Case Digest Compilation Nego Nov 21

AVENGERS CASE DIGEST
G.R. No. L-1405 July 31, 1948 All postmasters and all banks were instructed not to pay anyone of
the money orders if presented for payment. The Bank of America
BENJAMIN ABUBAKAR, petitioner, received a copy of said notice three days later.
vs.
THE AUDITOR GENERAL, respondent. One of the above-mentioned money orders numbered 124688 was
received by appellant as part of its sales receipts. The following day
In 1941, a treasury warrant was issued in favor of Placido Urbanes, it deposited the same with the Bank of America, and one day
a government employee in the province of La Union. The said thereafter the latter cleared it with the Bureau of Posts and received
treasury warrant was meant to augment the Food Production from the latter its face value of P200.00.
Campaign in the said province. It was then negotiated by Urbanes
to Benjamin Abubakar, a private individual. When Abubakar sought Appellee Mauricio A. Soriano of the Manila Post Office notified the
to have the treasury warrant encashed, the Auditor General denied Bank of America that money order No. 124688 had been found to
payment because first of, it is against the appropriating law have been irregularly issued and that the amount it represented had
(Republic Act 80) to authorize payments to private individuals been deducted from the bank's clearing account. For its part, the
when it comes to treasury warrants. Abubakar then contends that he Bank of America debited appellant's account with the same amount
is entitled to encash as he was a holder in good faith. and gave it advice thereof by means of a debit memo.
ISSUE: WHETHER OR NOT A TREASURY WARRANT IS A Issue: WON the postal money order in question is a negotiable
NEGOTIABLE INSTRUMENT. instrument
HELD: No. A treasury warrant is not a negotiable instrument. One Ruling: No. It is not disputed that the Philippine postal statutes
of the requirements of a negotiable instrument is that it must be were patterned after similar statutes in force in United States.
unconditional. In Section 3 of the Negotiable Instruments Law, an
order or promise to pay out of a particular fund makes the Of particular application to the postal money order in question are
instrument conditional. A treasury warrant, like the one in this case, the conditions laid down in the letter of the Director of Posts to the
comes from a particular fund, a particular appropriation. In this Bank of America for the redemption of postal money orders
case, it was written on the face of the treasury warrant that it is received by it from its depositors. Among others, the condition is
payable from the appropriation for food administration. Thus, it is imposed that "in cases of adverse claim, the money order or money
not negotiable for being conditional. orders involved will be returned to you (the bank) and the,
corresponding amount will have to be refunded to the Postmaster,
NOTE the difference: However, an instrument is negotiable if it Manila, who reserves the right to deduct the value thereof from any
merely mentions/indicates a particular fund out of which amount due you if such step is deemed necessary." The conditions
reimbursement is to be made. This does not make the instrument thus imposed in order to enable the bank to continue enjoying the
conditional because it does not say that such particular fund is the facilities theretofore enjoyed by its depositors, were accepted by the
source of payment. It is only a notice to the drawee that he can Bank of America. The latter is therefore bound by them. That it is
reimburse himself out of that particular fund after paying the payee. so is clearly referred from the fact that, upon receiving advice that
As to the source of payment to the payee, there is no mention of it. the amount represented by the money order in question had been
deducted from its clearing account with the Manila Post Office, it
did not file any protest against such action. The appealed decision is
hereby affirmed.
G.R. No. L-22405 June 30, 1971
PHILIPPINE EDUCATION CO., INC., plaintiff-appellant,

vs. G.R. No. 97753 August 10, 1992
MAURICIO A. SORIANO, ET AL., defendant-appellees.
CALTEX (PHILIPPINES), INC., petitioner,
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST
Facts: Enrique Montinola sought to purchase from the Manila Post COMPANY, respondents.
Office 10 money orders of P200.00 each payable to E.P. Montinola.
After the postal teller had made out the money orders, Montinola On various dates, respondent Security Bank (Thru Sucat Branch)
offered to pay for them with private checks which were not issued certificates of time deposit (CTDs) in favor of one Angel
generally accepted in payment of money orders, but Montinola dela Cruz who deposited with herein respondent the aggregate
managed to leave the building with his own check and the ten (10) amount of P1,120,000.00. Angel dela Cruz delivered the said CTDs
money orders without the knowledge of the teller. to herein petitioner in connection with his purchased of fuel
products from the latter. Later on, Angel dela Cruz informed Mr.
Timoteo Tiangco, the Sucat Branch Manger, that he lost all the
certificates of time deposit in dispute. Mr. Tiangco advised said
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depositor to execute and submit a notarized Affidavit of Loss, as Currency, repayable to said depositor 731 days. after date, upon
required by respondent bank's procedure, if he desired replacement presentation and surrender of this certificate, with interest at the
of said lost CTDs. Angel then executed such. rate of 16% per cent per annum.
Angel dela Cruz negotiated and obtained a loan from respondent (Sgd. Illegible) (Sgd. Illegible)
bank in the amount P875,000. On the same date, said depositor
executed a notarized Deed of Assignment of Time Deposit which
Respondent court ruled that the CTDs in question are non-
stated, among others, that he (de la Cruz) surrenders to respondent
negotiable instruments. Ruling that while it may be true that the
bank "full control of the indicated time deposits from and after
word "bearer" appears rather boldly in the CTDs issued, it is
date" of the assignment and further authorizes said bank to pre-
important to note that after the word "BEARER" stamped on the
terminate, set-off and "apply the said time deposits to the payment
space provided supposedly for the name of the depositor, the words
of whatever amount or amounts may be due" on the loan upon its
"has deposited" a certain amount follows. The document further
maturity.
provides that the amount deposited shall be "repayable to said
Mr. Aranas, Credit Manager of petitioner Caltex went to the depositor" on the period indicated. Therefore, the text of the
respondent Bank and presented for verification the CTDs declared instrument(s) themselves manifest with clarity that they are payable,
lost by Angel dela Cruz alleging that the same were delivered to not to whoever purports to be the "bearer" but only to the specified
herein petitioner "as security for purchases made with Caltex person indicated therein, the depositor. In effect, the appellee bank
Philippines, Inc.". Later on, respondent bank received a letter from acknowledges its depositor Angel dela Cruz as the person who
herein petitioner Caltex formally informing it of its possession of made the deposit and further engages itself to pay said depositor the
the CTDs in question and of its decision to pre-terminate the same. amount indicated thereon at the stipulated date.
Petitioner Caltex then was requested by herein respondent bank to ISSUE: WHETHER OR NOT THE CTDS ARE
furnish the former "a copy of the document evidencing the NEGOTIABLE INSTRUMENTS.
guarantee agreement with Mr. Angel dela Cruz" as well as "the
HELD:Yes.
details of Mr. Angel dela Cruz" obligation against which petitioner
proposed to apply the time deposits. However, no copy of such Section 1 Act No. 2031, otherwise known as the Negotiable
requested documents was furnished by respondent. Instruments Law, enumerates the requisites for an instrument to
become negotiable, viz:
Accordingly, respondent bank rejected the petitioner's demand and
claim for payment of the value of the CTDs. (a) It must be in writing and signed by the maker or drawer;
The loan of Angel dela Cruz with the respondent bank matured and (b) Must contain an unconditional promise or order to pay a sum
fell due, respondent bank set-off and applied the time deposits in certain in money;
question to the payment of the matured loan.
(c) Must be payable on demand, or at a fixed or determinable future
Petitioner Caltex filed the instant complaint, praying that time;
respondent bank be ordered to pay it the aggregate value of the
certificates of time deposit of P1,120,000.00 plus the interests and (d) Must be payable to order or to bearer; and
damages.
(e) Where the instrument is addressed to a drawee, he must be
RTC DISMISSED THE COMPLAINT (NOT EXPLAINED) named or otherwise indicated therein with reasonable certainty.
AND WAS AFFIRMED BY RESPONDENT CA.
The CTDs in question undoubtedly meet the requirements of the
Sample of the said CTD- law for negotiability. The parties' bone of contention is with regard
to requisite (d) set forth above. It is noted that Mr. Timoteo P.
SECURITY BANK Tiangco, Security Bank's Branch Manager way back in 1982,
AND TRUST COMPANY6778 Ayala Ave., Makati No. 90101 testified in open court that the depositor reffered to in the CTDs is
Metro Manila, Philippines no other than Mr. Angel de la Cruz.
SUCAT OFFICEP 4,000.00
CERTIFICATE OF DEPOSIT On this score, the accepted rule is that the negotiability or non-
negotiability of an instrument is determined from the writing, that
Rate 16%
is, from the face of the instrument itself. In the construction of a bill
Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____ or note, the intention of the parties is to control, if it can be legally
This is to Certify that B E A R E R has deposited in this Bank the ascertained.
sum of PESOS: FOUR THOUSAND ONLY, SECURITY
BANK SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Contrary to what respondent CA held, the CTDs are negotiable
instruments. The documents provide that the amounts deposited
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CHRISpys NOTES
shall be repayable to the depositor. And who, according to the Treasury and demanded the refund by Golden
document, is the depositor? It is the "bearer." The documents do not Savings of the amount it had previously withdrawn,
say that the depositor is Angel de la Cruz and that the amounts to make up the deficit in its account.
deposited are repayable specifically to him. Rather, the amounts are
Issue: WON the subject treasury warrants are
to be repayable to the bearer of the documents or, for that matter,
whosoever may be the bearer at the time of presentment. On the negotiable intruments
wordings of the documents, therefore, the amounts deposited are Ruling: No.
repayable to whoever may be the bearer thereof. Reasons:
1. Expressly stated on its face.
Can petitioner recover on the CTDs? This time, NO. although the 2. Conditional because they are out of a
CTDs are bearer instruments, a valid negotiation thereof for the true
particular fund.
purpose and agreement between it and De la Cruz, as ultimately
ascertained, requires both delivery and indorsement. CTDs were in - Clearly stamped on their face is the word:
reality delivered to it as a security for De la Cruz' purchases of its non negotiable.
fuel products - Moreover, it is indicated that they are
payable from a particular fund, to wit, Fund 501.
There was no negotiation in the sense of a transfer of the legal title - An instrument to be negotiable instrument
to the CTDs in favor of petitioner in which situation, for obvious
must contain an unconditional promise or orders to
reasons, mere delivery of the bearer CTDs would have sufficed.
pay a sum certain in money.
- An unqualified order or promise to pay is
Where the holder has a lien on the instrument arising from contract, unconditional though coupled with:
he is deemed a holder for value to the extent of his lien. o an indication of a particular fund out of
which reimbursement is to be made or a particular
account to be debited with the amount; or
G.R. No. 88866 February 18, 1991
o a statement of the transaction which give
METROPOLITAN BANK & TRUST COMPANY,
rise to the instrument. But an order to promise to pay
petitioner,
out of particular fund is not unconditional.
vs.
- The indication of Fund 501 as the source of
COURT OF APPEALS, GOLDEN SAVINGS &
the payment to be made on the treasury warrants
LOAN ASSOCIATION, INC., LUCIA
makes the order or promise to pay not conditional
CASTILLO, MAGNO CASTILLO and GLORIA
and the warrants themselves non-negotiable.
CASTILLO
- Hence, non-negotiable.
Facts:
- Eduardo Gomez opened an account with
G.R. No. L-2516 September 25, 1950
Golden Savings and deposited 38 treasury warrants.
ANG TEK LIAN, petitioner,
- All warrants were subsequently indorsed by
vs.
Gloria Castillo as Cashier of Golden Savings and
THE COURT OF APPEALS, respondent.
deposited to its Savings account in Metrobank branch
in Calapan, Mindoro. They were sent for clearance in
the same bank. FACTS:
- Meanwhile, Gomez is not allowed to
Ang Tek Lian, knowing he had no funds therefor, drew the check
withdraw from his account, later, however,
upon the China Banking Corporation for the sum of P4,000,
exasperated over Floria repeated inquiries and also payable to the order of "cash". He delivered it to Lee Hua Hong in
as an accommodation for a valued client exchange for money which the latter handed in act. On the next
Metrobank decided to allow Golden Savings to business day, the check was presented by Lee Hua Hong to the
withdraw from proceeds of the warrants. drawee bank for payment, but it was dishonored for insufficiency of
- In turn, Golden Savings subsequently funds. Ang Tek Lian was convicted by the CFI of estafa for having
allowed Gomez to make withdrawals from his own issued a rubber check.
account. The Court of Appeals believed the version of Lee Huan Hong who
- Metrobank informed Golden Savings that 32 testified that appellant went to his (complainant's) office, and asked
of the warrants had been dishonored by the Bureau of him to exchange the check which he (appellant) then brought
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with him with cash alleging that he needed badly the sum of who tenders the check for collection, it will pay the instrument
P4,000 represented by the check, but could not withdraw it from the without further question; and it would incur no liability to the
bank, it being then already closed; that in view of this request and drawer in thus acting.
relying upon appellant's assurance that he had sufficient funds in the
blank, and because they used to borrow money from each other, A check payable to bearer is authority for payment to holder. Where
even before the war, and appellant owns a hotel and restaurant said a check is in the ordinary form, and is payable to bearer, so that no
complainant delivered to him, on the same date, the sum of P4,000 indorsement is required, a bank, to which it is presented for
in cash; that despite repeated efforts to notify him that the check payment, need not have the holder identified, and is not negligent in
had been dishonored by the bank, appellant could not be located falling to do so. . . . (Michie on Banks and Banking, Permanent
any-where, until he was summoned in the City Fiscal's Office in Edition, Vol. 5, p. 343.)
view of the complaint for estafa filed in connection therewith; and
that appellant has not paid as yet the amount of the check, or any . . . Consequently, a drawee bank to which a bearer
part thereof." check is presented for payment need not necessarily
have the holder identified and ordinarily may not be
It is argued, however, that as the check had been made payable to charged with negligence in failing to do so. See
"cash" and had not been endorsed by Ang Tek Lian, the defendant is Opinions 6C:2 and 6C:3 If the bank has no reasonable
not guilty of the offense charged. Based on the proposition that "by cause for suspecting any irregularity, it will be
uniform practice of all banks in the Philippines a check so drawn is protected in paying a bearer check, "no matter what
invariably dishonored," the following line of reasoning is advanced facts unknown to it may have occurred prior to the
in support of the argument: presentment." 1 Morse, Banks and Banking, sec. 393.
. . . When, therefore, he (the offended party ) Although a bank is entitled to pay the amount of a
accepted the check from the appellant, he did so bearer check without further inquiry, it is entirely
with full knowledge that it would be dishonored reasonable for the bank to insist that holder give
upon presentment. In that sense, the appellant could satisfactory proof of his identity. . . . (Paton's Digest,
not be said to have acted fraudulently because the Vol. I, p. 1089.)
complainant, in so accepting the check as it was
drawn, must be considered, by every rational The SC further held that the form of the check was totally
consideration, to have done so fully aware of the unconnected with its dishonor. The Court of Appeals declared that it
risk he was running thereby." was returned unsatisfied because the drawer had insufficient
funds not because the drawer's indorsement was lacking.
ISSUE:
Wherefore, there being no question as to the correctness of the
Whether or not a check payable to cash needs indorsement. penalty imposed on the appellant, the writ of certiorari is denied
and the decision of the Court of Appeals is hereby affirmed, with
HELD: costs.
NO.Under the Negotiable Instruments Law (sec. 9 [d], a

check drawn payable to the order of "cash" is a check payable to
bearer, and the bank may pay it to the person presenting it for G.R. No. 170325 September 26, 2008
payment without the drawer's indorsement.
PHILIPPINE NATIONAL BANK, Petitioner,
A check payable to the order of cash is a bearer instrument. vs.
ERLANDO T. RODRIGUEZ and NORMA
Where a check is made payable to the order of "cash", the word RODRIGUEZ, Respondents.
cash "does not purport to be the name of any person", and hence the
instrument is payable to bearer. The drawee bank need not obtain FACTS: Respondent Spouses Erlando and Norma Rodriguez were
any indorsement of the check, but may pay it to the person clients of PNB. The spouses were engaged in the informal lending
presenting it without any indorsement. business and had discounting arrangements with Philnabank
Employees Savings and Loan Association (PEMSLA).
Of course, if the bank is not sure of the bearer's identity or financial
solvency, it has the right to demand identification and /or assurance PEMSLA would grant loans to its members and the spouses would
against possible complications, for instance, (a) forgery of rediscount the postdated checks issued to its members whenever the
drawer's signature, (b) loss of the check by the rightful owner, (c) association was short on funds. PEMSLAs officers devised a
raising of the amount payable, etc. The bank may therefore require, scheme where they took out loans using other members without
for its protection, that the indorsement of the drawer or of some their consent and the PEMSLA checks issued for these loans were
other person known to it be obtained. But where the Bank is then given to the spouses for rediscounting.
satisfied of the identity and /or the economic standing of the bearer
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The RODRIGUEZ CHECKS were deposited directly by PEMSLA (e) Where the only or last indorsement is an indorsement in blank.
without any endorsement from the named payees. The spouses
endorsed 69 checks from Nov 1998 to Feb 1999 payable to 47 The distinction between bearer and order instruments lies in their
individual payees. manner of negotiation, an order instrument requires an endorsement
from the payee or holder before it may be validly negotiated. A
Petitioner PNB eventually found out the fraudulent scheme and bearer instrument, on the other hand, does not require an
closed the current account of PEMSLA which led to the checks endorsement to be validly negotiated. It is negotiable by mere
issued by the spouses being dishonoured for being withdrawn from delivery. (READ SEC. 30 NIL)
a closed account. Alarmed, the spouses filed a civil complaint for
damages against PEMSLA and PNB where they sought to recover A check that is payable to a specified payee is an order instrument.
the value of the checks deposited to the closed PEMSLA account However, under Section 9(C) of the NIL, a check payable to a
amounting to Php2,345,804.00. specific payee may nevertheless be considered as bearer instrument
if it is payable to the order of a fictitious or non-existing person, and
RTC RULED IN FAVOR OF THE SPOUSES RODRIGUEZ. such fact is known to the person making it so payable.
CA REVERSED THE RTC RULING; SPOUSES FILED MR; CA US JURISPRUDENCE YIELDS that an actual, existing, and living
REVERSED ITSELF. payee may also be fictitious if the maker of the check did not intend
for the payee to in fact receive the proceeds of the check
ISSUE: WON THE SUBJECT CHECKS ARE PAYABLE TO (FICTITIOUS-PAYEE RULE).
ORDER OR BEARER - YES
In a fictitious-payee situation, the drawee bank is absolved from
HELD: As a rule, when the payee is fictitious or not intended to be liability and the drawer bears the loss, When faced with a check
the true recipient of the proceeds, the check is considered as a payable to fictitious payee, it is treated as a bearer instrument that
bearer instrument. A check is "a bill of exchange drawn on a bank can be negotiated by delivery. The underlying theory is that one
payable on demand." It is either an order or a bearer instrument. cannot expect a fictitious payee to negotiate the check by placing
Sections 8 and 9 of the NIL states: his endorsement thereon.
SEC. 8. When payable to order. The instrument is payable to Since there are no genuine issues raised by petitioners, the trial
order where it is drawn payable to the order of a specified person or court was correct in dismissing the case by summary judgment by
to him or his order. It may be drawn payable to the order of reason of absence of genuine issues of fact or law. There are not
genuine issues raised by petitioners since they do not deny
(a) A payee who is not maker, drawer, or drawee; or obtaining a loan from Mercator by signing a promissory note, as
well as mortgaging their own properties as security for the said
(b) The drawer or maker; or loan.
(c) The drawee; or MUELLER AND MARTIN V LIBERTY INSURANCE BANK:
When the person making the check so payable did not intend for the
(d) Two or more payees jointly; or
specified payee to have any part in the transactions, the payee is
(e) One or some of several payees; or considered as a fictitious payee. The check is then considered as a
bearer instrument to be validly negotiated by mere delivery.
(f) The holder of an office for the time being.
GETTY PETROLEUM CORP. V. AMERICAN EXPRESS
Where the instrument is payable to order, the payee must be named TRAVEL RELATED SERVICES COMPANY, INC.: Upheld the
or otherwise indicated therein with reasonable certainty. fictitious-payee rule. The rule protects the depositary bank and
assigns the loss to the drawer of the check who was in a better
SEC. 9. When payable to bearer. The instrument is payable to position to prevent the loss in the first place. Due care is not even
bearer required from the drawee or depositary bank in accepting and
paying the checks. The effect is that a showing of negligence on the
(a) When it is expressed to be so payable; or part of the depositary bank will not defeat the protection that is
derived from this rule.
(b) When it is payable to a person named therein or bearer; or
In the case under review, the Rodriguez checks were payable to
(c) When it is payable to the order of a fictitious or non-existing specified payees. It is unrefuted that the 69 checks were payable to
person, and such fact is known to the person making it so payable; specific persons. Likewise, it is uncontroverted that the payees were
or actual, existing, and living persons that had a rediscounting
arrangement with spouses Rodriguez.
(d) When the name of the payee does not purport to be the name of
any person; or
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What remains to be determined is if the payees, though existing for deposit and payment. In fine, PNB should be held liable for the
persons, were "fictitious" in its broader context. amounts of the checks.
For the fictitious-payee rule to be available as a defense, PNB must WHEREFORE, the appealed Amended Decision is AFFIRMED.
show that the makers did not intend for the named payees to be part
of the transaction involving the checks. In this case however, the
banks only shows that the payees did not have knowledge of the
existence of the checks. This lack of knowledge on the part of the
payees, however, was not tantamount to a lack of intention on the
part of respondents-spouses that the payees would not receive the PHILIPPINE NATIONAL BANK vs.
checks proceeds. Considering that respondents-spouses were MANILA OIL REFINING & BY-PRODUCTS COMPANY,
transacting with PEMSLA and not the individual payees, it is INC.
understandable that they relied on the information given by the G.R. No. L-18103 June 8, 1922
officers of PEMSLA that the payees would be receiving the checks.
FACTS:
Verily, the subject checks are presumed order instruments for PNB
failed to present sufficient evidence to defeat the claim of This case concerns the validity of a provision in a Php61,000.00
respondents-spouses that the named payees were the intended promissory note whereby in case the same is not paid at maturity,
recipients of the checks proceeds. The bank failed to satisfy a the maker (Manila Oil)authorizes any attorney to appear and
requisite condition of a fictitious-payee situation that the confess judgment thereon for the principal amount, with interest,
maker of the check intended for the payee to have no interest in costs, and attorney's fees, and waives all errors, rights to inquisition,
the transaction. and appeal, and all property exceptions.
Because of a failure to show that the payees were "fictitious" in its On May 8, 1920, the manager and the treasurer of the Manila Oil
broader sense, the fictitious-payee rule does not apply. Thus, the executed and delivered to the PNB the promissory note in question.
checks are to be deemed payable to order. Consequently, the drawee When they defaulted, PNB brought action to the CFI of Manila to
bank bears the loss. recover the Php61,000.00. They brought with them Atty. Elias
Rector, an attorney associated with PNB, to enter in representation
PNB was remiss in its duty as the drawee bank. It does not dispute of Manila Oil. He filed a motion of confessing judgment. The
the fact that its teller or tellers accepted the 69 checks for deposit to defendant, however, in a sworn declaration, objected strongly to the
the PEMSLA account even without any endorsement from the unsolicited representation of attorney Recto. Later, attorney Antonio
named payees. It bears stressing that order instruments can only be Gonzalez appeared for the defendant and filed a demurrer, and
negotiated with a valid endorsement. when this was overruled, presented an answer.
A bank that regularly processes checks that are neither payable to The trial judge rendered judgment on the motion of attorney Recto
the customer nor duly indorsed by the payee is apparently grossly in the terms of the complaint.
negligent in its operations.
ISSUE:
In the case at bar, respondents-spouses were the banks depositors.
The checks were drawn against respondents-spouses accounts.
Whether the promissory note in question is valid.
PNB, had the responsibility to ascertain the regularity of the
indorsements, and the genuineness of the signatures on the checks
HELD:
before accepting them for deposit. Lastly, PNB was obligated to pay
the checks in strict accordance with the instructions of the drawers.
No. Warrants of attorney to confess judgment are not authorized nor
Petitioner miserably failed to discharge this burden.
contemplated by our law. Provisions in notes authorizing attorneys
The checks were presented to PNB for deposit by a representative to appear and confess judgments against makers should not be
of PEMSLA absent any type of indorsement, forged or otherwise. recognized in this jurisdiction by implication and should only be
The facts clearly show that the bank did not pay the checks in strict considered as valid when given express legislative sanction.
accordance with the instructions of the drawers, respondents-
spouses. Instead, it paid the values of the checks not to the named Although the NIL mentions of the validity of the promissory note
payees or their order, but to PEMSLA, a third party to the despite the presence of a provision of a confession of judgment, the
transaction between the drawers and the payees. Court points out the conclusion of the article: But nothing in this
section shall validate any provision or stipulation otherwise illegal."
A bank that has been remiss in its duty must suffer the If confessions of judgment were allowed, the debtor will be
consequences of its negligence. Being issued to named payees, PNB deprived of his right to be heard.
was duty-bound by law and by banking rules and procedure to
require that the checks be properly indorsed before accepting them
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Moreover, it is not the policy of the law to place a debtor in the such. By signing the notes, the maker promises to pay to the order
absolute power of his creditor. The field for fraud is too far enlarged of the payee or any holder according to the tenor thereof.
by such an instrument.
The solidary liability of private respondent Fermin Canlas is made
clearer and certain, without reason for ambiguity, by the presence of
REPUBLIC PLANTERS BANK vs. COURT OF APPEALS and
the phrase joint and several as describing the unconditional
FERMIN CANLAS G.R. No. 93073 December 21, 1992
promise to pay to the order of Republic Planters Bank. Where an
Facts: instrument containing the words I promise to pay is signed by
two or more persons, they are deemed to be jointly and severally
In 1979, World Garment Manufacturing, through its board liable thereon.
authorized Shozo Yamaguchi (president) and Fermin Canlas
(treasurer) to obtain credit facilities from Republic Planters Bank Canlas is solidarily liable on each of the promissory notes bearing
(RPB) in the forms of export advances and letters of credit/trust his signature for the following reasons:
receipts accommodations. For this, 9 promissory notes were
The promissory notes are negotiable instruments and must be
executed. Each promissory note was uniformly written in the
governed by the Negotiable Instruments Law.
following manner:
A change in the corporate name does not make a new corporation,
___________, after date, for value received, I/we, jointly and
and whether effected by special act or under a general law, has no
severaIly promise to pay to the ORDER of the REPUBLIC
affect on the identity of the corporation, or on its property, rights, or
PLANTERS BANK, at its office in Manila, Philippines, the sum of
liabilities.
___________ PESOS(....) Philippine Currency...
SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C.
Please credit proceeds of this note to: EVANGELISTA (Petitioners)
Vs.
________ Savings Account ______XX Current Account MERCATOR FINANCE CORP., ET. AL. (Respondents)
G.R. No. 148864, August 21, 2003
No. 1372-00257-6
of WORLDWIDE GARMENT MFG. CORP. THE CASE:
Sgd. Shozo Yamaguchi Sgd. Fermin Canlas The case is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, assailing the decision of the Court of
Appeals. The CA dismissed the appeal filed by petitioners.
December 20, 1982: Worldwide Garment Manufacturing, Inc.
THE FACTS:
changed its corporate name to Pinch Manufacturing Corporation.
The note became due and no payment was made. RPB eventually Petitioners filed a complaint for annulment of titles against
sued Yamaguchi and Canlas. Canlas, in his defense, averred that he respondents Mercator Finance Corporation, Lydia P. Salazar,
should not be held personally liable for such authorized corporate Lamecs Realty & Development Corporation, and the Register of
acts that he performed inasmuch as he signed the promissory notes Deeds of Bulacan.
in his capacity as officer of Worldwide Garment Manufacturing and
when he issued said promissory notes in behalf of Worldwide THE CONTENTION OF THE PETITIONERS:
Garment Manufacturing, Inc., it was in blank (typewritten entries
not appearing when he signed) 1) Petitioners are the registered owners of five (5) parcels of
land contained in the Real Estate Mortgage executed by
ISSUE: Whether or not Canlas should be held liable for the them and Embassy Farms, Inc.
promissory notes. 2) They executed the Real Estate Mortgage in favor of
Mercator Financing Corporation (Mercator) only as
HELD: officers of Embassy Farms.
3) They did not receive the proceeds of the loan evidence by
Yes. Under the Negotiable lnstruments Law, persons who write their a promissory note, as all of it went to Embassy Farms.
names on the face of promissory notes are makers and are liable as
7 | Page
CHRISpys NOTES
4) The mortgage was without any consideration as to them issue to be litigated. It contended that since the petitioners admitted
since they did not personally obtain any loan or credit the existence of the promissory note, the mortgage, foreclosure
accommodations. There being no principal obligation in proceedings and the subsequent sales are valid and the complaint
which the mortgage rests, the real estate mortgage is void. must be dismissed.
5) The following are not valid:
a) The foreclosure proceedings conducted by Mercator THE RULING OF THE TRIAL COURT:
b) The issuance of the transfer certificate of title to it
c) The subsequent sale of the same parcels of land to The RTC granted the motion for summary judgment and
respondent Lydia P. Salazar dismissed the complaint. Petitioners filed a motion for
d) The transfer of the titles to the name of respondent
reconsideration, which was subsequently denied. Hence, petitioners
Salazar
e) The sale and transfer of the properties to respondent appeals the RTC ruling before the Court of Appeals.
Lamecs Realty & Development Corporation
THE RULING OF THE COURT OF APPEALS:
THE CONTENTION OF THE RESPONDENT MERCATOR
FINANCE CORP: The appellate court denied the petitioners appeal. Hence, the
filed the present Petition for Review on Certiorari before the
1) Petitioners were the owners of the subject parcels of land. Supreme Court.
However, on February 16, 1982, plaintiffs executed a
Mortgage in favor of defendant Mercator Finance THE ISSUES:
Corporation for and in consideration of certain loans,
and/or other forms of credit accommodations obtained 1) Whether or not the Real Estate Mortgage executed by
from the Mortgagee (defendant Mercator Finance Corp.) the plaintiffs in favor of defendant Mercator Finance
amounting the P844,625.78. Corp. is null and void.
2) The mortgage was to secure the payment of the amount of 2) Whether or not the extrajudicial foreclosure
P844,625.78 and those others that the mortgagee may proceedings undertaken on subject parcels of land to
extend to the mortgagor. satisfy the indebtedness of Embassy Farms, Inc. is null
3) Since petitioners signed the promissory note as co-makers, and void.
aside from the Continuing Suretyship Agreement 3) Whether nor the sale made by defendant Mercator
subsequently executed to guarantee the indebtedness of Finance Corp. in favor of Lydia Salazar and that
Embassy Farms, and the succeeding promissory notes executed by the latter in favor of defendant Lamecs
restructuring the loan, such petitioners are jointly and Realty & Development Corporation are null and void.
severally liable with Embassy Farms. THE RULING OF THE SUPREME COURT:
4) Due to the failure of petitioners to pay the obligation, the
foreclosure and subsequent sale of the mortgaged The Supreme Court dismissed the petition. It ordered the
properties are valid. petitioners to pay the costs of suit.
THE CONTENTION OF RESPONDENTS SALAZAR AND
THE BASIS OF THE SUPREME COURT RULING:
LAMECS REALTY & DEVELOPMENT CORP.:
REGARDING THE FIRST ISSUE: Whether or not the Real
1) Both respondents Salazar and Lamecs are innocent
Estate Mortgage executed by the plaintiffs in favor of defendant
purchasers for value and in good faith, since they relied on
the validity of the title of Mercator. Mercator Finance Corp. is null and void.
2) Petitioners were the prior owners of the subject parcels of
land, but now respondents are already the registered HELD: No. The Real Estate Mortgage executed by the
owners of the land. plaintiffs in favor of defendant Mercator Finance Corp. is not
3) The petitioner can no longer recover the property by null and void.
reason of laches, since they kept silent and did not act for a
lapse of almost 10 years from the foreclosure of the REASONS:
property and the subsequent sales that they made their
claim. Hence, petitioners are in estoppel and guilty of 1) The subject promissory notes were signed in the personal
laches. capacities of the petitioners, and as officers of said debtor
corporation (Embassy Farms, Inc.).
At the pre-trial, Mercator moved for summary judgment on the 2) The petitioners were wrong in their contention that the
ground that except as to the amount of damages, there is no factual loans secured by the mortgage they executed were not
8 | Page
CHRISpys NOTES
personally theirs. In constituting a mortgage over their The parties cannot be allowed to introduce
own properties in order to secure the purported corporate evidence of conditions allegedly agreed upon by
debt of Embassy Farms, Inc., the petitioners undeniably them other than those stipulated in the loan
assumed the personality of persons interested in the documents because when they reduced their
fulfillment of the principal obligation who, to save the agreement in writing, it is presumed that they
subject realties from foreclosure and with a view towards have made the writing the only repository and
being subrogated to the right of the creditor, were free to memorial of truth, and whatever is not found in
discharge the same by payment. the writing must be understood to have been
waived and abandoned.
REGARDING THE SECOND ISSUE: Whether or not the
extrajudicial foreclosure proceedings undertaken on subject REGARDING THE THIRD ISSUE: Whether nor the sale
parcels of land to satisfy the indebtedness of Embassy Farms, made by defendant Mercator Finance Corp. in favor of Lydia
Inc. is null and void. Salazar and that executed by the latter in favor of defendant
Lamecs Realty & Development Corporation are null and void.
HELD: No. The extrajudicial foreclosure proceedings
undertaken on subject parcels of land to satisfy the HELD: No. The sale made by defendant Mercator Finance
indebtedness of Embassy Farms, Inc. is not null and void. Corp. in favor of Lydia Salazar and that executed by the latter
in favor of defendant Lamecs Realty & Development
REASONS: Corporation are not null and void.
1) The failure of the petitioners to pay the loan resulted to the REASONS:
action of foreclosure of the mortgaged properties by
Mercator Finance Corp. 1) If appellants really felt aggrieved by the foreclosure of the
subject mortgage and the subsequent sales of the realties to
2) The act of the petitioners in mortgaging their own other parties, they should have commenced the suit
properties as security for the loan implies the risk of these immediately, and should not have procrastinated for about
being foreclosed by reason of failure to pay the loan. nine (9) years. Hence, they are guilty of laches.
3) A simple perusal of the promissory note and the continuing
surety agreement proved that petitioners are solidary
obligors with Embassy Farms, Inc. G.R. No. 93073 December 21, 1992
a) The promissory note clearly states that the petitioners
jointly and severally promise to the pay the order of REPUBLIC PLANTERS BANK, petitioner,
Mercator Finance Corporation the principal sum of vs.
the loan in installments. COURT OF APPEALS and FERMIN CANLAS, respondents.
b) Since the petitioners executed a continuing suretyship
agreement with Mercator Finance, they are solidarily
liable with the principal (Embassy Farms, Inc.). Facts:
c) Paragraph (g), Section 17 of the Negotiable
Instruments Law states that Where an instrument In 1979, World Garment Manufacturing, through its board
containing the word I promise to pay is signed by authorized Shozo Yamaguchi (president) and Fermin Canlas
two or more persons, they are deemed to be jointly (treasurer) to obtain credit facilities from Republic Planters Bank
and severally liable thereon. This provision of law (RPB) in the forms of export advances and letters of credit/trust
applies squarely to the present case. receipts accommodations. For this, 9 promissory notes were
executed. Each promissory note was uniformly written in the
4) Petitioners cannot claim that they did not personally following manner:
receive any consideration for the contract.
a) It is a well-entrenched rule that the consideration ___________, after date, for value received, I/we, jointly and
necessary to support a surety obligation need not pass severaIly promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of
directly to the surety.
b) A consideration moving to the principal alone is ___________ PESOS(....) Philippine Currency...
sufficient to consider the surety obligation as valid. Please credit proceeds of this note to:
5) The parol evidence rule does not apply in the case. ________ Savings Account ______XX Current Account
9 | Page
CHRISpys NOTES
No. 1372-00257-6 The case is a Petition for Review on Certiorari under Rule 45 of the
of WORLDWIDE GARMENT MFG. CORP. Appeals. The CA dismissed the petition.
Sgd. Shozo Yamaguchi Sgd. Fermin Canlas THE FACTS:
December 20, 1982: Worldwide Garment Manufacturing, Inc. Petitioners filed a complaint for annulment of titles against
changed its corporate name to Pinch Manufacturing Corporation. respondents Mercator Finance Corporation, Lydia P. Salazar,
The note became due and no payment was made. RPB eventually Lamecs Realty & Development Corporation, and the Register of
sued Yamaguchi and Canlas. Canlas, in his defense, averred that he Deeds of Bulacan.
should not be held personally liable for such authorized corporate
acts that he performed inasmuch as he signed the promissory notes THE CONTENTION OF THE PETITIONERS:
when he issued said promissory notes in behalf of Worldwide 1) Petitioners are the registered owners of five (5) parcels of
Garment Manufacturing, Inc., it was in blank (typewritten entries land contained in the Real Estate Mortgage executed by them and
not appearing when he signed) Embassy Farms, Inc.
ISSUE: Whether or not Canlas should be held liable for the 2) They executed the Real Estate Mortgage in favor of
promissory notes. Mercator Financing Corporation (Mercator) only as officers of
Embassy Farms.
HELD:
such. By signing the notes, the maker promises to pay to the order 4) The mortgage was without any consideration as to them
of the payee or any holder according to the tenor thereof. since they did not personally obtain any loan or credit
accommodations. There being no principal obligation in which the
The solidary liability of private respondent Fermin Canlas is made mortgage rests, the real estate mortgage is void.
the phrase joint and several as describing the unconditional 5) The following are not valid:
instrument containing the words I promise to pay is signed by a) The foreclosure proceedings conducted by Mercator
liable thereon. b) The issuance of the transfer certificate of title to it
Canlas is solidarily liable on each of the promissory notes bearing c) The subsequent sale of the same parcels of land to
his signature for the following reasons: respondent Lydia P. Salazar
The promissory notes are negotiable instruments and must be d) The transfer of the titles to the name of respondent Salazar
e) The sale and transfer of the properties to respondent
A change in the corporate name does not make a new corporation, Lamecs Realty & Development Corporation
FINANCE CORP:
liabilities.
1) Petitioners were the owners of the subject parcels of land.
However, on February 16, 1982, plaintiffs executed a Mortgage in
G.R. No. 148864 August 21, 2003 favor of defendant Mercator Finance Corporation for and in
consideration of certain loans, and/or other forms of credit
SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. accommodations obtained from the Mortgagee (defendant Mercator
EVANGELISTA, Petitioners, Finance Corp.) amounting the P844,625.78.
vs.
2) The mortgage was to secure the payment of the amount of
MERCATOR FINANCE CORP., LYDIA P. SALAZAR,
P844,625.78 and those others that the mortgagee may extend to the
LAMEC'S** REALTY AND DEVELOPMENT CORP. and the
mortgagor.
REGISTER OF DEEDS OF BULACAN, Respondents.
3) Since petitioners signed the promissory note as co-makers,
THE CASE:
aside from the Continuing Suretyship Agreement subsequently
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CHRISpys NOTES
executed to guarantee the indebtedness of Embassy Farms, and the favor of defendant Lamecs Realty & Development Corporation are
succeeding promissory notes restructuring the loan, then petitioners null and void.
are jointly and severally liable with Embassy Farms.
THE RULING OF THE SUPREME COURT:
foreclosure and subsequent sale of the mortgaged properties are The Supreme Court dismissed the petition. It ordered the
valid. petitioners to pay the costs of suit.
THE CONTENTION OF RESPONDENTS SALAZAR AND THE BASIS OF THE SUPREME COURT RULING:
REGARDING THE FIRST ISSUE: Whether or not the Real Estate
1) Both respondents Salazar and Lamecs are innocent Mortgage executed by the plaintiffs in favor of defendant Mercator
purchasers for value and in good faith, since they relied on the Finance Corp. is null and void.
validity of the title of Mercator.
HELD: No. The Real Estate Mortgage executed by the plaintiffs in
2) Petitioners were the prior owners of the subject parcels of favor of defendant Mercator Finance Corp. is not null and void.
land, but now respondents are already the registered owners of the
land. REASONS:
3) The petitioner can no longer recover the property by 1) The subject promissory notes were signed in the personal
reason of laches, since they kept silent and did not act for a lapse of capacities of the petitioners, and as officers of said debtor
almost 10 years from the foreclosure of the property and the corporation (Embassy Farms, Inc.).
subsequent sales that they made their claim. Hence, petitioners are
in estoppel and guilty of laches. 2) The petitioners were wrong in their contention that the
loans secured by the mortgage they executed were not personally
At the pre-trial, Mercator moved for summary judgment on the theirs. In constituting a mortgage over their own properties in order
ground that except as to the amount of damages, there is no factual to secure the purported corporate debt of Embassy Farms, Inc., the
issue to be litigated. It contended that since the petitioners admitted petitioners undeniably assumed the personality of persons interested
the existence of the promissory note, the mortgage, foreclosure in the fulfillment of the principal obligation who, to save the subject
proceedings and the subsequent sales are valid and the complaint realties from foreclosure and with a view towards being subrogated
must be dismissed. to the right of the creditor, were free to discharge the same by
payment.
THE RULING OF THE TRIAL COURT:
The RTC granted the motion for summary judgment and dismissed extrajudicial foreclosure proceedings undertaken on subject parcels
the complaint. Petitioners filed a motion for reconsideration, which of land to satisfy the indebtedness of Embassy Farms, Inc. is null
was subsequently denied. Hence, petitioners appeals the RTC and void.
ruling before the Court of Appeals.
HELD: No. The extrajudicial foreclosure proceedings undertaken
THE RULING OF THE COURT OF APPEALS: on subject parcels of land to satisfy the indebtedness of Embassy
Farms, Inc. is not null and void.
The appellate court denied the petitioners appeal. Hence, the filed
the present Petition for Review on Certiorari before the Supreme REASONS:
Court.
1) The failure of the petitioners to pay the loan resulted to the
THE ISSUES: action of foreclosure of the mortgaged properties by Mercator
Finance Corp.
1) Whether or not the Real Estate Mortgage executed by the
plaintiffs in favor of defendant Mercator Finance Corp. is null and 2) The act of the petitioners in mortgaging their own
void. properties as security for the loan implies the risk of these being
foreclosed by reason of failure to pay the loan.
2) Whether or not the extrajudicial foreclosure proceedings
undertaken on subject parcels of land to satisfy the indebtedness of 3) A simple perusal of the promissory note and the continuing
Embassy Farms, Inc. is null and void. surety agreement proved that petitioners are solidary obligors with
Embassy Farms, Inc.
3) Whether nor the sale made by defendant Mercator Finance
Corp. in favor of Lydia Salazar and that executed by the latter in
11 | P a g e
CHRISpys NOTES
a) The promissory note clearly states that the petitioners 2) Since there are no genuine issues raised by petitioners, the
jointly and severally promise to the pay the order of Mercator trial court was correct in dismissing the case by summary judgment
Finance Corporation the principal sum of the loan in installments. by reason of absence of genuine issues of fact or law. There are not
genuine issued raised by petitioners since they do not deny
b) Since the petitioners executed a continuing suretyship obtaining a loan from Mercator by signing a promissory note, as
agreement with Mercator Finance, they are solidarily liable with the well as mortgaging their own properties as security for the said
principal (Embassy Farms, Inc.). loan.
c) Paragraph (g), Section 17 of the Negotiable Instruments

Law states that Where an instrument containing the word I
promise to pay is signed by two or more persons, they are deemed G.R. No. 161756 December 16, 2005
to be jointly and severally liable thereon. This provision of law
applies squarely to the present case. VICTORIA J. ILANO represented by her Attorney-in-fact,
MILO ANTONIO C. ILANO, Petitioners, vs. HON. DOLORES
L. ESPAOL, in her capacity as Executive Judge, RTC of Imus,
Cavite, Br. 90, and, AMELIA ALONZO, EDITH CALILAP,
4) Petitioners cannot claim that they did not personally DANILO CAMACLANG, ESTELA CAMACLANG, ALLAN
receive any consideration for the contract. CAMACLANG, LENIZA REYES, EDWIN REYES, JANE
BACAREL, CHERRY CAMACLANG, FLORA CABRERA,
a) It is a well-entrenched rule that the consideration necessary ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA
to support a surety obligation need not pass directly to the surety. CASTRO, GLORIA DOMINGUEZ, ANNILYN C. SABALE
and several JOHN DOES, Respondents.
b) A consideration moving to the principal alone is sufficient
to consider the surety obligation as valid. Facts:
Defendant Amelia Alonzo is a trusted employee of Petiotioner
Victoria Ilano, Alonzo worked for Ilano for several years and
5) The parol evidence rule does not apply in the case. gained Alonzos trust and confidence.
Due to these trust and confidence reposed upon ALONZO by Ilano,
The parties cannot be allowed to introduce evidence of there were occasions when ALONZO was entrusted with Ilanos
conditions allegedly agreed upon by them other than those METROBANK Check Book containing either signed or unsigned
stipulated in the loan documents because when they reduced their blank checks, especially in those times when Ilano left for the
agreement in writing, it is presumed that they have made the writing United States for medical check-up
the only repository and memorial of truth, and whatever is not That Sometime during the second week of December 1999, or
found in the writing must be understood to have been waived and thereabouts, defendant ALONZO by means of deceit and abuse
abandoned. of confidence succeeded in procuring Promissory Notes and
signed blank checks from Ilano who was then recuperating
from illness.
Several blank checks and promissory notes were issued to certain
REGARDING THE THIRD ISSUE: Whether nor the sale made by
individuals with corresponding amount by Alonzo who allegedly
defendant Mercator Finance Corp. in favor of Lydia Salazar and
procured the signature of Ilano .
that executed by the latter in favor of defendant Lamecs Realty &
A Complaint for Revocation/Cancellation of Promissory Notes and
Development Corporation are null and void.
Bills of Exchange (Checks) with Damages and Prayer
HELD: No. The sale made by defendant Mercator Finance Corp. for Preliminary Injunction or Temporary Restraining Order
in favor of Lydia Salazar and that executed by the latter in favor of (TRO) against Alonzo et al. before the Regional Trial Court of
defendant Lamecs Realty & Development Corporation are not null Cavite.
and void. Ilano contends that Alonzo, by means of deceit and abuse of
confidence succeeded in procuring Promissory Notes and signed
REASONS: blank checks. Alonzo likewise succeeded in inducing Ilano to
sign antedated Promissory Notes.
1) If appellants really felt aggrieved by the foreclosure of the The RTC rendered a decision dismissing the complaint for lack of
subject mortgage and the subsequent sales of the realties to other cause of action and failure to allege the ultimate facts of the case.
parties, they should have commenced the suit immediately, and On appeal, the Court of Appeals affirmed the dismissal of the
should not have procrastinated for about nine (9) years. Hence, complaint. Hence, this petition.
they are guilty of laches. ISSUES:
(Related in Nego)
12 | P a g e
CHRISpys NOTES
1.) WON Checks drawn from a closed account is still The March 21, 2003 decision of the appellate court affirming the
negotiable. (NO) October 12, 2000 Order of the trial court, Branch 20 of the RTC of
2.) WON undated Check is negotiable (YES) Imus, Cavite, is AFFIRMED with MODIFICATION in light of
HELD: the foregoing discussions.
1.) With respect to the checks subject of the complaint, it is The trial court is DIRECTED to REINSTATE Civil Case No.
gathered that, except for Check No. 0084078, they were 2079-00 to its docket and take further proceedings thereon only
drawn all against Ilanos Metrobank Account No. 00703- insofar as the complaint seeks the revocation/cancellation of the
955536-7 shows that it was dishonored due to Account subject promissory notes and damages.
Closed. When Ilano then filed her complaint, all the Let the records of the case be then REMANDED to the trial court.
checks subject hereof which were drawn against the same
closed account were already rendered valueless or non- G.R. No. 74917 January 20, 1988
negotiable, hence, Ilano had, with respect to them, no BANCO DE ORO SAVINGS AND MORTGAGE
cause of action. BANK, petitioner,
vs.
2.)With respect to Check No. 0084078, however, which was
drawn against another account of Ilano, albeit the date of issue EQUITABLE BANKING CORPORATION,
bears only the year 1999, its validity and negotiable PHILIPPINE CLEARING HOUSE
character at the time the complaint was filed was not CORPORATION, AND REGIONAL TRIAL
affected. COURT OF QUEZON CITY, BRANCH XCII
(92), respondents.
For Section 6 of the Negotiable Instruments Law provides:
Section 6. Omission; seal; particular money. The
validity and negotiable character of an G.R. Nos. L-25836-37 January 31, 1981
instrument are not affected by the fact that
THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,
(a) It is not dated; or vs.
(b) Does not specify the value given, or that any JOSE M. ARUEGO, defendant-appellant.
value had been given therefor; or
(c) Does not specify the place where it is drawn Facts: Petitioner Philippine Bank of Commerce filed a complaint
or the place where it is payable; or against respondent Jose Aruego to recover the cost of the printing of
(d) Bears a seal; or "World Current Events," a periodical published by the defendant. To
(e) Designates a particular kind of current money facilitate the payment of the printing Aruego obtained a credit
in which payment is to be made. accommodation from the bank. For every printing of the "World
Current Events," the printer, Encal Press and Photo Engraving,
**Note However, even if the holder of Check No. 0084078 collected the cost of printing by drawing a draft against the bank,
would have filled up the month and day of issue thereon to be said draft being sent later to Aruego for acceptance. As an added
December and 31, respectively, it would have, as it did, become security for the payment of the amounts advanced to the printers,
stale six (6) months or 180 days thereafter, following current the plaintiff bank also required Aruego to execute a trust receipt in
banking practice. (so still no casue of action) favor of said bank wherein said defendant undertook to hold in trust
for plaintiff the periodicals and to sell the same with the promise to
** Promissory Note turn over to the plaintiff the proceeds of the sale of said publication
It is, however, with respect to the questioned promissory notes to answer for the payment of all obligations arising from the draft.
that the present petition assumes merit. For, Ilanos allegations
Respondent Aruego's defenses consist of the following:
in the complaint relative thereto, even if lacking particularity,
does not as priorly stated call for the dismissal of the a) He signed the BOE in a representative capacity, as the then
complaint. President of the Philippine Education Foundation Company;
(The promissory notes show that some of the [respondents]
were actually creditors of Ilano and who were issued the b) He signed these BOE as accommodation or additional party
subject checks as securities for the loan/obligation incurred. obligor.
Having taken the instrument in good faith and for value, the
Issues:
[respondents] are therefore considered holders thereof in due
course and entitled to payment.) 1. Whether or not defendant is personally liable. YES
WHEREFORE, the petition is PARTLY GRANTED. 2. Whether or not defendant is an accommodation party. NO.
13 | P a g e
CHRISpys NOTES
2. Whether or not the drafts signed were bills of exchange. YES to Benjamin Abubakar, a private individual. When Abubakar sought
to have the treasury warrant encashed, the Auditor General denied
Ruling: payment because first of, it is against the appropriating law
(Republic Act 80) to authorize payments to private individuals
1. Section 20 of the NIL provides that "Where the instrument when it comes to treasury warrants. Abubakar then contends that he
contains or a person adds to his signature words indicating that he is entitled to encash as he was a holder in good faith.
signs for or on behalf of a principal or in a representative capacity,
he is not liable on the instrument if he was duly authorized; but the ISSUE: WHETHER OR NOT A TREASURY WARRANT IS A
mere addition of words describing him as an agent or as filing a NEGOTIABLE INSTRUMENT.
representative character, without disclosing his principal, does not
exempt him from personal liability. HELD: No. A treasury warrant is not a negotiable instrument. One
of the requirements of a negotiable instrument is that it must be
Nowhere in the draft has Aruego disclosed that he was signing as a unconditional. In Section 3 of the Negotiable Instruments Law, an
representative of the Philippine Education Foundation Company. order or promise to pay out of a particular fund makes the
For failure to disclose his principal, Aruego is personally liable for instrument conditional. A treasury warrant, like the one in this case,
the drafts he accepted. comes from a particular fund, a particular appropriation. In this
case, it was written on the face of the treasury warrant that it is
2. An accommodation party is one who has signed the instrument as payable from the appropriation for food administration. Thus, it is
maker, drawer, indorser, without receiving value therefor and for not negotiable for being conditional.
the purpose of lending his name to some other person. Such person
is liable on the instrument to a holder for value, notwithstanding NOTE the difference: However, an instrument is negotiable if it
such holder, at the time of the taking of the instrument knew him to merely mentions/indicates a particular fund out of which
be only an accommodation party. In lending his name to the reimbursement is to be made. This does not make the instrument
accommodated party, the accommodation party is in effect a surety conditional because it does not say that such particular fund is the
for the latter. He lends his name to enable the accommodated party source of payment. It is only a notice to the drawee that he can
to obtain credit or to raise money. He receives no part of the reimburse himself out of that particular fund after paying the payee.
consideration for the instrument but assumes liability to the other As to the source of payment to the payee, there is no mention of it.
parties thereto because he wants to accommodate another. In the
instant case, the defendant signed as a drawee/acceptor. Under the
NIL, a drawee is primarily liable. Thus, if the defendant who is a
lawyer, he should not have signed as an acceptor/drawee. In doing G.R. No. L-22405 June 30, 1971
so, he became primarily and personally liable for the drafts.
PHILIPPINE EDUCATION CO., INC., plaintiff-appellant,
3. Under the NIL, a BOE is an unconditional order in writing
addressed by one person to another, signed by the person giving it, vs.
requiring the person to whom it is addressed to pay on demand or at
a fixed or determinable future time a sum certain in money to order MAURICIO A. SORIANO, ET AL., defendant-appellees.
or to bearer. As long as a commercial paper conforms to the
definition of a bill of exchange, that paper is considered a bill of
exchange. The nature of acceptance is important only in the Facts: Enrique Montinola sought to purchase from the Manila Post
determination of the kind of liabilities of the parties involved, but Office 10 money orders of P200.00 each payable to E.P. Montinola.
not in the determination of whether a commercial paper is a bill of After the postal teller had made out the money orders, Montinola
exchange or not. offered to pay for them with private checks which were not
generally accepted in payment of money orders, but Montinola
managed to leave the building with his own check and the ten (10)
G.R. No. L-1405 July 31, 1948 money orders without the knowledge of the teller.
BENJAMIN ABUBAKAR, petitioner, All postmasters and all banks were instructed not to pay anyone of
the money orders if presented for payment. The Bank of America
vs. received a copy of said notice three days later.
THE AUDITOR GENERAL, respondent. One of the above-mentioned money orders numbered 124688 was
received by appellant as part of its sales receipts. The following day
In 1941, a treasury warrant was issued in favor of Placido Urbanes, it deposited the same with the Bank of America, and one day
a government employee in the province of La Union. The said thereafter the latter cleared it with the Bureau of Posts and received
treasury warrant was meant to augment the Food Production from the latter its face value of P200.00.
Campaign in the said province. It was then negotiated by Urbanes
14 | P a g e
CHRISpys NOTES
Appellee Mauricio A. Soriano of the Manila Post Office notified the bank "full control of the indicated time deposits from and after
Bank of America that money order No. 124688 had been found to date" of the assignment and further authorizes said bank to pre-
have been irregularly issued and that the amount it represented had terminate, set-off and "apply the said time deposits to the payment
been deducted from the bank's clearing account. For its part, the of whatever amount or amounts may be due" on the loan upon its
Bank of America debited appellant's account with the same amount maturity.
and gave it advice thereof by means of a debit memo.
Mr. Aranas, Credit Manager of petitioner Caltex went to the
Issue: WON the postal money order in question is a negotiable respondent Bank and presented for verification the CTDs declared
instrument lost by Angel dela Cruz alleging that the same were delivered to
herein petitioner "as security for purchases made with Caltex
Ruling: No. It is not disputed that the Philippine postal statutes were Philippines, Inc.". Later on, respondent bank received a letter from
patterned after similar statutes in force in United States. herein petitioner Caltex formally informing it of its possession of
the CTDs in question and of its decision to pre-terminate the same.
Of particular application to the postal money order in question are
the conditions laid down in the letter of the Director of Posts to the Petitioner Caltex then was requested by herein respondent bank to
Bank of America for the redemption of postal money orders furnish the former "a copy of the document evidencing the
received by it from its depositors. Among others, the condition is guarantee agreement with Mr. Angel dela Cruz" as well as "the
imposed that "in cases of adverse claim, the money order or money details of Mr. Angel dela Cruz" obligation against which petitioner
orders involved will be returned to you (the bank) and the, proposed to apply the time deposits. However, no copy of such
corresponding amount will have to be refunded to the Postmaster, requested documents was furnished by respondent.
Manila, who reserves the right to deduct the value thereof from any
amount due you if such step is deemed necessary." The conditions Accordingly, respondent bank rejected the petitioner's demand and
thus imposed in order to enable the bank to continue enjoying the claim for payment of the value of the CTDs.
facilities theretofore enjoyed by its depositors, were accepted by the
Bank of America. The latter is therefore bound by them. That it is The loan of Angel dela Cruz with the respondent bank matured and
so is clearly referred from the fact that, upon receiving advice that fell due, respondent bank set-off and applied the time deposits in
the amount represented by the money order in question had been question to the payment of the matured loan.
deducted from its clearing account with the Manila Post Office, it
did not file any protest against such action. The appealed decision is Petitioner Caltex filed the instant complaint, praying that
hereby affirmed. respondent bank be ordered to pay it the aggregate value of the
certificates of time deposit of P1,120,000.00 plus the interests and
damages.
G.R. No. 97753 August 10, 1992 RTC DISMISSED THE COMPLAINT (NOT EXPLAINED) AND
WAS AFFIRMED BY RESPONDENT CA.
CALTEX (PHILIPPINES), INC., petitioner,
Sample of the said CTD-
vs.
SECURITY BANK
COURT OF APPEALS and SECURITY BANK AND TRUST
COMPANY, respondents. AND TRUST COMPANY6778 Ayala Ave., Makati No. 90101
On various dates, respondent Security Bank (Thru Sucat Branch) Metro Manila, Philippines
issued certificates of time deposit (CTDs) in favor of one Angel
dela Cruz who deposited with herein respondent the aggregate SUCAT OFFICEP 4,000.00
amount of P1,120,000.00. Angel dela Cruz delivered the said CTDs
to herein petitioner in connection with his purchased of fuel CERTIFICATE OF DEPOSIT
products from the latter. Later on, Angel dela Cruz informed Mr.
Rate 16%
Timoteo Tiangco, the Sucat Branch Manger, that he lost all the
certificates of time deposit in dispute. Mr. Tiangco advised said Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____
depositor to execute and submit a notarized Affidavit of Loss, as
required by respondent bank's procedure, if he desired replacement This is to Certify that B E A R E R has deposited in this Bank the
of said lost CTDs. Angel then executed such. sum of PESOS: FOUR THOUSAND ONLY, SECURITY BANK
SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Currency,
Angel dela Cruz negotiated and obtained a loan from respondent repayable to said depositor 731 days. after date, upon presentation
bank in the amount P875,000. On the same date, said depositor and surrender of this certificate, with interest at the rate of 16% per
executed a notarized Deed of Assignment of Time Deposit which cent per annum.
stated, among others, that he (de la Cruz) surrenders to respondent
15 | P a g e
CHRISpys NOTES
(Sgd. Illegible) (Sgd. Illegible) say that the depositor is Angel de la Cruz and that the amounts
deposited are repayable specifically to him. Rather, the amounts are
to be repayable to the bearer of the documents or, for that matter,
whosoever may be the bearer at the time of presentment. On the
Respondent court ruled that the CTDs in question are non- wordings of the documents, therefore, the amounts deposited are
negotiable instruments. Ruling that while it may be true that the repayable to whoever may be the bearer thereof.
word "bearer" appears rather boldly in the CTDs issued, it is
important to note that after the word "BEARER" stamped on the Can petitioner recover on the CTDs? This time, NO. although the
space provided supposedly for the name of the depositor, the words CTDs are bearer instruments, a valid negotiation thereof for the true
"has deposited" a certain amount follows. The document further purpose and agreement between it and De la Cruz, as ultimately
provides that the amount deposited shall be "repayable to said ascertained, requires both delivery and indorsement. CTDs were in
depositor" on the period indicated. Therefore, the text of the reality delivered to it as a security for De la Cruz' purchases of its
instrument(s) themselves manifest with clarity that they are payable, fuel products
not to whoever purports to be the "bearer" but only to the specified
person indicated therein, the depositor. In effect, the appellee bank There was no negotiation in the sense of a transfer of the legal title
acknowledges its depositor Angel dela Cruz as the person who to the CTDs in favor of petitioner in which situation, for obvious
made the deposit and further engages itself to pay said depositor the reasons, mere delivery of the bearer CTDs would have sufficed.
amount indicated thereon at the stipulated date.
ISSUE: WHETHER OR NOT THE CTDS ARE NEGOTIABLE Where the holder has a lien on the instrument arising from contract,
INSTRUMENTS. he is deemed a holder for value to the extent of his lien.
HELD:Yes.
Section 1 Act No. 2031, otherwise known as the Negotiable G.R. No. 88866 February 18, 1991
Instruments Law, enumerates the requisites for an instrument to
become negotiable, viz: METROPOLITAN BANK & TRUST COMPANY, petitioner,
(a) It must be in writing and signed by the maker or drawer; vs.
(b) Must contain an unconditional promise or order to pay a sum COURT OF APPEALS, GOLDEN SAVINGS & LOAN
certain in money; ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO
and GLORIA CASTILLO
(c) Must be payable on demand, or at a fixed or determinable future
time;
(d) Must be payable to order or to bearer; and Facts:
(e) Where the instrument is addressed to a drawee, he must be - Eduardo Gomez opened an account with Golden Savings
named or otherwise indicated therein with reasonable certainty. and deposited 38 treasury warrants.
The CTDs in question undoubtedly meet the requirements of the - All warrants were subsequently indorsed by Gloria Castillo
law for negotiability. The parties' bone of contention is with regard as Cashier of Golden Savings and deposited to its Savings account
to requisite (d) set forth above. It is noted that Mr. Timoteo P. in Metrobank branch in Calapan, Mindoro. They were sent for
Tiangco, Security Bank's Branch Manager way back in 1982, clearance in the same bank.
testified in open court that the depositor reffered to in the CTDs is
no other than Mr. Angel de la Cruz. - Meanwhile, Gomez is not allowed to withdraw from his
account, later, however, exasperated over Floria repeated
On this score, the accepted rule is that the negotiability or non- inquiries and also as an accommodation for a valued client
negotiability of an instrument is determined from the writing, that Metrobank decided to allow Golden Savings to withdraw from
is, from the face of the instrument itself. In the construction of a bill proceeds of the warrants.
or note, the intention of the parties is to control, if it can be legally
ascertained. - In turn, Golden Savings subsequently allowed Gomez to
make withdrawals from his own account.
Contrary to what respondent CA held, the CTDs are negotiable
instruments. The documents provide that the amounts deposited - Metrobank informed Golden Savings that 32 of the
shall be repayable to the depositor. And who, according to the warrants had been dishonored by the Bureau of Treasury and
document, is the depositor? It is the "bearer." The documents do not
16 | P a g e
CHRISpys NOTES
demanded the refund by Golden Savings of the amount it had business day, the check was presented by Lee Hua Hong to the
previously withdrawn, to make up the deficit in its account. drawee bank for payment, but it was dishonored for insufficiency of
funds. Ang Tek Lian was convicted by the CFI of estafa for having
Issue: WON the subject treasury warrants are negotiable intruments issued a rubber check.
Ruling: No. The Court of Appeals believed the version of Lee Huan Hong who
testified that appellant went to his (complainant's) office, and asked
Reasons: him to exchange the check which he (appellant) then brought
with him with cash alleging that he needed badly the sum of
1. Expressly stated on its face. P4,000 represented by the check, but could not withdraw it from the
bank, it being then already closed; that in view of this request and
2. Conditional because they are out of a particular fund.
relying upon appellant's assurance that he had sufficient funds in the
- Clearly stamped on their face is the word: non blank, and because they used to borrow money from each other,
negotiable. even before the war, and appellant owns a hotel and restaurant said
complainant delivered to him, on the same date, the sum of P4,000
- Moreover, it is indicated that they are payable from a in cash; that despite repeated efforts to notify him that the check
particular fund, to wit, Fund 501. had been dishonored by the bank, appellant could not be located
any-where, until he was summoned in the City Fiscal's Office in
- An instrument to be negotiable instrument must contain an view of the complaint for estafa filed in connection therewith; and
unconditional promise or orders to pay a sum certain in money. that appellant has not paid as yet the amount of the check, or any
part thereof."
- An unqualified order or promise to pay is unconditional
though coupled with: It is argued, however, that as the check had been made payable to
"cash" and had not been endorsed by Ang Tek Lian, the defendant is
o an indication of a particular fund out of which not guilty of the offense charged. Based on the proposition that "by
reimbursement is to be made or a particular account to be debited uniform practice of all banks in the Philippines a check so drawn is
with the amount; or invariably dishonored," the following line of reasoning is advanced
in support of the argument:
o a statement of the transaction which give rise to the
instrument. But an order to promise to pay out of particular fund is . . . When, therefore, he (the offended party ) accepted the check
not unconditional. from the appellant, he did so with full knowledge that it would be
dishonored upon presentment. In that sense, the appellant could not
- The indication of Fund 501 as the source of the payment to be said to have acted fraudulently because the complainant, in so
be made on the treasury warrants makes the order or promise to pay accepting the check as it was drawn, must be considered, by every
not conditional and the warrants themselves non-negotiable. rational consideration, to have done so fully aware of the risk he
was running thereby."
- Hence, non-negotiable.
ISSUE:
Whether or not a check payable to cash needs indorsement.
HELD:
G.R. No. L-2516 September 25, 1950
NO.Under the Negotiable Instruments Law (sec. 9 [d], a
ANG TEK LIAN, petitioner, check drawn payable to the order of "cash" is a check payable to
bearer, and the bank may pay it to the person presenting it for
vs. payment without the drawer's indorsement.
THE COURT OF APPEALS, respondent. A check payable to the order of cash is a bearer instrument.
Where a check is made payable to the order of "cash", the word

cash "does not purport to be the name of any person", and hence the
FACTS:
instrument is payable to bearer. The drawee bank need not obtain
Ang Tek Lian, knowing he had no funds therefor, drew the check any indorsement of the check, but may pay it to the person
upon the China Banking Corporation for the sum of P4,000, presenting it without any indorsement.
payable to the order of "cash". He delivered it to Lee Hua Hong in
exchange for money which the latter handed in act. On the next Of course, if the bank is not sure of the bearer's identity or financial
solvency, it has the right to demand identification and /or assurance
17 | P a g e
CHRISpys NOTES
against possible complications, for instance, (a) forgery of association was short on funds. PEMSLAs officers devised a
drawer's signature, (b) loss of the check by the rightful owner, (c) scheme where they took out loans using other members without
raising of the amount payable, etc. The bank may therefore require, their consent and the PEMSLA checks issued for these loans were
for its protection, that the indorsement of the drawer or of some then given to the spouses for rediscounting.
other person known to it be obtained. But where the Bank is
satisfied of the identity and /or the economic standing of the bearer The RODRIGUEZ CHECKS were deposited directly by PEMSLA
who tenders the check for collection, it will pay the instrument without any endorsement from the named payees. The spouses
without further question; and it would incur no liability to the endorsed 69 checks from Nov 1998 to Feb 1999 payable to 47
drawer in thus acting. individual payees.
A check payable to bearer is authority for payment to holder. Where Petitioner PNB eventually found out the fraudulent scheme and
a check is in the ordinary form, and is payable to bearer, so that no closed the current account of PEMSLA which led to the checks
indorsement is required, a bank, to which it is presented for issued by the spouses being dishonoured for being withdrawn from
payment, need not have the holder identified, and is not negligent in a closed account. Alarmed, the spouses filed a civil complaint for
falling to do so. . . . (Michie on Banks and Banking, Permanent damages against PEMSLA and PNB where they sought to recover
Edition, Vol. 5, p. 343.) the value of the checks deposited to the closed PEMSLA account
amounting to Php2,345,804.00.
. . . Consequently, a drawee bank to which a bearer check is
presented for payment need not necessarily have the holder RTC RULED IN FAVOR OF THE SPOUSES RODRIGUEZ.
identified and ordinarily may not be charged with negligence in
failing to do so. See Opinions 6C:2 and 6C:3 If the bank has no CA REVERSED THE RTC RULING; SPOUSES FILED MR; CA
reasonable cause for suspecting any irregularity, it will be protected REVERSED ITSELF.
in paying a bearer check, "no matter what facts unknown to it may
have occurred prior to the presentment." 1 Morse, Banks and ISSUE: WON THE SUBJECT CHECKS ARE PAYABLE TO
Banking, sec. 393. ORDER OR BEARER - YES
Although a bank is entitled to pay the amount of a bearer check HELD: As a rule, when the payee is fictitious or not intended to be
without further inquiry, it is entirely reasonable for the bank to the true recipient of the proceeds, the check is considered as a
insist that holder give satisfactory proof of his identity. . . . (Paton's bearer instrument. A check is "a bill of exchange drawn on a bank
Digest, Vol. I, p. 1089.) payable on demand." It is either an order or a bearer instrument.
Sections 8 and 9 of the NIL states:
The SC further held that the form of the check was totally
unconnected with its dishonor. The Court of Appeals declared that it SEC. 8. When payable to order. The instrument is payable to
was returned unsatisfied because the drawer had insufficient funds order where it is drawn payable to the order of a specified person or
not because the drawer's indorsement was lacking. to him or his order. It may be drawn payable to the order of
Wherefore, there being no question as to the correctness of the (a) A payee who is not maker, drawer, or drawee; or
penalty imposed on the appellant, the writ of certiorari is denied and
(b) The drawer or maker; or
the decision of the Court of Appeals is hereby affirmed, with costs.
(c) The drawee; or
(d) Two or more payees jointly; or

G.R. No. 170325 September 26, 2008
(e) One or some of several payees; or
PHILIPPINE NATIONAL BANK, Petitioner,
(f) The holder of an office for the time being.
vs.
Where the instrument is payable to order, the payee must be named
ERLANDO T. RODRIGUEZ and NORMA RODRIGUEZ,
or otherwise indicated therein with reasonable certainty.
Respondents.
SEC. 9. When payable to bearer. The instrument is payable to
FACTS: Respondent Spouses Erlando and Norma Rodriguez were
bearer
clients of PNB. The spouses were engaged in the informal lending
business and had discounting arrangements with Philnabank (a) When it is expressed to be so payable; or
Employees Savings and Loan Association (PEMSLA).
(b) When it is payable to a person named therein or bearer; or
PEMSLA would grant loans to its members and the spouses would
rediscount the postdated checks issued to its members whenever the
18 | P a g e
CHRISpys NOTES
(c) When it is payable to the order of a fictitious or non-existing In the case under review, the Rodriguez checks were payable to
person, and such fact is known to the person making it so payable; specified payees. It is unrefuted that the 69 checks were payable to
or specific persons. Likewise, it is uncontroverted that the payees were
actual, existing, and living persons that had a rediscounting
(d) When the name of the payee does not purport to be the name of arrangement with spouses Rodriguez.
any person; or
What remains to be determined is if the payees, though existing
(e) Where the only or last indorsement is an indorsement in blank. persons, were "fictitious" in its broader context.
The distinction between bearer and order instruments lies in their For the fictitious-payee rule to be available as a defense, PNB must
manner of negotiation, an order instrument requires an endorsement show that the makers did not intend for the named payees to be part
from the payee or holder before it may be validly negotiated. A of the transaction involving the checks. In this case however, the
bearer instrument, on the other hand, does not require an banks only shows that the payees did not have knowledge of the
endorsement to be validly negotiated. It is negotiable by mere existence of the checks. This lack of knowledge on the part of the
delivery. (READ SEC. 30 NIL) payees, however, was not tantamount to a lack of intention on the
part of respondents-spouses that the payees would not receive the
A check that is payable to a specified payee is an order instrument. checks proceeds. Considering that respondents-spouses were
However, under Section 9(C) of the NIL, a check payable to a transacting with PEMSLA and not the individual payees, it is
specific payee may nevertheless be considered as bearer instrument understandable that they relied on the information given by the
if it is payable to the order of a fictitious or non-existing person, and officers of PEMSLA that the payees would be receiving the checks.
such fact is known to the person making it so payable.
Verily, the subject checks are presumed order instruments for PNB
US JURISPRUDENCE YIELDS that an actual, existing, and living failed to present sufficient evidence to defeat the claim of
payee may also be fictitious if the maker of the check did not intend respondents-spouses that the named payees were the intended
for the payee to in fact receive the proceeds of the check recipients of the checks proceeds. The bank failed to satisfy a
(FICTITIOUS-PAYEE RULE). requisite condition of a fictitious-payee situation that the maker of
the check intended for the payee to have no interest in the
In a fictitious-payee situation, the drawee bank is absolved from transaction.
liability and the drawer bears the loss, When faced with a check
payable to fictitious payee, it is treated as a bearer instrument that Because of a failure to show that the payees were "fictitious" in its
can be negotiated by delivery. The underlying theory is that one broader sense, the fictitious-payee rule does not apply. Thus, the
cannot expect a fictitious payee to negotiate the check by placing checks are to be deemed payable to order. Consequently, the drawee
his endorsement thereon. bank bears the loss.
Since there are no genuine issues raised by petitioners, the trial PNB was remiss in its duty as the drawee bank. It does not dispute
court was correct in dismissing the case by summary judgment by the fact that its teller or tellers accepted the 69 checks for deposit to
reason of absence of genuine issues of fact or law. There are not the PEMSLA account even without any endorsement from the
genuine issues raised by petitioners since they do not deny named payees. It bears stressing that order instruments can only be
obtaining a loan from Mercator by signing a promissory note, as negotiated with a valid endorsement.
loan. A bank that regularly processes checks that are neither payable to
the customer nor duly indorsed by the payee is apparently grossly
MUELLER AND MARTIN V LIBERTY INSURANCE BANK: negligent in its operations.
When the person making the check so payable did not intend for the
specified payee to have any part in the transactions, the payee is In the case at bar, respondents-spouses were the banks depositors.
considered as a fictitious payee. The check is then considered as a The checks were drawn against respondents-spouses accounts.
bearer instrument to be validly negotiated by mere delivery. PNB, had the responsibility to ascertain the regularity of the
indorsements, and the genuineness of the signatures on the checks
GETTY PETROLEUM CORP. V. AMERICAN EXPRESS before accepting them for deposit. Lastly, PNB was obligated to pay
TRAVEL RELATED SERVICES COMPANY, INC.: Upheld the the checks in strict accordance with the instructions of the drawers.
fictitious-payee rule. The rule protects the depositary bank and Petitioner miserably failed to discharge this burden.
assigns the loss to the drawer of the check who was in a better
position to prevent the loss in the first place. Due care is not even The checks were presented to PNB for deposit by a representative
required from the drawee or depositary bank in accepting and of PEMSLA absent any type of indorsement, forged or otherwise.
paying the checks. The effect is that a showing of negligence on the The facts clearly show that the bank did not pay the checks in strict
part of the depositary bank will not defeat the protection that is accordance with the instructions of the drawers, respondents-
derived from this rule. spouses. Instead, it paid the values of the checks not to the named
19 | P a g e
CHRISpys NOTES
payees or their order, but to PEMSLA, a third party to the ISSUE:
transaction between the drawers and the payees.
A bank that has been remiss in its duty must suffer the
consequences of its negligence. Being issued to named payees, PNB Whether the promissory note in question is valid.
was duty-bound by law and by banking rules and procedure to
require that the checks be properly indorsed before accepting them
for deposit and payment. In fine, PNB should be held liable for the
amounts of the checks. HELD:
WHEREFORE, the appealed Amended Decision is AFFIRMED.

No. Warrants of attorney to confess judgment are not authorized nor
contemplated by our law. Provisions in notes authorizing attorneys
to appear and confess judgments against makers should not be
recognized in this jurisdiction by implication and should only be
considered as valid when given express legislative sanction.
PHILIPPINE NATIONAL BANK vs. Although the NIL mentions of the validity of the promissory note
despite the presence of a provision of a confession of judgment, the
MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC. Court points out the conclusion of the article: But nothing in this
section shall validate any provision or stipulation otherwise illegal."
G.R. No. L-18103 June 8, 1922 If confessions of judgment were allowed, the debtor will be
deprived of his right to be heard.
FACTS:
Moreover, it is not the policy of the law to place a debtor in the
absolute power of his creditor. The field for fraud is too far enlarged
by such an instrument.
This case concerns the validity of a provision in a Php61,000.00
promissory note whereby in case the same is not paid at maturity,
the maker (Manila Oil)authorizes any attorney to appear and
confess judgment thereon for the principal amount, with interest, REPUBLIC PLANTERS BANK vs. COURT OF APPEALS and
costs, and attorney's fees, and waives all errors, rights to inquisition, FERMIN CANLAS G.R. No. 93073 December 21, 1992
and appeal, and all property exceptions.
Facts:
In 1979, World Garment Manufacturing, through its board

On May 8, 1920, the manager and the treasurer of the Manila Oil authorized Shozo Yamaguchi (president) and Fermin Canlas
executed and delivered to the PNB the promissory note in question. (treasurer) to obtain credit facilities from Republic Planters Bank
When they defaulted, PNB brought action to the CFI of Manila to (RPB) in the forms of export advances and letters of credit/trust
recover the Php61,000.00. They brought with them Atty. Elias receipts accommodations. For this, 9 promissory notes were
Rector, an attorney associated with PNB, to enter in representation executed. Each promissory note was uniformly written in the
of Manila Oil. He filed a motion of confessing judgment. The following manner:
defendant, however, in a sworn declaration, objected strongly to the
unsolicited representation of attorney Recto. Later, attorney Antonio ___________, after date, for value received, I/we, jointly and
Gonzalez appeared for the defendant and filed a demurrer, and severaIly promise to pay to the ORDER of the REPUBLIC
when this was overruled, presented an answer. PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(....) Philippine Currency...
Please credit proceeds of this note to:

The trial judge rendered judgment on the motion of attorney Recto
in the terms of the complaint. ________ Savings Account ______XX Current Account
No. 1372-00257-6
20 | P a g e
CHRISpys NOTES
of WORLDWIDE GARMENT MFG. CORP. The case is a Petition for Review on Certiorari under Rule 45 of the
Sgd. Shozo Yamaguchi Sgd. Fermin Canlas Appeals. The CA dismissed the appeal filed by petitioners.
THE FACTS:
December 20, 1982: Worldwide Garment Manufacturing, Inc. Petitioners filed a complaint for annulment of titles against
changed its corporate name to Pinch Manufacturing Corporation. respondents Mercator Finance Corporation, Lydia P. Salazar,
The note became due and no payment was made. RPB eventually Lamecs Realty & Development Corporation, and the Register of
sued Yamaguchi and Canlas. Canlas, in his defense, averred that he Deeds of Bulacan.
should not be held personally liable for such authorized corporate
acts that he performed inasmuch as he signed the promissory notes THE CONTENTION OF THE PETITIONERS:
when he issued said promissory notes in behalf of Worldwide 1) Petitioners are the registered owners of five (5) parcels of
Garment Manufacturing, Inc., it was in blank (typewritten entries land contained in the Real Estate Mortgage executed by them and
not appearing when he signed) Embassy Farms, Inc.
ISSUE: Whether or not Canlas should be held liable for the 2) They executed the Real Estate Mortgage in favor of
promissory notes. Mercator Financing Corporation (Mercator) only as officers of
Embassy Farms.
HELD:
such. By signing the notes, the maker promises to pay to the order 4) The mortgage was without any consideration as to them
of the payee or any holder according to the tenor thereof. since they did not personally obtain any loan or credit
accommodations. There being no principal obligation in which the
The solidary liability of private respondent Fermin Canlas is made mortgage rests, the real estate mortgage is void.
the phrase joint and several as describing the unconditional 5) The following are not valid:
instrument containing the words I promise to pay is signed by a) The foreclosure proceedings conducted by Mercator
liable thereon. b) The issuance of the transfer certificate of title to it
Canlas is solidarily liable on each of the promissory notes bearing c) The subsequent sale of the same parcels of land to
his signature for the following reasons: respondent Lydia P. Salazar
The promissory notes are negotiable instruments and must be d) The transfer of the titles to the name of respondent Salazar
e) The sale and transfer of the properties to respondent
A change in the corporate name does not make a new corporation, Lamecs Realty & Development Corporation
FINANCE CORP:
liabilities.
SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C.
However, on February 16, 1982, plaintiffs executed a Mortgage in
EVANGELISTA (Petitioners)
favor of defendant Mercator Finance Corporation for and in
Vs. consideration of certain loans, and/or other forms of credit
accommodations obtained from the Mortgagee (defendant Mercator
MERCATOR FINANCE CORP., ET. AL. (Respondents) Finance Corp.) amounting the P844,625.78.
G.R. No. 148864, August 21, 2003 2) The mortgage was to secure the payment of the amount of
P844,625.78 and those others that the mortgagee may extend to the
mortgagor.
THE CASE: 3) Since petitioners signed the promissory note as co-makers,

aside from the Continuing Suretyship Agreement subsequently
21 | P a g e
CHRISpys NOTES
executed to guarantee the indebtedness of Embassy Farms, and the favor of defendant Lamecs Realty & Development Corporation are
succeeding promissory notes restructuring the loan, such petitioners null and void.
are jointly and severally liable with Embassy Farms.
THE RULING OF THE SUPREME COURT:
foreclosure and subsequent sale of the mortgaged properties are The Supreme Court dismissed the petition. It ordered the
valid. petitioners to pay the costs of suit.
THE CONTENTION OF RESPONDENTS SALAZAR AND THE BASIS OF THE SUPREME COURT RULING:
1) Both respondents Salazar and Lamecs are innocent Mortgage executed by the plaintiffs in favor of defendant Mercator
purchasers for value and in good faith, since they relied on the Finance Corp. is null and void.
HELD: No. The Real Estate Mortgage executed by the plaintiffs in
2) Petitioners were the prior owners of the subject parcels of favor of defendant Mercator Finance Corp. is not null and void.
land, but now respondents are already the registered owners of the
land. REASONS:
3) The petitioner can no longer recover the property by 1) The subject promissory notes were signed in the personal
reason of laches, since they kept silent and did not act for a lapse of capacities of the petitioners, and as officers of said debtor
almost 10 years from the foreclosure of the property and the corporation (Embassy Farms, Inc.).
subsequent sales that they made their claim. Hence, petitioners are
in estoppel and guilty of laches. 2) The petitioners were wrong in their contention that the
loans secured by the mortgage they executed were not personally
At the pre-trial, Mercator moved for summary judgment on the theirs. In constituting a mortgage over their own properties in order
ground that except as to the amount of damages, there is no factual to secure the purported corporate debt of Embassy Farms, Inc., the
issue to be litigated. It contended that since the petitioners admitted petitioners undeniably assumed the personality of persons interested
the existence of the promissory note, the mortgage, foreclosure in the fulfillment of the principal obligation who, to save the subject
proceedings and the subsequent sales are valid and the complaint realties from foreclosure and with a view towards being subrogated
must be dismissed. to the right of the creditor, were free to discharge the same by
payment.
THE RULING OF THE TRIAL COURT:
The RTC granted the motion for summary judgment and dismissed extrajudicial foreclosure proceedings undertaken on subject parcels
the complaint. Petitioners filed a motion for reconsideration, which of land to satisfy the indebtedness of Embassy Farms, Inc. is null
was subsequently denied. Hence, petitioners appeals the RTC and void.
ruling before the Court of Appeals.
HELD: No. The extrajudicial foreclosure proceedings undertaken
THE RULING OF THE COURT OF APPEALS: on subject parcels of land to satisfy the indebtedness of Embassy
the present Petition for Review on Certiorari before the Supreme REASONS:
Court.
1) The failure of the petitioners to pay the loan resulted to the
THE ISSUES: action of foreclosure of the mortgaged properties by Mercator
Finance Corp.
1) Whether or not the Real Estate Mortgage executed by the
plaintiffs in favor of defendant Mercator Finance Corp. is null and
void.
2) The act of the petitioners in mortgaging their own
2) Whether or not the extrajudicial foreclosure proceedings properties as security for the loan implies the risk of these being
undertaken on subject parcels of land to satisfy the indebtedness of foreclosed by reason of failure to pay the loan.
Embassy Farms, Inc. is null and void.
3) Whether nor the sale made by defendant Mercator Finance

Corp. in favor of Lydia Salazar and that executed by the latter in 3) A simple perusal of the promissory note and the continuing
surety agreement proved that petitioners are solidary obligors with
Embassy Farms, Inc.
22 | P a g e
CHRISpys NOTES
a) The promissory note clearly states that the petitioners G.R. No. 93073 December 21, 1992
jointly and severally promise to the pay the order of Mercator
Finance Corporation the principal sum of the loan in installments. REPUBLIC PLANTERS BANK, petitioner,
b) Since the petitioners executed a continuing suretyship vs.

agreement with Mercator Finance, they are solidarily liable with the
principal (Embassy Farms, Inc.). COURT OF APPEALS and FERMIN CANLAS, respondents.
c) Paragraph (g), Section 17 of the Negotiable Instruments

Law states that Where an instrument containing the word I
promise to pay is signed by two or more persons, they are deemed Facts:
to be jointly and severally liable thereon. This provision of law
In 1979, World Garment Manufacturing, through its board
applies squarely to the present case.
authorized Shozo Yamaguchi (president) and Fermin Canlas
(treasurer) to obtain credit facilities from Republic Planters Bank
(RPB) in the forms of export advances and letters of credit/trust
4) Petitioners cannot claim that they did not personally receipts accommodations. For this, 9 promissory notes were
receive any consideration for the contract. executed. Each promissory note was uniformly written in the
following manner:
a) It is a well-entrenched rule that the consideration necessary
to support a surety obligation need not pass directly to the surety. ___________, after date, for value received, I/we, jointly and
severaIly promise to pay to the ORDER of the REPUBLIC
b) A consideration moving to the principal alone is sufficient PLANTERS BANK, at its office in Manila, Philippines, the sum of
to consider the surety obligation as valid. ___________ PESOS(....) Philippine Currency...
Please credit proceeds of this note to:
5) The parol evidence rule does not apply in the case. ________ Savings Account ______XX Current Account
The parties cannot be allowed to introduce evidence of No. 1372-00257-6

conditions allegedly agreed upon by them other than those
stipulated in the loan documents because when they reduced their of WORLDWIDE GARMENT MFG. CORP.
agreement in writing, it is presumed that they have made the writing
the only repository and memorial of truth, and whatever is not Sgd. Shozo Yamaguchi Sgd. Fermin Canlas
found in the writing must be understood to have been waived and
December 20, 1982: Worldwide Garment Manufacturing, Inc.
abandoned.
changed its corporate name to Pinch Manufacturing Corporation.
REGARDING THE THIRD ISSUE: Whether nor the sale made by The note became due and no payment was made. RPB eventually
defendant Mercator Finance Corp. in favor of Lydia Salazar and sued Yamaguchi and Canlas. Canlas, in his defense, averred that he
that executed by the latter in favor of defendant Lamecs Realty & should not be held personally liable for such authorized corporate
Development Corporation are null and void. acts that he performed inasmuch as he signed the promissory notes
HELD: No. The sale made by defendant Mercator Finance Corp. when he issued said promissory notes in behalf of Worldwide
in favor of Lydia Salazar and that executed by the latter in favor of Garment Manufacturing, Inc., it was in blank (typewritten entries
defendant Lamecs Realty & Development Corporation are not null not appearing when he signed)
and void.
ISSUE: Whether or not Canlas should be held liable for the
REASONS: promissory notes.
1) If appellants really felt aggrieved by the foreclosure of the HELD:

subject mortgage and the subsequent sales of the realties to other
parties, they should have commenced the suit immediately, and Yes. Under the Negotiable lnstruments Law, persons who write their
should not have procrastinated for about nine (9) years. Hence, names on the face of promissory notes are makers and are liable as
they are guilty of laches. such. By signing the notes, the maker promises to pay to the order
of the payee or any holder according to the tenor thereof.
The solidary liability of private respondent Fermin Canlas is made

the phrase joint and several as describing the unconditional
23 | P a g e
CHRISpys NOTES
promise to pay to the order of Republic Planters Bank. Where an 5) The following are not valid:
instrument containing the words I promise to pay is signed by
two or more persons, they are deemed to be jointly and severally a) The foreclosure proceedings conducted by Mercator
liable thereon.
b) The issuance of the transfer certificate of title to it
Canlas is solidarily liable on each of the promissory notes bearing
his signature for the following reasons: c) The subsequent sale of the same parcels of land to
respondent Lydia P. Salazar
The promissory notes are negotiable instruments and must be
governed by the Negotiable Instruments Law. d) The transfer of the titles to the name of respondent Salazar
A change in the corporate name does not make a new corporation, e) The sale and transfer of the properties to respondent
and whether effected by special act or under a general law, has no Lamecs Realty & Development Corporation
liabilities. THE CONTENTION OF THE RESPONDENT MERCATOR
FINANCE CORP:

G.R. No. 148864 August 21, 2003 However, on February 16, 1982, plaintiffs executed a Mortgage in
favor of defendant Mercator Finance Corporation for and in
SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. consideration of certain loans, and/or other forms of credit
EVANGELISTA, Petitioners, accommodations obtained from the Mortgagee (defendant Mercator
Finance Corp.) amounting the P844,625.78.
vs.
2) The mortgage was to secure the payment of the amount of
MERCATOR FINANCE CORP., LYDIA P. SALAZAR, P844,625.78 and those others that the mortgagee may extend to the
LAMEC'S** REALTY AND DEVELOPMENT CORP. and the mortgagor.
REGISTER OF DEEDS OF BULACAN, Respondents.
3) Since petitioners signed the promissory note as co-makers,
THE CASE: aside from the Continuing Suretyship Agreement subsequently
executed to guarantee the indebtedness of Embassy Farms, and the
The case is a Petition for Review on Certiorari under Rule 45 of the succeeding promissory notes restructuring the loan, then petitioners
Revised Rules of Court, assailing the decision of the Court of are jointly and severally liable with Embassy Farms.
Appeals. The CA dismissed the petition.
THE FACTS: foreclosure and subsequent sale of the mortgaged properties are
valid.
Petitioners filed a complaint for annulment of titles against
respondents Mercator Finance Corporation, Lydia P. Salazar, THE CONTENTION OF RESPONDENTS SALAZAR AND
Lamecs Realty & Development Corporation, and the Register of LAMECS REALTY & DEVELOPMENT CORP.:
Deeds of Bulacan.
1) Both respondents Salazar and Lamecs are innocent
THE CONTENTION OF THE PETITIONERS: purchasers for value and in good faith, since they relied on the
1) Petitioners are the registered owners of five (5) parcels of
land contained in the Real Estate Mortgage executed by them and 2) Petitioners were the prior owners of the subject parcels of
Embassy Farms, Inc. land, but now respondents are already the registered owners of the
land.
2) They executed the Real Estate Mortgage in favor of
Mercator Financing Corporation (Mercator) only as officers of 3) The petitioner can no longer recover the property by
Embassy Farms. reason of laches, since they kept silent and did not act for a lapse of
almost 10 years from the foreclosure of the property and the
3) They did not receive the proceeds of the loan evidence by subsequent sales that they made their claim. Hence, petitioners are
a promissory note, as all of it went to Embassy Farms. in estoppel and guilty of laches.
4) The mortgage was without any consideration as to them At the pre-trial, Mercator moved for summary judgment on the
since they did not personally obtain any loan or credit ground that except as to the amount of damages, there is no factual
accommodations. There being no principal obligation in which the issue to be litigated. It contended that since the petitioners admitted
mortgage rests, the real estate mortgage is void.
24 | P a g e
CHRISpys NOTES
the existence of the promissory note, the mortgage, foreclosure to the right of the creditor, were free to discharge the same by
proceedings and the subsequent sales are valid and the complaint payment.
must be dismissed.
THE RULING OF THE TRIAL COURT: extrajudicial foreclosure proceedings undertaken on subject parcels
of land to satisfy the indebtedness of Embassy Farms, Inc. is null
The RTC granted the motion for summary judgment and dismissed and void.
the complaint. Petitioners filed a motion for reconsideration, which
was subsequently denied. Hence, petitioners appeals the RTC HELD: No. The extrajudicial foreclosure proceedings undertaken
ruling before the Court of Appeals. on subject parcels of land to satisfy the indebtedness of Embassy
THE RULING OF THE COURT OF APPEALS:
REASONS:
the present Petition for Review on Certiorari before the Supreme 1) The failure of the petitioners to pay the loan resulted to the
Court. action of foreclosure of the mortgaged properties by Mercator
Finance Corp.
THE ISSUES:
2) The act of the petitioners in mortgaging their own
1) Whether or not the Real Estate Mortgage executed by the properties as security for the loan implies the risk of these being
plaintiffs in favor of defendant Mercator Finance Corp. is null and foreclosed by reason of failure to pay the loan.
void.
3) A simple perusal of the promissory note and the continuing
2) Whether or not the extrajudicial foreclosure proceedings surety agreement proved that petitioners are solidary obligors with
undertaken on subject parcels of land to satisfy the indebtedness of Embassy Farms, Inc.
Embassy Farms, Inc. is null and void.
a) The promissory note clearly states that the petitioners
3) Whether nor the sale made by defendant Mercator Finance jointly and severally promise to the pay the order of Mercator
Corp. in favor of Lydia Salazar and that executed by the latter in Finance Corporation the principal sum of the loan in installments.
favor of defendant Lamecs Realty & Development Corporation are
null and void. b) Since the petitioners executed a continuing suretyship
agreement with Mercator Finance, they are solidarily liable with the
THE RULING OF THE SUPREME COURT: principal (Embassy Farms, Inc.).
The Supreme Court dismissed the petition. It ordered the c) Paragraph (g), Section 17 of the Negotiable Instruments
petitioners to pay the costs of suit. Law states that Where an instrument containing the word I
promise to pay is signed by two or more persons, they are deemed
THE BASIS OF THE SUPREME COURT RULING: to be jointly and severally liable thereon. This provision of law
applies squarely to the present case.
Mortgage executed by the plaintiffs in favor of defendant Mercator
Finance Corp. is null and void.
4) Petitioners cannot claim that they did not personally
HELD: No. The Real Estate Mortgage executed by the plaintiffs in receive any consideration for the contract.
favor of defendant Mercator Finance Corp. is not null and void.
a) It is a well-entrenched rule that the consideration necessary
REASONS: to support a surety obligation need not pass directly to the surety.
1) The subject promissory notes were signed in the personal b) A consideration moving to the principal alone is sufficient
capacities of the petitioners, and as officers of said debtor to consider the surety obligation as valid.
corporation (Embassy Farms, Inc.).
2) The petitioners were wrong in their contention that the

loans secured by the mortgage they executed were not personally 5) The parol evidence rule does not apply in the case.
theirs. In constituting a mortgage over their own properties in order
to secure the purported corporate debt of Embassy Farms, Inc., the The parties cannot be allowed to introduce evidence of
petitioners undeniably assumed the personality of persons interested conditions allegedly agreed upon by them other than those
in the fulfillment of the principal obligation who, to save the subject stipulated in the loan documents because when they reduced their
realties from foreclosure and with a view towards being subrogated agreement in writing, it is presumed that they have made the writing
25 | P a g e
CHRISpys NOTES
the only repository and memorial of truth, and whatever is not unsigned blank checks, especially in those times when Ilano left for
found in the writing must be understood to have been waived and the United States for medical check-up
abandoned.
That Sometime during the second week of December
1999, or thereabouts, defendant ALONZO by means of deceit and
abuse of confidence succeeded in procuring Promissory Notes and
REGARDING THE THIRD ISSUE: Whether nor the sale made by signed blank checks from Ilano who was then recuperating from
defendant Mercator Finance Corp. in favor of Lydia Salazar and illness.
that executed by the latter in favor of defendant Lamecs Realty &
Development Corporation are null and void. Several blank checks and promissory notes were issued to
certain individuals with corresponding amount by Alonzo who
HELD: No. The sale made by defendant Mercator Finance Corp. allegedly procured the signature of Ilano .
in favor of Lydia Salazar and that executed by the latter in favor of
defendant Lamecs Realty & Development Corporation are not null A Complaint for Revocation/Cancellation of Promissory
and void. Notes and Bills of Exchange (Checks) with Damages and Prayer for
Preliminary Injunction or Temporary Restraining Order (TRO)
REASONS: against Alonzo et al. before the Regional Trial Court of Cavite.
1) If appellants really felt aggrieved by the foreclosure of the Ilano contends that Alonzo, by means of deceit and abuse
subject mortgage and the subsequent sales of the realties to other of confidence succeeded in procuring Promissory Notes and signed
parties, they should have commenced the suit immediately, and blank checks. Alonzo likewise succeeded in inducing Ilano to sign
should not have procrastinated for about nine (9) years. Hence, antedated Promissory Notes.
they are guilty of laches.
The RTC rendered a decision dismissing the complaint for
lack of cause of action and failure to allege the ultimate facts of the
case.
2) Since there are no genuine issues raised by petitioners, the
trial court was correct in dismissing the case by summary judgment On appeal, the Court of Appeals affirmed the dismissal of
by reason of absence of genuine issues of fact or law. There are not the complaint. Hence, this petition.
genuine issued raised by petitioners since they do not deny
obtaining a loan from Mercator by signing a promissory note, as ISSUES:
loan. (Related in Nego)
1.) WON Checks drawn from a closed account is still

negotiable. (NO)
G.R. No. 161756 December 16, 2005
2.) WON undated Check is negotiable (YES)
VICTORIA J. ILANO represented by her Attorney-in-fact, MILO
ANTONIO C. ILANO, Petitioners, vs. HON. DOLORES L. HELD:
ESPAOL, in her capacity as Executive Judge, RTC of Imus,
Cavite, Br. 90, and, AMELIA ALONZO, EDITH CALILAP, 1.) With respect to the checks subject of the complaint, it is
DANILO CAMACLANG, ESTELA CAMACLANG, ALLAN gathered that, except for Check No. 0084078, they were drawn all
CAMACLANG, LENIZA REYES, EDWIN REYES, JANE against Ilanos Metrobank Account No. 00703- 955536-7 shows
BACAREL, CHERRY CAMACLANG, FLORA CABRERA, that it was dishonored due to Account Closed. When Ilano then
ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA filed her complaint, all the checks subject hereof which were drawn
CASTRO, GLORIA DOMINGUEZ, ANNILYN C. SABALE and against the same closed account were already rendered valueless or
several JOHN DOES, Respondents. non-negotiable, hence, Ilano had, with respect to them, no cause of
action.
Facts:
Defendant Amelia Alonzo is a trusted employee of

Petiotioner Victoria Ilano, Alonzo worked for Ilano for several 2.)With respect to Check No. 0084078, however, which was drawn
years and gained Alonzos trust and confidence. against another account of Ilano, albeit the date of issue bears only
the year 1999, its validity and negotiable character at the time the
Due to these trust and confidence reposed upon ALONZO complaint was filed was not affected.
by Ilano, there were occasions when ALONZO was entrusted with
Ilanos METROBANK Check Book containing either signed or
26 | P a g e
CHRISpys NOTES
For Section 6 of the Negotiable Instruments Law provides: the complaint seeks the revocation/cancellation of the subject
promissory notes and damages.
Section 6. Omission; seal; particular money. The validity and
negotiable character of an instrument are not affected by the fact Let the records of the case be then REMANDED to the trial court.
that
G.R. No. 74917 January 20, 1988

(a) It is not dated; or
BANCO DE ORO SAVINGS AND MORTGAGE BANK,
(b) Does not specify the value given, or that any value had been petitioner,
given therefor; or
vs.
(c) Does not specify the place where it is drawn or the place where
it is payable; or EQUITABLE BANKING CORPORATION, PHILIPPINE
CLEARING HOUSE CORPORATION, AND REGIONAL TRIAL
(d) Bears a seal; or COURT OF QUEZON CITY, BRANCH XCII (92), respondents.
(e) Designates a particular kind of current money in which payment

is to be made.
G.R. Nos. L-25836-37 January 31, 1981
THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,

**Note However, even if the holder of Check No. 0084078 would
have filled up the month and day of issue thereon to be December vs.
and 31, respectively, it would have, as it did, become stale six (6)
JOSE M. ARUEGO, defendant-appellant.
months or 180 days thereafter, following current banking practice.
(so still no casue of action) Facts: Petitioner Philippine Bank of Commerce filed a complaint
against respondent Jose Aruego to recover the cost of the printing of
"World Current Events," a periodical published by the defendant. To
facilitate the payment of the printing Aruego obtained a credit
** Promissory Note
accommodation from the bank. For every printing of the "World
It is, however, with respect to the questioned promissory notes that Current Events," the printer, Encal Press and Photo Engraving,
the present petition assumes merit. For, Ilanos allegations in the collected the cost of printing by drawing a draft against the bank,
complaint relative thereto, even if lacking particularity, does not as said draft being sent later to Aruego for acceptance. As an added
priorly stated call for the dismissal of the complaint. security for the payment of the amounts advanced to the printers,
the plaintiff bank also required Aruego to execute a trust receipt in
(The promissory notes show that some of the [respondents] were favor of said bank wherein said defendant undertook to hold in trust
actually creditors of Ilano and who were issued the subject checks for plaintiff the periodicals and to sell the same with the promise to
as securities for the loan/obligation incurred. Having taken the turn over to the plaintiff the proceeds of the sale of said publication
instrument in good faith and for value, the [respondents] are to answer for the payment of all obligations arising from the draft.
therefore considered holders thereof in due course and entitled to
payment.) Respondent Aruego's defenses consist of the following:
a) He signed the BOE in a representative capacity, as the then

President of the Philippine Education Foundation Company;
WHEREFORE, the petition is PARTLY GRANTED.
b) He signed these BOE as accommodation or additional party
obligor.
The March 21, 2003 decision of the appellate court affirming the Issues:
October 12, 2000 Order of the trial court, Branch 20 of the RTC of
1. Whether or not defendant is personally liable. YES
Imus, Cavite, is AFFIRMED with MODIFICATION in light of the
foregoing discussions. 2. Whether or not defendant is an accommodation party. NO.
The trial court is DIRECTED to REINSTATE Civil Case No. 2079- 2. Whether or not the drafts signed were bills of exchange. YES
00 to its docket and take further proceedings thereon only insofar as
27 | P a g e
CHRISpys NOTES
Ruling: hours and only to defendant's customers and only for amounts due
them, but said Hoard was not expressly authorized to prepare,
1. Section 20 of the NIL provides that "Where the instrument complete or deliver checks on such account; or to sign or endorse
contains or a person adds to his signature words indicating that he checks in the name of or on behalf of defendant.
signs for or on behalf of a principal or in a representative capacity,
he is not liable on the instrument if he was duly authorized; but the On February 24, 1939, without the knowledge and consent of the
mere addition of words describing him as an agent or as filing a defendant, Hoard intruded defendants office and opened the safe
representative character, without disclosing his principal, does not and took therefrom certain instruments printed for use as checks,
exempt him from personal liability. blank as to amount, date and payee, which had been signed by
defendant's office manager, in one of which instruments said Hoard
Nowhere in the draft has Aruego disclosed that he was signing as a thereafter inserted the date, amount and payee in the manner which
representative of the Philippine Education Foundation Company. appears more fully from such instrument. Hoard thereafter placed
For failure to disclose his principal, Aruego is personally liable for his name upon the back o and delivered the same to plaintiff for a
the drafts he accepted. consideration of $102.85. The check is in all respects regular except
that the name of the payee is written after the word "pay" and in the
2. An accommodation party is one who has signed the instrument as space intended for statement of the amount in writing.
maker, drawer, indorser, without receiving value therefor and for
the purpose of lending his name to some other person. Such person Issue: WON the instrument is complete and enforceable? Or WON
is liable on the instrument to a holder for value, notwithstanding the instrument is negotiable. NO
such holder, at the time of the taking of the instrument knew him to
be only an accommodation party. In lending his name to the Ruling: The instrument came into possession of plaintiff as an
accommodated party, the accommodation party is in effect a surety innocent purchaser for value. The NIL expressly provides that
for the latter. He lends his name to enable the accommodated party "every contract on a negotiable instrument is incomplete and
to obtain credit or to raise money. He receives no part of the revocable until delivery of the instrument for the purpose of giving
consideration for the instrument but assumes liability to the other effect thereto.
parties thereto because he wants to accommodate another. In the
instant case, the defendant signed as a drawee/acceptor. Under the This is merely a legislative enactment of the common law rule. This
NIL, a drawee is primarily liable. Thus, if the defendant who is a language that a contract becomes effectual only by delivery is
lawyer, he should not have signed as an acceptor/drawee. In doing modified by subsequent language in the section at least to the extent
so, he became primarily and personally liable for the drafts. that if any such instrument, after completion, is negotiated to a
holder in due course, it is valid and effectual for all purposes in his
3. Under the NIL, a BOE is an unconditional order in writing hands. The fact that a completed instrument is stolen from its
addressed by one person to another, signed by the person giving it, drawer prior to its delivery does not constitute a defense against a
requiring the person to whom it is addressed to pay on demand or at holder in due course.
a fixed or determinable future time a sum certain in money to order
or to bearer. As long as a commercial paper conforms to the "Where an incomplete instrument has not been delivered it will not,
definition of a bill of exchange, that paper is considered a bill of if completed and negotiated, without authority, be a valid contract
exchange. The nature of acceptance is important only in the in the hands of any holder, as against any person whose signature
determination of the kind of liabilities of the parties involved, but was placed thereon before delivery."
not in the determination of whether a commercial paper is a bill of
exchange or not. We think it clear that the check in controversy was an incomplete
instrument when stolen and cannot be enforced in the absence of
conduct on the part of the drawer creating an estoppel.
It is urged that defendant is chargeable with negligence and is

estopped to deny liability. The cases cited are those in which the
PAVILIS v. LIVESTOCK CO party sought to be charged upon a negotiable instrument has
entrusted an instrument signed in blank to an agent or some other
Facts: It was the practice of defendant's manager to sign a block of person who has wrongfully completed and negotiated the
instruments and deliver the same to the bookkeeper who completes instrument; an agency or trust was created by means of which the
the instruments as checks and deliver the same to customers. fraud was committed and the fact that there was no authority for
Instruments not delivered at the close of the business day were completing the instrument or that the paper was otherwise
returned for safekeeping/checking/auditing, and thereafter placed in wrongfully dealt with was no defense.
a safe in defendant's office.
While there can be no question that the provisions of the Negotiable
One C. Hoard was employed therein as a bookkeeper and clerk Instruments Law do not prevent an inquiry into the question of the
expressly authorized by defendant in the absence of such other negligent custody of an incomplete instrument, and that, if as a
bookkeeper to complete and deliver checks only during business result of negligence such instrument comes into the hands of a
28 | P a g e
CHRISpys NOTES
holder in due course, the latter may recover, yet we cannot say Ruling: No.
under the facts and circumstances of the instant case that defendant
was negligent. - The promissory note in question lacks the so-called words
of negotiability payable to order or to bearer
The loss did not result from completion and negotiation of the
check by one entrusted with its possession. It does not appear that - The note states as follows:
defendant company had reason to mistrust its employee and to
anticipate the wrongful taking by him of a check signed in blank, FOR VALUE RECEIVED, I/we jointly and
the subsequent completion and negotiation. The drawer owes the severally promise to pay to the INDUSTRIAL
duty to use due care in the execution of checks, but it does not PRODUCTS MARKETING, the sum of ONE
follow as a legal conclusion that signers of checks in blank assume MILLION NINETY THREE THOUSAND
the risk of liability in all cases where such instruments are SEVEN HUNDRED EIGHTY NINE PESOS &
wrongfully taken, completed and negotiated. To hold that a person 71/100 only (P 1,093,789.71), Philippine
is negligent in having in his possession a check signed in blank Currency, the said principal sum, to be payable in
would require something more than the exercise of ordinary care. 24 monthly installments starting July 15, 1978
The judgment appealed from is reversed. and every 15th of the month thereafter until fully
paid.
- Without those words, the instrument is payable only to the

G.R. No. 72593 April 30, 1987 person designated therein and is therefore non-negotiable. Any
subsequent purchaser thereof will not enjoy the advantages of being
CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY a holder of a negotiable instrument but will merely "step into the
WEE, and RODOLFO T. VERGARA, petitioners, shoes" of the person designated in the instrument and will thus be
open to all defenses available against the latter
vs.
- And as such, it follows that the respondent can never be a
IFC LEASING AND ACCEPTANCE CORPORATION, holder in due course, but remains merely an assignee of the note in
respondent. question.
Facts: - Thus, the petitioner may raise against the respondents all
defenses available to it against the seller.
- Petitioner bought from Atlantic Gulf and Pacific Company two
used tractors.
- Petitioner was issued sales invoice for the two used tractors.
- At the same time, the deed of sale with chattel mortgage G.R. No. 138074 August 15, 2003
with promissory note was issued.
CELY YANG, Petitioner,
- Simultaneously, the seller assigned the deed of sale with chattel
mortgage and promissory note to respondent. vs.
- The used tractors were then delivered, but barely 14 days after, the HON. COURT OF APPEALS, PHILIPPINE COMMERCIAL
tractors broke down. INTERNATIONAL BANK, FAR EAST BANK & TRUST CO.,
EQUITABLE BANKING CORPORATION, PREM
- The seller sent mechanics but the tractors were not repaired CHANDIRAMANI and FERNANDO DAVID, Respondents.
accordingly as they were no longer serviceable.
Facts:
- Petitioner delayed the payments on the promissory notes until the
seller completes its obligation under the warranty. Conformably with her agreement with Prem Chandiramani,
- Thereafter, a collection suit was filed against petitioner for the Cely Yang procured two cashiers checks in the amount of
payment of the promissory note. Php 2.087 Million each, payable to Fernando David. Yang
also secured from FEBTC a dollar draft, which Chandiramani
- RTC: ordered petitioners to pay.
would exchange for another dollar draft in the same amount.
- CA: affirmed She gave the checks to Danilo Ranigo to be delivered to
Chandiramani.
Issue: WON the promissory notes were negotiable
29 | P a g e
CHRISpys NOTES
Ranigo allegedly lost the checks and the draft. The loss was possession of the checks is unsupported, devoid of any
reported to the police. However, the instruments were not concrete proof to sustain it. Note that both the trial court and
actually lost. Chandiramani was able to get hold of them the appellate court found that David did not receive the
without delivering the Php 4.2 million check as consideration. checks gratis, but instead gave Chandiramani US
Subsequently, Chandiramani delivered the checks to $360,000.00 as consideration for the said instruments. Factual
Fernando David and the latter gave USD 360,000 in return. findings of the Court of Appeals are conclusive on the parties
and not reviewable by this Court; they carry great weight
Yang lodged a Complaint for injunction and damages against when the factual findings of the trial court are affirmed by the
Equitable, Chandiramani, and David, with prayer for a appellate court.
temporary restraining order, with the Regional Trial Court.
The Complaint was subsequently amended to include a Second, Yang fails to point any circumstance which should
prayer for Equitable to return to Yang the amount of P2.087 have put David on inquiry as to the why and wherefore of the
million, with interest thereon until fully paid. Later on, Yang possession of the checks by Chandiramani. David was not
filed a separate case for injunction and damages, with prayer privy to the transaction between Yang and Chandiramani.
for a writ of preliminary injunction against FEBTC, PCIB, Instead, Chandiramani and David had a separate dealing in
Chandiramani and David, with the RTC. which it was precisely Chandiramanis duty to deliver the
checks to David as payee. The evidence shows that
Issue: Chandiramani performed said task to the letter. Yang admits
that David took the step of asking the manager of his bank to
Is Fernando David entitled the proceeds of the checks?
verify from FEBTC and Equitable as to the genuineness of
Held: the checks and only accepted the same after being assured
that there was nothing wrong with said checks. At that time,
YES. In the present case, it is not disputed that David was the David was not aware of any stop payment order. Under
payee of the checks in question. The weight of authority these circumstances, David thus had no obligation to
sustains the view that a payee may be a holder in due course. ascertain from Chandiramani what the nature of the latters
Hence, the presumption that he is a prima facie holder in due title to the checks was, if any, or the nature of his possession.
course applies in his favor. However, said presumption may Thus, the court cannot hold him guilty of gross neglect
be rebutted. Hence, what is vital to the resolution of this issue amounting to legal absence of good faith, absent any showing
is whether David took possession of the checks under the that there was something amiss about Chandiramanis
conditions provided for in Section 52 of the Negotiable acquisition or possession of the checks.
Instruments Law. All the requisites provided for in Section 52
must concur in Davids case, otherwise he cannot be deemed MARCELO A. MESINA, vs.THE HONORABLE
a holder in due course. INTERMEDIATE APPELLATE COURT G.R. No. 70145
November 13, 1986 145 SCRA 497
First, with respect to consideration, Section 24 of the FACTS:
Negotiable Instruments Law creates a presumption that every
party to an instrument acquired the same for a consideration Jose Go purchased from Associate Bank a Cashiers Check, which
he left on top of the managers desk when left the bank. The
or for value. Thus, the law itself creates a presumption in bank manager then had it kept for safekeeping by one of its
Davids favor that he gave valuable consideration for the employees. The employee was then with one Alexander Lim.
checks in question. In alleging otherwise, the Yang has the He left the check in his desk and upon his return, Lim and the
onus to prove that David got hold of the checks absent said check were gone. When Go inquired about his check, the same
couldn't be found and Go was advised to request for the
consideration. In other words, the Yang must present STOPPAGE OF PAYMENT which he did. He executed also an
convincing evidence to overthrow the presumption. Our affidavit of loss as well as reported it to the police.
scrutiny of the records, however, shows that the petitioner
The bank then received the check twice for clearing. Two times they
failed to discharge her burden of proof. The averment that dishonored the payment with the words "Payment Stopped"
David did not give valuable consideration when he took stamped on it. After the second time, a lawyer contacted it
30 | P a g e
CHRISpys NOTES
demanding payment with the threat to sue but refused to disclose his name upon the back o and delivered the same to plaintiff for a
the name of his client. Later, the name of Mesina was revealed. consideration of $102.85. The check is in all respects regular except
When asked by the police on how he possessed the check, he that the name of the payee is written after the word "pay" and in the
said it was paid to him by Lim. An information for theft was then space intended for statement of the amount in writing.
filed against Lim.
Issue: WON the instrument is complete and enforceable? Or WON
A case of interpleader was filed by the bank. Mesina moved for the instrument is negotiable. NO
the dismissal of the case but was denied. The trial court
ruled in the interpleader case ordering the bank to replace the Ruling: The instrument came into possession of plaintiff as an
cashiers check in favor of Go. innocent purchaser for value. The NIL expressly provides that
"every contract on a negotiable instrument is incomplete and
ISSUE: W/N petitioner is holder of holder of cashiers check in due revocable until delivery of the instrument for the purpose of giving
course. NO! effect thereto.
HELD: This is merely a legislative enactment of the common law rule. This
language that a contract becomes effectual only by delivery is
Petitioner failed to substantiate that he was a holder in due modified by subsequent language in the section at least to the extent
course. Upon questioning, he admitted that he got the check that if any such instrument, after completion, is negotiated to a
from Lim who stole the check. He refused to disclose how and holder in due course, it is valid and effectual for all purposes in his
why it has passed to him. It simply means that he has notice of the hands. The fact that a completed instrument is stolen from its
defect of his title over the check from the start. The holder of a drawer prior to its delivery does not constitute a defense against a
cashiers check who is not a holder in due course cannot holder in due course.
enforce payment against the issuing bank which dishonors the
same. If a payee of a cashiers check obtained it from the issuing "Where an incomplete instrument has not been delivered it will not,
bank by fraud, or if there is some other reason why the payee if completed and negotiated, without authority, be a valid contract
is not entitled to collect the check, the bank would of course in the hands of any holder, as against any person whose signature
have the right to refuse payment of the check when presented by was placed thereon before delivery."
payee, since the bank was aware of the facts surrounding the loss of
the check in question. We think it clear that the check in controversy was an incomplete
instrument when stolen and cannot be enforced in the absence of
conduct on the part of the drawer creating an estoppel.
It is urged that defendant is chargeable with negligence and is

estopped to deny liability. The cases cited are those in which the
PAVILIS v. LIVESTOCK CO party sought to be charged upon a negotiable instrument has
entrusted an instrument signed in blank to an agent or some other
Facts: It was the practice of defendant's manager to sign a block of person who has wrongfully completed and negotiated the
instruments and deliver the same to the bookkeeper who completes instrument; an agency or trust was created by means of which the
the instruments as checks and deliver the same to customers. fraud was committed and the fact that there was no authority for
Instruments not delivered at the close of the business day were completing the instrument or that the paper was otherwise
returned for safekeeping/checking/auditing, and thereafter placed in wrongfully dealt with was no defense.
a safe in defendant's office.
While there can be no question that the provisions of the Negotiable
One C. Hoard was employed therein as a bookkeeper and clerk Instruments Law do not prevent an inquiry into the question of the
expressly authorized by defendant in the absence of such other negligent custody of an incomplete instrument, and that, if as a
bookkeeper to complete and deliver checks only during business result of negligence such instrument comes into the hands of a
hours and only to defendant's customers and only for amounts due holder in due course, the latter may recover, yet we cannot say
them, but said Hoard was not expressly authorized to prepare, under the facts and circumstances of the instant case that defendant
complete or deliver checks on such account; or to sign or endorse was negligent.
checks in the name of or on behalf of defendant.
The loss did not result from completion and negotiation of the
On February 24, 1939, without the knowledge and consent of the check by one entrusted with its possession. It does not appear that
defendant, Hoard intruded defendants office and opened the safe defendant company had reason to mistrust its employee and to
and took therefrom certain instruments printed for use as checks, anticipate the wrongful taking by him of a check signed in blank,
blank as to amount, date and payee, which had been signed by the subsequent completion and negotiation. The drawer owes the
defendant's office manager, in one of which instruments said Hoard duty to use due care in the execution of checks, but it does not
thereafter inserted the date, amount and payee in the manner which follow as a legal conclusion that signers of checks in blank assume
appears more fully from such instrument. Hoard thereafter placed the risk of liability in all cases where such instruments are
31 | P a g e
CHRISpys NOTES
wrongfully taken, completed and negotiated. To hold that a person would require something more than the exercise of ordinary care.
is negligent in having in his possession a check signed in blank The judgment appealed from is reversed.
32 | P a g e
CHRISpys NOTES

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AVENGERS CASE DIGEST

PHILIPPINE EDUCATION CO., INC., plaintiff-appellant,

NO.Under the Negotiable Instruments Law (sec. 9 [d], a

of WORLDWIDE GARMENT MFG. CORP. THE CASE:

Sgd. Shozo Yamaguchi Sgd. Fermin Canlas THE FACTS:

c) Paragraph (g), Section 17 of the Negotiable Instruments

(a) It must be in writing and signed by the maker or drawer; vs.

(d) Must be payable to order or to bearer; and Facts:

Whether or not a check payable to cash needs indorsement.

Where a check is made payable to the order of "cash", the word

(d) Two or more payees jointly; or

WHEREFORE, the appealed Amended Decision is AFFIRMED.

In 1979, World Garment Manufacturing, through its board

Please credit proceeds of this note to:

THE CASE: 3) Since petitioners signed the promissory note as co-makers,

3) Whether nor the sale made by defendant Mercator Finance

b) Since the petitioners executed a continuing suretyship vs.

c) Paragraph (g), Section 17 of the Negotiable Instruments

Please credit proceeds of this note to:

The parties cannot be allowed to introduce evidence of No. 1372-00257-6

1) If appellants really felt aggrieved by the foreclosure of the HELD:

The solidary liability of private respondent Fermin Canlas is made

1) Petitioners were the owners of the subject parcels of land.

2) The petitioners were wrong in their contention that the

1.) WON Checks drawn from a closed account is still

Defendant Amelia Alonzo is a trusted employee of

G.R. No. 74917 January 20, 1988

(e) Designates a particular kind of current money in which payment

THE PHILIPPINE BANK OF COMMERCE, plaintiff-appellee,

a) He signed the BOE in a representative capacity, as the then

It is urged that defendant is chargeable with negligence and is

- Without those words, the instrument is payable only to the

It is urged that defendant is chargeable with negligence and is

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