METROBANK vs. CA G.R. No. 88866 18 February 1991 Petition for review on certiorari J. Cruz FACTS: Eduardo Gomez opened an account with Golden Savings and Loan Association (Golden) and deposited 38 treasury warrants which total P1,755,228.37 [all were drawn by Philippine Fish Marketing Authority; 6 were directly payable to Gomez, others were indorsed by their respective payees]. On various dates (between 25 June to 16 July 1979) all the treasury warrants were subsequently indorsed by Gloria Castillo, a cashier at Golden, and deposited to the company’s Metrobank account. They were sent for clearing to the petitioner’s main office, which forwarded them to the Bureau of Treasury for special clearing. After repeated inquiries by their “valued client,” represented by Castillo, petitioner allowed the series of withdrawals (9, 13 & 16 July 1979), which totaled P968,000.00. In turn, Gomez was allowed to withdraw from his account with Golden (a total of P1,167,500.00) 21 July 1979 – petitioner informed Golden that 32 of the treasury warrants were dishonored by the Bureau of Treasury, and demanded the refund which was rejected. RTC: rendered judgment in favor of Golden. On motion for reconsideration, complaint was dismissed. CA: trial court decision was affirmed. ISSUE: Whether treasury warrants are negotiable instruments? HELD: No. CA decision AFFIRMED. RATIO: The Court held that the treasury warrants are non-negotiable instruments evident by the word “non-negotiable” stamped on its face, and it also indicates that they are payable from a particular fund, Fund 501. Sec. 3 of the NIL provides that an “order or promise to pay out of a particular fund is not unconditional.” The indication that the source of the payment (Fund 501) makes the order or promise to pay “not unconditional” and the warrants themselves non-negotiable. Petitioner cannot contend that by indorsing the warrants in general, Golden assumed that they were “genuine and in all respects what they purport to be,” in accordance with Sec. 66 of NIL. The simple reason is that this law is not applicable to non-negotiable treasury warrants. Castillo did not indorse them for the purpose of guaranteeing their genuineness but to deposit them with petitioner for clearing.
Caltex Philippines Inc v CA and Security Bank and Trust Company GR No. 97753, 10 August 1992 Petition for review on Certiorari Regalado, J. Facts: On various dates, defendant bank issued 280 certificates of time deposit (CTDs) in favor of Angel dela cruz who deposited with the former the amount of P1,120,000. Dela Cruz delivered CTDs to plaintiff in connection with the purchase of fuel products from the latter. Dela Cruz informed bank branch manger that he lost all CTDs and was advised by the latter to execute and submit a notarized Affidavit of Loss if he desired replacement of lost CTDs. Dela Cruz obtained a P875k loan and thereafter executed a notarized Deed of Assignment of Time Deposit that he surrenders to defendant bank full control of CTDs from and after date of assignment and to apply time deposits to the payment of whatever amount may be due on the loan upon maturity. Credit Manager of Caltex went to bank and presented for verification the CTDs alleging that the same were delivered as security for purchases made with Caltex Phil Inc by dela Cruz. Bank rejected the plaintiff’s demand and claim for payment of the value of the CTDs. Caltex filed instant complaint praying that defendant bank be ordered to pay aggregate value of CTDs. Complaint was dismissed. On appeal, court affirmed lower court’s dismissal. Issue: 1. W/N the certificates of deposit are negotiable instruments 2. W/N the petitioner became a holder in due course of CTDs 3. W/N provisions of Code of Commerce relating to lost instruments payable to bearer shall be applied. Held:
1. Yes
2. No
3. No
4. Ruling: 1. CTDs in question are negotiable instruments for they undoubtedly meet the requirements of the law for negotiability under Sec 1 of Act No. 2031 1. 5. The documents provide that the amounts deposited shall be repayable to the depositor. It is the “bearer.” The documents do not say that the depositor is dela Cruz and that the amounts deposited are repayable specifically to him. 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 this score, the accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, from the face of the instrument itself. In the construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained. No other words are to be added to it or substituted in its stead. What the parties meant must be determined by what they said. 2. Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between petitioner and dela Cruz requires both delivery and indorsement. Dela Cruz delivered the CTDs to petiioner without informing respondent bank thereof at anytime. The CTDs were in reality delivered as a security for purchase of fuel products, as stated by petitioner’s own representative. 6. Under Negotiable instruments law, an instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof, and a holder may be the payee or indorsee of a bill or note, who is in possession of it or the bearer thereof. 7. In the case, there was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner in which situation, mere delivery of the bearer CTDs would have sufficed. The delivery only was for security of the purchases could at most constitute petitioner only as a holder for value by reason of his lien. 8. Where holder has lien on the instrument arising from contract, he is deemed a holder for value to the extent of his lien. Such holder of collateral security, he would be a pledgee but the requirement and effects thereof shall be governed by CC on pledge of incorporeal rights 2. 3. A close scrutiny of the provisions of the Code of Commerce laying down the rules to be followed in case of lost instruments payable or bearer will reveal that said provisions even assuming their applicability to the CTDs in the case at bar are merely permissive and not mandatory. Where the provision reads ‘may’ this word shows that it is not mandatory but discretional. 9. The rights provided by Arts 548-558 merely established a right of recourse in favor of dispossessed owner or holder of a bearer instrument so that he may obtain a duplicate, an option in favor of party liable for some valid ground, may elect to refuse to issue replacement of instrument. Such neither prohibit or restricts issuance of replacement instrument. 10. 11. 12.
1 That it must be in writing and signed by the maker or drawer; must contain unconditional promise or order to pay a sum certain in money; must be payable on demand or at a fixed or determinable future time; must be payable to order or to bearer; and where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
2 Art 2095 – Incorporeal rights, evidenced by negotiable instruments may also be pledged. The instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed.
13. 14. 15. 16. 17. 18. 19. 20.ANG TEK LIAN vs. CA 21.No. L-2516. 25 September 1950 22. 23. Facts: 24. For issuing a rubber check, Ang Tek Lian was convicted of estafa. CA affirmed the verdict. Ang Tek Lian drew the check upon the China Banking Corporation for the sum of P4,000 payable to order of cash. He delivered it to Lee Hua Hong in exchange of money, who presented it to the drawee bank for payment, but was dishonored for insufficiency of funds, the balance being P335 only. Appellant could not be located anywhere until he was summoned in the City Fiscal’s Office in view of the complaint for estafa and for not paying yet the amount of the check. 25. 26. Issue: 27. Whether or not Ang Tek Lian was guilty, considering that the check had been made payable to “cash” and had not been endorsed by him. 28. 29. Held: 30. Yes. Petition denied. 31. 32. Ruling: 33. 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 payment without the drawer's indorsement. 34. 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 against possible complications, for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful owner, (c) raising of the amount payable, etc. The bank may therefore require, for its protection, that the indorsement of the drawer or of some other person known to it be obtained. But where the Bank is satisfied of the identity and/or the economic standing of the bearer who tenders the check for collection, it will pay the instrument without further question; and it would incur no liability to the drawer in thus acting. 35. "A check payable to bearer is authority for payment to the holder. Where a check is in the ordinary form, and is payable to bearer, so that no indorsement is required, a bank, to which it is presented for payment, need not have the holder identified, and is not negligent in failing to do so. " (Michie on Banks and Banking, Permanent Edition, Vol. 5, p. 343.) 36. The Court of Appeals declared that it was returned unsatisfied because the drawer had insufficient funds, not because the drawer's indorsement was lacking. 37. 38. 39. 40. 41. 42. 43. 44.
45. 46. 47. 48. 49. 50. 51. 52. 53. 54.
55. 56. 57.Philippine National Bank v. Rodriguez 58.G.R. No. 170325 26 September 2008 59. 60. Facts: 61. Spouses Erlando and Norma Rodriguez, who were clients of petitioner PNB, were engaged in the informal lending business. The private respondents entered into a discounting 3 agreement with Philnabank Employees Savings and Loan Association (PEMSLA) which is also a client of PNB. PEMSLA regularly granted loans to its members and Spouses Rodriguez would rediscount the postdated checks issued to members whenever the association was short of funds. The Spouses would replace the postdated checks with their own checks issued to members. Some PEMSLA officers devised a scheme to obtain additional loans despite outstanding loans by taking out loans in the name of unknowing members. The PEMSLA checks issues for these loans were given to the spouses for rediscounting. The checks from the Spouses were deposited directly by PEMSLA to its savings account without indorsement from named payees, which was an irregular procedure made through the facilitation of PEMSLA member and PNB Employee Endundo Palermo Jr. PNB found out about the fraudulent scheme and closed the PEMSLA account. As a result, the checks deposited by the Spouses were dishonored. The Spouses filed a suit for damages against PEMSLA and PNB seeking to recover the value of checks deposited to PEMSLA amounting to Php 2,345,804. The Spouses argued that PNB credited the checks to the PEMSLA account even without indorsement. Hence, it should bear the loss. PNB argued that payees were fictitious payees under the NIL. Hence, checks were negotiable by mere delivery. The RTC ruled in favor of the Spouses. Upon appeal, the CA reversed the RTC’s decision arguing that the checks were bearer instruments which did not requirement indorsement for negotiation. Upon a motion for reconsideration, the CA reversed itself and ruled that the checks were payable to order. 62. 63. Issue: Whether the checks were bearer instruments? 64. 65. Held: No. Petition denied. 66. 67. Ruling: 68.
3 A financing scheme where a post-dated check is exchanged for a current check with a discounted face value
As a rule, when the payee is fictitious or not intended to be the true recipients of the proceeds, the check is considered a bearer instrument. Ac actual, existing, and living payee may be deemed fictitious if the maker of the check did not intend the payee to receive the proceeds of the checks. For the fictitious payer to be used as a defense, PNB must show that the makers did not intend for the named payees to be part of the transaction involving the check. PNB failed to show evidence supporting this claim. 69. 70. 71. 72. 73. 74. 75. 76. 77.Philippine National Bank v Manila Oil Refining & By-Products Company 78.43 Phil 445, 08 June 1922 79. 80. Nature: Appeal from a judgment of the CFI of Manila 81. Ponente: DIAZ, J. 82. 83. Facts: 84. 85. On May 8, 1920, the manager and the treasurer of the Manila Oil Refining & ByProducts Company, Inc., executed and delivered to the Philippine National Bank, a promissory note containing a provision that in the case the same is not paid at maturity, the maker authorizes any attorney to appear and confess judgment thereon for the principal amount, with interest, costs, and attorneys fees, and waives all errors, right to inquisition, and appeal, and all property exemptions. 86. 87. The Manila Oil Refining Company failed to pay the promissory note on demand and hence PNB brought action in the CFI to recover the whole amount. The CFI denied the motions of PNB and forwarded the complaint to the SC, hence this appeal. 88. 89. Issue: Whether a confession of judgment or commonly called a judgment note is a negotiable instrument and is therefore valid in Philippine jurisdiction. 90. 91. Held: No, judgment note is not a negotiable instrument and is thus not valid in Philippine jurisdiction. 92. 93. Ruling: 94. 95. The appellee argues that Section 5 of the NIL provides that “the negotiable character of an instrument otherwise negotiable is not affected by a provision which x x x (b) authorizes a confession of judgment if the instrument be not paid at maturity.” 96. 97. However, the Court says that this provision of the law cannot be taken to sanction judgments by confession because it a portion of a uniform law which merely provides that, in jurisdictions where judgment notes are recognized, such clauses shall not affect the negotiable character of the instrument. Further, the NIL concludes with these words: “But nothing in this section shall validate any provision or stipulation otherwise illegal”. 98.
99.
While common law dictates that these judgment notes may be accepted in some jurisdictions, the SC is of the opinion that such is not authorized nor contemplated by our law and should only be considered as valid when given express legislative sanction. Judgment notes are deemed to be against public policy because they enlarge the field for fraud, and might be the source of abuse and oppression and make the courts an involuntary party thereto. Thus the judgment is set aside and the case is remanded to the lower court for further proceeding in accordance with this decision. 100. 101.
102.
