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Hong Kong and Shanghai Banking Corporation Limited vs. CIR

The Supreme Court ruled that electronic instructions sent by investors to HSBC for stock purchases are not considered bills of exchange or negotiable instruments under Philippine law for three reasons: 1) The electronic messages were not signed by the investors as supposed drawers of a bill of exchange. 2) The messages did not contain an unconditional order to pay a sum certain in money, as payment would come from a specific account. 3) The messages were not payable to order or bearer, but to a specifically designated third party. As such, the electronic messages received by HSBC did not qualify as proper presentment for acceptance or payment of a bill of exchange under the Negotiable Instruments Law.

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434 views3 pages

Hong Kong and Shanghai Banking Corporation Limited vs. CIR

The Supreme Court ruled that electronic instructions sent by investors to HSBC for stock purchases are not considered bills of exchange or negotiable instruments under Philippine law for three reasons: 1) The electronic messages were not signed by the investors as supposed drawers of a bill of exchange. 2) The messages did not contain an unconditional order to pay a sum certain in money, as payment would come from a specific account. 3) The messages were not payable to order or bearer, but to a specifically designated third party. As such, the electronic messages received by HSBC did not qualify as proper presentment for acceptance or payment of a bill of exchange under the Negotiable Instruments Law.

Uploaded by

Jayrell Castor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Hong Kong and Shanghai Banking Corporation Limited-Philippine Branches vs.

Commissioner of Internal Revenue


724 SCRA 499
2014

Petitioner:
Hong Kong and Shanghai Banking Corporation (HSBC)

Respondent:
Commissioner of Internal Revenue

I. Facts

Hong Kong and Shanghai Banking Corporation (HSBC) performs custodial services
on behalf of its investor-clients, corporate and individual, resident or nonresident of
the Philippines, with respect to their passive investments in the Philippines,
particularly investments in shares of stocks in domestic corporations.
It serves as the collection/payment agent with respect to dividends and other
income derived from its investor-clients passive investments.
HSBCs investor-clients maintain Philippine peso and/or foreign currency accounts.
Those accounts are managed by HSBC through instructions given through electronic
messages.
In purchasing shares of stock and other investment in securities, the investor-clients
would send electronic messages from abroad instructing HSBC to debit their local or
foreign currency accounts and to pay the purchase price therefor upon receipt of the
securities.

II. Issue

Whether or not the instructions sent through electronic messages by the client-investors
to Hong Kong and Shanghai Banking Corporation are considered as bills of exchange

III. Ruling of the Court of Tax Appeals

The electronic message instructions are not negotiable instruments.


They do not have the feature of negotiability, which is the ability to be
transferred.

IV. Ruling of the Court of Appeals

The instructions are negotiable instruments; they are bills of exchange.

V. Ruling of the Supreme Court:

A. Rule of Law

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Section 1 of the Negotiable Instruments Law provides:

Sec. 1. Form of negotiable instruments.An instrument to be negotiable must conform


to the following requirements:
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.

A bill of exchange is an unconditional order in writing addressed by one person to


another, signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum certain in money to order or to bearer.

A bill of exchange is one of two general forms of negotiable instruments under the
Negotiable Instruments Law.

Section 132 of the Negotiable Instruments Law provides:

Sec. 132. Acceptance; how made, by and so forth.The acceptance of a bill is the
signification by the drawee of his assent to the order of the drawer. The acceptance must be in
writing and signed by the drawee. It must not express that the drawee will perform his promise by
any other means than the payment of money.

Under the law, therefore, what is accepted is a bill of exchange, and the acceptance of a
bill of exchange is both the manifestation of the drawees consent to the drawers order to pay
money and the expression of the drawees promise to pay. It is the act by which the drawee
manifests his consent to comply with the request contained in the bill of exchange directed to
him and it contemplates an engagement or promise to pay. Once the drawee accepts, he
becomes an acceptor. As acceptor, he engages to pay the bill of exchange according to the tenor
of his acceptance. Acceptance is made upon presentment of the bill of exchange, or within 24
hours after such presentment.

Presentment for acceptance is the production or exhibition of the bill of exchange to the
drawee for the purpose of obtaining his acceptance. Presentment for acceptance is necessary only
in the instances where the law requires it. In the instances where presentment for acceptance is
not necessary, the holder of the bill of exchange can proceed directly to presentment for
payment. Presentment for payment is the presentation of the instrument to the person primarily
liable for the purpose of demanding and obtaining payment thereof. Thus, whether it be
presentment for acceptance or presentment for payment, the negotiable instrument has to be
produced and shown to the drawee for acceptance or to the acceptor for payment.

B. Application

The electronic messages are not signed by the investor-clients, as supposed drawers of a
bill of exchange; they do not contain an unconditional order to pay a sum certain in money as the

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payment is supposed to come from a specific fund or account of the investor-clients; and, they
are not payable to order or bearer but to a specifically designated third party. Thus, the electronic
messages are not bills of exchange.

The electronic messages received by HSBC from its investor-clients abroad instructing
the former to debit the latters local and foreign currency accounts and to pay the purchase price
of shares of stock or investment in securities do not properly qualify as either presentment for
acceptance or presentment for payment.

VI. Conclusion:

Therefore, instructions sent through electronic messages by the client-investors to HSBC


are not considered as bills of exchange and are also not negotiable instruments.

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