1. Republic Planters Bank vs.

CA completed houses and developed lands delivered to and accepted by

AFRDC and the GSIS. Sometime in 1979, Ong discovered that Diaz
Facts: Republic Planters Bank issued 9 promissory notes signed by Shozo and Francisco, the Vice-President of GSIS, had executed and signed
Yamaguchi (President) and seven checks of various dates and amounts payable to HCCC for
Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc.
completed and delivered work under the contract. Ong, however,
Yamaguchi and Canlas were authorized
by the corporation to apply for credit facilities with the bank in form of claims that these checks were never delivered to HCCC. It turned out
export advances and letters of credit that Francisco forged the indorsement of Ong on the checks and
or trust receipts accommodations. Three years after, the bank filed an action indorsed the checks for a second time by signing her name at the
to recover the sums of money back of the checks, petitioner then deposited said checks in her
covered by the promissory notes. Worldwide Garment Manufacturing savings account. A case was brought by private respondents against
changed its name to Pinch petitioner to recover the value of said checks. Petitioner however
Manufacturing Corp. Canlas alleged he was not liable personally for the claims that she was authorized to sign Ong's name on the checks by
corporate acts that he performed, and virtue of the Certification executed by Ong in her favor giving her the
that the notes were still blank when he signed them. authority to collect all the receivables of HCCC from the GSIS,
including the questioned checks.
Issue: Whether the corporate treasurer is liable for the amounts in the
promissory notes. Issue: Whether petitioner cannot be held liable on the questioned
checks by virtue of the Certification executed by Ong giving her the
Held: Canlas is a co-maker of the promissory notes, under the law, and authority to collect such checks from the GSIS.
cannot escape liability arising
therefrom. Inasmuch as the instrument contained the words “I promise to Ruling: Petitioner is liable. The Negotiable Instruments Law provides
pay” and is signed by two or more that where any person is under obligation to indorse in a
persons, said persons are deemed to be jointly and severally liable thereon. representative capacity, he may indorse in such terms as to negative
As the promissory notes are personal liability. An agent, when so signing, should indicate that he
stereotype ones issued by the bank in printed form with blank spaces filled is merely signing in behalf of the principal and must disclose the name
up as per agreed terms of the loan, of his principal; otherwise he shall be held personally liable. Even
following customary procedures, leaving the debtors to do nothing but read
assuming that Francisco was authorized by HCCC to sign Ong's
the terms and conditions therein
name, still, Francisco did not indorse the instrument in accordance
and to sign as makers or co-makers. Section 14 of the Negotiable Instruments
Law, therefore, does not apply. with law. Instead of signing Ong's name, Francisco should have
Canlas is solidarily liable with the corporation for the amount of the 9 signed her own name and expressly indicated that she was signing as
promissory notes. an agent of HCCC. Thus, the Certification cannot be used by
Francisco to validate her act of forgery.
2. Francisco vs CA
3. Jai-alai Corp vs BPI
Facts: A. Francisco Realty & Development Corporation (AFRDC), of
which petitioner Francisco is the president, entered into a Land FACTS: Jai-Alai Corp. deposited 10 checks with BPI. The checks
Development and Construction Contract with private respondent were from Ramirez, a sales agent of the Inter-Island Gas were all
Herby Commercial & Construction Corporation (HCCC), represented payable to Inter-Island Gas Service, Inc. or order. Inter-Island Gas
by its President and General Manager private respondent Ong. discovered that all the indorsements made on the checks purportedly
Under the contract, HCCC was to be paid on the basis of the by its cashiers were forgeries. BPI debited Jai-Alai's current account
and forwarded to it the checks containing the forged indorsements 
ISSUE: W/N BPI had the right to debit. proximate cause of the loss (P3 million), and should bear the loss.
HELD: YES. Having indorsed the checks to BPI, Jai-Alai is deemed to 5. Gempesaw vs. CA
have given the warranty prescribed in Section 66 of the NIL that every
single one of those checks "is genuine and in all respects what it Facts: Natividad Gempesaw issued checks, prepared by her bookkeeper, a
purports to be." The depositor of a check as indorser warrants that it is total of 82 checks in favor of
several supplies. Most of the checks for amounts in excess of actual
genuine and in all respects what it purports to be. Jai Alai Corporation
obligations as shown in their corresponding invoices. It was only after the
negligent in accepting the checks without question from Antonio lapse of more than 2 years did she discovered the fraudulent
Ramirez notwithstanding that the payee was the Inter-Island Gas manipulations of her bookkeeper. It was also learned that the indorsements of
Services, Inc. and it did not appear that he was authorized to indorse the payee were forged, and the
it. checks were brought to the chief accountant of Philippine Bank of
Commerce (the Drawee Bank, Buendia
4. MWSS vs CA Branch) who deposited them in the accounts of Alfredo Romero and Benito
Facts: By special arrangement with PNB, MWSS used personalized checks Lam. Gempesaw made demand
in drawing from its account. The upon the bank to credit the amount charged due the checks. The bank
checks were printed by its printer, F. Mesina Enterprises. 23 checks were refused. Hence, the present action.
paid and cleared by PNB, and
debited against MWSS’ account from March to May 1969. The checks were Issue: Who shall bear the loss resulting from the forged indorsements.
deposited by payees Raul Dizon,
Arturo Sison, and Antonio Mendoza in their account with PCIBank. Said Held: As a rule, a drawee bank who has paid a check on which an
persons were later found to be fictitious. MWSS requested PNB to restore the indorsement has been forged cannot charge the drawer’s account for the
amount debited due to the 23 checks, allegedly forged, to its amount of said check. An exception to the rule is where the drawer is guilty
account. The bank refused. Hence, the present action. of such negligence which causes the bank to honor such checks. Gempesaw
did not exercise prudence in taking steps that a careful and prudent
Issue: Who shall bear the loss resulting from the alleged forged checks. businessman would take in circumstances to discover discrepancies in her
account. Her negligence was the proximate cause of her loss, and under
Held: There was no express and categorical finding that the 23 checks were Section 23 of the Negotiable
forged or signed by persons other Instruments Law, is precluded from using forgery as a defense.
than the authorized MWSS signatories. Forgery is not presumed but should
be established by clear, positive On the other hand, the banking rule banning acceptance of checks for deposit
and convincing evidence. MWSS is barred from setting up defense of forgery or cash payment with more than one indorsement unless cleared by some
under Section 23 of the bank officials does not invalidate the instrument; neither does it invalidate
Negotiable Instruments Law as MWSS committed gross negligence in the the negotiation or transfer of said checks. The only kind of indorsement
printing of its personalized checks, which stops the further negotiation of an instrument is a restrictive
failed to reconcile its bank statements with its own records, and failed to indorsement which prohibits the further negotiation thereof, pursuant to
provide appropriate security Section 36 of the Negotiable Instruments Law. In light of any case not
measures over its own record. PNB, the drawee bank, had taken necessary provided for in the Act that is to be governed by the provisions of existing
measures in the detection of forged checks and the prevention of their legislation, pursuant to Section 196 of the Negotiable Instruments Law, the
fraudulent encashment through constant reminders to all its current account bank may be held liable for damages in accordance with Article 1170 of the
bookkeepers informing them of the activities of forgery syndicates. MWSS’ Civil Code. The drawee bank, in its failure to discover the fraud committed
gross negligence was the by its employee and in contravention banking rules in allowing a chief
accountant to deposit the checks bearing second indorsements, was adjudged 50% of the same amount.
liable to share the loss with Gempesaw on a 50:50 ratio.
7. PCIB vs CA
6. Associated Bank vs CA Facts: Ford issued Citibank checks in favor of the Commissioner of
Facts: The Province of Tarlac maintains a current account with the Internal Revenue as payments of its
Philippine National Bank (PNB Tarlac taxes, through the depository bank Insular Bank of Asia and America
Branch) where the provincial funds are deposited. Portions of the funds were (later PCIBank). Proceeds of the checks
allocated to the Concepcion were never received by the Commissioner, but were encashed and
Emergency Hospital. Checks were issued to it and were received by the diverted to the accounts of members of a
hospital’s administrative officer and syndicate, to which Ford’s General Ledger Accountant Godofredo
cashier (Fausto Pangilinan). Pangilinan, through the help of Associated Bank Rivera belongs. Upon demand of the
but after forging the signature of Commissioner anew, Ford was forced to make second payment of its
the hospital’s chief (Adena Canlas), was able to deposit the checks in his taxes. Thus, Ford instituted actions to
personal account. All the checks recover the amounts from the collecting (depository) and drawee
bore the stamp “All prior endorsement guaranteed Associated Bank.” banks.
Through post-audit, the province discovered that the hospital did not receive
several allotted checks, and sought the restoration of the debited Issue: Whether Ford has the right to recover from the collecting bank
amounts from PNB. In turn, PNB demanded reimbursement from Associated (PCI Bank) and/or the drawee bank
Bank. Both banks resisted (Citibank) the value of the checks.
payment. Hence, the present action.
Held: The mere fact that forgery was committed by a drawer-payor’s
Issue: Who shall bear the loss resulting from the forged checks. confidential employee or agent, who by
virtue of his position had unusual facilities to perpetrate the fraud and
Held: PNB is not negligent as it is not required to return the check to the imposing the forged paper upon the
collecting bank within 24 hours as bank, does not entitle the bank to shift the loss to the drawer-payor, in
the banks involved are covered by Central Bank Circular 580 and not the the absence of some circumstance
rules of the Philippine Clearing raising estoppel against the drawer. The rule applies to checks
House. Associated Bank, and not PNB, is the one duty-bound to warrant the fraudulently negotiated or diverted by the
instrument as genuine, valid and confidential employees who hold them in their possession.
subsisting at the time of indorsement pursuant to Section 66 of the
Negotiable Instruments Law. The stamp In GRs 121413 and 121479, PCIBank failed to verify the authority of
guaranteeing prior indorsement is not an empty rubric; the collecting bank is Mr. Rivera to negotiate the checks.
held accountable for checks Furthermore, PCIBank’s clearing stamp which guarantees prior or
deposited by its customers. However, due to the fact that the Province of lack of indorsements render PCIBank
Tarlac is equally negligent in liable as it allowed Citibank without any other option but to pay the
permitting Pangilinan to collect the checks when he was no longer connected checks. PCIBank, being a depository /
with the hospital, it shares the collecting bank of the BIR, had the responsibility to make sure that the
burden of loss from the checks bearing a forged indorsement. Therefore, the crossed checks were deposited in
Province can only recover 50% “Payee’s account only” as found in the instrument.
of the amount from the drawee bank (PNB), and the collecting bank
(Associated Bank) is liable to PNB for In GR 128604, on the other hand, the switching operation involving
the checks, while in transit for clearing,
were the clandestine or hidden actuations performed by the members payment thereof against any party thereto, can be acquired through or
of the syndicate in their own personal, under such signature, unless the party against whom it is sought to
covert and private capacity; without the knowledge nor official or enforce such right is precluded from setting up the forgery or want of
conscious participation of PCIBank in the authority.”
process of embezzlement. Central Bank Circular 580 (1977),
however, provide d that any theft affecting items Under this provision, a forged signature is a real or absolute defense,
in transit for clearing are for the account of the sending bank (herein and a person whose signature on a negotiable instrument is forged is
PCIBank). Still, Citibank was likewise deemed to have never become a party thereto and to have never
negligent in the performance of its duties as it failed to establish its consented to the contract that allegedly gave rise to it.
payment of Ford’s checks were made in
due course and legally in order. The fact that drawee bank did not The counterfeiting of any writing, consisting in the signing of another’s
discover the irregularity seasonably name with intent to defraud, is forgery.
constitutes negligence in carrying out the bank’s duty to its depositors.
In the present case, we hold that there was forgery of the drawer’s
8. BPI vs CASA Montessori signature on the check.

Facts: CASA Montessori International opened a Current Account with Forgery “cannot be presumed.” It must be established by clear,
BPI with CASA’s President Ms. Lebron as one of its authorized positive and convincing evidence.
signatories. In 1991, CASA discovered that 9 of its checks had been
Having established the forgery of the drawer’s signature, BPI — the
encashed by a certain Sonny D. Santos since 1990 in the total
drawee — erred in making payments by virtue thereof. The forged
amount of ₱782,000.00 It turned out that ‘Sonny D. Santos’ with
signatures are wholly inoperative, and CASA — the drawer whose
account at BPI’s Greenbelt Branch [was] a fictitious name used by
authorized signatures do not appear on the negotiable instruments —
Leonardo T. Yabut who worked as external auditor of CASA. Yabut
cannot be held liable thereon.
voluntarily admitted that he forged the signature of Ms. Lebron and
encashed the checks. A Complaint for Collection with Damages In this jurisdiction, the negligence of the party invoking forgery is
against BPI to reinstate the amount of ₱782,500.00 in the current and recognized as an exception to the general rule that a forged signature
savings accounts of CASA with interest at 6% per annum. The RTC is wholly inoperative. Contrary to BPI’s claim, however, we do not find
rendered a decision in favor of the CASA. Modifying the Decision of CASA negligent in handling its financial affairs. CASA, we stress, is
the RTC, the CA apportioned the loss between BPI and CASA. The not precluded from setting up forgery as a real defense.
appellate court took into account CASA’s contributory negligence that
resulted in the undetected forgery. 9. Samsung Construction Co. vs Far East Bank and Trust
Co.
Issue: Whether or not CASA is precluded from setting up forgery as a
defense. Facts: Samsung Construction maintained a current account with Far
East Bank and Trust Bank (FETBC) in its Bel-Air Makati Branch, with
Ruling: Forged Signature Wholly Inoperative Jong Kyu Lee who is the Project Manager as the sole signatory and
Section 23 of the NIL provides: Kyu Yong Lee having the checks in his custody as the company’s
accountant. A certain Roberto Gonzaga presented an FETBC Check
“Section 23. Forged signature; effect of. — When a signature is forged on the same branch. The check was payable to cash and drawn
or made without the authority of the person whose signature it against the account of Samsung Construction amounting to P995,
purports to be, it is wholly inoperative, and no right x x x to enforce 500.00. The teller and the bank officers were satisfied with the
genuineness of the signature in the check and confirmed the identity The circumstances should have aroused the suspicion of the bank, as
of Gonzaga with the assistant accountant of Samsung Construction it is not ordinary business practice for a check for such large amount
who was also familiar and known to them, the latter being present at to be made payable to cash or to bearer, instead of to the order of a
the bank premises at that time. In the end, the check was authorized specified person. Extraordinary diligence dictates that FEBTC should
to be encashed. The Project Manager and the Accountant of the have ascertained from Jong personally that the signature in the
company found out the next day that the last blank check was missing questionable check was his. Still, even if the bank performed with
and that the check was encashed with Jong’s signature being forged. utmost diligence, the drawer whose signature was forged may still
Samsung Construction demanded reimbursement of the amount recover from the bank as long as he or she is not precluded from
encashed and when it was not heeded immediately, it filed a setting up the defense of forgery. After all, Section 23 of the
Complaint against the bank for violation of Sec. 23 of Negotiable Negotiable Instruments Law plainly states that no right to enforce the
Instruments Law. payment of a check can arise out of a forged signature. Since the
drawer, Samsung Construction, is not precluded by negligence from
In the RTC, it held that Jong’s signature on the check was forged and
setting up the forgery, the general rule should apply. Consequently, if
ordered the bank to pay company for the amount plus interest. During
a bank pays a forged check, it must be considered as paying out of its
appeal in CA, this decision was reversed by stating that even
funds and cannot charge the amount so paid to the account of the
assuming there was forgery, it occurred due to the negligence of
depositor. A bank is liable, irrespective of its good faith, in paying a
Samsung Construction specifically the accountant for lack of care in
forged check.
keeping the checks. The decision was appealed to SC, based on the
grounds that the CA misapprehended the facts and erred when it said 10. Montinola vs PNB
that the company has been negligent in safekeeping the check.
Facts: Ubaldo D. Laya was the Provincial Treasurer of Misamis
Issue: Is bank liable to reimburse the amount encashed through Oriental and the ex officio agent of the Philippine National Bank
forgery? branch in the province. Mariano V. Ramos worked under him as
assistant agent in the bank branch The currency being used in
Ruling: Yes, the bank is liable to pay Samsung Construction.
Mindanao was the emergency currency. Ramos was inducted into the
Therefore, the decision of CA is set aside.
United States Armed Forces in the Far East (USAFFE) as disbursing
Under Sec. 23 of Negotiable Instruments Law, forgery is a real or officer of an army division. Ramos,disbursing officer, went to Province
absolute defense by the party whose signature is forged. The general Lanao to procure a cash advance in the amount of P800K for the use
rule remains that the drawee who has paid upon the forged signature of the USAFFE. Provincial Treasurer of Lanao did not have that
bears the loss. The exception to this rule arises only when negligence amount in cash so he gave Ramos P300,000 in emergency notes and
can be traced on the part of the drawer whose signature was forged, a check for P500,000 Ramos went to the office of Provincial Treasurer
and the need arises to weigh the comparative negligence between the Laya at Misamis Oriental to encash the check for P500,000 which he
drawer and the drawee to determine who should bear the burden of had received from the Provincial Treasurer of Lanao. Laya did not
loss. The Court finds no basis to conclude that Samsung Construction have enough cash to cover the check so he gave Ramos P400,000 in
was negligent in the safekeeping of its checks especially that emergency notes and a check No. 1382 for P100,000 drawn on the
Samsung Construction reported the forgery almost immediately upon Philippine National Bank. According to Laya he had previously
discovery. The general rule imputing liability on the drawee who paid deposited P500,000 emergency notes in the Philippine National Bank
out on the forgery holds in this case. branch in Cebu and he expected to have the check issued by him
cashed in Cebu against said deposit. The USAFFE forces to which he
was attached surrendered. Ramos was made a prisoner of war
Ramos allegedly indorsed the check to Enrique P. note covering the P10,000 loan was signed by Toribio. The Prudencios also
Montinola. Montinola filed a complaint to collect the sum of P100,000, signed the portion of the note
the amount of Check issued by the Provincial Treasurer of Misamis indicating that they are requesting the PNB to issue the check covering the
Oriental to Mariano V. Ramos and supposedly indorsed to Montinola loan to the Company. Jose Toribio
executed the “Deed of Assignment” assigning all payments made by the
Issue: a. W/N Montinola cannot hold PNB liable because there Bureau to the company on account of
is "Agent, Phil. National Bank" is an alteration – YES. "Agent, Phil. the Puerto Princesa building project in favor of PNB. The Bureau, however,
National Bank" now appearing under the signature of the Provincial conditioned that the payment
Treasurer on the face of the original check - converts the bank from a should be for labor and materials. The Prudencios wrote PNB that since PNB
mere drawee to a drawer and therefore changes its liability, authorized payments to the
constitutes a material alteration of the instrument without the consent Company where there were changes in the conditions of the contract without
of the parties liable thereon, and so discharges the instrument. their knowledge, they seek to
cancel the mortgage contract. Failing to cancel the mortgage, they filed suit
(Section 124 of the Negotiable Instruments Law). Montinola may
to cancel the same.
therefore 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 Issue: Whether the Prudencios were solidary co-debtors or sureties as a
which case, as such assignee, he is subject to all defenses available result of being accommodation
to the drawer Provincial Treasurer of Misamis Oriental and against makers.
Ramos. 
Held: In lending his name to the accommodated party, the accommodation
W/N Montinola is a holder in due course – NO. Neither can Montinola party is in effect a surety.
be considered as a holder in due course because section 52 of said However, unlike in a contract of suretyship, the liability of the
law defines a holder in due course as a holder who has taken the accommodation party remains not only
instrument under certain conditions, one of which is that he became primary but also unconditional to a holder for value such that even if the
the holder before it was overdue. When Montinola received the check, accommodated party receives an
it was long overdue. Neither could it be said that he took it in good extension of the period of payment without the consent of the
faith. He has not paid the full amount of P90,000 for which Ramos accommodation party, the latter is still liable for
sold him P30,000 of the value of the check.  the whole obligation and such extension does not release him because as far
as the holder for value is
11. PNB vs CA concerned, he is a solidary co-debtor. Consequently, the Prudencios cannot
12. Prudencio vs CA claim to have been released from
their obligation simply because the time of payment of such obligation was
Facts: Eulalio and Elisa Prudencio are the registered owners of a parcel of temporarily deferred by PNB
land located in Sampaloc, Manila. without their knowledge and consent. To be freed of obligation, it is thus
The property was mortgaged to PNB to guarantee a loan of P1,000 extended necessary to determine if PNB, the
to one Domingo Prudencio. payee of the promissory note, is a holder in due course. Herein, PNB was an
Sometime in 1955, Concepcion & Tamayo Construction Co., through Jose immediate party or in privy to
Toribio (Prudencio’s relative), the note, besides that it dealt directly with the Prudencios knowing fully well
persuaded the Prudencios to mortgage their property to secure the loan of that they are accommodation
P10,000 which the company was makers. The general rule that a payee may be considered a holder in due
negotiating with the PNB. The Prudencios signed the “Amendment of Real course does not apply to PNB.
Estate Mortgage.” The promissory
 13. Travel-on vs CA them, qualifying the cash payment. Instead of cash payment, the
vendee authorized the vendor to obtain a loan from the financier
Facts: Travel-On Inc. is a travel agency selling airline tickets on commission on which the vendee bound itself to pay for. This loan was to cover
basis for and in behalf of for the payment of P1,000,000. This addendum was not notarized.
different airline companies. Arturo S. Miranda had a revolving credit line
with Travel-On. He procured tickets Petitioner Soriano signed as maker the promissory notes
on behalf of airline passengers and derived commissions therefrom. Miranda payable to the bank. However, the petitioners failed to pay the
apparently owed Travel-On the obligations as they were due. During that time, the bank was in
amount of P278,201.57 (the value of airline tickets sold to the former), to financial distress and this prompted it to endorse the promissory
which Miranda paid various
notes for collection. The bank gave ample time to petitioners then to
amounts in cash and in kind. He thereafter issued 6 post-dated checks
satisfy their obligations. The trial court held in favor of the bank. It
amounting to P115,000 which were all
dishonored by the drawee bank. Travel-On filed suit to recover the value of didn't find merit to the contention that Wonderland was the one
the checks. Miranda countered to be held liable for the promissory notes.
that he instead overpaid his obligations, and that he merely issued the checks HELD: First, there was no contract of sale that materialized.
for purposes of accommodation
The original agreement was that Wonderland would pay cash
as he allegedly had in the past accorded Travel-On.
and petitioner would deliver possession of the farmlands. But
Issue: Whether Miranda is indebted to Travel-On, or whether he is an this was changed through an addendum, that petitioner would
accommodation party. instead secure a loan and the settlement of the same would be
shouldered by Wonderland. Petitioners became liable as
Held: A check which is regular on its face is deemed prima facie to have accommodation parties. They have the right after paying the
been issued for a valuable instrument to seek reimbursement from the party accommodated,
consideration and every person whose signature appears thereon is deemed to since the relation between them has in effect became one of principal
have become a party thereto for value. Thus, the mere introduction of the and surety.
instrument sued on, in evidence prima facie, entitles the plaintiff to
recovery. Such presumption subsists unless otherwise contradicted by other Furthermore, the contract of surety between Woodland and
competent evidence. The checks, petitioner was extinguished by the rescission of the contract of sale of
being presented for payment, were thus intended for encashment. There is the farmland. With the rescission, there was confusion in the persons
nothing in the checks (nor in other of the principal debtor and surety. The addendum thereon likewise
documents) that stated otherwise. Travel-On was a payee, not an lost its efficacy.
accommodated party for the checks, as it
realized no value on the checks which bounced. Travel-On, thus, is entitled 15. Lim vs Saban
to the benefit of the presumption
that it is a holder in due course. Facts: The late Eduardo Ybanez entered i nto an Agreement and
Authority to Negotiate and Sell (Agency Agreement) with respondent
14. Agro Conglomerates vs CA Florencio Saban (Saban) on February 8, 1994. Under the Agency
Agreement, Ybañez authorized Saban to look for a buyer of the lot for
Facts: Petitioner sold to Wonderland Food Industries two parcels of
Two Hundred Thousand Pesos P 200,000.00) and to mark up the
land. They stipulated under a Memorandum of Agreement that the
selling price to include the amounts needed for payment of taxes,
terms of payment would be P1,000,000 in cash, P2,000,000 in
transfer of title and other expenses incident to the sale, as well as
shares of stock, and the balance would be payable in monthly
Saban’s commission for the sale. Through Saban's effort, he sold said
installments. Thereafter, an addendum was executed between
lot to Spouses Lim and Genevieve L im. He sold the lot for Php600, Neither is there any indication that Lim issued the checks for the
000.00. Saban gave Ybanez Php230, 000.00. However, Ybanez purpose of enabling Ybañez, or any other person for that matter, to
found out that the lot was being sold for Php600, 000.00 and asked obtain credit or to raise money, thereby totally debunking the
Lim to directly pay him the balance. Lim cancelled all checks issued to presence of the third requisite of an accommodation party.
Saban and paid directly to Ybanez. Saban said that Lim and Ybanez
did it to deprive him of the commission due tohim. 16. BPI vs Roxas

Issue: Whether or not Lim is liable on the checks because she issued FACTS: Gregorio Roxas, as trader, delivered stocks of vegetable oil
them as an accommodation party. to Spouses Rodrigo and Marissa Cawili. As payment, they issued a
personal check amounting to PHP348,805.50which was dishonored
Ruling: Section 29 of the Negotiable Instruments Law defines an by the drawee bank when respondent tried to encash it. The Spouses
accommodation party as a person "who has signed the negotiable Cawili replaced the check with a cashier's check from Bank of the
instrument as maker, drawer, acceptor or indorser, without receiving Philippine Island (Petitioner). The cashier's check was drawn against
value therefor, for the purpose of lending his name to some other the account of Marissa Cawili. The Cashier Check was handed to
person." The accommodation party is liable on the instrument to a respondent by Rodrigo Cawili. When respondent tried to encash the
holder for value even though the holder at the time of taking the Cashier Check, it was dishonored on the ground that the account of
instrument knew him or her to be merely an accommodation party. Marissa was closed on the same date that respondent tried to encash
The accommodation party may of course seek reimbursement from such check. Respondent thereafter filed a complaint with the Regional
the party accommodated. Trial Court for a sum of money praying that petitioner pay him the
amount of the check, damages and cost of the suit. The RTC in its
As gleaned from the text of Section 29 of the Negotiable Instruments
decision held that Petitioner is liable to pay the face value of the
Law, the accommodation party is one who meets all these three
cashier's check amounting to PHP 384, 805.50. On appeal, the CA
requisites, viz: (1) he signed the instrument as maker, drawer,
affirmed the decision of the RTC. Hence, the filing of the Petition for
acceptor, or indorser; (2) he did not receive value for the signature;
Certiorari by the petitioner.
and (3) he signed for the purpose of lending his name to some other
person. In the case at bar, while Lim signed as drawer of the checks ISSUE:(1) Whether or not the respondent is a holder in due course?
she did not satisfy the two other remaining requisites.
(2) Whether or not petitioner is liable to respondent for the
The absence of the second requisite becomes pellucid when it is amount of the cashier’s check?
noted at the outset that Lim issued the checks in question on account
of her transaction, along with the other purchasers, with Ybañez which HELD: The petition is DENIED. The assailed Decision of the Court of
was a sale and, therefore, a reciprocal contract. Specifically, she drew Appeals (Fourth Division) is AFFIRMED.
the checks in payment of the balance of the purchase price of the lot Held [1]: Petitioner contends that the element of "value" is not
subject of the transaction. And she had to pay the agreed purchase present, therefore, respondent could not be a holder in due course.
price in consideration for the sale of the lot to her and her co-vendees. There is no dispute that respondent received Rodrigo Cawili’s
In other words, the amounts covered by the checks form part of the cashier’s check as payment for the former’s vegetable oil. The fact
cause or consideration from Ybañez’s end, as vendor, while the lot that it was Rodrigo who purchased the cashier’s check from petitioner
represented the cause or consideration on the side of Lim, as vendee. will not affect respondent’s status as a holder for value since the
Ergo, Lim received value for her signature on the checks. check was delivered to him as payment for the vegetable oil he sold to
spouses Cawili. Verily, the Court of Appeals did not err in concluding
that respondent is a holder in due course of the cashier’s check.
 [2]: BPI is liable to Respondent. It bears emphasis that the only”) were dishonored. So were the checks of Riverside and
disputed check is a cashier’s check. A cashier’s check is really the Kanebo.
bank’s own check and may be treated as a promissory note with the
 Bank filed a complaint for sum of money in CFI against E.T.
bank as the maker. The check becomes the primary obligation of the
Henry, the spouses Tan, Hi-Cement (including its general
bank which issues it and constitutes a written promise to pay upon
manager and its treasurer as signatories of the postdated
demand. The mere issuance of a cashier’s check is considered
crossed checks), Riverside and Kanebo
acceptance thereof. Petitioner bank became liable to respondent from
the moment it issued the cashier’s check. Having been accepted by  CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-
respondent, subject to no condition whatsoever, petitioner should Cement, Riverside and Kanebo, jointly and severally, to pay
have paid the same upon presentment by the former. bank damages represented by the face value of the postdated
checks plus interests, services, charges and penalties until
17. Dino vs Judal-loot fully paid
18. Hi-Cement Corp vs Insular Bank of Asia and America
 G.R. 132403: RTC & CA
FACTS:
 Hi-Cement authorized its general manager and
treasurer to issue the subject postdated crossed
 Enrique Tan and Lilia Tan (spouses Tan) were the controlling checks
stockholders of E.T. Henry & Co., Inc. (E.T. Henry), a
company engaged in the business of processing and   Hi-Cement was already estopped from denying such
distributing bunker fuel. authority since it never objected to the signatories'
issuance of all previous checks to E.T. Henry 
 E.T. Henry's customers were Hi-Cement Corporation (Hi-
Cement), Riverside Mills Corporation (Riverside) and Kanebo ISSUE: 
Cosmetics Philippines, Inc. (Kanebo) who issued postdated
1. W/N bank was a holder in due course - NO
checks for their purchases
2. W/N Hi-Cement can still be made liable for the checks - NO
 Sometime in 1979:  Insular Bank of Asia and America (turned
PCIB then Equitable PCI-Bank) granted E.T. Henry a credit HELD:  CA AFFIRMED with MODIFICATION remanded to RTC for
facility known as “Purchase of Short Term Receivables.” (re- recomputation
discounting arrangement)
1. NO.
 Through this, E.T. Henry was able to encash, with pre-
 Section 191
deducted interest, the postdated checks of its clients.  
 Section 52
 For every transaction, E.T. Henry had to execute a
promissory note and a deed of assignment   Bank was all too aware that subject checks were crossed and
bore restrictions that they were for deposit to payee's account
 1979-1981: E.T. Henry was able to re-discount its clients'
only; hence, they could not be further negotiated to it
checks 
 irregularity - only the treasurer's signature appeared on the
 February 1981: 20 checks of Hi-Cement (which were crossed
deed of assignment
and which bore the restriction “deposit to payee’s account
  As a banking institution, it behooved respondent to act with to the check or the nature of his possession. Failing in this respect, the holder
extraordinary diligence in every transaction is declared guilty of gross
negligence amounting to legal absence of good faith, contrary to Section 52
 Its business is impressed with public interest, thus, it was not (c) of the Negotiable Instruments
expected to be careless and negligent, specially so where the Law, and as such the consensus of authority is to the effect that the holder of
checks it dealt with were crossed. the check is not a holder in due
course. BCCFI cannot be obliged to pay the checks as there is a failure of
 It is then settled that crossing of checks should put the holder consideration (King being unable to
on inquiry and upon him devolves the duty to ascertain the supply the bales of tobacco leaf, for which the checks were intended for).
indorser’s title to the check or the nature of his possession. - Still, SIHI -- a holder not in due
failure: guilty of gross negligence amounting to legal absence course -- can collect from the immediate indorser, George King. Such is the
of good faith  disadvantage of a holder not in
due course, i.e. the instrument is subject to defenses as if it were non-
     2. NO.  negotiable.
 the drawer of the postdated crossed checks was not liable to
20. Atrium Management Corp. vs. CA
the holder who was deemed not a holder in due course
1. REPUBLIC PLANTERS BANK vs. CA and FERMIN CANLAS
 may recover from the party who indorsed/encashed the
checks “if the latter has no valid excuse for refusing G.R. No. 93073            December 21, 1992
payment - E.T. Henry had no justification to refuse
payment, it should pay  Republic Planters Bank issued 9 promissory notes signed by Shozo
Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide
19. Bataan Cigar vs CA Garment Manufacturing Inc. Yamaguchi and Canlas were authorized
by the corporation to apply for credit facilities with the bank in form of
Facts: Bataan Cigar and Cigarette Factory Inc. (BCCFI) engaged one of its export advances and letters of credit or trust receipts
suppliers, Kim Tim Pua George
accommodations. Three years after, the bank filed an action to
(George King), to deliver bales of tobacco leaf. In consideration thereof,
recover the sums of money covered by the promissory notes.
BCCFI issued postdated cross
checks to King. King sold the checks, at a discount, to the State Investment Worldwide Garment Manufacturing changed its name to Pinch
House Inc. (SIHI). As King failed Manufacturing Corp. Canlas alleged he was not liable personally for
to deliver the bales of tobacco leaf despite demand, BCCFI issued stop the corporate acts that he performed, and that the notes were still
payment orders on the checks. Efforts blank when he signed them.
by SIHI to collect from BCCFI failed. SIHI filed suit.
Issue: Whether or not the corporate treasurer is liable for the amounts
Issue: Whether SIHI can recover the value of the checks, premised on the in the promissory notes.
issue whether SIHI is a holder in Held: Canlas is a co-maker of the promissory notes, under the law,
due course.
and cannot escape liability arising therefrom. Inasmuch as the
instrument contained the words “I promise to pay” and is signed by
Held: The facts of the case are on all fours to the case of SIHI vs.
Intermediate Appellate Court. The crossing two or more persons, said persons are deemed to be jointly and
of the checks should put the holder on inquiry and upon him devolves the severally liable thereon. As the promissory notes are stereotype ones
duty to ascertain the indorser’s title issued by the bank in printed form with blank spaces filled up as per
agreed terms of the loan, following customary procedures, leaving the the Inter-Island Gas Services, Inc. and it did not appear that he was
debtors to do nothing but read the terms and conditions therein and to authorized to indorse it.
sign as makers or co-makers. Section 14 of the Negotiable
Instruments Law, therefore, does not apply. Canlas is solidarily liable 8. BPI vs. CASA MONTESSORI G.R. No. 149454 May 28, 2004 Negotiable
with the corporation for the amount of the 9 promissory notes. Instruments Law, Forgery, Public Interest in Banking Business

2. http://www.thezamboanguena.com/2018/01/francisco-v-ca-g-r-no- JUNE 10, 2019

116320-29-nov-1999-319-scra-354/
FACTS:
3. Jai-Alai Corp. Of The Phil. V. BPI (1975)
CASA Montessori International opened a Current Account with BPI with
G.R. No. L-29432    August 6, 1975  CASA’s President Ms. Lebron as one of its authorized signatories.

Lessons Applicable: Forgery (Negotiable Instruments Law) In 1991, CASA discovered that 9 of its checks had been encashed by a
certain Sonny D. Santos since 1990 in the total amount of ₱782,000.00
FACTS:
It turned out that ‘Sonny D. Santos’ with account at BPI’s Greenbelt Branch
 Jai-Alai Corp. deposited 10 checks with BPI.   [was] a fictitious name used by Leonardo T. Yabut who worked as external
 The checks were from Ramirez, a sales agent of the Inter- auditor of CASA. Yabut voluntarily admitted that he forged the signature of
Island Gas were all payable to Inter-Island Gas Service, Inc. Ms. Lebron and encashed the checks.
or order.   A Complaint for Collection with Damages against BPI to reinstate the
 Inter-Island Gas discovered that all the indorsements made amount of ₱782,500.00 in the current and savings accounts of  CASA with
on the checks purportedly by its cashiers were forgeries.   interest at 6% per annum.

 BPI debited Jai-Alai's current account and forwarded to it The RTC rendered a decision in favor of the CASA.
the checks containing the forged indorsements  Modifying the Decision of the RTC, the CA apportioned the loss between BPI
ISSUE: W/N BPI had the right to debit. and CASA. The appellate court took into account CASA’s contributory
negligence that resulted in the undetected forgery.
HELD: YES.
Hence, these Petitions.
 Having indorsed the checks to BPI, Jai-Alai is deemed to have given
the warranty prescribed in Section 66 of the NIL that every single ISSUE:
one of those checks "is genuine and in all respects what it purports Whether or not CASA is precluded from setting up forgery as a defense.
to be."  
Whether or not BPI was negligent and therefore liable
 The depositor of a check as indorser warrants that it is genuine and
in all respects what it purports to be.   RULING:

 Jai Alai Corporation negligent in accepting the checks without Forged Signature Wholly Inoperative
question from Antonio Ramirez notwithstanding that the payee was
Section 23 of the NIL provides:
“Section 23. Forged signature; effect of. — When a signature is forged or “under obligation to treat the accounts of its depositors with meticulous
made without the authority of the person whose signature it purports to be, care, always having in mind the fiduciary nature of their relationship.”
it is wholly inoperative, and no right x x x to enforce payment thereof
BPI’s negligence consisted in the omission of that degree of diligence
against any party thereto, can be acquired through or under such signature,
required of a bank. It cannot now feign ignorance, for very early on we have
unless the party against whom it is sought to enforce such right is precluded
already ruled that a bank is “bound to know the signatures of its customers;
from setting up the forgery or want of authority.”
and if it pays a forged check, it must be considered as making the payment
Under this provision, a forged signature is a real or absolute defense, and a out of its own funds, and cannot ordinarily charge the amount so paid to the
person whose signature on a negotiable instrument is forged is deemed to account of the depositor whose name was forged.”
have never become a party thereto and to have never consented to the
Loss Borne by Proximate Source of Negligence
contract that allegedly gave rise to it.
For allowing payment on the checks to a wrongful and fictitious payee, BPI
The counterfeiting of any writing, consisting in the signing of another’s
— the drawee bank — becomes liable to its depositor-drawer. It “may not
name with intent to defraud, is forgery.
debit the drawer’s account and is not entitled to indemnification from the
In the present case, we hold that there was forgery of the drawer’s drawer.” In both law and equity, when one of two innocent persons “must
signature on the check. suffer by the wrongful act of a third person, the loss must be borne by the
one whose negligence was the proximate cause of the loss or who put it into
Forgery “cannot be presumed.” It must be established by clear, positive and
the power of the third person to perpetrate the wrong.”
convincing evidence.
Pursuant to its prime duty to ascertain well the genuineness of the
Having established the forgery of the drawer’s signature, BPI — the drawee
signatures of its client-depositors on checks being encashed, BPI is
— erred in making payments by virtue thereof. The forged signatures are
“expected to use reasonable business prudence.” Unfortunately, it failed in
wholly inoperative, and CASA — the drawer whose authorized signatures do
that regard.
not appear on the negotiable instruments — cannot be held liable thereon.

In this jurisdiction, the negligence of the party invoking forgery is recognized

as an exception to the general rule that a forged signature is wholly 9. http://www.thezamboanguena.com/2018/01/samsung-const-co-phil-v-
inoperative. Contrary to BPI’s claim, however, we do not find CASA far-east-bank-g-r-no-129015-13-aug-2004-436-scra-402/
negligent in handling its financial affairs. CASA, we stress, is not precluded
Samsung Construction v. Far East Bank and Trust Company (FEBTC)
from setting up forgery as a real defense.
and CA, G.R. No. 129015 Banking, Negotiable Instruments Law
Clear Negligence in Allowing Payment Under a Forged Signature
MARCH 27, 2019
We have repeatedly emphasized that, since the banking business is FACTS:
impressed with public interest, of paramount importance thereto is the
trust and confidence of the public in general. Consequently, the highest A certain Roberto Gonzaga presented for payment FEBTC Check No.
degree of diligence is expected, and high standards of integrity and 432100 to the bank’s branch in Bel-Air, Makati. The check, payable to
performance are even required, of it. By the nature of its functions, a bank is cash and drawn against Samsung Construction’s current account,
was in the amount of P999,500.00. The bank teller, Cleofe Justiani,
checked the balance of the account. After ascertaining there were
enough funds, and after comparing the signature in the check and that  
of the specimen on record, Justiani was satisfied as to the authenticity
RULING:
of the signature on the check.
Section 23 of the Negotiable Instruments Law states:
Gonzaga presented 3 identification cards to the bank officers.
When a signature is forged or made without the authority of the
Justiani forwarded the check to the branch Senior Assistant Cashier
person whose signature it purports to be, it is wholly inoperative, and
Gemma Velez for approval. Velez too concluded that the check was
no right to retain the instrument, or to give a discharge therefore, or to
indeed signed by the company’s  Project Manager Jong Kyu Lee.
enforce payment thereof against any party thereto, can be acquired
The check was also forwarded to Shirley Syfu, another bank officer for through or under such signature, unless the party against whom it is
approval. Syfu then noticed that Jose Sempio III (Sempio), the sought to enforce such right is precluded from setting up the forgery
assistant accountant of Samsung Construction, was also in the or want of authority.
bank. Syfu showed the check to Sempio, who vouched for the
The general rule is to the effect that a forged signature is wholly
genuineness of Jong’s signature.
inoperative, and payment made through or under such signature is
Satisfied with the genuineness of the signature of Jong, Syfu ineffectual or does not discharge the instrument. If payment is made,
authorized the banks encashment of the check to Gonzaga. the drawee cannot charge it to the drawers account. The traditional
justification for the result is that the drawee is in a superior position to
The following day, the company’s accountant, Kyu Yong Lee
detect a forgery because he has the makers signature and is
discovered that a check had been encashed. Aware that he had not
expected to know and compare it. The rule has a healthy cautionary
prepared such a check for Jong’s signature, Kyu found that the last
effect on banks by encouraging care in the comparison of the
blank check was missing.
signatures against those on the signature cards they have on file.
Jong learned of the encashment of the check, and realized that his
Quite palpably, the general rule remains that the drawee who has paid
signature had been forged.
upon the forged signature bears the loss. The exception to this rule
Samsung Construction filed a Complaint for violation of Section 23 of arises only when negligence can be traced on the part of the drawer
the NIL, and prayed for the payment of the amount debited as a result whose signature was forged, and the need arises to weigh the
of the questioned check plus interest, and attorneys fees. comparative negligence between the drawer and the drawee to
determine who should bear the burden of loss. 
The RTC held that Jong’s signature on the check was forged and
accordingly directed the bank to pay or credit back to Samsung We recognize that Section 23 of the Negotiable Instruments Law bars
Constructions account the said amount. a party from setting up the defense of forgery if it is guilty of
negligence. Yet, we are unable to conclude that Samsung
On appeal, the CA reversed the RTC Decision and absolved FEBTC Construction was guilty of negligence in this case.
from any liability.
Given the circumstances, extraordinary diligence dictates that FEBTC
  should have ascertained from Jong personally that the signature in
ISSUE: the questionable check was his.

Whether or not FEBTC is liable to Samsung Construction in paying Still, even if the bank performed with utmost diligence, the drawer
the forged check. whose signature was forged may still recover from the bank as long
as he or she is not precluded from setting up the defense of forgery. the amount of Check issued by the Provincial Treasurer of Misamis
After all, Section 23 of the Negotiable Instruments Law plainly states Oriental to Mariano V. Ramos and supposedly indorsed to Montinola
that no right to enforce the payment of a check can arise out of a
ISSUE: 
forged signature. Since the drawer, Samsung Construction, is not
precluded by negligence from setting up the forgery, the general rule  W/N Montinola cannot hold PNB liable because there
should apply. Consequently, if a bank pays a forged check, it must be is "Agent, Phil. National Bank" is an alteration – YES. "Agent,
considered as paying out of its funds and cannot charge the amount Phil. National Bank" now appearing under the signature of the
so paid to the account of the depositor. A bank is liable, irrespective of Provincial Treasurer on the face of the original check
its good faith, in paying a forged check. - converts the bank from a mere drawee to a drawer and
therefore changes its liability, constitutes a material alteration
of the instrument without the consent of the parties liable
10. Montinola V. PNB (1951) thereon, and so discharges the instrument. (Section 124 of the
Negotiable Instruments Law). Montinola may therefore not be
G.R. No. L-2861             February 26, 1951
regarded as an indorsee. At most he may be regarded as a
Lessons Applicable: Alteration (Negotiable Instruments Law) mere assignee of the P30,000 sold to him by Ramos, in which
case, as such assignee, he is subject to all defenses available
to the drawer Provincial Treasurer of Misamis Oriental and
FACTS: Ubaldo D. Laya was the Provincial Treasurer of Misamis against Ramos. 
Oriental and the ex officio agent of the Philippine National Bank
branch in the province. Mariano V. Ramos worked under him as 1. W/N Montinola is a holder in due course - NO
assistant agent in the bank branch The currency being used in
 Neither can Montinola be considered as a holder in due course
Mindanao was the emergency currency. Ramos was inducted into the
because section 52 of said law defines a holder in due course
United States Armed Forces in the Far East (USAFFE) as disbursing
as a holder who has taken the instrument under certain
officer of an army division. Ramos,disbursing officer, went to Province
conditions, one of which is that he became the holder before it
Lanao to procure a cash advance in the amount of P800K for the use
was overdue. When Montinola received the check, it was long
of the USAFFE. Provincial Treasurer of Lanao did not have that
overdue. Neither could it be said that he took it in good faith.
amount in cash so he gave Ramos P300,000 in emergency notes and
He has not paid the full amount of P90,000 for which Ramos
a check for P500,000 Ramos went to the office of Provincial Treasurer
sold him P30,000 of the value of the check. 
Laya at Misamis Oriental to encash the check for P500,000 which he
had received from the Provincial Treasurer of Lanao. Laya did not  check was issued to M. V. Ramos not as a person but M. V.
have enough cash to cover the check so he gave Ramos P400,000 in Ramos as the disbursing officer of the USAFFE. Therefore, he
emergency notes and a check No. 1382 for P100,000 drawn on the had no right to indorse it personally to plaintiff
Philippine National Bank. According to Laya he had previously
11. PNB v. CA
deposited P500,000 emergency notes in the Philippine National Bank
branch in Cebu and he expected to have the check issued by him G.R. No. 108052, 24 July 1996
cashed in Cebu against said deposit. The USAFFE forces to which he
was attached surrendered. Ramos was made a prisoner of war FACTS:

Ramos allegedly indorsed the check to Enrique P. PNB, herein petitioner, doubly credited the private respondent’s
Montinola. Montinola filed a complaint to collect the sum of P100,000, account erroneously. Petitioner then demanded the private
respondent to return the amount in excess, equal to P34,340.58.  Agro would secure a loan in the name of Agro
Thereafter, remittances from abroad to the private respondent were Conglomerates Inc. for the total amount of the initial
coursed through petitioner PNB. Without his knowledge and consent, payments, while the settlement of loan would be
the bank deducted P34,340.58 from the remittances, by virtue of assumed by Wonderland
compensation. Private respondent averred contending that the bank
 Mario Soriano (of Agro) signed as maker several
does not have a legal justification to make compensation on the
promissory notes, payable to Regent in favor of
remittances. The trial and the CA ruled in favor of the private
Wonderland
respondent and ordered the amount taken by the petitioner to be
returned the private respondent.  subsidiary contract of suretyship had taken
effect since Agro signed the promissory notes
14. Agro Conglomerates Inc. V. CA (2000)
as maker and accommodation party for the
 G.R. No. 117660  December 18, 2000 benefit of Wonderland
Lessons Applicable: Consideration and Accommodation Party
 bank released the proceeds of the loan to Agro
(Negotiable Instruments Law)
who failed to meet their obligations as they fell
FACTS:
due
 July 17, 1982: Agro Conglomerates, Inc. (Agro) sold 2 parcels
 bank, experiencing financial
of land to Wonderland Food Industries, Inc (Wonderland) for P
turmoil, gave Agro opportunity to
5M under terms and conditions:
settle their account by extending
1. P 1M Pesos shall be paid in cash upon the signing of the payment due dates
agreement
 Mario Soriano manifested
2. P 2M Pesos worth of common shares of stock of the his intention to re-
Wonderland Food Industries, Inc. structure the loan, yet did
not show up nor submit
3. balance of P2,000,000.00 shall be paid in 4 equal installments,
his formal written request
the first installment falling due, 180 days after the signing of
the agreement and every six months thereafter, with an  Regent filed 3 separate complaints before the RTC for
interest  rate of 18% per annum, to be advanced by the Collection of sums of money
vendee upon the signing of the agreement
 CA affirmed Trial court: held Agro liable
ISSUE: W/N Agro should be liable because there was no
accomodation or surety
HELD: YES. CA affirmed.
 July 19, 1982: Agro, Wonderland and Regent Savings & Loan
Bank (Regent) (formerly Summa Savings & Loan  First,  there  was  no  contract  of  sale  that  materialized.   
Association) amended the arrangement resulting to The  original agreement  was  that  Wonderland  would  pay 
a revision  - addedum was not notarized cash  and  Agro would deliver  possession  of  the 
farmlands.    But  this  was  changed  through  an addendum,
 that Agro would instead secure a loan and the settlement   another person is also under the
of the same would be shouldered by Wonderland.    obligation or other duty to the
obligee, who is entitled to but
 contract  of  surety  between  Woodland and petitioner was
one performance
extinguished by the rescission of the contract of sale of the
farmland  The surety’s liability to the creditor or
promisee is directly and equally bound
 With the rescission,  there was confusion in the
with the principal and the creditor may
persons of the  principal  debtor  and  surety.    The 
proceed against any one of the solidary
addendum  thereon  likewise  lost  its efficacy
debtors
 accommodation party - NOT in this case because of recission
 Novation - NOT in this case
 person who has signed the instrument as:
 extinguishment of an obligation by the substitution or
 maker change of the obligation by a subsequent one which
extinguishes or modifies the first, either by changing
 acceptor the object or principal conditions, or by substituting
 indorser another in place of the debtor, or by subrogating a third
person in the rights of the creditor
 without receiving value therefor
 never presumed and it must be clearly and
 for the purpose of lending his name to some other unequivocally shown
person
 requisites:
 is liable on the instrument to a holder for value,
notwithstanding such holder at the time of taking the 1. There must be a previous valid obligation - lacking
instrument knew (the signatory) to be an 2. There must be an agreement of the parties concerned to a
accommodation party new contract
 has the right, after paying the holder, to obtain 3. There must be the extinguishment of the old contract; and
reimbursement from the party accommodated, since
the relation between them has in effect become one of 4. There must be the validity of the new contract
principal and surety, the accommodation party being
 Sec. 22 of the Civil Code provides:
the surety.
Every person who through an act of performance by another, or any
 Suretyship 
other means, acquires or comes into possession of something at the
 relation which exists where: expense of the latter without just or legal ground, shall return the
same to him.
 1 person has undertaken an
obligation  Agro had no legal or just ground to retain the proceeds of the
loan at the expense of Wonderland.  
  Neither could Agro excuse themselves and hold Wonderland Thousand Pesos (P600,000.00), inclusive of taxes and other
still liable to pay the loan upon the rescission of their sales incidental expenses of the sale.
contract - surety no effect because of the rescission
After the sale, Lim remitted to Saban the amounts of P113,257 for
 If Agro sustained damages as a result of the rescission,
payment of taxes due on the transaction as well as P50,000.00 as
they should have impleaded Wonderland and asked
broker's commission. Lim also issued in the name of Saban four
damages
postdated checks in the aggregate amount of P236,743.00.
 The non-inclusion of a necessary party does not
prevent the court from proceeding in the action, Subsequently, Ybañez sent a letter dated June 10, 1994 addressed to
and the judgment rendered therein shall be Lim. In the letter Ybañez asked Lim to cancel all the checks issued by
without prejudice to the rights of such her in Saban's favor and to "extend another partial payment" for the
necessary party lot in his (Ybañez's) favor. 

 But respondent appellate court did not After the four checks in his favor were dishonored upon presentment,
err in holding that Agro are duty-bound Saban filed a complaint for collection of sum of money and damages
under the law to pay the claims of against Ybañez and Lim
Regent from whom they had obtained Saban alleged that Ybañez told Lim that he (Saban) was not entitled
the loan proceeds to any commission for the sale since he concealed the actual selling
15. LIM v. SABAN price of the lot from Ybañez and because he was not a licensed real
estate broker. Ybañez was able to convince Lim to cancel all four
G.R. No. 163720; December 16, 2004 checks.
Ponente: J. Tinga
In his Answer, Ybañez claimed that Saban was not entitled to any
commission because he concealed the actual selling price from him
and because he was not a licensed real estate broker.
FACTS:

Under an Agency Agreement, Ybañez authorized Saban to look for a

1. Chan Wan v. Tan Kim [G.R. No. L-15380. September
buyer of the lot for Two Hundred Thousand Pesos (P200,000.00) and
to mark up the selling price to include the amounts needed for 30, 1960]
payment of taxes, transfer of title and other expenses incident to the 30JUL
sale, as well as Saban's commission for the sale. 
FACTS
Through Saban's efforts, Ybañez and his wife were able to sell the lot
to the petitioner Genevieve Lim (Lim) and the spouses Benjamin and Checks payable to “cash or bearer” were drawn by defendant
Lourdes Lim (the Spouses Lim) on March 10, 1994. The price of the Tan Kim and were all presented for payment by Chan Wan to
lot as indicated in the Deed of Absolute Sale is Two Hundred the drawee bank, but they were all dishonored. Defendant
Thousand Pesos (P200,000.00).  It appears, however, that the argued that plaintiff is a holder not in due course.
vendees agreed to purchase the lot at the price of Six Hundred
ISSUE
Whether or not a holder not in due course is barred from warrants in general, Golden Savings assumed that they were
collecting the value of checks issued to him.  “genuine and in all respects what they purport to be,” in
accordance with Section 66 of the Negotiable Instruments Law.
RULING
The simple reason is that this law is not applicable to the non-
NO. It does not that simply because he was not a holder in due negotiable treasury warrants.
course Chan Wan could not recover on the checks. The
(b) YES. Metrobank was indeed negligent in giving Golden
Negotiable Instruments Law does not provide that a holder who
Savings the impression that the treasury warrants had been
is not a holder in due course, may not in any case, recover on
cleared and that, consequently, it was safe to allow Gomez to
the instrument. The only disadvantage of holder who is not a
withdraw the proceeds thereof from his account with it. Without
holder in due course is that the negotiable instrument is subject
such assurance, Golden Savings would not have allowed the
to defense as if it were non- negotiable.
withdrawals; with such assurance, there was no reason not to
allow the withdrawal. However, withdrawals released after the
notice of the dishonor may be debited as it will result to unjust
2. Metropolitan Bank and Trust Co. v. Court of Appeals enrichment.
[G.R. No. 88866. February 18, 1991]
G.R. No. 88866 February 18, 1991
FACTS
Lessons Applicable: Forgery (Negotiable Instruments Law)
Various treasury warrants drawn by the Philippine Fish
Marketing Authority were subsequently indorsed by Golden FACTS:
Savings. Petitioner allowed Golden Savings to withdraw thrice
 January 1979: Eduardo Gomez opened an account with
from uncleared treasury warrants as the former was
Golden Savings and deposited over a period of 2 months
exasperated over persistent inquiries of the latter after one
38 treasury warrants totalling P1,755,228.37. 
week. Warrants were later dishonored by the Bureau of
Treasury.  all drawn by the Philippine Fish Marketing
Authority and purportedly signed by its General
ISSUE
Manager and countersigned by its Auditor:
(a) Whether or not treasury warrants are negotiable instruments.
 6 - directly payable to Gomez 
(b) Whether or not petitioner’s negligence would bar them for
 32 - indorsed by their respective payees,
recovery.
followed by Gomez as second indorser
RULING
 June 25 - July 16, 1979: all warrants were subsequently
(a) NO. The indication of fund as the source of the payment to indorsed by Gloria Castillo as Cashier of Golden Savings
be made on the treasury warrants makes the order or promise and deposited to its Savings in the Metrobank branch 
to pay “not unconditional” and the warrants themselves non-
negotiable. Metrobank cannot contend that by indorsing the
  They were then sent for clearing by the branch debited to Golden Savings, as obviously Gomez can no longer
office to the principal office of Metrobank, which be permitted to withdraw this amount from his deposit because
forwarded them to the Bureau of Treasury for of the dishonor of the warrants
special clearing
 Metrobank was negligent in giving Golden Savings the
 More than 2 weeks after the deposits, Castillo asked if impression that the treasury warrants had been cleared
the warrants were cleared.  and that, consequently, it was safe to allow Gomez to
withdraw
 She was told to wait. 
 It "presumed" that the warrants had been cleared
 Gomez was also not allowed to withdraw from his
simply because of "the lapse of one week."
account
 exasperated over Gloria's repeated inquiries and also as
an accommodation for a "valued client," Metrobank  There was no reason why it should not have
allowed Golden Savings to make the following waited until the treasury warrants had been
withdrawals: cleared
 July 9, 1979 - P508,000.00 Art. 1909. — The agent is responsible not only for fraud, but
also for negligence, which shall be judged 'with more or less
 July 13, 1979 - P310,000.00
rigor by the courts, according to whether the agency was or was
 July 16, 1979 - P150,000.00 not for a compensation.

 Gomez was also allowed to withdraw a total amount  Golden Savings acted with due care and diligence
of P1,167,500 (latest on July 16, 1979)
 Forgery cannot be presumed. It must be established by
 July 21, 1979: Metrobank informed Golden Savings that clear, positive and convincing evidence. -here not proven
32 of the warrants had been dishonored by the Bureau of
 treasury warrants in question are not negotiable
Treasury on July 19, 1979, and demanded the refund by
instruments
Golden Savings of the amount it had previously
withdrawn, to make up the deficit in its account. - refused  stamped on their face is the word "non-
negotiable" 
 CA affirmed RTC: favored Golden Savings
 indicated that they are payable from a particular
ISSUE: W/N Metrobank can claim a refund from Golden
fund
Savings
Sec. 1. — Form of negotiable instruments. — An instrument to
HELD: NO. Affirmed. withdrawn must be charged not to Golden
be negotiable must conform to the following requirements:
Savings but to Metrobank, which must bear the consequences
of its own negligence. But the balance of P586,589.00 should be (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 of land co-owned by said mortgagor spouses, was given as
certain in money; security under the aforesaid two deeds.  They also executed a
‘promissory note” which states in part:
(c) Must be payable on demand, or at a fixed or determinable
future time; … for value received, we the undersigned … JOINTLY,
SEVERALLY and SOLIDARILY, promise to pay the
(d) Must be payable to order or to bearer; and
GOVERNMENT SERVICE INSURANCE SYSTEM the sum of .
(e) Where the instrument is addressed to a drawee, he must be . . (P 11,500.00) Philippine Currency, with interest at the rate
named or otherwise indicated therein with reasonable certainty. of six (6%) per centum compounded monthly payable in . . .
(120)equal monthly installments of . . . (P 127.65) each.
xxx xxx xxx
Both parties relied on the provisions of Section 29 of Act No.
Sec. 3. When promise is unconditional. — An unqualified order 2031, otherwise known as the Negotiable Instruments Law,
or promise to pay is unconditional within the meaning of this Act which provide that an accommodation party is one who has
though coupled with — signed an instrument as maker, drawer, acceptor of indorser
(a) An indication of a particular fund out of which reimbursement without receiving value therefor, but is held liable on the
is to be made or a particular account to be debited with the instrument to a holder for value although the latter knew him to
amount; or be only an accommodation party.

(b) A statement of the transaction which gives rise to the ISSUE

instrument judgment. Whether or not the executed promissory note is a negotiable
But an order or promise to pay out of a particular fund is not instrument.
unconditional. RULING
NO.The promissory note hereinbefore quoted, as well as the
mortgage deeds subject of this case, are clearly not negotiable
instruments. These documents do not comply with the fourth
3. GSIS v. Court of Appeals [G.R. No. L-40824. February requisite to be considered as such under Section 1 of Act No.
23, 1989] 2031 because they are neither payable to order nor to bearer.
FACTS The note is payable to a specified party, the GSIS. Absent the
aforesaid requisite, the provisions of Act No. 2031 would not
Private respondents, Mr. and Mrs. Isabelo R. Racho, together apply; governance shall be afforded, instead, by the provisions
with the spouses Mr. and Mrs. Flaviano Lagasca, executed a of the Civil Code and special laws on mortgages.
deed of mortgage, in favor of petitioner Government Service
Insurance System (GSIS) and subsequently, another deed of
mortgage, in connection with two loans granted by the latter in Philippine Bank of Commerce v. Aruego [G.R. Nos. L-25836-
the sums of P 11,500.00 and P 3,000.00, respectively. A parcel 37.January 31, 1981]
FACTS certificate, with interest at the rate of 16% per cent per
annum. 
Defendant-appellant Aruego signed various bills of exchange
which was negotiated and later dishonored. Appellee bank (Sgd. Illegible)
aggrieved, sued Aruego.
Caltex (Phils.) Inc. went to the SBTCSucat branch and
ISSUE presented for verification the CTDs declared lost by Angel dela
Cruz alleging that the same were delivered to herein plaintiff “as
Whether or not defendant may effectively put up the defense
security for purchases made with Caltex Philippines, Inc.” by
that he was just an agent of the company issuing the bills of
said depositor. SBTC rejected Caltex’s demand and claim.
exchange.
Caltex sued SBTC but case was dismissed rationalizing that
RULING CTD’s are non-negotiable instruments.

Section 20 of the Negotiable Instruments Law provides that ISSUE

“Where the instrument contains or a person adds to his
Whether or not Certificate of Time Deposit (CTD) is a negotiable
signature words indicating that he signs for or on behalf of a
instrument.
principal or in a representative capacity, he is not liable on the
instrument if he was duly authorized; but the mere addition of RULING
words describing him as an agent or as filing a representative
YES. The CTDs in question undoubtedly meet the requirements
character, without disclosing his principal, does not exempt him
of the law for negotiability under Section 1 of the Negotiable
from personal liability.”
Instruments Law. The accepted rule is that the negotiability or
non-negotiability of an instrument is determined from the writing,
that is, from the face of the instrument itself.  In the construction
Caltex Inc. v. Court of Appeals [G.R. No. 97753. August
of a bill or note, the intention of the parties is to control, if it can
10, 1992]
be legally ascertained. Here, if it was really the intention of
FACTS respondent bank to pay the amount to Angel de la Cruz only, it
could have with facility so expressed that fact in clear and
On various dates, Security Bank and Trust Company (SBTC), categorical terms in the documents, instead of having the word
through its Sucat Branch issued 280 certificates of time deposit “BEARER” stamped on the space provided for the name of the
(CTD) in favor of one Angel dela Cruz who later lost them. depositor in each CTD.
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____  While the writing may be read in the light of surrounding
This is to Certify that B E A R E R has deposited in this circumstances in order to more perfectly understand the intent
Bank the sum of PESOS: FOUR THOUSAND ONLY, and meaning of the parties, yet as they have constituted the
SECURITY BANK SUCAT OFFICE P4,000& 00 CTS Pesos, writing to be the only outward and visible expression of their
Philippine Currency, repayable to said depositor 731 meaning, no other words are to be added to it or substituted in
days. after date, upon presentation and surrender of this its stead.
 government is not engaging in commercial transactions but
merely exercises a governmental power for the public benefit.It
Philippine Education Co. Inc. v. Soriano [G.R. No. L-22405.
is to be noted in this connection that some of the restrictions
June 30, 1971]
imposed upon money orders by postal laws and regulations are
FACTS inconsistent with the character of negotiable instruments. For
instance, such laws and regulations usually provide for not more
Enrique Montinola sought to purchase from the Manila Post than one endorsement; payment of money orders may be
Office ten (10) money orders each payable to E.P. Montinola. withheld under a variety of circumstances.
After the postal teller had made out money orders, Montinola
offered to pay for them with a private checks were not generally
accepted in payment of money orders, the teller advised him to
Sesbreño v. Court of Appeals [G.R. No. 89252. May 24,  1993]
see the Chief of the Money Order Division, but instead of doing
so, Montinola managed to leave building with his own check and FACTS
the ten(10) money orders without the knowledge of the teller.
Petitioner Raul Sesbreño made a money market placement in
Upon discovery of the disappearance of the unpaid money
the amount of P300,000.00 with the Philippine Underwriters
orders, an urgent message was sent to all postmasters, and the
Finance Corporation (“Philfinance”). The latter issued a
following day notice was likewise served upon all banks,
Certificate of Confirmation of Sale “without recourse” from Delta
instructing them not to pay anyone of the money orders
Motors Corporation Promissory Note, a Certificate of securities
aforesaid if presented for payment. The Bank of America
indicating the sale to petitioner, with the notation that the said
received a copy of said notice three days later. It debited
security was in custodianship of Pilipinas Bank, andpost-dated
appellant’s account with the same amount and gave it advice
checks payable with petitioner as payee, Philfinance as drawer.
thereof by means of a debit memo.
Petitioner approached private respondent Pilipinas Bank and
ISSUE handed her a demand letter informing the bank that his
placement with Philfinance had remained unpaid and
Whether or not postal money orders are negotiable instruments.
outstanding, and that he in effect was asking for the physical
RULING delivery of the underlying promissory note. Pilipinas did not
deliver the Note, nor any certificate of participation in respect
NO. Postal money orders are not negotiable instruments. Our thereof, to petitioner.
postal statutes were patterned after statutes in force in the
United States. For this reason, ours are generally construed in ISSUES
accordance with the construction given in the United States to
(a) Whether or not Pilipinas Bank is liable for its action.
their own postal statutes, in the absence of any special reason
justifying a departure from this policy or practice. The weight of (b)Whether or not non-negotiable instruments are transferrable.
authority in the United States is that postal money orders are not
RULING
negotiable instruments, the reason behind this rule being that, in
establishing and operating a postal money order system, the
(1) YES. Private respondent Pilipinas bank is liable for damages Private respondents, Mr. and Mrs. Isabelo R. Racho, together
plus legal interest thereon by arising out of its breach of duty. By with the spouses Mr. and Mrs. Flaviano Lagasca, executed a
failing to deliver the Note to the petitioner as depositor- deed of mortgage, in favor of petitioner Government Service
beneficiary of the thing deposited, Pilipinas effectively and Insurance System (GSIS) and subsequently, another deed of
unlawfully deprived petitioner of the Note deposited with it. mortgage, in connection with two loans granted by the latter in
Whether or not Pilipinas itself benefitted from such conversion the sums of P 11,500.00 and P 3,000.00, respectively. A parcel
or unlawful deprivation inflicted upon petitioner, is of no moment of land co-owned by said mortgagor spouses, was given as
for present purposes.In the case at bar, the custodian- security under the aforesaid two deeds.  They also executed a
depositary bank Pilipinas refused to deliver the security ‘promissory note” which states in part:
deposited with it when petitioner first demanded physical
… for value received, we the undersigned … JOINTLY,
delivery thereof. Instead of complying with the demand of the
SEVERALLY and SOLIDARILY, promise to pay the
petitioner, Pilipinas purported to require and await the
GOVERNMENT SERVICE INSURANCE SYSTEM the sum of .
instructions of Philfinance, in obvious contravention of its
. . (P 11,500.00) Philippine Currency, with interest at the rate
undertaking under the DCR to effect physical delivery of the
of six (6%) per centum compounded monthly payable in . . .
Note upon receipt of “written instructions” from petitioner
(120)equal monthly installments of . . . (P 127.65) each.
Sesbreño.
Both parties relied on the provisions of Section 29 of Act No.
(2) YES. A non-negotiable instrument may, obviously, not be
2031, otherwise known as the Negotiable Instruments Law,
negotiated; but it may be assigned or transferred, absent an
which provide that an accommodation party is one who has
express prohibition against assignment or transfer written in the
signed an instrument as maker, drawer, acceptor of indorser
face of the instrument. It is important to bear in mind that
without receiving value therefor, but is held liable on the
the negotiation of a negotiable instrument must be distinguished
instrument to a holder for value although the latter knew him to
from the assignment or transfer of an instrument whether that
be only an accommodation party.
be negotiable or non-negotiable. Only an instrument qualifying
as a negotiable instrument under the relevant statute may ISSUE
be negotiated either by indorsement thereof coupled with
delivery, or by delivery alone where the negotiable instrument is Whether or not the executed promissory note is a negotiable
in bearer form. A negotiable instrument may, however, instead instrument.
of being negotiated, also be assigned or transferred. The legal RULING
consequences of negotiation as distinguished from assignment
of a negotiable instrument are, of course, different. NO.The promissory note hereinbefore quoted, as well as the
mortgage deeds subject of this case, are clearly not negotiable
instruments. These documents do not comply with the fourth
GSIS v. Court of Appeals [G.R. No. L-40824. February requisite to be considered as such under Section 1 of Act No.
23, 1989] 2031 because they are neither payable to order nor to bearer.
The note is payable to a specified party, the GSIS. Absent the
FACTS aforesaid requisite, the provisions of Act No. 2031 would not
apply; governance shall be afforded, instead, by the provisions as it never left the possession of the bank, or its representative
of the Civil Code and special laws on mortgages. in New York City, there was no delivery in the sense intended in
Section 16 of the same Law. In this connection it is unnecessary
to point out that the official receipt delivered by the bank to the
Kauffman v. PNB [G.R. No. 16454. September 29, 1921] purchaser of the telegraphic order, and already set out above,
cannot itself be viewed in the light of a negotiable instrument,
FACTS although it affords complete proof of the obligation actually
Wicks, the treasurer of the Philippine Fiber and Produce assumed by the bank. Kauffman, however, has remedy based
Company (PFPC), presented himself in the exchange on the Civil Code, particularly on stipulations pour atrui.
department of the Philippine National Bank in Manila and
requested that a telegraphic transfer of $45,000 should be made
to Kauffman in New York City, upon account of the PFPC. Maralit v. Imperial

Pay George A. Kauffman, New York, account Philippine G.R. No. 130756, 21 January 1999, SCRA 605
Fiber Produce Co., $45,000. (Sgd.) PHILIPPINE NATIONAL FACTS:
BANK, Manila.
Petitioner Ester B. Maralit filed three complaints for estafa through
PNB’s representative in New York withheld the money from falsification of commercial documents through reckless imprudence against
Kauffman, in view of his reluctance to accept certain bills of the respondent Jesusa Corazon L. Imperial. Maralit alleged that she was
PFPC. Kauffman demanded the money but was refused to be assistant manager of the Naga City branch of the PNB; that on May 20,
paid. 1992, June 1, 1992, and July 1, 1992 respondent Imperial separately
ISSUE deposited in her savings account at the PNB three United States treasury
warrants and on the same days withdrew their peso equivalent of
Whether or not Kauffman has a right of action based on P59,216.86, P130,743.60, and P130,326.00, respectively; and that the
Negotiable Instruments Law. treasury warrants were subsequently returned one after the other by the
United States Treasury, through the Makati branch of the Citibank, on the
RULING
ground that the amounts thereof had been altered. Maralit claimed that, as
NO. Kauffman has no right of action based on Negotiable a consequence, she was held personally liable by the PNB for the total
Instrument’s Law on the ground that it can only come into amount of P320,287.30.
operation if there is a document in existence of the character In her counter-affidavit, respondent claimed that she merely helped a
described in Section 1 of the said Law, and rights properly relative, Aida Abengoza, encash the treasury warrants; that she deposited
speaking arise in respect to said instrument until it is delivered. the treasury warrants in her savings account and then withdrew their peso
In this case, there was an order transmitted by PNB to its New equivalent with the approval of petitioner; that she gave the money to Aida
York branch, for the payment of a specified sum of money to Abengoza; that she did not know that the amounts on the treasury warrants
Kauffman. But this order was not made payable “to order” or “to had been altered nor did she represent to petitioner that the treasury
bearer,” as required in subsection (d) of that Act; and inasmuch warrants were genuine; and that upon being informed of the dishonor of
the warrants she immediately contacted Aida Abengoza and signed an the purpose of clearing the same. Private respondent acceded, and agreed
acknowledgment of debt promising to pay the total amount of the treasury to deliver to Chan a signed blank withdrawal slip, with the understanding
warrants. that as soon as the check is cleared, both of them would go to the bank to
withdraw the amount of the check upon private respondent’s presentation
MTC acquitted Imperial but held her civilly liable as indorser of the checks
to the bank of his passbook. Napiza thus endorsed the check and deposited
which are the subject matter of the criminal action. The RTC held that the
it in a Foreign Currency Deposit Unit (FCDU) Savings Account he maintained
decision of the MTC did not really find respondent liable for P320,286.46
with BPI. Using the blank withdrawal slip given by private respondent to
because in fact it was petitioner who was found responsible for making the
Chan, one Ruben Gayon, Jr. was able to withdraw the amount from Napiza’s
defraudation possible.
FCDU account. It turned out that said check deposited by private
ISSUE: respondent was a counterfeit check.

Whether or not respondent is civilly liable as indorser of the checks subject When BPI demanded the return of the money, private respondent claimed
matter of the criminal action. that he deposited the check “for clearing purposes” only to accommodate
Chan.
RULING:
Petitioner claims that private respondent, having affixed his signature at the
The Court symphatizes with the complainant that there was indeed damage dorsal side of the check, should be liable for the amount stated therein in
and loss, but said loss is chargeable to the accused who upon her accordance with the provision of the Negotiable Instruments Law on the
indorsements warrant that the instrument is genuine in all respect what it liability of a general indorser.
purports to be and that she will pay the amount thereof in case of dishonor.
(Sec. 66 Negotiable Instrument Law) ISSUE:

Thus, while the MTC found petitioner partly responsible for the encashment Whether private respondent is obliged to return the money paid out by BPI
of the altered checks, it found respondent civilly liable because of her on a counterfeit check even if he deposited the check “for clearing
indorsements of the treasury warrants, in addition to the fact that purposes” only to accommodate Chan.
respondent executed a notarized acknowledgment of debt promising to pay
RULING:
the total amount of said warrants.
Ordinarily private respondent may be held liable as an indorser of the check
or even as an accommodation party. However, petitioner BPI, in allowing
the withdrawal of private respondent’s deposit, failed to exercise the
diligence of a good father of a family. BPI violated its own rules by allowing
Bank of the Philippine Islands v. Court of Appeals the withdrawal of an amount that is definitely over and above the aggregate
G.R. No. 112392, 29 February 2000, SCRA 641 amount of private respondent’s dollar deposits that had yet to be cleared.
The proximate cause of the eventual loss of the money on BPI’s part was its
FACTS: personnel’s negligence in allowing such withdrawal in disregard of its own
A certain Henry Chan owned a Continental Bank Manager’s Check payable rules and the clearing requirement in the banking system. In so doing, BPI
to “cash”. Chan went to the office of Benjamin Napiza and requested him to assumed the risk of incurring a loss on account of a forged or counterfeit
deposit the check in his dollar account by way of accommodation and for foreign check and hence, it should suffer the resulting damage.
It is thus clear that ordinarily private respondent may be held liable as an Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial
indorser of the check or even as an accommodation party. However, to hold Banking Corporation (RCBC). The checks were returned for the reason
private respondent liable for the amount of the check he deposited by the “account closed.” The dishonor of the checks was evidenced by the RCBC
strict application of the law and without considering the attending return slip.
circumstances in the case would result in an injustice and in the erosion of
On June 20, 1986, complainant through counsel notified the petitioner of
the public trust in the banking system. The interest of justice thus demands
the dishonor. Petitioner failed to make arrangements for payment within
looking into the events that led to the encashment of the check.
five (5) banking days.

On November 6, 1987, petitioner was charged with three (3) counts of

violation of B.P. Blg. 224 under three separate Informations for the three
checks amounting to P5,500.00, P3,375.00, and P6,410.00.
Wong v. Court of Appeals
Petitioner was similarly charged in Criminal Case No. 12057 for ABC Check
G.R. No. 117857, 2 February 2001, 351 SCRA 100
No. 660143463 in the amount of P3,375.00, and in Criminal Case No. 12058
FACTS: for ABC Check No. 660143464 for P6,410.00. Both cases were raffled to the
same trial court. The version of the defense is that petitioner issued the six
Petitioner Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of (6) checks to guarantee the 1985 calendar bookings of his customers.
calendars. LPI would print sample calendars, then give them to agents to According to petitioner, he issued the checks not as payment for any
present to customers. The agents would get the purchase orders of obligation, but to guarantee the orders of his customers. Petitioner
customers and forward them to LPI. After printing the calendars, LPI would appealed his conviction to the Court of Appeals.
ship the calendars directly to the customers.
On October 28, 1994, it affirmed the trial court’s decision in toto. Hence, the
Thereafter, the agents would come around to collect the payments. present petition.
Petitioner, however, had a history of unremitted collections, which he duly
acknowledged in a confirmation receipt he co-signed with his wife. Hence, ISSUE:
petitioner’s customers were required to issue postdated checks before LPI
Whether or not the prosecution was able to establish beyond reasonable
would accept their purchase orders.
doubt all the elements of the offense penalized under B.P. Blg. 22.
In early December 1985, Wong issued six (6) postdated checks totaling
RULING:
P18,025.00, all dated December 30, 1985 and drawn payable to the order of
LPI. These checks were initially intended to guarantee the calendar orders of Yes.
customers who failed to issue post-dated checks.
As to the second element, B.P. Blg. 22 creates a presumption juris
However, following company policy, LPI refused to accept the checks as tantum that the second element prima facie exists when the first and third
guarantees. Instead, the parties agreed to apply the checks to the payment elements of the offense are present. Thus, the maker’s knowledge is
of petitioner’s unremitted collections for 1984 amounting to P18,077.07. LPI presumed from the dishonor of the check for insufficiency of funds.
waived the P52.07 difference. Before the maturity of the checks, petitioner
Petitioner contends that the first element does not exist because the checks
prevailed upon LPI not to deposit the checks and promised to replace them
were not issued to apply for account or for value. He attempts to distinguish
within 30 days. However, petitioner reneged on his promise.
his situation from the usual “cut-and-dried” B.P. 22 case by claiming that the
checks were issued as guarantee and the obligations they were supposed to
State Investment House vs. CA
guarantee were already paid.
GR 101163, 11 January 1993
This flawed argument has no factual basis, the RTC and CA having both ruled
that the checks were in payment for unremitted collections, and not as First Division, Bellosillo (J)
guarantee. Likewise, the argument has no legal basis, for what B.P. Blg. 22
punishes is the issuance of a bouncing check and not the purpose for which Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for
it was issued nor the terms and conditions relating to its issuance. As to the pieces of jewelry sold on commission. Victoriano negotiated the checks to
second element, B.P. Blg. 22 creates a presumption juris tantum that the the State Investment House Inc. (SIHI). Moulic failed to sell the pieces of
second element prima facie exists when the first and third elements of the jewelry, so he returned them to the payee before the maturity of the
offense are present. Thus, the maker’s knowledge is presumed from the checks. The checks, however, could not be retrieved as they had already
dishonor of the check for insufficiency of funds. been negotiated. Before the check’s maturity dates, Moulic withdrew her
funds from the drawee bank. Upon presentment of the checks for payment,
An essential element of the offense is “knowledge” on the part of the maker they were dishonored for insufficiency of funds. SIHI sued to recover the
or drawer of the check of the insufficiency of his funds in or credit with the value of the checks.
bank to cover the check upon its presentment. Since this involves a state of
mind difficult to establish, the statute itself creates a prima Issue: Whether the personal defense of failure or absence of consideration
facie presumption of such knowledge where payment of the check “is is available, or conversely, whether SIHI is a holder in due course.
refused by the drawee because of insufficient funds in or credit with such Held: On their faces, the post-dated checks were complete and regular; SIHI
bank when presented within ninety (90) days from the date of the check.” bought the checks from the payee (Victoriano) before their due dates; SIHI
To mitigate the harshness of the law in its application, the statute provides took the checks in good faith and for value, albeit at a discounted price; and
that such presumption shall not arise if within five (5) banking days from SIHI was never informed not made aware that the checks were merely
receipt of the notice of dishonor, the maker or drawer makes arrangements issued to payee as security and not for value. Complying with the requisites
for payment of the check by the bank or pays the holder the amount of the of Section 52 of the Negotiable Instruments Law, SIHI is a holder in due
check. course. As such, it holds the instruments free from any defect of title of
prior parties, and from defenses available to prior parties among
The clear import of the law is to establish a prima facie presumption of themselves. SIHI may enforce full payment of the checks. The defense of
knowledge of such insufficiency of funds under the following conditions (1) failure or absence of consideration is not available as SIHI was not privy to
presentment within 90 days from date of the check, and (2) the dishonor of the purpose for which the checks were issued.
the check and failure of the maker to make arrangements for payment in
full within 5 banking days after notice thereof. That the post-dated checks were merely issued as security is not a ground
for the discharge of the instrument as against a holder in due course. It is
That the check must be deposited within ninety (90) days is simply one of not one of the grounds outlined in Section 119 of the Negotiable Instrument
the conditions for the prima facie presumption of knowledge of lack of Law, for the instrument to be discharged.
funds to arise. It is not an element of the offense.
It must be noted that the drawing and negotiation of a check have certain
effects aside from the transfer of title or the incurring of liability in regard to
the instrument by the transferor. The holder who takes the negotiated NO. MOULIC cannot set up against STATE the defense that there was failure
paper makes a contract with the parties on the face of the instrument. or absence of consideration. MOULIC can only invoke this defense against
There is an implied representation that funds or credit are available for the STATE if it was privy to the purpose for which they were issued and
payment of the instrument in the bank upon which it is drawn. therefore is not a holder in due course.
Consequently, the withdrawal of the money from the drawee bank to avoid
MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the
liability on the checks cannot prejudice the rights of holders in due course.
discharge of the instrument. But, the intentional cancellation contemplated
The drawer, Moulic, is liable to the holder in due course, SIHI. under paragraph (c) is that cancellation effected by destroying the
instrument either by tearing it up,5 burning it,6 or writing the word
Ver. 2
“cancelled” on the instrument. The act of destroying the instrument must
State Investment House v. Court of Appeals also be made by the holder of the instrument intentionally. Since MOULIC
failed to get back possession of the post-dated checks, the intentional
217 SCRA 32 (1993) cancellation of the said checks is altogether impossible.
FACTS: On the other hand, the acts which will discharge a simple contract for the
Private respondent Nora B. Moulic issued to Corazon Victoriano, as security payment of money under paragraph (d) are determined by other existing
for pieces of jewelry to be sold on commission, two (2) post-dated Equitable legislations since Sec. 119 does not specify what these acts are, e.g., Art.
Banking Corporation checks in the amount of Fifty Thousand Pesos 1231 of the Civil Code7 which enumerates the modes of extinguishing
(P50,000.00) each, one dated 30 August 1979 and the other, 30 September obligations. Again, none of the modes outlined therein is applicable in the
1979. Thereafter, the payee negotiated the checks to petitioner State instant case as Sec. 119 contemplates of a situation where the holder of the
Investment House. Inc. (STATE). instrument is the creditor while its drawer is the debtor. In the present
action, the payee, Corazon Victoriano, was no longer MOULIC’s creditor at
MOULIC failed to sell the pieces of jewelry, so she returned them to the the time the jewelry was returned.
payee before maturity of the checks. The checks, however, could no longer
be retrieved as they had already been negotiated. Consequently, before ELVIRA YU OH vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES
their maturity dates, MOULIC withdrew her funds from the drawee bank. G.R. No. 125297, June 6, 2003
Upon presentment for payment, the checks were dishonored for Facts:
insufficiency of funds. On 20 December 1979, STATE allegedly notified
MOULIC of the dishonor of the checks and requested that it be paid in cash Elvira Yu Oh purchased pieces of jewelry from Solid Gold International
instead, although MOULIC avers that no such notice was given her. Traders, Inc. Due to her failure to pay the purchase price, Solid Gold filed
civil cases against her for specific performance. On September 17, 1990, Yu
ISSUE: Oh and Solid Gold, through its general manager Joaquin Novales III, entered
Whether or not Moulic can set up against the petitioner the defense that into a compromise agreement to settle said civil cases. The compromise
there was failure or absence of consideration agreement, as approved by the trial court, provided that Yu Oh shall issue a
total of ninety-nine post-dated checks in the amount of P50,000.00 each,
RULING: dated every 15th and 30th of the month starting October 1, 1990 and the
balance of over P1 million to be paid in lump sum on November 16, 1994
which is also the due date of the 99 th and last postdated check. Yu Oh issued
ten checks at P50,000.00 each, for a total of P500,000.00, drawn against her -After moving in his unit, Sycip complained to FRC regarding defects in the
account at the Equitable Banking Corporation (EBC), Grace Park, Caloocan unit and incomplete features of the townhouse project. FRC ignored the
City Branch. Novales then deposited each of the ten checks on their complaint.
respective due dates with the Far East Bank and Trust Company (FEBTC).
-Sycip served on FRC 2 notarial notices to the effect that he was suspending
However, said checks were dishonored by EBC for the reason "Account
his instalment payments on the unit pending compliance with the project
Closed." Dishonor slips were issued for each check that was returned to
plans and specifications, as approved by the Housing and Land Use
Novales.
Regulatory Board (HLURB).
Issue:
-Notwithstanding the notarial notices, FRC continued to present for
Whether or not notice of dishonor is dispensable in the case at bar. encashment Sycip’s postdated checks in its possession. Sycip sent “stop
payment orders” to the bank.
Held:
-The bank (Citibank) advised Sycip to close his checking account to avoid
It is essential for the maker or drawer to be notified of the dishonor of her
paying bank charges evry time he made a “stop payment” order.
check, so she could pay the value thereof or make arrangements for its
payment within the period prescribed by law and omission or neglect on the -Due to the closure of petitioner’s checking account, the drawee bank
part of the prosecution to prove that the accused received such notice of dishonoured six postdated checks. FRC filed a complaint against petitioner
dishonor is fatal to its cause. Thus, absent a clear showing that petitioner for violations of BP Blg 22 involving said dishonoured checks.
actually knew of the dishonor of her checks and was given the opportunity
-RTC and CA found petitioner guilty of violating Sec 1 of BP Blg 22 in each of
to make arrangements for payment as provided for under the law, we
the six cases.
cannot with moral certainty convict her of violation of B.P. Blg. 22. The
failure of the prosecution to prove that petitioner was given the requisite  
notice of dishonor is a clear ground for her acquittal.
Issue: w/n the CA erred in affirming the conviction of petitioner for violation
of the Bouncing Checks Law.
SYCIP JR. v. CA [Or yung related sa topic] w/n petitioner has a valid defense to the charges
against him
BY MAROON 5 PARTNERS AND ASSOCIATES JUNE 1, 2012 BP22
 
Facts:
Held: Petitioner’s exercise of a right of the buyer under Article 23 of PD 957
-Francisco Sycip agreed to buy, on installment, from Francel Realty
is a valid defense to the charges against him.  Petition is granted. Petitioner
Corporation (FRC), a townhouse unit.
is ACQUITTED of the charges against him under BP Blg. 22.
-Upon execution of the contract to sell, Sycip, as required issued to FRC 48
 
postdated checks, each on the amount of P9,304 covering 48 monthly
instalments. RD:

-We find that although the first element of the offense exists, the other
elements have not been established beyond reasonable doubt.
Under the provisions of BP Blg 22, an offense is committed when the Facts:    BA-Finance Corporation (BA Finance) and Miller Offset Press, Inc.
following elements are present: (1) the making, drawing and issuance of any (Miller) entered into a credit line facility agreement whereby Miller can
check to apply for account or for value; (2) the knowledge of the maker, discount and assign its trade receivables with the BA Finance. At the same
drawer, or issuer that at the time of issue he does not have sufficient funds time, Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng, acting for
in or credit with the drawee bank for the payment of such check in full upon Miller, executed a Continuing Suretyship Agreement with BA-Finance. 
its presentment; and (3) the subsequent dishonour of the check by the Under the agreement,  they jointly and severally guaranteed the full and
drawee bank for insufficiency of funds or credit or dishonor for the same prompt payment of any and all indebtedness which Miller may incur with
reason had not the drawer, without any valid cause, ordered the bank to BA-Finance.
stop payment.
Miller discounted and assigned several trade receivables to BA-Finance by
We find from the records no showing that at the time said checks were executing Deeds of Assignment in favor of the latter. In consideration
issued, petitioner had knowledge that his deposit or credit in the bank thereof, BA-Finance issued four checks payable to the order of Miller with
would be insufficient to cover them when presented for encashment. the notation “For Payee’s Account Only.” These checks were drawn against
Bank of America. The four checks were deposited by Ching Uy Seng in
-We are of the view that petitioner had a valid cause to order his bank to
Associated Citizens Bank with his joint account with Uy Chung Seng.
stop payment. The third element of “subsequent dishonour of the check…
Associated Bank stamped the checks and guaranteed all prior endorsements
without valid cause” appear to us not established by the prosecution.
and/or lack of endorsements and sent them through clearing. Later, Bank of
-Following Article 11 (5) of the RPC, petitoner’s exercise of a right of the America as drawee bank honored the checks and paid the proceeds to
buyer under Art 23 of PD 957 is a valid defense to charges against him. Associated Bank as the collecting bank. When Miller failed to deliver to BA-
Finance the proceeds of the assigned trade receivables, BA-Finance filed a
Sec 23 of PD 957: The buyer of a townhouse unit has the right to suspend collection suit against Miller and impleaded the three representative of the
his amortization payments, should the subdivision or condominium latter.
developer fail to develop or complete the project in accordance with duly
approved plans and specifications. Bank of America filed a third party complaint against Associated Bank. In its
answer to the third party complaint, Associated Bank admitted having
received the four checks for deposit in the joint account of Ching Uy Seng
Bank of America, NT and SA vs. Associated Citizens Bank G.R. No. 141001, and Uy Chung Guan Seng, but alleged that Ching Uy Seng, being one of the
May 21, 2009 corporate officers of Miller, was duly authorized to act for and on behalf of
Miller.
MARCH 16, 2014LEAVE A COMMENT
Issues: Whether or not Bank of America is liable to pay BA-Finance and
The Bank is under strict liability, based on the contract between the bank whether or not Associated Bank should reimburse Bank of America the
and its customer (drawer), to pay the check only to the payee or the amount of the four checks.
payee’s order. The drawer’s instructions are reflected on the face and by
the terms of the check. When the drawee bank pays a person other than Held:    The bank on which a check is drawn, known as the drawee bank, is
the payee named on the check, it does not comply with the terms of the under strict liability, based on the contract between the bank and its
check and violates its duty to charge the drawer’s account only for customer (drawer), to pay the check only to the payee or the payee’s order.
properly payable items. The drawer’s instructions are reflected on the face and by the terms of the
check. When the drawee bank pays a person other than the payee named
on the check, it does not comply with the terms of the check and violates its FACTS OF THE CASE:
duty to charge the drawer’s account only for properly payable items.  On
Lisam Enterprises, Inc. [LISAM], a family-owned and controlled corporation
the part of Associated Bank, the law imposes a duty of diligence on the
that maintains Current Account No. 445830099-8 with petitioner PNB avail a
collecting bank to scrutinize checks deposited with it for the purpose of
Floor Stock Line (FSL) in the increased amount of Thirty Million Pesos (₱30
determining their genuineness and regularity. The collecting bank being
Million), Soriano as the chairman and president of LISAM and the authorized
primarily engaged in banking holds itself out to the public as the expert and
signatory in all LISAMs Transactions with [PNB]. For each availment, LISAM
the law holds it to a high standard of conduct. In presenting the checks for
through [Soriano], executed 52 Trust Receipts (TRs). In addition to the
clearing and for payment, the defendant [collecting bank] made an express
promissory notes, showing its receipt of the items in trust with the duty to
guarantee on the validity of “all prior endorsements.” Thus, stamped at the
turn-over the proceeds of the sale thereof to [PNB].
back of the checks are the defendant’s clear warranty. As the warranty has
proven to be false and inaccurate, Associated Bank is liable for any damage PNBs authorized personnel conducted an actual physical inventory of
arising out of the falsity of its representation. LISAMs motor vehicles and motorcycles and found that only four (4) units
covered by the TRs remained unsold.
Held:    A bank that regularly processes checks that are neither payable to
the customer nor duly indorsed by the payee is apparently grossly negligent Total availments on the line covered by TRs, [LISAM] should have remitted
in its operations. This Court has recognized the unique public interest to PNB, Twenty Nine Million Four Hundred Eighty Seven Thousand Eight
possessed by the banking industry and the need for the people to have full Hundred Forty Four Pesos and Fifty Five Centavos (₱29,487,844.55).
trust and confidence in their banks. For this reason, banks are minded to Despite several formal demands, respondent Soriano failed and refused to
treat their customer’s accounts with utmost care, confidence, and honesty. turn over the said amount to the prejudice of PNB. ll
In a checking transaction, the drawee bank has the duty to verify the
genuineness of the signature of the drawer and to pay the check strictly in PNB, as previously adverted to, filed a complaint-affidavit before the Office
accordance with the drawer’s instructions, i.e., to the named payee in the of the City Prosecutor of Naga City charging Soriano with fifty two (52)
check. It should charge to the drawer’s accounts only the payables counts of violation of the Trust Receipts Law, in relation to Article 315,
authorized by the latter. Otherwise, the drawee will be violating the paragraph 1(b) of the Revised Penal Code.
instructions of the drawer and it shall be liable for the amount charged to In refutation, Soriano filed a counter-affidavit asserting that:
the drawer’s account. Rodriguez checks are payable to order since the bank
failed to prove that the named payees therein are fictitious. 1. LISAM submitted proposals to PNB for the restructuring of all of LISAMs
credit facilities. PNB LISAM informing PNBs lack of objection to LISAMs
Hence, the fictitious-payee rule which will make the instrument payable to proposal of restructuring all its obligations; and
bearer does not apply. PNB accepted the 69 checks for deposit to the
PEMSLA account even without any indorsement from the named payees. It 2. PNB Boards minutes of meeting informed that the Board of Directors of
bears stressing that order instruments can only be negotiated with a valid PNB has approved the conversion of LISAMs existing credit facilities at PNB.
indorsement. PNB filed a reply-affidavit maintaining Sorianos criminal liability under the
TRs:

PHILIPPINE NATIONAL BANK, Petitioner, v. LILIAN S. SORIANO, Respondent. While it is true that said restructuring was approved, the same was never
implemented because [LISAM] failed to comply with the conditions of
approval stated in B/R No. 6, such as the payment of the interest and other
charges and the submission of the title of the 283 sq. m. of vacant Art. 1292. In order that an obligation may be extinguished by another which
residential lot, x x x Tandang Sora, Quezon City. substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point
The DOJ, in a Resolution dated 25 June 2002, reversed and set aside the
incompatible with each other. contemplates two kinds of novation: express
earlier resolution of the Naga City Prosecutor and hereby directed to move,
or implied. The extinguishment of the old obligation by the new one is a
with leave of court, for the withdrawal of the informations for estafa against
necessary element of novation, which may be effected either expressly or
Lilian S. Soriano in Criminal Case Nos. 2001-0641 to 0693.
impliedly.
PNB filed a petition for certiorari  before the Court of Appeals. The appellate
In order for novation to take place, the concurrence of the following
court did not find grave abuse of discretion in the questioned resolution of
requisites is indispensable:
the DOJ, and dismissed PNBs petition for certiorari.
(1) There must be a previous valid obligation;
ISSUE: Whether or not the Court of Appeals gravely erred in concurring with
the finding of the DOJ that the approval by PNB of [LISAMs] restructuring (2) There must be an agreement of the parties concerned to a new contract;
proposal of its account with PNB had changed the status of [LISAMs]
(3) There must be the extinguishment of the old contract; and
obligations secured by Trust Receipts to one of an ordinary loan, non-
payment of which does not give rise to a criminal liability. (4) There must be the validity of the new contract. 23ςrνll
Petitioner file an appeal by certiorari. In this case, without a written contract stating in unequivocal terms that the
parties were novating the original loan agreement, thus undoubtedly
HELD:
eliminating an express novation.
Respondent Soriano, despite several opportunities to do so, failed to file a
The approval of LISAMs restructuring proposal is not the bone of contention
Memorandum as required in the Court Resolution dated 16 January 2008.
in this case. The pitch of the issue lies in whether, assuming a restructuring
Thus, on 8 July 2009, the Court resolved to dispense with the filing of
was effected, it extinguished the criminal liability on the loan obligation
Soriano’s Memorandum.
secured by trust receipts, by extinguishing the entruster-entrustee
LISAM failed to comply with the conditions precedent for its effectivity, relationship and substituting it with that of an ordinary creditor-debtor
specifically, the payment of interest and other charges, and the submission relationship.
of the titles to the real properties in Tandang Sora, Quezon City. PNB is
The Court look to whether there is an incompatibility between the Floor
adamant that the events concerning the restructuring of LISAMs loan did
Stock Line secured by TRs and the subsequent restructured Omnibus Line
not affect the TR security, thus, Sorianos criminal liability there under
which was supposedly approved by PNB. The test of incompatibility is
subsists.
whether the two obligations can stand together, each one having its
The Court did not subscribe to the appellate courts reasoning. The DOJ independent existence. If they cannot, they are incompatible and the latter
Secretarys and the Court of Appeals holding that, the supposed obligation novates the first.
restructuring novated the loan agreement between the parties is myopic.
The Court have scoured the records and found no incompatibility between
The purported restructuring of the loan agreement did not constitute
the Floor Stock Line and the purported restructured Omnibus Line. While
novation.
the restructuring was approved in principle, the effectivity thereof was
Article 1292 of the Civil Code which provides:cbrary subject to conditions precedent such as the payment of interest and other
charges, and the submission of the titles to the real properties in Tandang Regional Trial Court, Branch 21 of Naga City in Criminal Cases Nos. 2001-
Sora, Quezon City. 0641 to 2001-0693, except Criminal Case No. 2001-0671, dated 27
November 2002, 21 February 2003 and 15 July 2003 are SET ASIDE and its
Moreover, as asserted by Soriano in her counter-affidavit, the waiver
Order of 16 October 2002 resetting the continuation or the pre-trial
pertains to penalty charges on the Floor Stock Line. There is no showing that
is REINSTATED. The RTC is further ordered to conduct the pretrial with
the waiver extinguished Sorianos obligation to "sell the merchandise for
dispatch.ςrαlαωlιbrαr
cash for LISAMs account and to deliver the proceeds thereof to PNB to be
applied against its acceptance on LISAMs account." Soriano further agreed SO ORDERED.
to hold the "vehicles and proceeds of the sale thereof in Trust for the
payment of said acceptance and of any of its other indebtedness to PNB."

Well-settled is the rule that, with respect to obligations to pay a sum of

Borromeo vs. Sun
money, the obligation is not novated by an instrument that expressly Borromeo vs Sun
recognizes the old, changes only the terms of payment, adds other G.R. No. 75908. October 22, 1999
obligations not incompatible with the old ones, or the new contract merely PURISIMA, J
supplements the old one. Besides, novation does not extinguish criminal
liability. It stands to reason therefore, that Sorianos criminal liability under At bar is a Petition for review on Certiorari under Rule 45 of the
the TRs subsists considering that the civil obligations under the Floor Stock Revised Rules of Court seeking to set aside the Resolution of
Line secured by TRs were not extinguished by the purported restructured the then Intermediate Appellate Court, which reversed its earlier
Omnibus Line. Decision setting aside the Decision of the former Court of the
Based on all the foregoing, we find grave error in the Court of Appeals First Instance of Rizal.
dismissal of PNBs petition for certiorari. Certainly, while the determination
Facts: 
of probable cause to indict a respondent for a crime lies with the
prosecutor, the discretion must not be exercised in a whimsical or despotic Amancio Sun brought before the then Court of the First Instance
manner tantamount to grave abuse of discretion. of Rizal an action against Lourdes O. Borromeo (in her capacity
as corporate secretary), Federico O. Borromeo and Federico O.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
Borromeo (F.O.B.), Inc., to compel the transfer to his name in
in CA-G.R. SP No. 76243 finding no grave abuse of discretion on the part of
the books of F.O.B., Inc., shares of stock registered in the name
the Secretary of Justice is REVERSED and SET ASIDE.
of Federico O. Borromeo, as evidenced by a Deed of
The Resolution of the Secretary of Justice dated 25 June 2002, directing the Assignment. Private respondent averred that all the shares of
City Prosecutor of Naga City to move for the withdrawal of the Informations stock of F.O.B. Inc. registered in the name of Federico O.
for estafa  in relation to the Trust Receipts Law against respondent Lilian S. Borromeo belong to him, as the said shares were placed in the
Soriano, and his 29 October 2002 Resolution, denying petitioner's Motion name of Federico O. Borromeo 'only to give the latter
for Reconsideration, are ANNULLED and SET ASIDE for having been issued personality and importance in the business world.' On the other
with grave abuse of discretion; and the Resolution or the Naga City hand, petitioner Federico O. Borromeo disclaimed any
Prosecutor's Office dated 19 March 2001, finding probable cause against participation in the execution of the Deed of Assignment,
herein respondent, is REINSTATED. Consequently, the Orders of the theorizing that his supposed signature thereon was forged. LL
 While it is true that the 1974 standard signature of Federico O.
Borromeo is to the naked eye dissimilar to his questioned
The lower court of origin came out with a decision declaring the
signature circa 1954-1957, which could have been caused by
questioned signature on subject Deed of Assignment as the
sheer lapse of time, Col. Jose Fernandez, respondent's expert
genuine signature of Federico O. Borromeo. After considering
witness, found the said signatures similar to each other after
the testimonies of the two expert witnesses for the parties and
subjecting the same to stereomicroscopic examination and
after a careful and judicious study and analysis of the
analysis because the intrinsic and natural characteristic of
questioned signature as compared to the standard signatures.
Federico O. Borromeo's handwriting were present in all the
On appeal by petitioners, the Court of Appeals adjudged as
exemplar signatures used by both Segundo Tabayoyong and
forgery the controverted signature of Federico O. Borromeo.
Col. Jose Fernandez.
Amancio Sun interposed a motion for reconsideration of the said
decision, contending that Segundo Tabayoyong, petitioners'
expert witness, is not a credible witness. Acting on the aforesaid
Abubakar vs Auditor General
motion for reconsideration, the Court of Appeals reconsidered
its decision. FACTS:
Issue: WON the signature of Frederico O. Borromeo in the Deed A treasury warrant was issued in favor of Placido Urbanes in his
of Assignments is a genuine signature. capacity as disbursing officer of the Food Administration. He
later indorsed it to petitioner, Benjamin Abubakar, a private
Held:
citizen. The Auditor General refused to authorize the payment of
Pertinent records reveal that the subject Deed of Assignment is said treasury warrant
embodied in blank form for the assignment of shares with
ISSUE(S):
authority to transfer such shares in the books of the corporation.
It was clearly intended to be signed in blank to facilitate the Whether or not the subject treasury warrant is a negotiable
assignment of shares from one person to another at any future instrument
time. This is similar to Section 14 of the Negotiable Instruments
Law where the blanks may be filled up by the holder, the signing HELD:
in blank being with the assumed authority to do so. Indeed, as NO. This treasury warrant is not within the scope of the
the shares were registered in the name of Federico O. negotiable instrument law. The document bearing on its face the
Borromeo just to give him personality and standing in the words “payable from the appropriation for food administration,”
business community, private respondent had to have a counter is actually an order for payment out of “a particular fund,” and is
evidence of ownership of the shares involved. Thus, the not unconditional and does not fulfill one of the essential
execution of the deed of assignment in blank, to be filled up requirements of a negotiable instrument.
whenever needed. The same explains the discrepancy between
the date of the deed of assignment and the date when the PERTINENT PROVISION(S)
signature was affixed thereto.
NIL, Section 3, last sentence: But an order or promise to pay out Finding no merit in this appeal, the judgment of the court below
of a particular fund is not unconditional. is affirmed with costs against the appellant.

G.R. No. L-39815             April 28, 1934 Digest: New Pacific Timber & Supply Co., Inc vs. Seneris
[No. L-41764. December19, 1980.]
EULALIO BELISARIO, plaintiff-appellant,
vs. FACTS: Herein petitioner was the defendant in a complaint for
PAZ NATIVIDAD VIUDA DE ZULUETA, defendant-appellee. collection of a sum of money filed by the private respondent. On
July 19, 1974, a compromise judgment was rendered by the
BUTTE, J.:
respondent Judge in accordance with an amicable settlement
FACTS entered into by the parties. For failure of the petitioner to comply
with his judgment obligation, the respondent Judge, issued an
It appears from Exhibit A that the plaintiff sold the lands (Nos. order for the issuance of a writ of execution. Accordingly, writ of
3357 and 3358) to the defendant fo  P37,000, which was duly execution was issued for the amount of P63,130.00 pursuant to
paid, and the agreement on the part of the grantee to assume which, the Ex Officio Sheriff levied upon the following personal
an indebtedness secured by a lien for 4, 500, which was properties of the petitioner and set the auction sale thereof on
likewise duly paid. The deed bears the date of April 29, 1927. January 15, 1975. Prior to January 15, 1975, petitioner
On the same date the defendant executed and delivered in favor deposited with the Clerk of CFI the sum of P63,130.00 for the
of the plaintiff an option to repurchase the lands on or before the payment of the judgment obligation, consisting of the following.
end of May, 1931, for the sum of P37,000. (1) P50,000.00 in Cashier's Checks No. S314361 dated January
3, 1975 of the Equitable Banking Corporation; and (2)
On the 28th of May, 1931, the plaintiff tendered to the defendant P13,130.00 in cash. The private respondent refused to accept
a check in the sum of P37,000, drawn by Rosendo Santiago the check as well as the cash deposit. The respondent judge
against his account in the Peoples Bank and Trust Company. upheld private respondent's claim that he has the right to refuse
ISSUE payment by means of a check, the respondent Judge citing
Section 63 of the Central Bank Act, and Article 1249 of the New
Whether or not the checks made would produce the effect of Civil Code.
payment.
HELD
ISSUE: Whether or not the private respondent can validly refuse
At the time said check was tendered to the defendant the acceptance of the payment of the judgment obligation made by
drawer thereof had on deposit in the said bank subject to check the petitioner consisting of P50,000.00 in Cashier's Check and
the sum of P5.85. Even if the check had been good, the P13,130.00 in cash which it deposited with the Ex-Officio Sheriff
defendant was not legally bound to accept it because such a before the date of the scheduled auction sale. / Can the check
check does not satisfy the requirements of a legal tender. be considered a valid payment of the judgment obligation?
HELD: It is to be emphasized in this connection that the check
deposited by the petitioner in the amount of P50.000.00 is not
an ordinary check but a Cashier's Check of the Equitable
Banking Corporation, a bank of good standing and reputation.
Where a check is certified by the bank on which it is drawn, the
certification is equivalent to acceptance. The object of certifying
a check, as regards both parties, is to enable the holder to use it
as money. When the holder procures the check to be certified,
"the check operates as an assignment of a part of the funds to
the creditors". The exception to the rule enunciated under
Section 63 of the Central Bank Act to the effect "that a check
which has been cleared and credited to the account of the
creditor shall be equivalent to a delivery to the creditor in cash in
an amount equal to the amount credited to his account" shall
apply in this case. Petition was granted ordering the private
respondent to accept the sum of P63,130.00 under deposit as
payment of the judgment obligation in his favor. “Considering
that the whole amount deposited by the petitioner consisting of
Cashier's Check of P60;000.00 and P13,130.00 in cash covers
the judgment obligation of P63,000.00 as mentioned in the writ
of execution, then. We see no valid reason for the private
respondent to have refused acceptance of the payment of the
obligation in his favor”.