Philippine Education Co. vs.

Soriano Lessons Applicable: Requisites of negotiability to antedated

and postdated instruments (Negotiable Instrument Law)
L-22405 June 30, 1971
FACTS:
Dizon, J.:
Security Bank and Trust Company (Security Bank),
Facts: a commercial banking institution, through its Sucat
Branch issued 280 certificates of time deposit
Enrique Montinola sought to purchase from Manila (CTDs) in favor of Angel dela Cruz who deposited
Post Office ten money orders of 200php each payable to E. with Security Bank the total amount of P1,120,000
P. Montinola. Montinola offered to pay with the money Angel delivered the CTDs to Caltex for his purchase
orders with a private check. Private check were not of fuel products
generally accepted in payment of money orders, the teller
advised him to see the Chief of the Money Order Division, March 18, 1982: Angel informed Mr. Tiangco, the
Sucat Branch Manager that he lost all CTDs,
but instead of doing so, Montinola managed to leave the
submitted the required Affidavit of Loss and
building without the knowledge of the teller. Upon the received the replacement
disappearance of the unpaid money order, a message was
sent to instruct all banks that it must not pay for the money March 25, 1982: Angel dela Cruz negotiated and
order stolen upon presentment. The Bank of America obtained a loan from Security Bank in the amount
of P875,000 and executed a notarized Deed of
received a copy of said notice. However, The Bank of
Assignment of Time Deposit
America received the money order and deposited it to the
appellants account upon clearance. Mauricio Soriano, Chief November, 1982: Mr. Aranas, Credit Manager of
of the Money Order Division notified the Bank of America Caltex went to the Sucat branch to verify the CTDs
that the money order deposited had been found to have declared lost by Angel
been irregularly issued and that, the amount it represented
November 26, 1982: Security Bank received a
had been deducted from the banks clearing account. The letter from Caltex formally informing it of its
Bank of America debited appellants account with the same possession of the CTDs in question and of its
account and give notice by mean of debit memo. decision to pre-terminate the same.

Issue: December 8, 1982: Caltex was requested by

Security Bank to furnish:
Whether or not the postal money order in question
a copy of the document evidencing the
is a negotiable instrument
guarantee agreement with Mr. Angel dela
Cruz
Held:
the details of Mr. Angel's obligation
No. It is not disputed that the Philippine postal statutes
against which Caltex proposed to apply
were patterned after similar statutes in force in United the time deposits
States. The Weight of authority in the United States is that
postal money orders are not negotiable instruments, the Security Bank rejected Caltex demand for payment
reason being that in establishing and operating a postal bec. it failed to furnish a copy of its agreement w/
Angel
money order system, the government is not engaged in
commercial transactions but merely exercises a April 1983, the loan of Angel dela Cruz with
governmental power for the public benefit. Moreover, Security Bank matured
some of the restrictions imposed upon money orders by
August 5, 1983: CTD were set-off w/ the matured
postal laws and regulations are inconsistent with the
loan
character of negotiable instruments. For instance, such
laws and regulations usually provide for not more than one Caltex filed a complaint praying the bank to pay
endorsement; payment of money orders may be withheld 1,120,000 plus 16% interest
under a variety of circumstances.
CA affirmed RTC to dismiss complaint

ISSUE:
Negotiable Instruments Case Digest: Caltex (Phils.) Inc. V. 1. W/N the CTDs are negotiable
CA And Security Bank And Trust Co. (1992)
2. W/N Caltex as holder in due course can rightfully
G.R. No. 97753 August 10, 1992 recover on the CTDs
HELD: Petition is Denied and appealed decision is affirmed. therefor and the effects thereof, not
being provided for by the Negotiable
1. YES. Instruments Law, shall be governed by
the Civil Code provisions on pledge of
Section 1 Act No. 2031, otherwise known as the Negotiable incorporeal rights:
Instruments Law, enumerates the requisites for an
instrument to become negotiable, viz: Art. 2095. Incorporeal rights, evidenced by negotiable
instruments, . . . may also be pledged. The instrument
(a) It must be in writing and signed by the maker or drawer; proving the right pledged shall be delivered to the creditor,
and if negotiable, must be indorsed.
(b) Must contain an unconditional promise or order to pay
a sum certain in money; Art. 2096. A pledge shall not take effect against third
persons if a description of the thing pledged and the date of
(c) Must be payable on demand, or at a fixed or
the pledge do not appear in a public instrument.
determinable future time;
Art. 1625. An assignment of credit, right or action shall
(d) Must be payable to order or to bearer; and -check
produce no effect as against third persons, unless it appears
(e) Where the instrument is addressed to a drawee, he in a public instrument, or the instrument is recorded in the
must be named or otherwise indicated therein with Registry of Property in case the assignment involves real
reasonable certainty. property.

The documents provide that the amounts Metrobank vs. CA

deposited shall be repayable to the depositor
Metropolitan Bank & Trust Company vs. Court of Appeals
depositor = bearer
G.R. No. 88866 February, 18, 1991
If it was really the intention of
respondent bank to pay the Cruz, J.:
amount to Angel de la Cruz only,
Facts:
it could have with facility so
expressed that fact in clear and Eduardo Gomez opened an account with Golden
categorical terms in the Savings and deposited 38 treasury warrants. All warrants
documents, instead of having the were subsequently indorsed by Gloria Castillo as Cashier of
word "BEARER" stamped on the Golden Savings and deposited to its Savings account in
space provided for the name of Metrobank branch in Calapan, Mindoro. They were sent for
the depositor in each CTD clearance. Meanwhile, Gomez is not allowed to withdraw
from his account, later, however, exasperated over Floria
negotiability or non-negotiability of an instrument
repeated inquiries and also as an accommodation for a
is determined from the writing, that is, from the
valued client Metrobank decided to allow Golden Savings
face of the instrument itself
to withdraw from proceeds of the warrants. In turn, Golden
2. NO. Savings subsequently allowed Gomez to make withdrawals
from his own account. Metrobank informed Golden Savings
although the CTDs are bearer instruments, a valid that 32 of the warrants had been dishonored by the Bureau
negotiation thereof for the true purpose and of Treasury and demanded the refund by Golden Savings of
agreement between it and De la Cruz, as the amount it had previously withdrawn, to make up the
ultimately ascertained, requires both delivery and deficit in its account. The demand was rejected. Metrobank
endorsement then sued Golden Savings.

CTDs were in reality delivered to it as a Issue:

security for De la Cruz' purchases of its
fuel products 1. Whether or not Metrobank can demand refund agaist
Golden Savings with regard to the amount withdraws to
There was no negotiation in the sense of make up with the deficit as a result of the dishonored
a transfer of the legal title to the CTDs in treasury warrants.
favor of petitioner in which situation, for
obvious reasons, mere delivery of the 2. Whether or not treasury warrants are negotiable
bearer CTDs would have sufficed. instruments

Where the holder has a lien on the instrument Held:

arising from contract, he is deemed a holder for
No. Metrobank is negligent in giving Golden Savings
value to the extent of his lien.
the impression that the treasury warrants had been cleared
As such holder of collateral security, he and that, consequently, it was safe to allow Gomez to
would be a pledgee but the requirements withdraw. Without such assurance, Golden Savings would
not have allowed the withdrawals. Indeed, Golden Savings note, nor any instrument related thereto, to Sesbreno; but
might even have incurred liability for its refusal to return Sesbreno learned that the security which was issued on
the money that all appearances belonged to the depositor, April 10, 1980, maturing on 6 April 1981, has a face value
who could therefore withdraw it anytime and for any of P2,300,833.33 with PhilFinance as payee and Delta
reason he saw fit. Motors as maker; and was stamped non-negotiable on its
face. As Sesbreno was unable to collect his investment and
It was, in fact, to secure the clearance of the treasury interest thereon, he filed an action for damages against
warrants that Golden Savings deposited them to its account Delta Motors and Pilipinas Bank. Delta Motors contents
with Metrobank. Golden Savings had no clearing facilities of that said promissory note was not intended to be
its own. It relied on Metrobank to determine the validity of negotiated or otherwise transferred by Philfinance as
the warrants through its own services. The proceeds of the manifested by the word "non-negotiable" stamped across
warrants were withheld from Gomez until Metrobank the face of the Note.
allowed Golden Savings itself to withdraw them from its
own deposit.

Metrobank cannot contend that by indorsing the warrants ISSUE:

in general, Golden Savings assumed that they were genuine
and in all respects what they purport to be, in accordance Whether the non-negotiability of a promissory note
with Sec. 66 of NIL. The simple reason that NIL is not prevents its assignment.
applicable to non negotiable instruments, treasury
warrants.

No. The treasury warrants are not negotiable RULING:

instruments. Clearly stamped on their face is the word: non
A negotiable instrument, instead of being negotiated, may
negotiable. Moreover, and this is equal significance, it is
also be assigned or transferred. The legal consequences of
indicated that they are payable from a particular fund, to
negotiation and assignment of the instrument are different.
wit, Fund 501. An instrument to be negotiable instrument
A non-negotiable instrument may not be negotiated but
must contain an unconditional promise or orders to pay a
may be assigned or transferred, absent an express
sum certain in money. As provided by Sec 3 of NIL an
prohibition against assignment or transfer written in the
unqualified order or promise to pay is unconditional though
face of the instrument. The subject promissory note, while
coupled with: 1st, an indication of a particular fund out of
marked "non-negotiable," was not at the same time
which reimbursement is to be made or a particular account
stamped "non-transferable" or "non-assignable." It
to be debited with the amount; or 2nd, a statement of the
contained no stipulation which prohibited Philfinance from
transaction which give rise to the instrument. But an order
assigning or transferring such note, in whole or in part.
to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source of
Firestone Tire vs. CA
the payment to be made on the treasury warrants makes
the order or promise to pay not conditional and the Firestone Tire & rubber Co. vs. Court of Appeals
warrants themselves non-negotiable. There should be no
question that the exception on Section 3 of NIL is applicable GR No. 113236 March 5, 2001
in the case at bar.
Quisumbing, J.:

Facts:
Sesbreno vs CA
Forjas-Arca Enterprise Company is maintaining a
Sesbreno vs. Court of Appeals special savings account with Luzon Development Bank, the
latter authorized and allowed withdrawals of funds though
GR 89252, 24 May 1993 the medium of special withdrawal slips. These are supplied
by Fojas-Arca. Fojas-Arca purchased on credit with
FACTS: FirestoneTire & Rubber Company, in payment Fojas-Arca
delivered a 6 special withdrawal slips. In turn, these were
Petitioner Sesbreno made a money market placement in
deposited by the Firsestone to its bank account in Citibank.
the amount of P300,000 with the Philippine Underwriters
With this, relying on such confidence and belief Firestone
Finance Corporation (PhilFinance), with a term of 32
extended to Fojas-Arca other purchase on credit of its
days. PhilFinance issued to Sesbreno the Certificate of
products but several withdrawal slips were dishonored and
Confirmation of Sale of a Delta Motor Corporation
not paid. As a consequence, Citibank debited the plaintiffs
Promissory Note, the Certificate of Securities Delivery
account representing the aggregate amount of the two
Receipt indicating the sale of the note with notation that
dishonored special withdrawal slips. Fojas-Arca averred
said security was in the custody of Pilipinas Bank, and
that the pecuniary losses it suffered are a caused by and
postdated checks drawn against the Insular Bank of Asia
directly attributes to defendants gross negligence as a
and America for P304,533.33 payable on March 13,
result Fojas-Arca filed a complaint.
1981. The checks were dishonored for having been drawn
against insufficient funds. Pilipinas Bank never released the
Issue:

Whether or not the acceptance and payment of the

special withdrawal slips without the presentation of the
depositors passbook thereby giving the impression that it
is a negotiable instrument like a check.

Held:

No. Withdrawal slips in question were non

negotiable instrument. Hence, the rules governing the
giving immediate notice of dishonor of negotiable
instrument do not apply. The essence of negotiability which
characterizes a negotiable paper as a credit instrument lies
in its freedom to circulate freely as a substitute for money.
The withdrawal slips in question lacked this character.

Ang Tek Lian vs. Court of Appeals

L-2516 September, 1950

Bengzon, J.:

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.