiving value therefor and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party. In lending his name to the accommodated party, the accommodation party is in effect a surety for the latter. He lends his name to enable the accommodated party to obtain credit or to raise money. He receives no part of the consideration for the instrument but assumes liability to the other parties thereto because he wants to accommodate another. In the instant case, the defendant signed as a drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily liable. Thus, if the defendant who is a lawyer, he should not have signed as an acceptor/drawee. In doing so, he became primarily and personally liable for the drafts.

(METROPOLITAN CASE AGAIN)

IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE PAY,petitioner-appellant,vs.SEGUNDINA CHUA VDA. DE PALANCA,oppositor-appellee.G.R. No. L-29900/ 57 SCRA 618 June 28, 1974FACTS:On January 30, 1952, the late Justo Palanca and Rosa Gonzales Vda. de Carlos Palanca executed a promissory note to pay George Pay the amount of P26,900.00, with interest upon receipt by either of the undersigned of cash payment from the Estate of the late Don Carlos Palanca orupon demand. August 26, 1967, petitioner George Pay prayed for relief in court on his right under the promissory note.ISSUE:WON a creditor is barred by prescription to collect on a promissory note executed more than fifteen years.RULING:Yes. The ten-year period of limitation of actions did apply, the note being immediately due and demandable, the creditor admitting expressly that he was relying on the wording "upon demand." Article 1179 of the Civil Code provides: "Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once."

ANG TEK LIAN,petitioner,vs.THE COURT OF APPEALS,respondent.G.R. No. L-2516/ 87 Phil 383 September 25, 1950

FACTS:Knowing he had no funds therefor, Ang Tek Lian drew a check upon China Banking Corporation for the sum of P4, 000, payable to the order of "cash". He delivered it to Lee Hua Hong in exchange for money. The next business day, the check was presented by Lee Hua Hong to the drawee bank for payment, but it was dishonored for insufficiency of funds. For having issued a rubber check, Ang Tek Lian was convicted ofestafa.ISSUE:WON an instrument payable to the order of cash is a bearer instrument.RULING:Yes. Under the Negotiable Instruments Law, 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 drawer's indorsement.A check payable to bearer is authority for payment to holder. Where a check is in the ordinary form, and is payable to bearer, so that no indorsement is required, a bank, to which it is presented for payment, need not have the holder identified, and is not negligent in falling to do so. If the bank has no reasonable cause for suspecting any irregularity, it will be protected in paying a bearer check, "no matter what facts unknown to it may have occurred prior to the presentment."LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity as garnishee, petitioner,vs.HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H. SESBREO,respondents.

G.R. No. 111190/ 245 SCRA 374 June 27, 1995FACTS:Private respondent Raul H. Sesbreo obtained a favorable judgement before the RTC of Cebu wherein the court ordered Assistant City Fiscals Bienvenido N. Mabanto, Jr., and Dario D. Rama, Jr. to pay P11, 000.00. The judgment being final, the court ordered its execution. On February 4, 1992, a notice of garnishment was served on petitioner Loreto D. de la Victoria as City Fiscal of Mandaue City where Mabanto, Jr., was then detailed. On January 19, 1993 petitioner moved to quash the notice of garnishment claiming that he was not in possession of any money, funds, credit, property or anything of value belonging to Mabanto, Jr., except his salary and RATA checks, but said checks were not yet properties of Mabanto, Jr., until delivered to him. He further claimed that, as such, they were still public funds which could not be subject to garnishment.The trial court denied the motion and ordered petitioner to immediately comply with its February 4, 1992 order. It opined that the checks of Mabanto, Jr., had already been released through petitioner by the Department of Justice duly signed by the officer concerned. Upon service of the writ of garnishment, petitioner as custodian of the checks was under obligation to hold them for the judgment creditor. The motion for reconsideration was denied. ISSUE:

WON the salary checks not delivered to Mabanto, Jr., still formed part of public funds and beyond the reach of garnishment proceedings.

RULING:Yes. Under Sec. 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawer with intent to transfer title to the payee and recognize him as the holder thereof.As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives his compensation in the form of checks from the Department of Justice through petitioner as City Fiscal of Mandaue City and head of office. Inasmuch as said checks had not yet been delivered to Mabanto, Jr., theydid not belong to himand still had the character of public funds. Being public fund, the checks may not be garnished to satisfy the judgment. The rationale behind this doctrine is obvious consideration of public policy. JUAN CASABUENA,petitioner, vs.HON. COURT OF APPEALS and SPOUSES CIRIACO URDANETA AND OFELIA IPIL URDANETA,respondents.

G.R. No. 115410/ 286 SCRA 594February 27, 1998

FACTS:

Private respondent Ciriaco Urdaneta is one of the grantees of a parcel of land by the City of Manila through its land reform program. Being in debt to Arsenia Benin, he ceded his rights over the land through a deed of assignment to secure the debt.The parties verbally agreed that Urdaneta could redeem the property upon payment of the loan within three (3) years from the date of assignment and that failure to pay would transfer physical possession of the lot to Benin for a period of 15 years, without actual transfer of title and ownership thereto. The administration of the property was further assigned to Candido and Juan Casabuena, to whom Benin had transferred her right, title and interest. From 1973 to 1976, Juan Casabuena was Benins rental collector. However, their relationship soured which compelled the latter to name as administrator Angel Tanjuakio, who filed a complaint for ejectment against petitioner.Finding that the receipts issued by Tanjuakio were insufficient to prove his ownership over the property, the complaint was dismissed.Upon learning of the litigation between petitioner and Benin, Urdaneta asked them to vacate the property and surrender to him possession thereof. The Urdaneta spouses and Benin then entered into an agreement whereby the latter would surrender the property with the duplex constructed thereon.On November 3, 1987, they filed a complaint for recovery of possession of the property with damages against petitioner and Thelma Casabuena, representing the heirs of Candido Casabuena. Urdaneta spouses was declared by the court as its true and lawful owners with the deed of assignment to Benin merely serving as evidence of Ciriacos indebtedness to her in view of the prohibition against the sale of the land imposed by the City government.Petitioner now assails that the assignment by Benin was made in her capacity as creditor of the spouses, thus allowing her to transfer ownership of the property to her assignees.ISSUE:

WON a deed of assignment transfer ownership of the property to the assignee.

RULING:No. An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal cause, transfers his credit and its accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent as the assignor could have enforced it against the debtor. Stated simply, it is the process of transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor.The assignment involves no transfer of ownership but merely affects the transfer of rights which the assignor has at the time, to the assignee.The act of assignment could not have operated to efface liens or restrictions burdening the right assigned,because an assignee cannot acquire a greater right than that pertaining to the assignor.At most, an assignee can only acquire rights duplicating those which his assignor is entitled by law to exercise.In the case at bar, the Casabuenas merely stepped into Benins shoes, who was not so much an owner as a mere assignee of the rights of her debtors.Not having acquired any right over the land in question, it follows that Benin conveyed nothing to defendants with respect to the property.

(SESBRENO CASE AGAIN)

CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T. VERGARA,petitioners,vs.IFC LEASING AND ACCEPTANCE CORPORATION,respondent.

G.R. No. 72593/ 149 SCRA 448 April 30, 1987FACTS:Petitioner is a corporation engaged in the logging business in Davao Oriental. It contracted with Industrial Products Marketing (the "seller-assignor"), a corporation dealing in tractors and other heavy equipment business and agreed to purchase on instalment 2 units of "Used" Allis Crawler Tractors with warranty of 90 days performance of the machines and availability of parts.On April 5, 1978, simultaneously with the execution of the deed of sale with chattel mortgage with promissory note, the seller-assignor, by means of a deed of assignment, assigned its rights and interest in the chattel mortgage in favor of the respondent.Barely 14 days had elapsed after their delivery when one of the tractors broke down and after another 9 days, the other tractor likewise broke down. Because of the breaking down of the tractors, the road building and simultaneous logging operations of petitioner-corporation were delayed. Since the tractors were no longer serviceable, petitioner Wee asked the seller-assignor to pull out the units and have them reconditioned, and thereafter to offer them for sale. Petitioner-corporation also advised the seller-assignor that the payments of the installments as listed in the promissory note would be delayed until the seller-assignor completely fulfills its obligation under its warranty. However, the seller-assignor did nothing with regard to the request, until a complaint was filed by the respondent against the petitioners for the recovery of the principal sum of P1, 093,789.71 with interest, attorney's fees and costs of suit. It argued that the defense of petitioners of breach of warranty does not lie in favor of the Corporation and against IFC Leasing who is the assignee of the promissory note and a holder of the same in due course.ISSUE:

WON the promissory note in question is a negotiable instrument.

RULING:The promissory note in question is not a negotiable instrument. The pertinent portion of the note issued by the Corporation is as follows:FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the sum of (P1,093,789.71), Philippine Currency, the said principal sum, to be payable in 24 monthly installments. . .Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a promissory note must be payable to order or bearer, it cannot be denied that the promissory note in question is not a negotiable instrument.The instrument in order to be considered negotiable must contain the so called words of negotiability - i.e., must be payable to order or bearer. These words serve as an expression of consent that the instrument may be transferred. This consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a non-negotiable one.There are the only two ways by which an instrument may be made payable to order. There must always be a specified person named in the instrument. It means that the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the words or order or to the order of, the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely step into the shoes of the person designated in the instrument and will thus be open to all defenses available against the latter.Therefore, considering that the subject promissory note is not a negotiable instrument, it follows that the respondent can never be a holder in due course but remains a mere assignee of the note in question. Thus, the petitioner may raise against the respondent all defenses available to it as against the seller-assignor, Industrial Products Marketing.

TRADERS ROYAL BANK,petitioner,vs.COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES,respondents.G.R. No. 93397/ 269 SCRA 16March 3, 1997FACTS:Private respondent Filriters is the registered owner of Central Bank Certificate of Indebtedness (CBCI) No. D891 with a face value of P500,000.00. Under a deed of assignment, Filriters transferred CBCI No. D891 to Philippine Underwriters Finance Corporation (Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was still registered in the name of Filriters, to herein petitioner Traders Royal Bank (TRB). The transfer was made under a repurchase agreement, granting Philfinance the right to repurchase the instrument on or before April 27, 1981. When Philfinance failed to buy back the note on maturity date, it executed a deed of assignment, conveying to petitioner all its right and the title to CBCI No. D891.Armed with the deed of assignment, petitioner then sought the transfer and registration of CBCI No. D891 in its name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however, refused to effect the transfer and registration in view of an adverse claim filed by private respondent Filriters. Having no other recourse, petitioner filed a special civil action for mandamus against the Central Bank in the Regional Trial Court of Manila. The suit, however, failed to get a favourable judgment.ISSUE:WON CBCI No. D891 was not a negotiable instrument which would have served as an expression of consent that the instrument may be transferred by negotiation.RULING:The CBCI is not a negotiable instrument. The instrument provides for a promise to pay the registered owner Filriters. Very clearly, the instrument was only payable to Filriters. It lacked the words of negotiability which should have served as an expression of the consent that the instrument may be transferred by negotiation. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchstone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection, which the law throws around a holder in due course. This freedom in negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum of money to a specified person or entity for a period of time. Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not governed by the negotiable instruments law. Moreover, the transfer of the CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, did not conform to Sec. 3, Art. V of Central Bank Circular No. 769, otherwise known as the "Rules and Regulations Governing Central Bank Certificates of Indebtedness" which provides that any assignment of registered certificates shall not be valid unless made . . . by the registered owner thereof in person or by his representative duly authorized in writing.

MANUEL LIM and ROSITA LIM,petitioners,vs.COURT OF APPEALS and PEOPLE OF THE PHILIPPINES,respondents.

G.R. No. 107898/ 251 SCRA 409 December 19, 1995

FACTS:Petitioner spouses Manuel and Rosita Lim are the president and treasurer, respectively, of Rigi Bilt Industries, Inc. (RIGI). The Lims ordered several pieces of mild steel plates and "Z" purlins from LINTON and said materials were delivered at their place of business in Kalookan City. The Lims issued 7 postdated SOLIDBANK Checks as payment which were received by the collector of LINTON. However, when those 7 checks were deposited with the Rizal Commercial Banking Corporation they were dishonored for "insufficiency of funds" with the additional notation "payment stopped" stamped thereon. Despite demand petitioners refused to make good the checks or pay the value of the deliveries. Hence, they were charged before the Regional Trial Court of Malabon with 3 counts of estafa and 7 counts of violation of B.P. 22.The trial court held both accused guilty of estafa and violation of B.P. Blg. 22. On appeal, the Court of Appeals acquitted accused-appellants of estafa on the ground that indeed the checks were not made in payment of an obligation contracted at the time of their issuance. However it affirmed the finding of the trial court that they were guilty of having violated B.P. Blg. 22.ISSUE:

WON the negotiation takes place in Kalookan City and not in Malabon to support petitioners claim that the trial court of Malabon exceeded its jurisdiction in trying and deciding the case.

RULING:The negotiation takes place in Malabon. Under Sec. 191 of the Negotiable Instruments Law the term "issue" means the first delivery of the instrument complete in form to a person who takes it as a holder. The term "holder" refers to the payee or indorsee of a bill or note who is in possession of it or the bearer thereof. The SC cited People v.Yabut in explaining that the place where the bills were written, signed, or dated does not necessarily fix or determine the place where they were executed. What is of decisive importance is the delivery thereof. The delivery of the instrument is the final actessentialto itsconsummationas an obligation. An undelivered bill or note is inoperative. Until delivery, the contract is revocable. And the issuance as well as the delivery of the check must be to a person who takes it as aholder, which means "thepayeeor indorseeof a bill or note, who is in possession of it, or the bearer thereof." Delivery of the check signifies transfer of possession, whether actual or constructive, from one person to another with intent totransfer title thereto.Although LINTON sent a collector who received the checks from petitioners at their place of business in Kalookan City, they were actually issued and delivered to LINTON at its place of business in Balut, Navotas. The receipt of the checks by the collector of LINTON is not the issuance and delivery to the payee in contemplation of law. The collector was not the person who could take the checks as a holder,i.e., as a payee or indorsee thereof, with the intent to transfer title thereto. Neither could the collector be deemed an agent of LINTON with respect to the checks because he was a mere employee. There was nospecial fiduciaryrelationship that permeated their dealings. For a contract of agency to exist, the consent of both parties is essential. The principal consents that the other party, the agent, shall act on his behalf, and the agent consents so as to act. It must exist as afact. The law makes no presumption thereof. The person alleging it has the burden of proof to show, not only the fact of its existence, but also its nature and extent.

(DELA VICTORIA CASE AGAIN)

DEVELOPMENT BANK OF RIZAL,plaintiff-petitioner,vs.SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES,defendants-respondents.

G.R. No. 85419/ 217 SCRA 743 March 9, 1993FACTS:For a loan extended by petitioner Bank to respondent Sima Wei executed and delivered to the former a promissory note in the amount of P1, 820,000.00. Sima Wei made partial payments on the note and subsequently issued 2 crossed checks payable to petitioner Bank drawn against China Banking Corporation for the balance. However, said checks were not delivered to the petitioner-payee or to any of its authorized representatives. For reasons not shown, these checks came into the possession of respondent Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement to the account of respondent Plastic Corporation at Producers Bank. Cheng Uy, Branch Manager of the Balintawak branch of Producers Bank, relying on the assurance of respondent Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of Producers Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter. ISSUE:WON DBP has a cause of action against any or all of the defendants, in the alternative or otherwise.RULING:The normal parties to a check are the drawer, the payee and the drawee bank. Section 16 of the Negotiable Instruments Law, which governs checks, provides in part: every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its delivery to him.Delivery of an instrument means transfer of possession, actual or constructive, from one person to another.Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the instrument.The allegations of the petitioner show that the two (2) China Bank checks were not delivered to the payee, the petitioner herein. Without the delivery of said checks to petitioner-payee, the former did not acquire any right or interest therein and cannot therefore assert any cause of action,founded on said checks, whether against the drawer Sima Wei or against the Producers Bank or any of the other respondents. However, the drawer Sima Wei is not freed from liability to petitioner Bank under the loan evidenced by the promissory note agreed to by her. Her allegation that she has paid the balance of her loan with the two checks payable to petitioner Bank has no merit because these checks were never delivered to petitioner Bank.

ENRIQUE P. MONTINOLA,plaintiff-appellant,vs.THE PHILIPPINE NATIONAL BANK, ET AL.,defendants-appellees.G.R. No. L-2861/ 68 Phil 178 February 26, 1951FACTS:

Check No. 1382 with an amount of P100, 000 was issued by Ubaldo D. Laya in his capacity as Provincial Treasurer of Misamis Oriental as drawer on Philippine National Bank as drawee. Said check was countersigned by the provincial auditor.

Laya delivered P400, 000 in emergency notes and said check to Mariano V. Ramos as disbursing officer of the United States Armed Forces in the Far East (USAFFE). Ramos, in his personal capacity, then sold P30,000 of the check to Enrique P. Montinola for P90,000 Japanese military notes, of which only P45,000 was paid by Montinola. The writing made by Ramos at the back of the check was an instruction to the bank to pay P30, 000 to Montinola and to deposit the balance to his (Ramos) credit. This writing, however, was obliterated and in its place made Laya in issuing the check as acting in his capacity as "Agent, Phil. National Bank and hence making the drawee, the drawer.

ISSUE:

WON the instrument was legally negotiated.

RULING:

The check was not legally negotiated. Section 32 of the NIL provides that "the indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, does not operate as a negotiation of the instrument."

Montinola may not be regarded as an indorsee. At most he may be regarded as a mere assignee of the P30,000 sold to him by Ramos, in which case, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos. Neither can Montinola be considered as a holder in due course because a holder in due course is a holder who has taken the instrument under certain conditions, one of which is that he became the holder before it was overdue. When Montinola received the check, it was long overdue. Also, Montinola is not even a holder because a holder is the payee or indorsee of a bill or note and Montinola is not a payee.As a mere assignee Montinola is subject to all the defenses available against assignor Ramos. However, Ramos had he retained the check may not collect its value because it had been issued to him as disbursing officer of the USAFFE. Therefore, he had no right to indorse it personally to plaintiff. It was negotiated in breach of trust, hence he transferred nothing to the plaintiff.

(ANG TEK LIAN CASE AGAIN)

METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION,plaintiff-appellee,vs.SAMBOK MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD.,defendants-appellants.

G.R. No. L-39641/ 120 SCRA 864February 28, 1983FACTS:On April 15, 1969 Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd., in the amount of P15, 939.00 payable in 12 equal monthly installments, beginning May 18, 1969, with interest of 1% per month. It is further provided that in case on non-payment of any of the installments, the remaining unpaid balance shall become due and payable with an additional interest equal to 25% of the total amount due. On the same date, Sambok Motors Company, sister company of Ng Sambok Sons Motors Co., Ltd., negotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment Corporation.Dr. Villaruel defaulted in the payment of his installments when they became due. He also failed to pay as demanded, hence plaintiff Metropol notified Sambok as indorsee of said note of the fact that the same has been dishonored and demanded payment. Sambok also failed to pay which led plaintiff to file a complaint for collection of a sum of money. During the pendency of the case in the trial court, defendant Dr. Villaruel died. Thus, the tiral court ordered Sambok Motors Company to pay the plaintiff.ISSUE:WON Sambok Motors Company is a qualified indorser of the subject promissory.RULING:No. A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import.Such an indorsement relieves the indorser of the general obligation to pay if the instrument is dishonored but not of the liability arising from warranties on the instrument as provided in Section 65 of the Negotiable Instruments Law. However, appellant Sambok indorsed the note "with recourse" and even waived the notice of demand, dishonor, protest and presentment."Recourse" means resort to a person who is secondarily liable after the default of the person who is primarily liable.Appellant, by indorsing the note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant. The effect of such indorsement is that the note was indorsed without qualification. A person who indorses without qualification engages that on due presentment, the note shall be accepted or paid, or both as the case may be, and that if it be dishonored, he will pay the amount thereof to the holder.Appellant Sambok's intention of indorsing the note without qualification is made even more apparent by the fact that the notice of demand, dishonor, protest and presentment were all waived. The words added by said appellant do not limit his liability, but rather confirm his obligation as a general indorser.Lastly, after an instrument is dishonored by non-payment, the person secondarily liable thereon ceases to be such and becomes a principal debtor.His liabiliy becomes the same as that of the original obligor.Consequently, the holder need not even proceed against the maker before suing the indorser.

NATIVIDAD GEMPESAW,petitioner,vs.THE HONORABLE COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS,respondents.

G.R. No. 92244/ 218 SCRA 628 February 9, 1993

FACTS:Petitioner Natividad O. Gempesaw owns and operates four grocery stores in Caloocan City. To facilitate payment of debts to her suppliers, petitioner draws checks against her checking account with the respondent Philippine Bank of Communications as drawee. As a customary practice, the checks were prepared and filled up by her trusted bookkeeper, Alicia Galang, and submitted to the petitioner for her signature, with the corresponding invoice receipts which indicate the correct obligations due and payable to her suppliers. Petitioner signed each and every check without verifying the accuracy of the checks against the corresponding invoices. For a period of two years, petitioner issued 82 checks in favor of several suppliers. These checks were all presented by the indorsees to respondent drawee Bank which debited the amounts thereof against petitioner's checking account. Most of the checks were for amounts in excess of her actual obligations to the various payees. On November 7, 1984, petitioner made a written demand on respondent drawee Bank to credit her account with the money value of the 82 checks totalling P1,208.606.89 for having been wrongfully charged against her account. Respondent drawee Bank refused to grant petitioner's demand.ISSUES:

1. WON drawee bank can charge the drawer's account for the amount of said checks.1. WON the banking rules which prohibit the drawee bank from having checks with more than one indorsement invalidates the instrument.

RULING:1. Yes. As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer's account for the amount of said check. An exception to this rule is where the drawer is guilty of such negligence which causes the bank to honor such a check or checks. The negligence of a depositor which will prevent recovery of an unauthorized payment is based on failure of the depositor to act as a prudent businessman would under the circumstances. In the case at bar, the petitioner relied implicitly upon the honesty and loyalty of her bookkeeper, and did not even verify the accuracy of amounts of the checks she signed against the invoices attached thereto. Furthermore, although she regularly received her bank statements, she apparently did not carefully examine the same nor the check stubs and the returned checks, and did not compare them with the same invoices. Thus, petitioner's negligence was the proximate cause of her loss. And since it was her negligence which caused the respondent drawee Bank to honor the forged checks or prevented it from recovering the amount it had already paid on the checks, petitioner cannot now complain should the bank refuse to recredit her account with the amount of such checks.Under Section 23 of the NIL, she is now precluded from using the forgery to prevent the bank's debiting of her account.

1. No. The banking rule banning acceptance of checks for deposit or cash payment with more than one indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it invalidate the negotiation or transfer of the said check. In effect, this rule destroys the negotiability of bills/checks by limiting their negotiation by indorsement of only the payee. Under the NIL, the only kind of indorsement which stops the further negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation thereof.

In this kind of restrictive indorsement, the prohibition to transfer or negotiate must be written in express words at the back of the instrument, so that any subsequent party may be forewarned that ceases to be negotiable. However, the restrictive indorsee acquires the right to receive payment and bring any action thereon as any indorser, but he can no longer transfer his rights as such indorsee where the form of the indorsement does not authorize him to do so.Although the holder of a check cannot compel a drawee bank to honor it because there is no privity between them, as far as the drawer-depositor is concerned, such bank may not legally refuse to honor a negotiable bill of exchange or a check drawn against it with more than one indorsement if there is nothing irregular with the bill or check and the drawer has sufficient funds. The drawee cannot be compelled to accept or pay the check by the drawer or any holder because as a drawee, he incurs no liability on the check unless he accepts it. But the drawee will make itself liable to a suit for damages at the instance of the drawer for wrongful dishonor of the bill or check.

BIBIANO V. BAAS, JR.,petitioner,vs.COURT OF APPEALS, AQUILINO T. LARIN, RODOLFO TUAZON AND PROCOPIO TALON,respondents.

G.R. No. 102967/325 SCRA 259 February 10, 2000

FACTS:

On February 20, 1976, petitioner Bibiano V. Baas Jr. sold to Ayala Investment Corporation 128,265 square meters of land in Muntinlupa for P2,308,770.00. AYALA issued one promissory note covering four equal annual installments. On the same day, petitioner discounted the promissory note with AYALA. AYALA then issued 9 checks to petitioner, all dated February 20, 1976 with uniform amount of P205, 224.00.In his 1976 Income Tax Return, petitioner reported the P461, 754 initial payment as income from disposition of capital asset. In the succeeding years, until 1979, petitioner reported a uniform income of P230,877.00 as gain from sale of capital asset. After an examination by the tax examiners, Rodolfo Tuazon and Procopio Talon, on April 11, 1978, they recommended a deficiency of tax assessment for P2,473,673.00. On June 27, 1980, respondent Larin sent a letter to petitioner informing of the income tax deficiency that must be settled but petitioner insisted that the sale of his land to AYALA was on installment. This led Larin to file a criminal complaint for tax evasion against the petitioner.ISSUE:

WON the proceeds of the discounted note should have been reported as taxable income during 1976 and not deferred on instalments. HELD:

Yes. As a general rule, the whole profit accruing from a sale of property is taxable as income in the year the sale is made. But, if not all of the sale price is received during such year, and a statute provides that income shall be taxable in the year in which it is received, the profit from an installment sale is to be apportioned between or among the years in which the installments are paid and received. However, the proceeds from the disposition or discounting of receivable, though not considered in computing for initial payments under Sec. 43 and Sec. 175 of the Tax Code, it is still taxable in the year it was converted to cash. Non-dealer sales of property may be reported as income under the installment method provided that the obligation is still outstanding at the close of the year. Where an installment obligation is discounted at a bank or finance company, a taxable disposition results. Clearly, the indebtedness of the buyer is discharged, while the seller acquires money for the settlement of his receivables. Logically then, the income should be reported at the time of the actual gain.

CHAN WAN,plaintiff-appellant,vs.TAN KIM and CHEN SO,defendants-appellees.

G.R. No. L-15380 September 30, 1960FACTS: Eleven checks totalling P4,290.00 payable to "cash or bearer" drawn by defendant Tan Kim upon the Equitable Banking Corporation, were all presented for payment by Chan Wan to the drawee bank, but were all dishonored due to insufficiency of funds. Tan Kim declared without contradiction that the checks had been issued to Pinong and Muy for some shoes the former had promised to make and were intended as mere receipts. In view of such circumstance, the court declined to order payment for reasons that: (a) plaintiff failed to prove that he was a holder in due course, and (b) the checks being crossed checks should not have been deposited with the bank mentioned in the crossing.ISSUE:

WON Chan Wan, a mere holder, may recover on the check.

RULING: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. If B purchases an overdue negotiable promissory note signed by A, he is not a holder in due course; but he may recover from A,if the latter has no valid excuse for refusing payment. The only disadvantage of holder who is not a holder in due course is that the negotiable instrument is subject to defense as if it were non- negotiable.

Atrium Management Corporation, petitioner, vs. Court of Appeals, e.t. Henry and Co., Lourdes Victoria M. de Leon, Rafael de Leon, Jr., and Hi-Cement Corporation, respondents.

G.R. No. 109491. February 28, 2001

LOURDES M. DE LEON, petitioner, vs. COURT OF APPEALS, ATRIUM MANAGEMENT CORPORATION, AND HI-CEMENT CORPORATION,respondents.G.R. No. 121794. February 28, 2001

FACTS:Hi-Cement Corporation through its corporate signatories, Lourdes M. de Leon, treasurer, and the late Antonio de las Alas, Chairman issued checks, to extend financial assistance, in favor of E.T. Henry and Co. Inc., as payee.E.T. Henry and Co., Inc., in turn, endorsed the four checks to petitioner Atrium Management Corporation for valuable consideration.Upon presentment for payment, the drawee bank dishonored all four checks for reason payment stopped.Atrium, thus, instituted an action for collection of the proceeds of four post-dated checks with a total amount of P2 million.The trial court ordered Lourdes M. de Leon, her husband Rafael de Leon, E.T. Henry and Co., Inc. and Hi-Cement Corporation to pay petitioner Atrium, jointly and severally. However, the CA absolved Hi-Cement Corporation from liability and dismissed the complaint as against it.It ruled that:(1) Lourdes M. de Leon was not authorized to issue the subject checks in favor of E.T. Henry, Inc. and such issuance constitutedultra viresacts; and (2) The subject checks were not issued for valuable consideration. ISSUE:1. WON Lourdes M. de Leons issuance constitutes an ultra vires act. 1. WON Atrium Management Corporation is a holder in due course.RULING:1. No. Anultra viresact is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the power conferred upon it by law.The termultra viresis distinguished from an illegal act for the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be validated.Lourdes M. de Leon is the treasurer of the corporation and is authorized to sign checks for the corporation.At the time of the issuance of the checks, there were sufficient funds in the bank to cover payment of the amount of P2 million pesos. With this in consideration, the act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to finance the activities of the corporation, hence, not an ultra viresact.1. No. Atrium was not a holder in due course. Atrium has taken the checks with notice that they were crossed checks and specifically indorsed for deposit to payees account only, E.T. Henry. Clearly, then, Atrium could not be considered a holder in due course.Considering that Atrium was not a holder in due course for having taken the instruments in question with notice that the same was for deposit only to the account of E.T. Henry, it was not altogether precluded from recovering on the instrument. The Negotiable Instruments Law does not provide that a holder not in due course can not recover on the instrument.The disadvantage of Atrium in not being a holder in due course is that the negotiable instrument is subject to defenses as if it were non-negotiable. One such defense is absence or failure of consideration.

MARCELO A. MESINA,petitioner,vs.THE HONORABLE INTERMEDIATE APPELLATE COURT, HON. ARSENIO M. GONONG, in his capacity as Judge of Regional Trial Court Manila (Branch VIII), JOSE GO, and ALBERT UY,respondents.G.R. No. 70145 November 13, 1986FACTS:Jose Go purchased from Associated Bank a Cashier's Check for P800,000.00. Unfortunately, he left said check on the top of the desk of the bank manager when he left the bank. The bank manager entrusted the check for safekeeping to Albert Uy, a bank official. Uy proceeded to the men's room and when he returned to his desk, his visitor Alexander Lim was already gone. The cashier's check was also nowhere to be found.Albert Uy advised Jose Go to accomplish a "stop payment" order. Associated Bank then received the lost check for clearing from Prudential Bank, Escolta Branch. The check had been dishonored twice by sending it back to Prudential Bank, with the words "Payment Stopped" stamped on it. Several days later, Associated Bank received a letter, from Atty. Lorenzo Navarro demanding payment on the cashier's check in question, which was being held by his client Marcelo A. Mesina.ISSUE:

WON petitioner can collect on the stolen check on the ground that he is a holder in due course.

RULING:

No. A person who became the holder of a cashier's check as endorsed by the person who stole it and who refused to say how and why it was passed to him is not a holder in due course. He had therefore notice of the defect of his title over the check from the start.

The holder of a cashier's check who is not a holder in due course cannot enforce such check against the issuing bank which dishonors the same. The bank was liable to nobody on the check but Jose Go. The bank had no intention to issue it to Mesina but only to buyer Jose Go. When payment on it was therefore stopped, respondent bank was not the one who did it but Jose Go, the owner of the check. Respondent bank could not be drawer and drawee for clearly, Jose Go owns the money it represents and he is therefore the drawer and the drawee in the same manner as if he has a current account and he issued a check against it; and from the moment said cashier's check was lost and/or stolen no one outside of Jose Go can be termed a holder in due course because Jose Go had not indorsed it in due course. The check in question suffers from the infirmity of not having been properly negotiated and for value by respondent Jose Go who as already been said is the real owner of said instrument.

(kulang ng EQUITABLE BANKING V SPECIAL STEEL GR 175350 June 13 2012)

VICENTE R. DE OCAMPO & CO.,plaintiff-appellee,vs.ANITA GATCHALIAN, ET AL.,defendants-appellants.G.R. No. L-15126 November 30, 1961

FACTS:

Manuel Gonzales represented himself as an authorized agent of Ocampo Clinic to sell a car. Anita Gatchalian, who is interested in buying it, issued a crossed check amounting to P600 as evidence of her good faith in the intention to purchase said car. Without knowledge of the above transaction, Vicente de Ocampo received from Gonzales the subject check for the payment of the hospitalization of his wife.

For failure of Gonzales to appear on the agreed day to bring the car and its certificate of registration as well as the return of the check, Gatchalian issued a "Stop Payment Order" on the check, with the drawee bank.

ISSUE:

WON Vicente de Ocampo is a holder in due course.

RULING:

No. The Negotiable Instruments Law provides that every holder is deemed prima facie to be a holder in due course. Said law further provides that a holder in due course is one who takes the instrument in good faith and for value and that in order that one may be a holder in due course it is necessary that at the time the instrument was negotiated to him he had no notice of any defect in the title of the person negotiating it.

In the case at bar the rule that a possessor of the instrument isprima facie a holder in due course does not apply because there was a defect in the title of the holder, Manuel Gonzales, because the instrument is not payable to him or to bearer. The check had two parallel lines in the upper left hand corner, which practice means that the check could only be deposited but may not be converted into cash. As holder's title was defective or suspicious, it cannot be stated that the payee acquired the check without knowledge of said defect in holder's title, and for this reason the presumption that it is a holder in due course or that it acquired the instrument in good faith does not exist. And having presented no evidence that it acquired the check in good faith, it (payee) cannot be considered as a holder in due course.

CELY YANG,petitioner, vs.HON. COURT OF APPEALS, PHILIPPINE COMMERCIAL INTERNATIONAL BANK, FAR EAST BANK & TRUST CO.,EQUITABLE BANKING CORPORATION, PREMCHANDIRAMANI and FERNANDO DAVID,respondents.

G.R. No. 138074August 15, 2003FACTS:Cely Yang and private respondent Prem Chandiramani entered into an agreement to exchange checks both payable to the order of private respondent Fernando David and dollar drafts. The difference of P26,000.00 in the exchange would be their profit to be divided equally between them.However, Chandiramani did not appear at the rendezvous and the messenger of Albert Liong, yangs business associate, lost the two cashiers checks and the dollar draft bought by Yang. It transpired, however, that the checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments, without delivering the exchange consideration consisting of the PCIB managers check and the dollar draft.Yang then requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft enabling the holder of PCIB FCDU Account to receive the amount of US$200,000.00. Thus, Yang lodged a Complaintfor injunction and damages against Equitable, Chandiramani, and David.ISSUE:

WON Fernando David is a holder in due course?

RULING:

Yes. Yang fails to point any circumstance which should have put David on inquiry as to the why and wherefore of the possession of the checks by Chandiramani. David was not privy to the transaction between petitioner and Chandiramani. Instead, Chandiramani and David had a separate dealing in which it was precisely Chandiramanis duty to deliver the checks to David as payee. The evidence shows that Chandiramani performed said task to the latter. David took the step of asking the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being assured that there was nothing wrong with said checks. At that time, David was not aware of any "stop payment" order. Under these circumstances, David thus had no obligation to ascertain from Chandiramani what the nature of the latters title to the checks was, if any, or the nature of his possession. Thus, he cannot be said to be guilty of gross neglect amounting to legal absence of good faith, absent any showing that there was something amiss about Chandiramanis acquisition or possession of the checks.

Moreover, the factual circumstances in De Ocampo and in Bataan Cigar are not present in this case. For here, there is no dispute that the crossed checks were delivered and duly deposited by David, the payee named therein, in his bank account. In other words, the purpose behind the crossing of the checks was satisfied by the payee.

BATAAN CIGAR AND CIGARETTE FACTORY, INC.,petitioner,vs.THE COURT OF APPEALS and STATE INVESTMENT HOUSE, INC.,respondents.G.R. No. 93048 March 3, 1994FACTS:Petitioner Bataan Cigar & Cigarette Factory, Inc. (BCCFI) engaged King Tim Pua George to deliver bales of tobacco leaf. It issued in consideration thereof post dated crossed checks. However, George King sold at a discount several of said checks, drawn by petitioner, naming George King as payee to SIHI. Due to George Kings failure to deliver the bales of tobacco leaf as agreed despite petitioner's demand, BCCFI issued a stop payment order on all checks payable to George King. Efforts of SIHI to collect from BCCFI having failed, it instituted a case naming only BCCFI as party defendant. ISSUE:

WON SIHI is a holder in due course.

RULING:No. In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check should have the following effects: (a) the check maynotbe encashed but only deposited in the bank; (b) the check may be negotiatedonly once to one who has an account with a bank; (c) and the act of crossing the check serves aswarningto the holder that the check has been issuedfor a definite purposeso that he must inquire if he has received the check pursuant to that purpose, otherwise, he isnot a holder in due course. It is settled that crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain the indorser's title to the check or the nature of his possession. Failing in this respect, the holder is declared guilty of gross negligence amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable Instruments Law. In the present case, BCCFI's defense in stopping payment is as good to SIHI as it is to George King since the checks were issued with the intention that George King would supply BCCFI with the bales of tobacco leaf. There being failure of consideration, SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks.

STELCO MARKETING CORPORATION,petitioner,vs.HON. COURT OF APPEALS and STEELWELD CORPORATION OF THE PHILIPPINES, INC.,respondent.G.R. No. 96160 June 17, 1992FACTS:Stelco Marketing Corporation sold and delivered to RYL Construction, Inc. quantities of steels bars of various sizes and rolls of G.I. wire. Although the corresponding invoices issued by STELCO stipulated that RYL pay "COD" (cash on delivery), the latter made no payments for the construction materials thus ordered and delivered despite insistent demands for payment by the former.Steelweld Corporation of the Philippines issued a company check in favour of RYL for accommodation. RYL subsequently gave to Armstrong, Industries described by STELCO as its "sister corporation" and "manufacturing arm"a check drawn against Metrobank. When the latter deposited the check at its bank, it was dishonored because "drawn against insufficient funds."When so deposited, the check bore two endorsements, that of "RYL Construction followed by that of "Armstrong Industries."ISSUE:

WON STELCO ever became a holder in due course.

RULING:

No. There is no evidence whatsoever that the check was ever given to it, or indorsed to it in any manner or form in payment of an obligation or as security for an obligation, or for any other purpose before it was presented for payment.

STELCO cannot even be deemed a holder of the check for value. It does not meet two of the essential requisites prescribed by the statute. It did not become "the holder of it before it was overdue, and without notice that it had been previously dishonored," and it did not take the check "in good faith and for value." Neither is there any evidence whatever that Armstrong Industries, to whom R.Y. Lim negotiated the check, accepted the instrument and attempted to encash it in behalf, and as agent of STELCO. On the contrary, the indications are that Armstrong was really the intended payee of the check and was the party actually injured by its dishonour.

(kulang ng GO v METROPOLITAN BANK GR 168842 Aug 11 2010)

JUANITA SALAS,petitioner,vs.HON. COURT OF APPEALS and FIRST FINANCE & LEASING CORPORATION,respondents.G.R. No. 76788 January 22, 1990FACTS:Juanita Salas bought a motor vehicle from the Violago Motor Sales Corporation for P58, 138.20 as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation which financed the purchase. However, Salas defaulted in her installments due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident. This failure to pay prompted Finance & Leasing Corporation to initiate a civil case for collection of sum of money against Salas. ISSUE:

WON Filinvest Finance & Leasing Corporation is a holder in due course.

RULING:Filinvest is a holder in due course, having taken the instrument under the following conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation.Accordingly, respondent Corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS.

STATE INVESTMENT HOUSE,petitioner,vs.INTERMEDIATE APPELLATE COURT, ANITA PEA CHUA and HARRIS CHUA,respondents.G.R. No. 72764 July 13, 1989

FACTS:

Private respondent Harris Chua granted a loan to New Sikatuna Wood Industries, Inc. wherein private respondents wife, Anita Pena Chua, issued three crossed checks payable to New Sikatuna Wood Industries, Inc. all postdated December 22, 1980. Subsequently, New Sikatuna Wood Industries, Inc. entered into an agreement with petitioner State Investment House, Inc. where under a deed of sale, the former assigned and discounted with petitioner eleven postdated checks including the aforementioned three postdated checks issued by private respondents wife Anita Pea Chua to New Sikatuna Wood Industries, Inc.

However, when the three checks issued by private respondent Anita Pena Chua were deposited by petitioner, these checks were all dishonored. Petitioner claims that despite demands on private respondent Anita Pea to make good said checks, the latter failed to pay the same necessitating the former to file an action for collection against the latter and her husband Harris Chua.ISSUE:

WON petitioner is a holder in due course as to entitle it to proceed against private respondents Chua for the amount stated in the dishonored checks.

RULING:

No. The Negotiable Instruments Law regulating the issuance of negotiable checks as well as the rights and liabilities arising therefrom, does not mention "crossed checks". However, jurisprudence dictates the practice that a check with two parallel lines in the upper left hand corner means that it could only be deposited and may not be converted into cash. Consequently, such circumstance should put the payee on inquiry and upon him devolves the duty to ascertain the holder's title to the check or the nature of his possession. Failing in this respect, the payee is declared guilty of gross negligence amounting to legal absence of good faith and hence not a holder in due course.

When appellee rediscounted the check knowing that it was a crossed check he was knowingly violating the avowed intention of crossing the check. Furthermore, his failure to inquire from the holder, New Sikatuna Wood Industries, Inc., the purpose for which the three checks were cross despite the warning of the crossing, prevents him from being considered in good faith and thus he is not a holder in due course. Being not a holder in due course, plaintiff is subject to personal defenses, such as lack of consideration between appellants and New Sikatuna Wood Industries. Note that under the facts the checks were postdated and issued only as a loan to New Sikatuna Wood Industries, Inc. if and when deposits were made to back up the checks. Such deposits were not made, hence no loan was made, hence the three checks are without consideration.EULALIO PRUDENCIO and ELISA T. PRUDENCIO,petitioners,vs.THE HONORABLE COURT OF APPEALS, THE PHILIPPINE NATIONAL BANK, RAMON C. CONCEPCION and MANUEL M. TAMAYO, partners of the defunct partnership Concepcion & Tamayo Construction Company, JOSE TORIBIO, Atty-in-Fact of Concepcion & Tamayo Construction Company, and THE DISTRICT ENGINEER, Puerto Princesa, Palawan,respondents.

G.R. No. L-34539 July 14, 1986FACTS:The Concepcion & Tamayo Construction Company (Company) had a contract with the Bureau of Public Works (Bureau) for the construction of the municipal building in Palawan. As said Company needed funds for said construction, the Company approached appellants Eulalio and Elisa Prudencio to mortgage their property to guaranty a P 10, 000.00 loan which the PNB extended to the Company. Thus, a promissory note covering the loan was signed by Jose Toribio, as attorney-in-fact of the Company, and by the appellants. Further, Jose Toribio, executed a Deed of Assignment assigning in favor of the PNB all payments to be made by the Bureau to the Company for the construction of the Puerto Princesa building.However, notwithstanding the assignment of credit the PNB approved the Bureau's release of three payments directly to the Company instead of paying the same to the Bank. Subsequently, the Company abandoned the work and the Bureau rescinded the construction contract. Thus, appellants requested the PNB to cancel their mortgage contract since there was a change in the conditions of the contract without their knowledge. ISSUE:WON PNB is a holder in due course.RULING:No. Although as a general rule, a payee may be considered a holder in due course but such a rule cannot apply with respect to the respondent PNB because it has not acted in good faith when it waived the supposed payments from the Bureau of Public Works contrary to the Deed of Assignment. The PNB knew that the promissory note which it took from the accommodation makers was signed by the latter because of full reliance on the Deed of Assignment, which, PNB had no intention to comply with strictly. Worse, the third payment to the Company was approved by PNB although the promissory note was almost a month overdue, an act which is clearly detrimental to the petitioners. PNB being not a holder in due course, petitioners can validly set up their personal defence of release from the real estate mortgage against PNB.

(STELCO MARKETING AGAIN)

CHARLES A. FOSSUM,plaintiff-appellant,vs.FERNANDEZ HERMANOS, a general partnership, and JOSE F. FERNANDEZ Y CASTRO and RAMON FERNANDEZ Y CASTRO, members of the said partnership of FERNANDEZ HERMANOS,defendants-appellees.

G.R. No. L-19461 March 28, 1923

FACTS:

Fernandez and Hermanos, as managers of La Compaa Martima, ordered a tail shaft to Charles A. Fossum, as the resident agent of American Iron Products Company, Inc. Said tail shaft is to be installed on the shipRomulus. Thus, it was agreed that it would be in accordance with the specifications contained in a blueprint and the shaft should be shipped from New York. Meanwhile, the American Iron Products Company, Inc., had drawn a time draft upon Fernandez Hermanos for the purchase price of the shaft and payable to the PNB. In due course the draft was presented to Fernandez Hermanos for acceptance, and was accepted by said firm according to its tenor. However, upon inspection of the shaft, it was found not to be in conformity with the specifications and was incapable of use for the purpose for which it had been intended. For this reason, Fernandez Hermanos refused to pay the draft, and it remained for a time dishonored in the hands of the PNB. Later the bank indorsed the draft in blank, without consideration, and delivered it to Charles A. Fossum, who thereupon instituted an action on the instrument against the acceptor Fernandez Hermanos, among others.ISSUE:

WON Fossum is a holder in due course.

RULING:

No. Fossum himself is far from being a holder of this draft in due course. He was himself a party to the contract which supplied the consideration for the draft, albeit he there acted in a representative capacity. Moreover, he procured the instrument to be indorsed by the bank and delivered to him without the payment of value, after it was overdue, and with full notice that, as between the original parties, the consideration had completely failed. Under these circumstances recovery on this draft by Fossum by virtue of any merit in his own position is out of the question.

It is a well-known rule of law that if the original payee of a note unenforceable for lack of consideration repurchase the instrument after transferring it to a holder in due course, the paper again becomes subject in the payee's hands to the same defences to which it would have been subject if the paper had never passed through the hands of a holder in due course. The same is true where the instrument is retransferred to an agent of the payee.

JAI-ALAI CORPORATION OF THE PHILIPPINES,Petitioner, v. BANK OF THE PHILIPPINE ISLAND,Respondent.

G.R. No. L-29432August 6, 1975

FACTS:

Jai- Alai deposited several checks with BPI, all acquired from Antonio J. Ramirez, a regular bettor at the jai-alai games and a sales agent of the Inter-Island Gas Service, Inc., the payee of the checks. Subsequently, Ramirez resigned and after the checks had been submitted to inter-bank clearing, the Inter-Island Gas discovered that all the indorsement made on the cheeks as well as the rubber stamp impression thereon reading "Inter-Island Gas Service, Inc.", were forgeries. The drawers of the checks demanded reimbursement from the drawee-banks, who in turn demanded from BPI. BPI thus debited the value of the checks against petitioner's current account and forwarded to the latter the checks containing the forged indorsements which petitioner refused to accept.

ISSUE:

WON BPI had the right to debit from jai- Alais current account the value of the checks with forged