Pineda vs De La Rama
The petitioner Pineda acquired the services of the respondent Atty. De La Rama. Atty. De La Rama was tasked cause the delay of the filing of charges by NARIC (Nat. Rice and Corn Administration) against the petitioner. It is discovered that the said agency will file a criminal case against the petitioner of misappropriation of some cavans of palay. De La Rama was found to be a good friend of the General Manager of the said agency. Thereafter, the petitioner allegedly loaned an amount of money from De La Rama for the purposes of buying a hacienda in Mindoro, where the petitioner executed a promissory note in favor of the respondent. In view of this, the respondent sued the petitioner for collection of sum of money and damages, presenting as evidence the said promissory notes. The respondent, on the other hand, vehemently denied his liability under the said notes, arguing that he issued the same due to the manifestation of De La Rama that he had advanced the said amount to the NARIC general manager as ―lube money‖, for the purposes of preventing the filing of the criminal case. The RTC ruled in favor of Pineda, holding that Pineda executed the said promissory note not for the purposes buying the said hacienda, as averred by the respondents, but as a security for the ―payment‖ of De La Rama to the NARIC general manager. Upon appeal of the respondent, the CA reversed the RTC ruling, holding that Pineda, being a person of more than average intelligence, astute in business and wise in many ways, would not sign any document with his name therein unless he was fully aware of the terms and conditions thereof. With the foregoing, the petitioner sought recourse from the SC. WON the said promissory notes are valid (1.) The promissory notes are invalid. Every negotiable instrument is deemed prima facie to have been issued for valuable consideration; and every person thereto whose signature appears thereon to have become a party thereto for value. However, this presumption is only prima facie (on its face) in favor validity, and can be proven otherwise by satisfactory evidence. (2.) The CA‘s reliance to this presumption is misplaced, as contrary evidence shows that the issuance such note by Pineda is not for the alleged purchase of a hacienda, as asserted by De La Rama. It is for actually for the illegal purpose of indirectly bribing the NARIC general manager in order that the latter desist from filing a criminal action against Pineda. It is hard to believe that a man of high stature would repose trust to a fixer whom he met only for 3 months. De La Rama did not even specify where Pineda intended to use the said cash. (3.) Under the laws on obligations and contracts, a promissory note is void ab initio when the consideration for its issuance is for an unlawful purpose; as in the case at bar, for the purposes of bribery. Consequently, no cause of action for recovery of such amounts can arise therewith.
Philippine Bank of Commerce vs Aruego
Aruego, president of Philippine Education Foundation Company, obtained several credits from the petitioner bank for the purposes of printing and publication of ―World Current Events and Decision Law Journal‖. The printing company, Encal Press, collected the cost of printing from the said bank, through the respondent Aruego. Upon defaulting in payment to the petitioner bank, the bank sued Aruego for 22 transactions entered by the litigants. In his answer to the complaint, Aruego manifested that he singed the documents upon which the petitioner is suing in his capacity as President of Philippine Education Foundation, hence his liability is merely secondary and that he was signing merely as an accommodation party. The RTC held in favor of the petitioner and ordered the respondent to pay the amount of the credits he had taken advantage of. Upon his appeal to the CA, the latter certified the case to the SC on the ground that what are involved are questions of law. WON the respondent signed the bills of exchange in a representative capacity, as the President of the publishing firm, hence secondarily liable for the said credits. (1.) The respondent is personally liable for the credits. His defense that he is acting in a representative capacity is without merit. Under Sec. 20 of the NIL, ―when a person adds his signature a statement indicating that he signs merely for or on behalf of a principal, he shall not be liable on the instrument, provided that he is authorized, he adduces a statement therein that he is acting in a representative capacity, and that he discloses the principal. Non – compliance therewith will render the maker liable for the instrument”. (2.) It was discovered that upon Aruego‘s acceptance of the drafts, he did not specify therein nor disclosed that he is acting in a representative capacity nor he disclosed his principal, hence he is liable personally for the amounts prayed for. (3.) He is an accommodation party, having lent his name for the benefit of the company. An accommodation party is one who singed an instrument as maker, drawer or indorser without receiving the value thereof. In lending his name for the benefit of another, he is in effect a surety for the latter, such that the demandability of an instrument is chargeable against him. However, the accommodation party has the right to reimbursement for whatever he had advanced.
Clark vs Sellner
The defendants, with 2 other persons executed a promissory not with the amount of Php12, 000 in favor of the plaintiff. It is stated in the said not that the makers are joint and solidarilly liable to the plaintiff. Upon maturity of the note, the defendants failed to pay the said amount, causing the plaintiff to file an action for sum of money. The defendant Sellner argued that the latter did not receive in the transaction any part of the amount of the debt, that the instrument was not presented by the plaintiff for payment, and that the defendant being an accommodation party is not liable to the instrument unless it is negotiated. WON the defendant is liable as accommodation party (1.) The defendant is liable as an accommodation party. It should be taken into account that by putting his signature to the note, he lent his name to those who signed with him placing himself in the same position and liability as the other signers. (2.) It is immaterial that the accommodation party received amount for the use of his name. What is meant by ―without receiving value thereof‖ in Sec. 29 of the NIL is not receiving any amount for the use of his name, but should be understood as ―without receiving any amount by virtue of the instrument‖. (3.) As to the plaintiff, he is holder for value under Sec. 29 on account that he has paid the sum to the signers of the note at the time the note was executed and delivered to him.
PNB vs Maza & Mecenas
The respondents Maza and Mecenas executed several promissory notes in favor of the plaintiff bank. Resulting from this is the present suit filed by the bank to enforce payment on the promissory note. The respondents interposed as defense the fact that 1. A person named Enrique Echaus, presumably their acquaintance, sent the promissory notes to them for signing, 2. That they had never received the value on the alleged note, 3. That it was Echaus who negotiated the notes with the plaintiff, not the respondents. With this, they submit to the lower court that the sole and primary liability is with Echaus and that it is imperative that he be impleaded. The trial court ruled in favor of the bank, holding that they are principally liable for the amounts on the said notes, being the makers thereof, and that the participation of Echaus in the trial is not necessary. The respondents sought recourse from the SC, arguing that they are not liable for the notes on account that they did not receive the value thereof and merely strangers in the negotiation. WON the respondents are liable (1.) They are principally liable on account that they are accommodation parties. As provided for by sec. 24 of the NIL, an accommodation party is one who executes a negotiable instrument (promissory notes) for and on behalf of another party. Under these premises, the accommodation party to be held liable, it is not necessary that the latter receive in whole or in part the amounts on the notes. It is presumed that the value thereof is for the benefit of another party whose interests were accommodated by the accommodation party. (2.) It is clear that the respondents had executed the said promissory notes; hence they are principally liable to pay regardless if the amount on the note was enjoyed not by them but by Echaus.
Sadaya vs Sevilla
Sadaya, Sevilla and Varona executed promissory notes in favor of BPI. Under the notes, they declared themselves to be joint and solidary debtors for the amount of Php 15,000. Worth to note is that Sadaya and Sevilla are accommodation parties to the debt of Varona. Subsequently, Varona failed to pay Sadaya upon demand. Sadaya then paid to the bank the amount of Php 5,740. At this juncture, Sevilla died. Sadaya now sued the estate of Sevilla for the reimbursement of the amount that he had paid to the bank. The administrator of the estate argued that the decedent did not receive the amount and that the latter just singed the said notes as a surety of Varona. The trial court ruled in favor of Sadaya and admitted the amount of Php5,740 to be taken against the estate of Sevilla. Upon appeal of Sevilla, the CA disapproved the claim of Sadaya. Sayada sought an appeal with the SC, praying that the judgment award of Php5,740 must be reduced to 50%, which is the amount of Php2,870. WON there exist a right of reimbursement granted to an accommodation party against a co – accommodation party. (1.) Yes, Sadaya having paid the amount of Php5,740 as rightful contribution as solidary debtor, he now has the right to reimbursement against the co – accommodation party, Sevilla. When an accommodation party paid the bank the balance due on a promissory note, he may seek reimbursement from the other solidary accommodation party, absent any agreement to the contrary. (2.) This right springs from the implied promise between the accommodation makers to equally share the burdens resulting from execution of the said notes. They are joint guarantors of the principal debtors. (3.) The new civil code supplements the NIL insofar as the rights of reimbursement of accommodation parties are concerned. Under art. 2073, a solidary accommodation maker has the following rights, to wit; 1. He may demand from the principal debtor the amount that he had paid, 2. He may demand contribution from his co – accommodation party, without first directing his action against the principal debtor, PROVIDED THAT a. he made the payment upon a judicial demand OR if the principal debtor is insolvent. *In case a solidary accommodation party paid the amount on the note WITHOUT ANY PROOF THAT SUCH PAYMENT IS BY VIRTUE OF A JUDICIAL DEMAND OR THAT THE DEBTOR IS INSOLVENT, he may nor seek reimbursement.*
Republic Bank vs Ebrada
The respondent Ebrada successfully encashed a back pay check with the petitioner bank. The check was issued by the Bureau of Treasury. The plaintiff was later advised by the bureau that the indorsement at the backside of the check named after one ―Martin Lorenzo‖ was a forgery, the latter having died 11 years ago. With this, the bank filed a civil action against Ebrada for the recovery of the said amount. Ebrada filed her answer, alleging that she is a holder in due course as well as the formers indorsers of the checks. Upon stipulation of facts, it was established that the checks had several indorsement, to wit; Martin Lorenzo -> Ramon Lorenzo (forged signature), Ramon Lorenzo -> Delia Dominguez, Delia Dominguez -> Mauricia Ebrada. She also contended that she had turned over the said amount to Delia Dominguez, the latter then turned over as well the amount to Justinia Tinio. The RTC ruled in favor of the bank. WON Ebrada is principally liable despite the fact that she turned over the amount to another, hence did not receive nor enjoyed the value of the said note. (1.) Ebrada is liable on the instrument on account that she is an accommodation party. Under sec 29 of the NIL, an accommodation party is one who; 1. Had signed an instrument as an indorser, maker, drawer, acceptor, 2. without receiving the value thereof, 3. for the purposes of lending his name for the benefit of another, 4. the latter will be held principally liable for the instrument to a holder for value, regardless if the holder knew him to be merely an accommodation party. (2.) Under these premises, Ebrada drew the check for the benefit of Dominguez. She is principally liable as an accommodation party.
United general Industries vs Paler
The respondent Paler bought a television set from the plaintiff. To secure payment, the respondent executed a promissory note and a chattel mortgage in favor of the plaintiff. However, the respondent failed to pay upon expiration of the promissory note, and in turn, sold the television set without the consent of the plaintiff. With this, the plaintiff filed information against the respondents for estafa. The case for estafa did not pursue on account of the extra – judicial settlement between the parties where the respondent together with the accommodation party De La Rama executed a promissory note in favor of the plaintiff. The respondent, together with the accommodation party, failed to pay upon expiration of the note, hence the present civil action for sum of money. The RTC ruled in favor of the plaintiff. Upon appeal, the respondents argued that the criminal case must have been dismissed on account that the execution of the promissory note, in which De La Rama is an accommodation party, is for the purpose of stifling a criminal prosecution. WON De La Rama, as accommodation party, may be held liable for the promissory note. (1.) No, he may not be held liable therewith. As a general rule, an accommodation party may be held principally liable for the instrument he executed on behalf of another. However, if the cause which motivated him to become an accommodation party is for an illegal purpose, the instrument does not bind him and there could be no liability on his part. (2.) In the case of Paler on the other hand, he has an independent liability to the plaintiff, under the civil code principle of abuse of right. He has an independent obligation to pay the plaintiff for the television set that he had not paid. Such obligation is separate from the obligation to pay under the promissory note which was executed by De La Rama for his benefit.
Prudencio vs CA
Prudencio owns a piece of real estate which the latter mortgaged in favor of PNB with the consideration of which was for the benefit of Toribio. Toribio is the counsel of Tamayo & Conception Construction which was contracted by the Bureau of Public Works for the construction of a government building. Ostensibly, Toribio used the money which was loaned for him by the petitioners to shoulder the construction expenses of the construction company. As a security, the appellants together with Toribio executed a promissory note in favor of the bank. Toribio and the petitioners made a deed of assignment in favor of the bank, agreeing that the payment to be made by the Bureau will be paid directly to the PNB. However, PNB and the Toribio made a condition without the knowledge and consent of the petitioners, that PNB would apply the payment of the Bureau to the company for the labor and construction cost. Subsequently, the construction was abandoned by the company. With this, the petitioners wrote to PNB arguing that the mortgage must be cancelled on account that there was a change in the conditions in the contract without the petitioner‘s express approval. The PNB denied the claim, hence the present civil suit filed by the petitioners. After trial, the trial court ruled ion favor of the bank, holding that the petitioners and the Toribio are jointly and severally liable to the PNB. Upon appeal, the CA held to affirm the RTC decision, holding that the petitioners are accommodation parties on account that the loan was for the benefit of Toribio and that the liability is that of solidary co – accommodating parties. The petitioners appealed to the SC. WON the bank is a holder in due course and can demand payment from an accommodating party. (1.) The bank is not a holder in due course. As a general rule, the accommodating party has no recourse but to accede to the demand of the holder or payee for payment. This rule, however, admits an exception; the accommodating party will not be liable on the instrument if the holder or payee is not a holder in due course as described under sec 52 of the NIL. (2.) The motivation for the petitioners to mortgage their land in favor of PNB is because of said agreement that what the Bureau will pay will go directly to PNB as payment for the said loan. In the case at bar, the bank together with Toribio altered the conditions of the said agreement which is not in line with the tenor of the original agreement which motivated the petitioners to mortgage their land in the first place. Under these premises, the bank is not a holder in due course.
Crisologo Jose vs CA The plaintiff Santos is the vice – president of the Movers Company, while Atty. Benares was the president thereof. Atty. Benares wrote a company check payable to the petitioner Crisologo, in consideration for a quitclaim against the latter‘s interest over a parcel of land under GSIS custody. Ostensibly, the accommodation of Benares was for the benefit of Ong spouses, the buyers of the said land. The plaintiff was compelled by Benares to sign the said check, which the latter acceded to. However, the check bounced upon encashment. The petitioners filed a case for estafa against Santos and Benares. Santos tried to tender payment through a check, but was not accepted by Crisologo. In turn, Santos consigned the cash with the COC. After trial on the consignation proceeding, the court held that the consignation in the case at bar is not reflective of the nature of a valid consignation under art 1256 of the civil code. Upon appeal to the CA, the latter reversed RTC decision, reviving the case for consignation. The petitioners sought recourse from the SC, arguing that Movers Company, as represented by the plaintiff and Benares are principally liable on the instrument on account of they are accommodation parties, for the benefit of the Ong spouses. WON the company can be held liable thereto as an accommodation party. (1.) The rule that accommodation parties are liable on the instrument being held by a holder for value does not apply to corporations. Any issue or indorsement of a negotiable paper executed by a company acting as an accommodating party for another‘s benefit is ultra vires. The corporation is not liable as an accommodating party. The officers of a corporation cannot make the company liable as accommodating parties for their personal debts or financial interests for which the company has no concern whatsoever. (2.) The only instance where the company can be held liable as accommodating parties is when a negotiable instrument chargeable against the company if the officers who executed the same are authorized to dos so (board resolution?). If the executing officers are not authorized, then personal liability against the latter will arise. (3.) As to the extinguishment of the criminal action, the accomplished consignation does not automatically cause the extinguishment of the criminal action for estafa. The issues herein discussed are distinct and different compared to the ones in the criminal action.
Travel – On Incorporated vs CA The petitioner, Travel – On Inc., is engaged in the business of selling airline tickets. The respondent Miranda woks for the petitioner on a commission basis, where the former would procure airline tickets for the benefit of passengers and derive commission therefrom. The petitioner filed a collection suit against the respondent on the basis of 6 checks ostensibly issued by the latter. The respondent, in his answer, admitted that he issued the said checks but as an accommodating party on behalf of the company. He averred that the general manager of the company, Montilla, requested him to issue the said checks so that the latter would be able to prove to the board that the accounts receivable of the company were still good. He further argued that Montilla tried to enchash the checks and upon being dishonored, returned the same to him. He also claimed reimbursement for the payments he mad in excess. The trial court gave credence to the discrepancies on the ―statement of accounts‖ of the company, such that the accounts of the respondent did not tally. Hence, the trial court held in favor of the respondent, ordering the petitioner to reimburse the respondent the amounts that he overpaid to the petitioner including damages. The CA affirmed the trial court decision upon appeal of the petitioner. The petitioner then sought recourse from the SC, arguing that the court a quo erred in not giving credence to the presumption of validity of negotiable instruments. He further argued that the respondent is not an accommodating party as contemplated under the NIL. WON the respondent is an accommodating party // the checks in question enjoys the presumption of validity. (1.) Negotiable instruments enjoy a strong presumption of validity. When a check is prima facie valid, it is presumed to have been issued for valuable consideration and every person whose signature appears thereon are liable thereto, unless there is competent evidence to prove otherwise. In the case at bar, it is incumbent to the petitioner to overcome the presumption of validity given to the checks which he indubitably issued. The drawer of the check, not the payee, has the burden of proof to show that he is no longer indebted. The mere discrepancy in the account of the respondent does not constitute as sufficient evidence to rebut the said presumption. (2.) The respondent is not an accommodating party. Under the NIL, the accommodated party must enjoy the value of the instrument which was procured with the assistance of the accommodating party. In the case at bar, the petitioner company cannot be considered as the accommodated party on account that it did not receive the value thereof. The accommodated party must not be the payee.
Town Savings and Loan Bank vs CA
The spouses Hipolito applied for a loan with the petitioner Town Saving s and Loan Bank. To secure payment, the spouses executed a promissory note in favor of the petitioner. The spouses defaulted in payment; hence the civil action for collection of sum of money was filed by the petitioner. The spouses filed their answer, arguing that they were mere guarantors of Pilarita Reyes, the sibling of the husband Hipolito and that the former is the real party in – interest. They further alleged that the president of the bank persuaded them to sign the promissory note and that the latter manifested when they received the demand letter that such was just a mere formality, the purpose of which is to compel Reyes to settle the obligation. The trial court held in favor of the bank, holding that the spouses Hipolito was an accommodating party. However, the CA reversed the decision upon appeal upon holding that Hipolito did not accommodate Reyes but the bank, whose lending authority was limited. The bank appealed with the SC, arguing that the respondents should be held liable on account that they are accommodating parties. WON the spouse are liable as an accommodating party. (1.) The spouses are liable as an accommodating party. The statement of the latter, purporting that the president of the bank insisted that they undertake the loan is self serving, hence should not be given excessive credence. It is highly improbable that the bank would go out of its way just to induce a third party to accommodate a possible borrower. The most feasible scenario is that the borrower would be the one who would compel a third party to accommodate his financial interest. (2.) The requisites to determine the existence of accommodation are present in the case at bar, a third person acted as an indorser, maker or drawer lending his name for the benefit of another while not receiving the value thereof.
Bautista vs Auto Plus Traders Incorporated
The petitioner Bautista, president and the presiding officer of the Cruiser Bus Line, purchased several tires from the respondent Auto Plus. The petitioner executed 2 checks as payment. However, the checks bounced upon encashment, causing the respondents to file a criminal action for 2 counts of estafa. Upon hearing at the MTCC, the demurrer to evidence filed by the petitioner was granted based on reasonable doubt, but ordered the bus company to pay the debt with damages. Upon appeal with the RTC, the court modified the decision imposing the civil liability not against the company but to Bautista. The said decision was affirmed by the CA, holding that he accommodated the financial interest of the company. Thus the appeal of the petitioner with the SC, arguing that the CA erred in ruling that he is liable for the 2 checks notwithstanding the fact that he issued the same as an officer of the company. WON the petitioner is liable as an accommodating party. (1.) The petitioner is not an accommodating party. Although it is proven by evidence that Bautista was a party in the instrument as the drawer of the check and that he did not receive the value thereof, the third requisite is not present; that he lent his name for the benefit of the company. There is no showing as to what capacity did the petitioner drew the instrument. (2.) Ostensibly, the debts incurred in the case at bar are corporate in nature for which Cruiser Bus Lines is liable to. In the absence of any evidence which shows that he deliberately lent his name for the benefit of a third party, such cannot be presumed, hence the petitioner is not an accommodating party. (refer to tito presbi‘s dissent regarding B.P. 22; civil liability of drawer of a bouncing check is absolute)
Siain Enterprise vs Cupertino Realty
Siain Enterperise obtained a loan from Cupertino Realty, covered by 2 promissory notes signed by the presidents of the petitioner Siain, Cua and Lua. To secure the payment, the petitioner executed several REMs covering different realties and chattels. Thereafter, Cua signed a second promissory note in favor of the respondent on her personal capacity and on behalf of the petitioner Siain Enterprise. Sometime after, the petitioner made a demand against the respondent Cupertino, arguing that the consideration for the second promissory note is still not yet received by them. Cupertino, on the other hand, contended that the amount has long been delivered to the petitioner and that their argument is merely for the purpose of absconding from their debt which is already due and demandable. With this, Cupertino extra judicially foreclose the mortgage. The petitioner sought recourse from the court, arguing that the respondent did not have the capacity to extrajudicially foreclose the REMs. The court ruled to dismiss the complaint and ordered the petitioner to pay the demandable debts to Cupertino. The CA affirmed the decision of the RTC upon appeal, holding that bare denial and negative evidence of non – receipt of the consideration weighs less compared to the evidentiary gravity of Cupertino‘s affirmative evidence proving payment of the consideration. The petitioner sought recourse from the SC. WON there was payment of the consideration to the petitioner. (1.) There is payment of the consideration in the case at bar. Upon review of the chain of transactions by the parties, a presumption has risen that the loan documents were supported by a consideration. (2.) Under rule 131 sec 3 of the ROC, it provides that a disputable presumption is satisfactory if uncontradicted and not overcome by evidence, to wit; xxxxxx r. That there was sufficient consideration for a contract, s. That a negotiable instrument was given or indorsed for a sufficient consideration. (3.) Under sec 24 of the NIL, every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears on the instrument are deemed to have become a party thereto. (4.) Under these premises, the petitioner did not overcome by preponderance of evidence presumption of payment of the consideration.
Gonzales vs PCIB The petitioner Gonzales was a client of the PCIB. The bank extended a credit – on – hand – loan agreement with Gonzales, enabling the latter to draw checks. Subsequently, Gonzales, together with the spouses Panlilio executed and singed 2 promissory notes in favor of the bank in consideration of a loan. The promissory note explicitly stated that the makers are solidarilly liable to the said notes. Subsequently, Gonzales issued to a person named Unson a check as payment, to be drawn from the credit – on – hand – loan agreement (COHLA). The check was dishonored by the PCIB, which lead Unson to confront Gonzales for payment. After settling the debt to Unson, Gonzales sought damages from the bank for unjust dishonor of the check. The bank argued that the freezing of the COHLA account of Gonzales was justified on account that the loan, as evidenced by the promissory notes the latter issued with the spouses Panlilio, was unpaid upon its maturity. Gonzales on the other hand countered, arguing that he never received the consideration thereof and that he acted as a mere guarantor to the Panlilio spouses. The trial court ruled in favor of the bank, holding that Gonzales is solidarilly liable with the Panlilio spouses for the alleged promissory notes. The CA affirmed the RTC decision upon appeal, hence the recourse of the petitioners to the SC. WON Gonzales is liable on the promissory notes. (1.) Gonzales is liable on account that he is an accommodating party for the benefit of the spouses Panlilio. Secondly, it is explicitly stipulated under the promissory notes that Gonzales is solidarilly liable with the Panlilios on the promissory notes. (2.) The bank is at fault as well, on account that it did not give any notice to Gonzales, informing the latter that his account with the bank has been frozen on account of the unpaid promissory note. PCIB is obliged to formally inform and apprise Gonzales of the defaults and outstanding obligations especially when the bank invokes solidary liability of an accommodating party. (3.) The PCIB was grossly negligent in not giving prior notice to Gonzales about its course of action to suspend, terminate or revoke the credit line, thereby violating the terms of the COHLA.
Vicente R de Ocampo Co. vs Gatchalian The respondents initially made some arrangements with one Manuel Gonzales, wherein the latter is offering a sale of an automobile to the respondents. Being interested, the respondents Gatchalian requested Gonzales to furnish the certificate of registration and the unit itself for personal inspection as to the quality thereof. Gonzalez, however, manifested that the owner of the car, Ocampo Clinic, would like a guarantee that the respondents would pursue the purchase. With this, the respondents acceded and wrote a check payable to bearer, with the condition that it is just for the purposes of presentment to the owner of the car and that the check would be returned after the inspection of the car. Gatchalian then made a stop payment order against the said check. Gonzales however did produce the certificate and the car, and did not return the check. He, instead presented it for payment to the petitioner (owner of a hospital), for the medical expenses incurred by his wife. Upon encashment of the check by the plaintiff, the check was dishonored due to the stop payment order, hence the present suit for a sum of money and damages by the petitioner. The respondent argued that the petitioner is not a holder in due course on account that it had knowledge of the defect in the check by the fact that it did not inquire as to where the check originated from. They further argued that the lack of suspicion by the petitioner regarding Gonzales‘ presentment of a bearer check which is not drawn by another person renders the petitioner not a holder in due course. The RTC held in favor of the petitioner and ordered the respondent to pay the amount on the said check. The respondents appealed with the SC, arguing that the petitioner is not a holder in due course and that there was no negotiation of the check, there being no intent to deliver the same to a person who takes it as a holder. The issuance of the check is merely to serve as evidence as to the good faith of the respondents in buying the car. WON the petitioner is a holder in due course. (1.) The petitioner is not a holder in due course. Under art 52 of the NIL, a holder in due course is one a. who accepts a negotiable instrument that is complete and regular on its face, 2. that he became the holder thereof before it was overdue and without notice that it had been previously dishonored, 3. that he took it as a holder in good faith and for value, 4. and that he had no notice of any infirmity in the instrument or any defect in the title of the person negotiating it when the instrument was negotiated. (2.) Under these premises, the petitioner‘s nonchalance in ascertaining the origin of the instrument and the reason why the maker thereof is not Gonzales renders the petitioner not a holder in due course. The latter did not inquire as to the nature of the title and possession of Gonzales. Having failed to exert earnest effort in inquiring, it is tantamount to the legal absence of good faith. (3.) Knowledge of any infirmity regarding the nature of the title and possession of an instrument is not controlling in rendering a holder not a holder in due course. The purchaser of a negotiable instrument must exercise reasonable prudence and caution. If the circumstances surrounding the purchase of such excite any doubt, the absence of any effort in ascertaining the validity of the instrument renders the holder not a holder in due course. PNB vs Picornell
The respondent Picornell was an agent of Hyndman, Tavera and Ventura Firm of which the co – respondent Tavera was the successor thereof. The firm ordered Picornell to buy from the petitioner PNB a several bales of tobacco. As payment thereof, Picornell wrote a bill of exchange in favor of the petitioner, to be drawn against the account of the firm. Under the Bill of Exchange, there exist a condition that the bank should not deliver the said bales of tobacco prior to the payment of the value of the bill. The said bill of exchange was delivered to the PNB, with the latter accepting the same. Upon delivery of the bales of tobacco to the petitioner, the latter discovered that some of the said tobacco were deteriorated and of no use. With this, the respondent firm did not pay the value of the bill, leading the petitioner to file a civil action against both Picornell and the firm. The bank contended that the Picornell and the firm is liable on the instrument on account that there exist a consideration in the transaction between it and Picornell, hence it has the right to be paid the value on the instrument upon presentment to the drawee, herein the firm. Picornell on the other hand argued that he is merely and agent of the firm, hence he does not incur any liability on account that the negotiation was for the benefit of the principal. The firm set up their defense, contending that they are not liable on the thereon due to lack of consideration, such that a sizable amount of the bales of tobacco were deteriorated. The trial court ruled in favor of the bank, hence the appeal of the petitioners. WON Picornell and the firm are liable on the instrument. (1.) Picornell and the firm are liable. With regard to Picornell, he incurs liability for being the drawer of the instrument. Under the NIL sec 61, it is provided that “The drawer of the bill, by drawing the same, he warrants that it will be accepted on due presentment and paid in due course; hence if it is not paid by the drawee, he then is liable for payment of its value”. With the foregoing, Picorell is liable despite the fact that he is merely an agent of the firm. Hid contract is distinctly different from the drawer – payee relationship. His negotiation of the said bill constituted a contract which is distinct from his contract of agency with his principal, such that he will still be liable despite the fact that he merely acted for and on behalf of his principal. (2.) Insofar as the firm is concerned, the inferiority of the consideration, in this case the bales of tobacco, does not constitute as a ground as to not pay the value of the instrument drawn against it. The drawee, upon acceptance of the bill, becomes liable to the payee and cannot allege want of consideration between the payee and the drawer.
People vs Maniego
The accused Maniego, together with 2 others were charged with the crime of malversation of public funds. It was alleged that the co - accused Ubay, an officer of the AFP, confederated with the accused in acquiring several checks to be drawn against PNB and BPI. The checks were indorsed by Maniego. The co – accused Ubay was found guilty thereof. Maniego however was acquitted from the criminal liability, but was imposed the burden of paying the value of the instruments which she indorsed. Maniego then appealed with the SC, arguing that she is not liable on account of the dishonor of the said checks on account that she is merely an indorser thereof. WON Maniego assumes liability as an indorser. (1.) Maniego is liable as an indorser of the dishonored checks. Under the NIL, a mere indorser is also liable on account of the dishonor of the checks indorsed by the latter. Under sec 57 of the said law, the holder in due course may enforce payment of the full amount on the instrument against all parties liable thereon. (2.) Also under sec 66, it is provided that every indorser who indorses, without qualification, warrants to all subsequent holders in due course that 1. The instrument is valid and subsisting when he indorsed the same, and that 2.that he warrants that on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.
Ang Tiong vs Ting
One Lorenzo Ting issued an instrument payable to bearer. At the back of the check was the indorsement of Felipe Ang, the herein petitioner. The instrument was negotiated to the plaintiff Ang Tiong. Upon presentment for payment, the said check was dishonored by the drawee bank. With this, Ang Tion filed the present complaint for collection of sum of money against Ting and Ang, wherein the trial court held in favor of the plaintiff, rendering judgment ordering the petitioner to pay solidarilly with Ting. The petitioner sought recourse from the SC, arguing that he is merely and accommodating party thereof and that the lower court erred in holding him liable as a general indorser. WON the petitioner is liable to pay as an indorser. (1.) The petitioner is liable. Under sec 63 o the NIL, a person placing his signature upon an instrument, otherwise as a maker, drawer or acceptor thereof, is considered as a general indorser, UNLESS he annotates some statement therein that he intends to be bound in some other capacity. Under sec 66 of the same law, the general indorser is deemed to have warranted the following to all subsequent holders in due course; 1. That the instrument is genuine as to what it purports to be, 2. That he has good title to it, 3. That all the prior contracting parties have the capacity to contract, 4. That the instrument is at the time of his indorsement valid and subsisting, In addition, he engages that in the presentment thereof, the instrument shall be accepted and amount will be paid; and if dishonored, he shall be liable for payment thereof. (2.) Under these premises, the petitioner is liable to pay the amount as a general indorser. This liability is imposed upon the indorser even if the latter acted as an accommodation partywho lent his name for the benefit of another.
BDO vs Equitable PCI Bank
The petitioner BDO, through its Visa Card, department drew 6 crossed checks payable to certain member establishments of Visa Card. Subsequently, the checks were deposited with the defendants to the credit of its depositor, a certain Trencio. Following the usual procedure, the defendant Equitable stamped on the checks the usual endorsements, to wit; All prior or lack of endorsement guaranteed. After which, the defendant proceeded to sent the checks to PCHC for clearing. After the defendant has paid the amount on the checks, PCHC debited such amount against the clearing account of BDO, and credited the same to the clearing account of the defendant. Subsequently, the plaintiff discovered that the endorsements on the said checks were forgeries, such endorsements not of the payees. The plaintiff sought reimbursement of the amount of the forged instruments, but such was unheeded by the defendant, hence the present action. After the arbitration, under the PCHC, the arbiter rendered a decision in favor of the plaintiff, ordering the defendant to reimburse the said amount. The RTC affirmed the decision upon appeal. The petitioner sought recourse from the SC, arguing that the notes were actually non – negotiable on account that the phrase ―bearer‖ printed on the check was cancelled, hence the PCHC does not have jurisdiction over cases of this nature. WON the petitioner is liable to pay the amount. (1.) The petitioner is liable for such amount. Under sec 66 of the NIL are the warranties deemed to be undertaken by indorsers, to wit; 1. That the instrument is genuine as to what it purports to be, 2. That he has good title to it, 3. That all the prior contracting parties have the capacity to contract, 4. That the instrument is at the time of his indorsement valid and subsisting, In addition, he engages that in the presentment thereof, the instrument shall be accepted and amount will be paid; and if dishonored, he shall be liable for payment thereof. Under these premises, the bank is liable for it endorsed the checks without making any qualifications. The non – negotiability of the notes is not a valid defense to escape liability. The warranties of the general indorser under the NIL is sustained despite the non – negotiablility of the notes. (2.) The petitioner, as the collecting bank must exert due diligence in determining the genuiness of the instrument. If it disburses any amount accruing from a forged check without exerting any effort to ascertain the genuiness of the instrument, then the drawee bank suffers the loss. (3.) The drawee bank cannot repudiate the negotiability of the notes which it has endorsed earlier. Such constitutes estoppel. Repudiating an obligation voluntarily assumed after benefiting from it cannot be countenanced.
Associated Bank vs CA
The Province of Tarlac maintains a current account with the PNB where the provincial funds are deposited. Checks issued by the Province are signed by the Provincial Treasurer and countersigned by other officers. A portion of the funds is allocated to the Concepcion Emergency Hospital drawn to the order of "Concepcion Emergency Hospital " or "The Chief, Concepcion Emergency Hospital" The checks are released by the Office of the Provincial Treasurer and received for the hospital by its administrative officer and cashier. A retired employee of the hospital (cashier), named Pangilinan, managed to collect several checks and encash the amount of more than Php200k from the petitioner Associated bank. The latter forged the name and signature of the Chief of the payee hospital, Canlas. Pangilinan was able to withdraw the amount through forgery when the check was cleared and paid by PNB. All the checks bore the stamp of Associated Bank which reads "All prior endorsements guaranteed‖ by ASSOCIATED BANK. Upon post-audit by the Provincial Auditor, it was discovered that the hospital did not receive several allotment checks. With this, the province demanded the reimbursement of the said amount from the PNB. The PNB on its part demanded the return of such amount from the Associated Bank. With both bank unheeding the request for reimbursement, the Province of Tarlac filed the present case. The trail court held in favor of the Province, ordering PNB to reimburse the amount, and that the Associated Bank reimburse the same in favor of PNB. The CA affirmed the RTC decision, ordering Associated to reimburse PNB and ordering PNB to pay Province of Tarlac. ISSUE: W/N PNB and Associated Bank should be held liable
(1.) The collecting bank, Associated Bank, shall be liable to PNB for 50% of the amount. Although the indorsement on the instrument is forged, parties who warrant or admit the genuineness of the signature in question and those who, by their acts, silence or negligence are estopped from setting up the defense of forgery. The act of Associated Bank of stamping the words ―all indorsement / lack of indorsement are guaranteed‖ is actually an admission of the instrument‘s validity, hence the defense of forgery is unavailable to it. (2.) Under the NIL sec 6, it enunciates that the indorser of an instrument warrants the following, to wit; 1. That the instrument is genuine as to what it purports to be, 2. That he has good title to it, 3. That all the prior contracting parties have the capacity to contract, 4. That the instrument is at the time of his indorsement valid and subsisting, In addition, he engages that in the presentment thereof, the instrument shall be accepted and amount will be paid; and if dishonored, he shall be liable for payment thereof. An indorser of an order instrument warrants "that the instrument is genuine and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting
So even if the indorsement on the check deposited by the banks's client is forged, the collecting bank is bound by his warranties as an indorser and cannot set up the defense of forgery as against the drawee bank. The bank on which a check is drawn, known as the drawee bank, is under strict liability to pay the check to the order of the payee. In cases involving checks with forged indorsements, the drawee bank can seek reimbursement or a return of the amount it paid from the presentor bank or person. PCIB vs CA On October 19, 1977, plaintiff Ford issued a Citibank check amounting to P4,746,114.41 in favor of the Commissioner of Internal Revenue for the payment of manufacturer‘s taxes. The check was deposited with defendant IBAA (now PCIB), subsequently cleared the the Central Bank, and paid by Citibank to IBAA. The proceeds never reached BIR, so plaintiff was compelled to make a second payment. Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An investigation revealed that the check was recalled by Godofredo Rivera, the general ledger accountant of Ford, and was replaced by a manager‘s check. Alleged members of a syndicate deposited the two manager‘s checks with Pacific Banking Corporation. Ford filed a third party complaint against Rivera and PBC. The case against PBC was dismissed. The case against Rivera was likewise dismissed because summons could not be served. The trial court held Citibank and PCIB jointly and severally liable to Ford, but the Court of Appeals only held PCIB liable. II. G. R. No. 128604 Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payee‘s account only. The checks never reached BIR, so plaintiff was compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank. On investigation of NBI, the modus operandi was discovered. Gorofredo Rivera made the checks but instead of delivering them to BIR, passed it to Castro, who was the manager of PCIB San Andres. Castro opened a checking account in the name of a fictitious person ―Reynaldo Reyes‖. Castro deposited a worthless Bank of America check with the same amount as that issued by Ford. While being routed to the Central Bank for clearing, the worthless check was replaced by the genuine one from Ford. The trial court absolved PCIB and held Citibank liable, which decision was affirmed in toto by the Court of Appeals. Issues: (1) Whether there is contributory negligence on the part of Ford (2) Has petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? Held: (2) The general rule is that if the master is injured by the negligence of a third person and by the concuring contributory negligence of his own servant or agent, the latter's negligence is imputed to his
superior and will defeat the superior's action against the third person, asuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made. As defined, proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient, intervening cause produces the injury and without the result would not have occurred. It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of encashing the checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the parties. The mere fact that the forgery was committed by a drawer-payor's confidential employee or agent, who by virtue of his position had unusual facilities for perpertrating the fraud and imposing the forged paper upon the bank, does notentitle the bank toshift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession. (2) We have to scrutinize, separately, PCIBank's share of negligence when the syndicate achieved its ultimate agenda of stealing the proceeds of these checks. a. G. R. Nos. 121413 and 121479 On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances. Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent. It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an argreement to the contrary, that of principal and agent. A bank which receives such paper for collection is the agent of the payee or holder. Indeed, the crossing of the check with the phrase "Payee's Account Only," is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement guaranteed". Lastly, banking business requires that the one who first cashes and negotiates the check must take some precautions to learn whether or not it is genuine. And if the one cashing the check through indifference or other circumstance assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the check from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the person negotiating the instrument before paying the check. For this reason, a bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the drawee bank has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which proximately contributed to the success of the fraud practiced on the drawee bank. The latter may recover from the holder the money paid on the check. b. G. R. No. 128604
In this case, there was no evidence presented confirming the conscious participation of PCIBank in the embezzlement. As a general rule, however, a banking corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. A bank will be held liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even as regards that species of tort of which malice is an essential element. In this case, we find a situation where the PCIBank appears also to be the victim of the scheme hatched by a syndicate in which its own management employees had participated. But in this case, responsibility for negligence does not lie on PCIBank's shoulders alone. Citibank failed to notice and verify the absence of the clearing stamps. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be paid only to its designated payee. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. Thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 AND 16508. Thus, we are constrained to hold them equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR.
Far East Realty vs CA
The petitioner bank alleged that the private respondent prayed to them for an extension of an accommodation loan which they needed for their business. The loan was extended to the private respondents, with the latter delivering a check, drawn by Dy Hian Tat and indorsed by Gaw Suy An, for the payment of such loan. The instrument contained therein a condition that after one month from the execution of the loan, the said check would be redeemed by them by paying cash the amount due or the said check can be presented for payment on or immediately after one month. The check was however dishonored upon presentment by the petitioner, hence the present civil action. The private respondent Gaw Suy An contended that he cannot be made liable for the amount on the check on account that his indorsement therein was merely for the benefit of his principal, Victory hardware. Dy Hian Tat on the other hand contended that he never had any transaction of any check with the petitioner at anytime on account that he delivered such check to one Sin Chin Juat Grocery and not to the petitioner. Also retorted that check were, through several indorsements, were passed from one hand to the other, and eventually being in possession of the petitioner. He further argued that considering that this check in question was dated September 13, 1960 and deposited only for payment on March 5, 1964, this unreasonable delay in presentment wholly discharged not only the endorser but also the drawer. The trial court ruled in favor of the petitioners, ordering the private respondents to pay the amount on the instrument. The CA however reversed the said decision, holding that unreasonable delay in presenting the instrument for payment operates in a way that it discharges the debt not only of the maker but also to the consequent indorsers. The petitioners appealed, arguing that presentment for payment is not required in order to charge the drawer, and that notice of dishonor can be dispensed with if the account against which the check will be charged against is insufficient in funds. WON the delay in the presentment for payment of an instrument discharges the debt contracted by the maker and the indorser. (1.) The debt was discharged due to the unreasonable delay in presentment for payment. It is provided for by the NIL sec 71, 1.Where the instrument is not payable on demand, presentment must be made on the day it falls due; 2. If it is payable on demand, presentment must be made within a reasonable time after issue; 3. In the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof.
(2.) There‘s no hard and fast rule that can be drawn between what may be considered as a reasonable or an unreasonable time, because "reasonable time" depends upon the peculiar facts and circumstances in each case .It is obvious in this case that presentment and notice of dishonor were not made within a reasonable time. "Reasonable time" has been defined as so much time as is necessary under the circumstances for a reasonable prudent and diligent man to do, conveniently, what the contract or duty requires should be done, having a regard for the rights and possibility of loss, if any, to the other party
PNB vs Seeto
The respondent Seeto negotiated a check with the petitioner, PNB. The check is allegedly drawn by one Yek Kiao against the latter‘s account in the drawee bank, Philippine Bank of Communications. Seeto then made an unqualified indorsement in favor of the petitioner. When the check was presented for payment by the petitioner to the drawee bank, the latter dishonored the same on account that the said account had insufficient funds. The respondent did not heed the demand of the petitioner for reimbursement, claiming that the said account had sufficient fund at the time of negotiation with the petitioner and that had the petitioner not delayed in the check‘s presentment, it may have been paid before the funds of the said account was exhausted. The petitioner filed a suit for collection of sum of money, arguing that the respondent made a guarantee to it that he would pay the amount thereof in case of dishonor. The trial court ruled in favor of the petitioner, holding tha the assurances made by the respondent binded him to pay, and that no delay was incurred by the petitioner in timely presenting the check for payment on account of the distance between it office and the drawee bank. On appeal to the Court of Appeals, this court held that petitioner was guilty of unreasonably retaining and withholding the check, and that the delay in the presentment for payment was inexcusable, so that respondent was thereby discharged from liability. WON the respondent‘s debt was discharged due to delay in presentment by the petitioner. (1.) Yes, the petitioner is guilty of delay. Even though under the NIL sec 84 provides that ―when the instrument is dishonored by nonpayment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder‖, its application is subject to the condition imposed by sec 186, to the effect that the check must be presented for payment within a reasonable time after its issue. ―Within what time a check must be presented. — A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay‖. (2.) If the indorsers liability is not discharged due to unreasonable delay in presentment, such then is contrary to the essential nature and character of negotiable instruments - their negotiability. They are supposed to be passed on with promptness in the ordinary course of business transactions; not to be retained or kept for such time as the holder may want, otherwise the smooth flow of commercial transactions would be hindered. There is evidence to prove that had it not been for the unreasonable delay in its presentation for payment, the petitioner herein would have been able to receive payment therefor. (3.) The allegation of the petitioner as to the alleged assurance made by Seeto that the latter made himself liable in case of dishonor, such liability is not substantiated. Under sec 66, liability of drawer, there exist no guarantees that the latter would be liable even if there is delay in presentment.
Crystal vs CA
In a case previously decided by the Supreme Court, the petitioner sought to redeem a particular real estate which was subjected to execution. Herein respondents bought the property under execution sale. Before the lapse of the prescribed period to redeem the property, the petitioner Crystal tendered payment to the respondents through a check, and was consequently granted a deed of redemption. The amount of the check was however not realized (withdrawn). The private respondents now sought with the trial court to deem the redemption of the petitioner invalid in as much as the proceeds of the said check was never realized due to either dishonor or that the account became stale. The trial court in an earlier order held that question of ownership and the legality of the deed of redemption cannot be heard in the present action for legal redemption, and must be threshed out in a separate action. However, the trial court issued a writ of possession in favor of the respondents, and that such decision was later affirmed by the CA. The SC earlier ruled in favor of the respondents, until the present motion for reconsideration was filed. WON the dishonor of the check causes the redemption invalid // the account in which the check must be accounted against affect the validity thereof. (1.) The SC remanded the case to the trial court. If a check is issued for the purposes of legal redemption of property under execution is dishonored, then the redemption is null and void. If the account however became stale due to the non presentment of the check within a reasonable period, it is important to determine the circumstances under which the said check was not presented immediately. (2.) If such non presentment cannot be attributed to the drawer, then it would bring injustice to the latter if the said redemption be declared invalid. The determination of the cause why the amount of the check was not realized is imperative, for if it is without the fault of the drawer, the rights he acquired as a valid redemptioner will be prejudiced.
Papa vs Valencia
Petitioner Papa was the administrator of the Testate Estate of Angel Butte. Petitioner Papa, acting as attorney-in-fact of Butte, Papa sold to Respondent Peñarroyo a parcel of land located in QC. Such parcel of land, together with other parcels, was mortgaged by Butte to Assoc. Banking Corp (now Assoc. Citizens Bank) before she passed away. Butte, however, died before all of the properties were released. Assoc. Banking Corp. refused to release the subject parcel of land to Respondents until all of the mortgaged properties of Butte were released. The respondents Valencia and Peñarroyo discovered that the mortgage rights of the bank had been assigned to one Tomas L. Parpana (now deceased), as special administrator of the Estate of Ramon Papa, Jr, and that since then, herein petitioner had been collecting monthly rentals from the tenants of the property, knowing that said property had already been sold to private respondents. Trial Court allowed the respondents to redeem the property and an absolute deed of sale be executed in favor of Respondent Peñarroyo. NEGO TOPIC: On appeal to the Court of Appeals, the petitioner alleged that the sale was never ―consummated‖ as he did not encash the PCIB check given by respondents in payment of the full purchase price of the subject lot. He maintained that what said respondents had actually paid was earnest money. The CA ruled affirmed the decision of the trial court, holding that there was no evidence that petitioner did not, in fact, encash said check. On the other hand, respondent testified in court that petitioner Papa had received the amount of P45,000.00 and issued receipts therefor. According to respondent court, the presumption is that the check was encashed, especially since the payment by check was not denied by petitioner and that the check was ith Papa for 10 years. Petitioner appeals to the Supreme Court insisting that he did not encashed the check, and cited Art. 1249 of the Civil Code, which provides, in part, that payment by checks shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired. WON the PCIB check was encashed YES. The checks were encashed. While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor‘s unreasonable delay in presentment. The acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused. The payee of a check would be a creditor under this provision and if its non-payment is caused by his negligence, payment will be deemed accomplished and the maker will be discharged of the debt.
IAC vs Gueco
Respondents Gueco Spouses obtained a loan from petitioner Union Bank to purchase a car. In consideration thereof, the Spouses executed promissory notes and a chattel mortgage over the car to serve as security for the notes. The Spouses defaulted in payment. Consequently, the Bank filed a civil action for sum of money with prayer for a Writ of Replevin. The parties however attempted to compromise, whereas the bank lower the amount due. Gueco delivered a manager‘s check as per the compromise, but the car was not released because of his refusal to sign the Joint Motion to Dismiss demanded by the bank. Gueco argued that there is no need to execute a joint motion for dismissal on account that he hasn‘t filed his answer yet. Petitioner, however, insisted that the joint motion to dismiss is standard operating procedure in their bank as far as compromises are concerned. (Note: Petitioner did not encash the manager‘s check) Gueco initiated a civil action for damages on account of the bank‘s refusal to release the mortgaged property despite the payment of the manager‘s check. The MTC dismissed it for lack of merit. The RTC reversed such decision, holding that there was a meeting of the minds between the parties as to the reduction of the amount of indebtedness and the release of the car. CA affirmed such decision and held that the due to the petitioner refusal to release the car despite respondent's tender of payment, the former intentionally evaded its obligation and thereby became liable for moral and exemplary damages. WON the Petitioner was negligent for not encashing the check and therefore the car should be released and damages should be paid. (1.) A check must be presented for payment within a reasonable time after its issue, and in determining what is a ―reasonable time,‖ regard is to be had to the nature of the instrument, the usage of trade or business with respect to such instruments, and the facts of the particular case. In the case at bar, however, the check involved is not an ordinary bill of exchange but a manager‘s check. A manager‘s check is one drawn by the bank‘s manager upon the bank itself. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance. Even assuming that presentment is needed, failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay. Failure to present on time, thus, does not totally wipe out all liability. It has been held that, if the check had become stale, it becomes imperative that the circumstances that caused its non-presentment be determined. In the case at bar, there is no doubt that the petitioner bank held on the check and refused to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. The SC saw no bad faith or negligence in this position taken by the Bank. SUMMARY: Gueco Spouss obtained loan from bank to buy a car. Spouses defaulted payment. Bank sued. Upaid amount lowered as result of some negotiations. Gueco issued manager‘s check. Bank refused to accept and insisted that Gueco sps. Sign a Joint Motion to Dismiss. Spouses refused. Car was not released by Bank. Spouses sued Bank to recover the car and collect damages. Sps allege that the delivery of manager‘s check is effective as payment. Bank did not encash the check because of the pending case.
Check became stale. Should the bank release the car and pay damages? NO. The check in this case is a manager‘s check and it is accepted by issuance. Assuming presentment is needed, failure to present will discharge drawer to the extent of lost because of delay. If a check becomes stale, it is impt to look into the circumstance that caused the non-presentment. In this case, it is because of the pending case. The SC saw no bad faith or negligence on the part of the Bank.
PNB vs CA One Augusto Lim deposited in his account at PCIB several GSIS checks, against the latter‘s account in PNB. The check was sent for clearing with the Central Bank, and was thenafter sent to PNB. PBN however did not return the said check and paid the amount thereof to PCIB and debited such amount to the account of GSIS. However, the PNB recredited the amount to the account of GSIS on account that the said checks were forged. Consequently, PNB demanded the refund of the amount from PCIB, which the latter did not heed. The present suit was filed by PNB against PCIB. It was discovered that the signatures on the GSIS checks, purportedly of the officers of the latter, were forged. (GSIS >Pulido payee) > Manuel Go > Augusto Lim) It was discovered that the PCIB stamped the following on the back of the check: "All prior indorsements and/or Lack of Endorsement Guaranteed"; that, on the same date, the PCIB sent the check to the PNB, for clearance, through the Central Bank. GSIS consequently notified PNB beforehand that said check had been lost, and, accordingly, requested that its payment be stopped. The trial court dismissed the complaint, and such decision was affirmed by the CA, hence this petition with the SC, arguing that having the checks cleared constitutes acceptance and that PCIB should bear the loss due to its negligence in not determining the authenticity of the checks. WON the act of clearing constitutes acceptance // PCIB is guilty of negligence. (1.) No, the act of clearing insofar as checks are concerned is not acceptance. Acceptance is not required for checks, for the same are payable on demand. Acceptance and payment are distinguished with each other. The former pertains to a promise to perform an act while the latter is the actual performance of the act. (2.) Assuming that PCIB is negligence under these circumstances, the petitioner is guilty of an even greater degree of negligence. With the particularity, the PNB had been guilty of a greater degree of negligence, because it had a previous and formal notice from the GSIS that the check had been lost, with the request that payment thereof be stopped. The PNB's negligence was the main or proximate cause for the corresponding loss.
Metropol Financing vs Sambok Motors
One Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd for a certain amount, payable in 12 equal installments. It is provided therein that default in a single installment payment renders the not due and demandable in its full amount. Then after, the respondent Sambok Motors Company, a sister company of Ng Sambok Sons Motors Co., Ltd., being under the same management, negotiated the note in favor of the petitioner Metropol Financing. The respondent indorsed the note in favor of plaintiff with the following indorsement, to wit; ―Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse‖; Notice of Demand; Dishonor; Protest; and Presentment are hereby waived.
Subsequently, Villaruel defaulted in payment, causing the plaintiff to demand full payment thereof. The demand was unheeded, causing then the respondent to notify the respondent Sambok that the instrument was dishonored and thereby making demand for payment. Metropol instituted a case for collection of sum of money against Sambok. The latter contended that it cannot be held liable on the note before its co-defendant Villaruel is declared insolvent. The trial court held in favor of the petitioner and ordered the respondent to pay the said amount. Hence, the recourse of Sambok with the SC, contending that it is a qualified indorser whose liability to the 4 warranties under sec. 65, hence it cannot be held liable if the person primarily fails to pay. It further argued that it is a qualified indorser on account of the qualified indorsement on the note, referring to ―with recourse‖. WON the respondent is a qualified indorser. (1.) No, the respondent is not a qualified indorser, hence he can be held liable to pay as a person who is secondarily liable thereto. A qualified indorsement is one which limits the liability of the indorser. Such may be adduced with the words ―no recourse/sans recourse. In the case at bar, the respondent did the opposite and indorsed the words ―with recourse‖, with the corresponding waivers. (2.) By indorsing the note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable. A person secondarily liable as a general indorser undertakes that if upon presentment the instrument be dishonored, with the necessary proceedings on dishonor be undertaken, he shall pay the amount due to the holder.
Lopez vs People
The accused Lopez was charged with the crime of estafa, par. 2(d), through false pretenses executed simultaneously with fraud. The accused issued a check in favor of the complainant, knowing for a fact that the account against which the check will drawn from is already closed even before the transaction. The trial court convicted the accused of the crime. The accused now sought recourse from the CA contending that the complainant payee knew that the accused‘s account was already closed, hence debunking the finding of deceit. The CA affirmed the lower court‘s decision, hence the appeal of the accused with the SC. He now contends with the court that the trial court erred in not applying the pertinent provisions of the NIL in the case at bar, such that he is not liable thereon on account that the payee did not give him a notice of dishonor. WON the service of notice of dishonor is a controlling element in the prosecution of estafa. (1.) No, notice of dishonor is not necessary for the crime of estafa par 2(d) to be committed. Under the said provision, estafa is committed through the following acts, to wit; (1) the offender has postdated or issued a check in payment of an obligation contracted at the time of the postdating or issuance; (2) at the time of postdating or issuance of said check, the offender has no funds in the bank or the funds deposited are not sufficient to cover the amount of the check; and (3) the payee has been defrauded. The drawer of the dishonored check is given three days from receipt of the notice of dishonor to cover the amount of the check, otherwise, a prima facie presumption of deceit arises. (2.) Under the NIL, sec 114(d) provides that ―Notice of dishonor is not needed to be made to the drawer in the following cases… d. where the drawer has no right to expect or require the drawee to honor the check. The respondent has no right to require the drawee to honor such on account that he already knew even before the transaction in issue that his account with the drawee bank is already closed.
PNB vs CA
The Ministry of Education and Culture (now DECS) issued a check payable to F. Abante Marketing. The check is drawn against PNB. Abante deposited the check with Capitol City Development Bank (Capitol), which in turn deposited the check with its account with Philippine Bank of Communications (PBCOM). PBCOM is the collecting agent of Capitol. PBCOM sent the check to PNB for clearing. PNB cleared the check so PBCOM credited Capitol‘s account. However, subsequently, PNB returned the check because there had been a “material alteration” of the check number. PBCOM debited Capitol‘s account. However, Capitol cannot debit Abante‘s account because Abante had already withdrawn the amount of the check. Capitol sought clarification and re-crediting from PBCOM but all demands were unheeded. Capitol filed a suit with the RTC against PBCOM PBCOM filed a third-party complaint against PNB PNB filed a fourth-party complaint against Abante. RTC decision: o PBCOM ordered to recredit/reimburse Capitol o PNB ordered to recredit/reimburse PBCOM o F. abante to reimburse PNB CA decision: o PNB ordered to honor the check o After the check shall have been honored by PNB, PBCom shall re-credit Capitol o MR denied
Issue: W/N alteration of the check number is a material alteration Ruling: No. Not a material alteration. An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law. The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same. The check's serial number is not the sole indication of its origin.. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The check's issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential.
Not so important issues:
W/N a certification herein issued by the ministry of education can be given weight in evidence. Petitioner thus assails the refusal of respondent court to give weight to the certification because the author thereof was not presented to identify it and to be cross-examined thereon. SC: The one who signed the certification was not presented before the trial court to prove that the said document was really the document he prepared and that the signature below the said document is his own signature. Neither did petitioner present an eyewitness to the execution of the questioned document who could possibly identify it. Absent this proof, we cannot rule on the authenticity of the contents of the certification. Moreover, as we previously emphasized, there was no material alteration on the check, the change of its serial number not being substantial to its negotiability. W/N the drawee bank may still recover the value of the check from the collecting bank even if it failed to return the check within the twenty-four (24) hour clearing period because the check was tampered. SC: Since there is no material alteration in the check, petitioner has no right to dishonor it and return it to PBCom, the same being in all respects negotiable.
American Bank v. Macondray & Co. Facts: Bill of exchange (in the form alleged by the plaintiff) reads: MANILA, P. I., August 12, 1902.
$300.00 At sight pay to my order three hundred dollars, value received, and charge to my account. V. S. WOLFF.
To F. H. TAYLOR & Co., Louisville, Kentucky. No ................................ [Indorsements.] V. S. Wolff. The signature is O. K. payment guaranteed. Protest, demand, and notice of nonpayment waived. Macondray & Company. Pay to First National Bank of San Francisco, or order. American Bank, Manila, P. I. H. B. Mulford, cashier. Pay to 3rd National Bank or order. The First National Bank of San Francisco. James K. Lynch, cashier. This alleged bill of exchange, in the alleged form as it appears above was sent to the correspondent of the said American Bank in the United States for payment, which payment was not made for the reasons which appear in the protest made by a notary public in the United States.
American Bank (plaintiff) claims the right to recover from Wolff the amount of said bill of exchange, together with the expenses incurred by the protest, upon the theory that the Macondray (defendant) guaranteed the payment of said bill of exchange. The defendant, by its representative, Atherton Macondray, testified that he did not intend to guarantee the payment of said bill of exchange; that he only certified that the signature, V. S. Wolff, to said bill of exchange was genuine, and that the statement which appears in the above alleged indorsement "Payment guaranteed. Protest, demand, and notice of nonpayment waived" was not written on said indorsement at the time he signed the firm name of Macondray & Co. Issue: W/N Macondray & Co. is liable upon said bill of exchange as an indorser. Ruling: An examination of the alleged indorsement of Macondray & Co. which appeared upon the said bill of exchange at the time of the trial, and the indorsement of said company at the time of the trial, and the indorsement of said company at the time of the protest of said bill of exchange, shows beyond peradventure of doubt that the contention of the defendant is true, and that part of the indorsement which says "Payment guaranteed. Protest, demand, and notice of nonpayment waived" was added by some person after the signature of the defendant, Macondray & Co., and after the protest of said bill The liability of an indorser of a bill of exchange, after due protest and notice of nonpayment and dishonor, is the same as that of the original obligors on such a contract, and any material alteration in the terms of this contract by the holder of the same, without the consent of the obligor, will relieve such obligor from all liability thereon. Notwithstanding that the defendant is relieved from liability by reason of this material alteration in his indorsement, we hold that his original indorsement created no liability whatever. The original indorsement by the defendant was for the purpose only of assuring the plaintiff that the signature of V. S. Wolff, as attached to the original bill of exchange, was genuine — that is to say, that the person who signed the said bill of exchange was in fact V. S. Wolff, the person whom he represented himself to be. It was an indorsement for identification of the person only, and not for the purpose of incurring any liability as to the payment of such bill of exchange.
Montinola vs PNB Ramos was working for one Ubaldo Daya, the Provincial Treasurer of Misamis Oriental and the ex officio agent of the PNB. Ramos was there after appointed as a disbursing officer of the US Forces of the Far East (USAFFE). The latter then proceeded to Lanao to procure cash advance from Encarnacion (provincial treasurer of Lanao) for the use of USAFFE. Encarnacion did not have enough funds, so the latter issued a check worth 500,000. Ramos now went to Daya to encash the said check, but the latter did not have enough funds as well. Daya now issued in favor of Ramos check worth 100,000 against the account of PNB. Ramos however did not manage to encash the same due to the invasion of the Japanese army which detained him as a prisoner of war. After his release a year after, Ramos allegedly sold the check and indorsed the same in favor of Montinola. He sold 30,000 pesos of the 100,000 peso check. The indorsement made by Ramos was only that he was assigning P30000 with an instruction to the bank to pay P30000 to Montinola and to deposit the balance to Ramos's credit.
This writing was however mysteriously obliterated and the check partially mutilated. The indorsement made by Ramos was replaced by an indorsement stating that the whole amount of the check may be withdrawn and a thereon, to this effect “Daya, Agent of PNB‖. The check was overdue for 2 ½ years when it was negotiated. Montinola filed an action against the PNB to collect the whole amount of the check. Montinola argued it was mutilated due to an altercation between him and Ramos when the latter demanded the return of the check. He further contended that the annotation in the check, purporting that Daya is an agent of PNB, hence PNB is the drawer which is liable on the check. WON PNB is liable on the check. (1.) The insertion of the words "Agent, Phil. National Bank" which converts the bank from a mere drawee to a drawer and therefore changes its liability. Under sec. 124 of the NIL, such constitutes a material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument. The check was also illegally indorsed. The check was issued to Ramos not as a private person but as the disbursing officer of the USAFFE. Therefore, he had no right to indorse it personally to plaintiff. It was negotiated in breach of trust, hence he transferred nothing to the plaintiff. The check was not also legally negotiated on account that it transferred merely a portion of the amount thereof. Under sec 32 of the NIL, an indorsement must be an indorsement of the entire instrument. An indorsement which transfers to the indorsee a part of the amount payable (as in this case) does not operate as a negotiation of the instrument. Montinola may therefore not be regarded as an indorsee. At most he may be regarded as a mere assignee of the P30,000 sold to him by Ramos, in which case, as such assignee, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos. As already stated, as a mere assignee Montinola is subject to all the defenses available against assignor Ramos. And, Ramos had he retained the check may not now collect its value because it had been issued to him as disbursing officer. State Investment House vs CA Nora Moulic issued 2 post dated Equitable PCI Bank checks in favor of Corazon Victoriano. Moulic received from Victoriano several pieces of jewelries which the latter would sell for a commission. The checks was to serve as a security for the jewelries given by Victoriano to Moulic. Moulic returned the jewelries when she failed to sell the same. However, Victoriano negotiated the said checks in favor of herein petitioner State Investment House. Moulic, upon discovering that the checks were negotiated, she withdrawn the said amount from the drawee bank. The petitioner sought to collect the amount of the check, but dishonored upon presentment. Hence, the petitioner sued Moulic for the amount of the check. Moulic alleged that she cannot be held liable thereon on account that because the jewelry was never sold and the checks were negotiated without her knowledge and consent. The trial court dismissed the complaint.
Upon appeal of the petitioner, the CA affirmed the decision of the RTC, holding that the Notice of Dishonor by the petitioner was belatedly made, and that the jewelries were not sold, hence the checks ceased to served their purpose as security. The petitioner appealed to the SC. WON the checks had been discharged upon failing to sell the jewelries. (1.) No, the checks are still valid. The purpose of the issuance of the checks, being securities for the said jewelries, cannot amount to the discharge thereof. The only grounds for the discharge of instruments are enunciated under sec 119 of the NIL, to wit; (a) By payment in due course by or on behalf of the principal debtor; (b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation; (c) By the intentional cancellation thereof by the holder; (d) By any other act which will discharge a simple contract for the payment of money; (e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right.
Moulic‘s possible remedies are under (c) and (d). However, intentional cancellation under (c) contemplates destruction by tearing, burning or writing the words ―cancelled‖ BY THE HOLDER. In this case, Moulic was not a holder. Discharge under paragraph (d) are determined by other existing legislations. Under Art. 1231 of the Civil Code, it enumerates the modes of extinguishing obligations. Again, none of the modes outlined therein is applicable in the instant case. Sec. 119 contemplates of a situation where the holder of the instrument is the creditor while its drawer is the debtor. In the present action, the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time the jewelry was returned. (2.) Notice of dishonor is not needed to be served by the petitioner on account that Moulic was already aware that the said checks will be dishonored on account that she withdrew the amount on the drawee bank. She was the cause of the dishonor under sec 114.
Metropol Financing vs Sambok Motors One Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd for a certain amount, payable in 12 equal installments. It is provided therein that default in a single installment payment renders the not due and demandable in its full amount.
Then after, the respondent Sambok Motors Company, a sister company of Ng Sambok Sons Motors Co., Ltd., being under the same management, negotiated the note in favor of the petitioner Metropol Financing. The respondent indorsed the note in favor of plaintiff with the following indorsement, to wit; ―Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse‖; Notice of Demand; Dishonor; Protest; and Presentment are hereby waived.
Subsequently, Villaruel defaulted in payment, causing the plaintiff to demand full payment thereof. The demand was unheeded, causing then the respondent to notify the respondent Sambok that the instrument was dishonored and thereby making demand for payment. Metropol instituted a case for collection of sum of money against Sambok. The latter contended that it cannot be held liable on the note before its co-defendant Villaruel is declared insolvent. The trial court held in favor of the petitioner and ordered the respondent to pay the said amount. Hence, the recourse of Sambok with the SC, contending that it is a qualified indorser whose liability to the 4 warranties under sec. 65, hence it cannot be held liable if the person primarily fails to pay. It further argued that it is a qualified indorser on account of the qualified indorsement on the note, referring to ―with recourse‖. WON the respondent is a qualified indorser. (1.) No, the respondent is not a qualified indorser, hence he can be held liable to pay as a person who is secondarily liable thereto. A qualified indorsement is one which limits the liability of the indorser. Such may be adduced with the words ―no recourse/sans recourse. In the case at bar, the respondent did the opposite and indorsed the words ―with recourse‖, with the corresponding waivers. (2.) By indorsing the note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable. A person secondarily liable as a general indorser undertakes that if upon presentment the instrument be dishonored, with the necessary proceedings on dishonor be undertaken, he shall pay the amount due to the holder.
Lopez vs People The accused Lopez was charged with the crime of estafa, par. 2(d), through false pretenses executed simultaneously with fraud. The accused issued a check in favor of the complainant, knowing for a fact that the account against which the check will drawn from is already closed even before the transaction.
The trial court convicted the accused of the crime. The accused now sought recourse from the CA contending that the complainant payee knew that the accused‘s account was already closed, hence debunking the finding of deceit. The CA affirmed the lower court‘s decision, hence the appeal of the accused with the SC. He now contends with the court that the trial court erred in not applying the pertinent provisions of the NIL in the case at bar, such that he is not liable thereon on account that the payee did not give him a notice of dishonor. WON the service of notice of dishonor is a controlling element in the prosecution of estafa. (1.) No, notice of dishonor is not necessary for the crime of estafa par 2(d) to be committed. Under the said provision, estafa is committed through the following acts, to wit; (1) the offender has postdated or issued a check in payment of an obligation contracted at the time of the postdating or issuance; (2) at the time of postdating or issuance of said check, the offender has no funds in the bank or the funds deposited are not sufficient to cover the amount of the check; and (3) the payee has been defrauded. The drawer of the dishonored check is given three days from receipt of the notice of dishonor to cover the amount of the check, otherwise, a prima facie presumption of deceit arises. (2.) Under the NIL, sec 114(d) provides that ―Notice of dishonor is not needed to be made to the drawer in the following cases… d. where the drawer has no right to expect or require the drawee to honor the check. The respondent has no right to require the drawee to honor such on account that he already knew even before the transaction in issue that his account with the drawee bank is already closed.
Moran vs CA The petitioners spouses Moran owned a gasoline station in Wack Wack. They regularly purchase fuel in bulk from Petrophil Corp. The petitioners also maintained three joint accounts with respondent Citytrust Banking Corporation.
As a special privilege to the Morans, a pre-authorized transfer (PAT) agreement was entered into by the parties, where the bank can transfer funds from one account to the other without authorization from the spouses. The agreement stipulated the following; (1) xxx ―the checks would be honored if the savings account has sufficient balance to cover the overdraft; xxx (2) that the bank has the right to refuse to effect transfer of funds at their sole and absolute option and discretion; (3) Citytrust is free and harmless for any and all omissions or oversight in executing this automatic transfer of funds.‖
The petitioners drew 2 checks payable to Petrophil Corporation for several purchases. On Dec. 14 1983, when Petrophil deposited the said checks, the bank dishonored the same. Consequently, the petitioner went to the bank the day after (Dec. 15, 1983) to replenish the accounts for payment to Petrophil. He then learned that the bank dishonored the checks issued to Petrophil. As a result, Petrophil refused to deliver the orders of petitioner. Due to this, the petitioners did not have any recourse but to halt business operations. The petitioners immediately went to the bank and demanded explanation for the dishonor. The bank manager admitted that the dishonor was due to operational errors. The latter then proceeded to replace the dishonored checks and delivered to Petrophil new ones for payment on behalf of the petitioners. Subsequently, the petitioners wrote to the respondent claiming moral and actual damages for the inadvertent dishonor of the check. The spouses then filed a complaint for damages when the bank did not heed to their demand. The trial court dismissed the complaint. The CA affirmed such dismissal, hence the recourse of the petitioners with the SC. WON the petitioners had sufficient funds in their accounts when the bank dishonored the checks in question. (1.) No, the accounts did not have sufficient balance when the checks were presented. When PNB presented the checks for collection on Dec. 14, the available balance on the account was only P26,104.30 while the other one had no available balance. It was only on December 15 that the necessary funds were deposited, which unfortunately was too late to prevent the dishonor of the checks. The bank determined the sufficiency of the account on Dec. 14, although the actual date of the processing of the checks was on Dec 15. (2.) Conversely, a bank is not liable for its refusal to pay a check on account of insufficient funds, notwithstanding the fact that a deposit may be made later in the day. Before a bank depositor may maintain a suit to recover a specific amount from his bank, he must first show that he had on deposit sufficient funds to meet his demand.
PNB vs Quimpo Gozon was a depositor of the petitioner PNB. Gozon proceeded to the bank to transact business; he was accompanied by his friend Santos. While waiting in the car, Santos took a check from the Gozon‘s
checkbook which was left in the car, filled it up for the amount of P5,000, forged Gozon‘s signature, and encashed it on the same day. Gozon learned about the transaction upon receipt of the bank‘s statement of account, and requested the bank to recredit the amount to his account. The bank refused. Hence, the present action to recover the amount on the forged check. The trial court held in favor of Gozon, ordering PND to recredit the amount. The petitioner bank sought recourse with the SC. The bank argued that the proximate cause of the loss is imputable to Gozon‘s negligence in reposing trust to Santos who turns out to be a fraud. WON the bank is liable to recredit the amount of the forged check. (1.) Yes, the bank is liable to recredit the said amount. The bank is duty – bound to ascertain with reasonable business prudence the genuineness of the signature of the drawer on the check being encashed. A bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds. In the present case, the bank fell short of its duty to ascertain the genuiness of the Gozon‘s signature. As proven by evidence, the difference between Gozon‘s signature which the bank has a specimen of and the forgery was very palpable. (2.) Gozon‘s act in leaving his checkbook in the car, where his trusted friend remained in, cannot be considered negligence sufficient to excuse the bank from its own negligence. The bank bears the loss.
Republic vs BPI Corporacion De los Padres had acquired 24 treasury warrants. It acquired such for the accommodation of its former trusted employee, Carranza. The latter requested the corporation to cash the warrants as it is
difficult for him to directly transact with the government, and that his wife expected a sort of commission for the encashment. The corporation acceded to the request, provided that the warrants are cleared first by the treasurer and that the amount will be deposited to the account of the Corporacion with BPI before paying for it. The warrants were then cleared and paid to BPI, which then credited the amount to the account of the Corporacion. However, at different periods of time, the treasurer returned 24 warrants to the Central Bank on the ground that they have forged. Consequently, treasurer with the Central Bank demanded BPI to refund the amount of the forged treasury warrants, but such was unheeded. The government instituted the suit against BPI for the refund of the amount it disbursed by reason of the forged treasury warrants. The trial court dismissed the complaint, in view of the 24 – hour clearing rule under circular no. 9 of the central bank. Hence the recourse of the government with the SC. The government argued that it is not bound by the said rule on account that 1. the treasury is not a bank, and; 2. it is impossible for the treasury to very the genuiness and clear every warrant that comes to their possession within a period of 24 hours. WON the treasurer is guilty of negligence in honoring the forged warrants. (1.) The treasury is subject to the 24 hour clearing rule. The treasury is a member of the Clearing Office. It is clearly shown that the former "has agreed to clear its clearable items through" the latter "subject to the rules and regulations of the Central Bank.". It is also shown by evidence that the treasury has the capacity to clear an enormous number of warrants every day. (2.) The treasurer if guilty of negligence. The irregularity of said warrants was apparent the face. The bank had been informed of the irregularity only after the warrants had been cleared and honored, when the Treasury gave notice of the forgeries adverted to above. As a consequence, the loss of the amounts thereof is mainly imputable to acts and omissions of the Treasury. The treasury cleared the warrants and paid the amounts to the bank, which in turn credited the same to the account of the Corporacion. The treasury had not only been negligent, but also induced the bank to pay the amounts thereof to the Corporacion. Furthermore the warrants were valued for more than the authority of the treasurer to approve.
HSBC vs People‘s Bank and Trust Company PLDT drew a check on HSBC with the latter being the payee as well. The check was sent by mail to the payee. However, the check fell into the hands of Changco who erased the payee‘s name on the instrument
and replaced his own name therein as payee. Changco opened an account with the respondent bank and deposited the said check with the former. The People‘s Bank stamped on the check ―all prior indorsements guaranteed‖. The checks were cleared by HSBC, and the amount was deposited to Chanco‘s account. Upon discovery of the forgery, HSBC demanded from the collecting bank People‘s bank for reimbursement. HSBC however did not heed such demand. HSBC filed an action for reimbursement, arguing that the checks were altered and that the respondent is liable on account of its stamp ―all prior indorsements guaranteed‖. The complaint was dismissed, with the lower court holding that by virtue of Central Bank circular providing for 24 hour clearing period, the fact that plaintiff Bank allowed 27 days to elapse after clearing before notifying defendant Bank as to such alteration is conclusively negligence on the part of HSBC. HSBC sought recourse form the SC, arguing that the respondent guaranteed the genuiness of all prior indorsements by stamping on the said checks, hence they are liable for the loss. WON HSBC cannot recover from the People‘s Bank due to negligence.
(1.) No, HSBC cannot recover the amounts on the check. The 24 hour regulation of the Central Bank that requires after a clearing, that all cleared items must be returned not later than 3:00 PM of the following business day. Since HSBC only advised the Peoples Bank as to the alteration 27 days after clearing, reimbursement is now too late. Its failure to call the attention of the respondent as to such alteration until after the lapse of 27 days negates whatever right it might have had against the respondent. (2.) The respondent is not liable on its indorsement. The indorsement must be read together with the 24hour regulation on clearing. Once that 24-hour period is over, the liability on the indorsement has ceased. (3.) The 24 hour clearing rule is not only applicable to forged checks but also to altered checks. All items cleared at 11:00 o’clock a.m. shall be returned not later than 2:00 o’clock p.m. on the same day and all items cleared at 3:00 o’clock p.m. shall be returned not later than 8:30 a.m. of the following business day, except for items cleared on Saturday which may be returned not later than 8:30 of the following day.
Metropolitan Bank vs First National City Bank A check was drawn by Juaquin Cunanan and Co. on the respondent FNCB. Such was deposited with the petitioner Metropolitan Bank by one Salvador Sales who recently opened an account with the latter. Upon
receipt of the check, Metropolitan stamped on the check ―all prior indorsement / lack of indorsement guaranteed‖, and sent the same for clearing. After being cleared, the amount was credited to Sales‘ account, with the latter withdrawing the amount thereon. Subsequently, FNCB returned the check to the drawer Cunanan and Co. after (9) from clearing. The latte notified the company that the check was altered, such that the original amount of P50 was raised to P50,000, and that the words ―CASH‖ was superimposed upon the name of the payee, Manila Polo Club. FNCB demanded Metropolitan to reimburse the P50,000, but such demand was unheeded. Hence the suit by the respondent against Metropolitan for reimbursement. The trial court held in favor of the respondent and ordered metropolitan to pay the said amount. Metropolitan sought recourse form the SC, arguing that FNCB is liable on account that it did not comply with the 24 hour clearing rule by the Central Bank. WON which bank is liable for payment of the altered check. Is it the drawee bank (FNCB) or the collecting bank (Metropolitan) (1.) FNCB bears the loss due to its non compliance with the 24 hour clearing rule. The check was not returned to Metropolitan in accordance with the 24-hour clearing house period, but was cleared by FNCB. FNCB notified Metropolitan of the alteration only after the lapse of (9) days. With this, FNCB cannot take advantage of whatever right it might have had against Metro Bank. Its remedy lies not against Metro Bank, but against the party responsible for causing the alteration. (2.) The indorsement by metropolitan is of no moment. Such an indorsement must be read together with the 24-hour regulation on clearing. Once that 24- hour period is over, the liability on such an indorsement has ceased. All items cleared at 11:00 o’clock a.m. shall be returned not later than 2:00 o’clock p.m. on the same day and all items cleared at 3:00 o’clock p.m. shall be returned not later than 8:30 a.m. of the following business day, except for items cleared on Saturday which may be returned not later than 8:30 of the following day.
REPUBLIC BANK V. CA Facts: San Miguel Corporation – SMC
First National City Bank – FNCB Republic Bank – RB
SMC drew a dividend check on its account with FNCB in favor of Delgado, a stockholder, for the amount of Php240 The check was fraudulently altered: from Php 240 to Php 9,240 March 14, 1966 – Delgado indorsed and deposited the check in his account with RB Republic endorsed the check to FNCB by stamping on the back of the check ―all prior and/or lack of indorsement guaranteed‖ and presented it to FNCB for payment through the Central Bank Clearing House Check was cleared. FNCB paid RB Php 9,240 April 19, 1966 – SMC informed FNCB that the check was forged. FNCB returned the amount to SMC May 19, 1966 – FNCB informed RB in writing about the forgery. However, by that time, Delgado already withdrew the amount August 15, 1966 – FNCB demanded that RB refund the P9,240 on the basis of the latter‘s endorsement and guaranty. RB refused claiming there was delay in giving it notice of the alteration
Issue: W/N RB should refund the said amount Ruling: NO. The 24-hour clearing house rule embodied in Section 4(c) of Central Bank Circular No. 9, as amended, provides: ―Items which should be returned for any reason whatsoever shall be returned directly to the bank, institution or entity from which the item was received. For this purpose, the Receipt for Returned Checks (Cash Form No. 9) should be used. The original and duplicate copies of said Receipt shall be given to the Bank, institution or entity which returned the items and the triplicate copy should be retained by the bank, institution or entity whose demand is being returned. At the following clearing, the original of the Receipt for Returned Checks shall be presented through the Clearing Office as a demand against the bank, institution or entity whose item has been returned. Nothing in this section shall prevent the returned items from being settled by direct reimbursement to the bank, institution or entity returning the items. All items cleared at 11:00 o‘clock A.M. shall be returned not later than 2:00 o‘clock P.M. on the same day and all items cleared at 3:00 o‘clock P.M. shall be returned not later than 8:30 A.M. of the following business day except for items cleared on Saturday which may be returned not later than 8:30 A.M. of the following day.‖
The rule mandates banks that after a clearing, all cleared items must be returned not later than 3:00 PM of the following business day. It is true that when an endorsement is forged, the collecting bank or last endorser, as a general rule, bears the loss. But the unqualified endorsement of the collecting bank on the check should be read together with the 24-hour regulation on clearing house operation. Thus, when the drawee bank (FNCB) failed to return a forged or altered check to the collecting bank (RB) within the 24hour clearing period, the collecting bank is absolved from liability.
BPI V. CA Facts:
Eligia G. Fernando had a money market placement with BPI as evidenced by a promissory note with a maturity date of November 11, 1981 and a maturity value of P2,462,243.19
Someone who presented herself as Fernando called BPI Money Market Department wanting to preterminate the said placement.
Although not familiar with the voice of the real Eligia G. Fernando, the Dealer Trainee "made certain" that the caller was the real Eligia G. Fernando by "verifying" that the details the caller gave about the placement tallied with the details in "the ledger/folder" of the account. The Dealer Trainee knew the real Eligia G. Fernando to be the Treasurer of Philippine American Life Insurance Company (Philamlife) since he was handling Philamlife's corporate money market account. But neither the dealer trainee nor the officer who originally handled Fernando's account, nor anybody else at BPI, bothered to call up Fernando at her Philamlife office to verify the request for pretermination.
the caller asked that two checks be issued for the proceeds, one for P1,800,000.00 and the second for the balance. The said caller instructed that the checks would be picked up by her niece.
The dispatcher gave the checks to the person who said she was Fernando‘s niece. The dispatcher however did not get the promissory note evidencing the placement
The person presenting herself to be Fernando opened an account with China Banking Corporation (CBC), deposited the checks, and then withdrew said checks.
The real Fernando went to BPI for her placement and denied having it preterminated. She executed an affidavit stating that while she was the payee of the two checks in controversy, she never received nor endorsed them and that her purported signature on the back of the checks was not hers but forged. With her surrender of the original of the promissory note (No. 35623 with maturity value of P2,462,243.19) evidencing the placement which matured that day, BPI issued her a new promissory note
BPI returned the two checks in controversy to CBC for the reason "Payee's endorsement forged". CBC, in turn, returned the checks for reason "Beyond Clearing Time"
(note: the person who impersonated Fernando was Susan Lopez San Juan)
Issues: When a bank (in this case CBC) presents checks for clearing and payment, what is the extent of the bank's warranty of the validity of all prior endorsements stamped at the back of the checks? In the event that the payee's signature is forged, may the drawer/drawee bank (in this case BPI) claim reimbursement from the collecting bank [CBC] which earlier paid the proceeds of the checks after the same checks were cleared by petitioner BPI through the Philippine Clearing House Corp.? Ruling: In presenting the checks for clearing and for payment, the defendant made an express guarantee on the validity of "all prior endorsements." Thus, stamped at the back of the checks are the defendant's clear warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such warranty, plaintiff would not have paid on the checks.
In the present petition the payee's names in the two (2) subject checks were forged. Following the general rule, the checks are "wholly inoperative" and of no effect. However, the underlying circumstances of the case show that the general rule on forgery is not applicable. The issue as to who between the parties should bear the loss in the payment of the forged checks necessities the determination of the rights and liabilities of the parties involved in the controversy in relation to the forged checks. The records show that petitioner BPI as drawee bank and respondent CBC as representing or collecting bank were both negligent resulting in the encashment of the forged checks. The acts of the employees of BPI were tainted with more negligence if not criminal than the acts of CBC. First, the act of disclosing information about the money market placement over the phone is a violation of the General Banking Law. Second, there was failure on the bank‘s part to even compare the signatures during the termination of the placement, opening of a new account with the specimen signature in file of Fernando. And third, there was failure to ask the surrender of the promissory note evidencing the placement.
The acts of BPI employees was the proximate cause to the loss. Nevertheless, the negligence of the employees of CBC should be taken also into consideration. They closed their eyes to the suspicious large amount withdrawals made over the counter as well as the opening of the account. Considering the comparative negligence of the two (2) banks, we rule that the demands of substantial justice are satisfied by allocating the loss of P2,413,215.16 and the costs of the arbitration proceeding in the amount of P7,250.00 and the cost of litigation on a 60-40 ratio.
PHILIPPINE BANK OF COMMERCE V. COURT OF APPEALS Facts: Rommel Marketing Corp – RMC Philippine Bank of Commerce – PBC ( now absorbed by Philippine Commercial International Bank)
RMC maintained 2 accounts with RMC Pasig Branch
In the ordinary and usual course of banking operations, current account deposits are accepted by the bank on the basis of deposit slips prepared and signed by the depositor, or the latter's agent or representative, who indicates therein the current account number to which the deposit is to be credited, the name of the depositor or current account holder, the date of the deposit, and the
amount of the deposit either in cash or checks. The deposit slip has an upper portion or stub, which is detached and given to the depositor or his agent; the lower portion is retained by the bank. In some instances, however, the deposit slips are prepared in duplicate by the depositor. The original of the deposit slip is retained by the bank, while the duplicate copy is returned or given to the depositor.
Petitioner Romeo Lipana claims to have entrusted RMC funds in the form of cash totalling P304,979.74 to his secretary, Irene Yabut, for the purpose of depositing said funds in the current accounts of RMC with PBC.
It turned out, however, that these deposits, on all occasions (for a span of more than 1 year), were not credited to RMC's account but were instead deposited to Yabut's husband, Bienvenido Cotas who likewise maintains an account with the same bank.
During this period, petitioner bank had, however, been regularly furnishing private respondent with monthly statements showing its current accounts balances. Unfortunately, it had never been the practice of Romeo Lipana to check these monthly statements of account reposing complete trust and confidence on petitioner bank.
Irene Yabut's modus operandi: She would accomplish two (2) copies of the deposit slip, an original and a duplicate. The original showed the name of her husband as depositor and his current account number. On the duplicate copy was written the account number of her husband but the name of the account holder was left blank.
PBC's teller, Azucena Mabayad, would, however, validate and stamp both the original and the duplicate of these deposit slips retaining only the original copy despite the lack of information on the duplicate slip. The second copy was kept by Irene Yabut allegedly for record purposes.
After validation, Yabut would then fill up the name of RMC in the space left blank in the duplicate copy and change the account number written thereon, which is that of her husband's, and make it appear to be RMC's account number
Upon discovery of the loss of its funds, RMC demanded from petitioner bank the return of its money, but as its demand went unheeded, it filed a collection suit
Issue: What is the proximate cause of the loss( P304,979.74) suffered by the private respondent RMC -petitioner bank's negligence or that of private respondent's? Ruling: There are three elements of a quasi-delict: (a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the connection of cause and effect between the fault or negligence of the defendant and the damages incurred by the plaintiff In the case at bench, there is no dispute as to the damage suffered by RMC in the amount of P304, 979.74.
Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable man would do Applying the above test, it appears that the bank's teller, Ms. Azucena Mabayad, was negligent in validating, officially stamping and signing all the deposit slips prepared and presented by Ms. Yabut, despite the glaring fact that the duplicate copy was not completely accomplished contrary to the selfimposed procedure of the bank with respect to the proper validation of deposit slips, original or duplicate, as testified to by Ms. Mabayad herself It was this negligence of Ms. Azucena Mabayad, coupled by the negligence of the petitioner bank in the selection and supervision of its bank teller, which was the proximate cause of the loss suffered by the private respondent, and not the latter's act of entrusting cash to a dishonest employee, as insisted by the petitioners. Under the doctrine of "last clear chance" (also referred to, at times as "supervening negligence" or as "discovered peril"), petitioner bank was indeed the culpable party. This doctrine, in essence, states that where both parties are negligent, but the negligent act of one is appreciably later in time than that of the other, or when it is impossible to determine whose fault or negligence should be attributed to the incident, the one who had the last clear opportunity to avoid the impending harm and failed to do so is chargeable with the consequences thereof Here, assuming that private respondent RMC was negligent in entrusting cash to a dishonest employee, thus providing the latter with the opportunity to defraud the company, as advanced by the petitioner, yet it cannot be denied that the petitioner bank, thru its teller, had the last clear opportunity to avert the injury incurred by its client, simply by faithfully observing their self-imposed validation procedure. In the case of banks, however, the degree of diligence required is more than that of a good father of a family. Considering the fiduciary nature of their relationship with their depositors, banks are duty bound to treat the accounts of their clients with the highest degree of care. While it is true that had private respondent checked the monthly statements of account sent by the petitioner bank to RMC, the latter would have discovered the loss early on, such cannot be used by the petitioners to escape liability. This omission on the part of the private respondent does not change the fact that were it not for the wanton and reckless negligence of the petitioners' employee in validating the incomplete duplicate deposit slips presented by Ms. Irene Yabut, the loss would not have occurred In view of this, we believe that the demands of substantial justice are satisfied by allocating the damage on a 60-40 ratio. Dissenting Opinion by Justice Padilla: It seems that an innocent bank teller is being unduly burdened with what should fall on Ms. Irene Yabut, RMC's own employee, who should have been charged with estafa or estafa through falsification of private document.
Since Yabut deposited money in cash, the usual bank procedure then was for the teller to count whether the cash deposit tallied with the amount written down by the depositor in the deposit slip. If it did, then the teller proceeded to verify whether the current account number matched with the current account name as written in the deposit slip. In the earlier days before the age of full computerization, a bank normally maintained a ledger which served as a repository of accounts to which debits and credits resulting from transactions with the bank were posted from books of original entry. Thus, it was only after the transaction was posted in the ledger that the teller proceeded to machine validate the deposit slip and then affix his signature or initial to serve as proof of the completed transaction. It should be noted that the teller validated the depositor's stub in the upper portion and the bank copy on the lower portion on both the original and duplicate copies of the deposit slips presented by Yabut. The teller, however, detached the validated depositor's stub on the original deposit slip and allowed Yabut to retain the whole validated duplicate deposit slip that bore the same account number as the original deposit slip, but with the account name purposely left blank by Yabut, on the assumption that it would serve no other purpose but for a personal record to complement the original validated depositor's stub. Thus, when Yabut wrote the name of RMC on the blank account name on the validated duplicate copy of the deposit slip, tampered with its account number, and superimposed RMC's account number, said act only served to cover-up the loss already caused by her to RMC, or after the deposit slip was validated by the teller in favor of Yabut's husband. It is logical, therefore, to conclude that the legal or proximate cause of RMC's loss was when Yabut, its employee, deposited the money of RMC in her husband's name and account number instead of that of RMC, the rightful owner of such deposited funds. Precisely, it was the criminal act of Yabut that directly caused damage to RMC, her employer, not the validation of the deposit slip by the teller as the deposit slip was made out by Yabut in her husband s name and to his account. Even if the bank teller had required Yabut to completely fill up the duplicate deposit slip, the original deposit slip would nonetheless still be validated under the account of Yabut's husband. There was no way for PBC's bank tellers to reasonably foresee that Yabut might or would use the duplicate deposit slip to cover up her crime. Coming now to the doctrine of "last clear chance," it is my considered view that the doctrine assumes that the negligence of the defendant was subsequent to the negligence of the plaintiff and the same must be the proximate cause of the injury. In short, there must be a last and a clear chance, not a last possible chance, to avoid the accident or injury. It must have been a chance as would have enabled a reasonably prudent man in like position to have acted effectively to avoid the injury and the resulting damage to himself. In the case at bar, the bank was not remiss in its duty of sending monthly bank statements to private respondent RMC so that any error or discrepancy in the entries therein could be brought to the bank's attention at the earliest opportunity. Private respondent failed to examine these bank statements not because it was prevented by some cause in not doing so, but because it was purposely negligent as it admitted that it does not normally check bank statements given by banks.
It was private respondent who had the last and clear chance to prevent any further misappropriation by Yabut had it only reviewed the status of its current accounts on the bank statements sent to it monthly or regularly.
MANILA LIGHTER TRANSPORTATION V. CA Facts:
49 checks were issued by customers of the Manila Lighter in payment of brokerage/lighterage services and were all delivered, without petitioner's knowledge, to its collector, Augusto Perez.
The checks as thus endorsed were negotiated by Wilfredo Lagamon, accountant of Manila Lighter and relative of Luis Gaskell with Cao Pek and Co., an electronic store, whose treasurer is Ko Lit. Most of the checks, with a total amount of P90,500.24, were deposited by Ko Lit in his account with China Banking Corp. Three checks with a total amount of P1,115.05 were deposited in the account of Cao Pek & Co. while one check for P2,735.19 was deposited in the accounts of Lu Siu Po, manager of Cao Pek & Co.
Proceeds were later withdrawn
Respondent Bank denied liability for the petitioner's loss which was due to its own negligence. It alleged that petitioner is estopped from denying its collector's authority to receive the checks from the drawers/customers; that petitioner failed to give defendant Bank and the drawee Banks notice of the alleged forged or unauthorized indorsements within a reasonable time; and that its loss was occasioned by its own failure to observe the proper degree of diligence in the supervision of its employees, particularly its collector, Augusta Perez.
Issue:
Who shall bear the loss? Ruling: Since the petitioner was not a client of China Banking Corp, i.e., did not maintain an account in said Bank, the latter had no way of ascertaining the authenticity of its indorsements on the checks which were deposited in the accounts of the third-party defendants in said Bank. Respondent Bank was not negligent because, in accordance with banking practice, it caused the checks to pass through the clearing house before it allowed their proceeds to be withdrawn by the depositors (third-party defendants in the lower court).
WESTMONT BANK V. ONG Facts:
Ong maintained an account with Associated Banking Corp (now Westmont Bank)
Ong sold shares of stock through Island Securities Corp.
Island Securities Corp paid Ong through 2 Pacific Banking Corp. manager‘s checks. Both indicated Ong as payee
Before Ong could get hold of the checks, his friend Paciano Tanlimco got hold of them, forged Ong‘s signature and deposited these with petitioner, where Tanlimco was also a depositor. Even though Ong‘s specimen signature was on file, petitioner accepted and credited both checks to the account of Tanlimco, without verifying the ‗signature indorsements‘ appearing at the back thereof. Tanlimco then immediately withdrew the money
Instead of going straight to the bank to stop or question the payment, Ong first sought the help of Tanlimco‘s family reported the incident to the Central Bank to recover the amount. Both attempts are futile
About five (5) months from discovery of the fraud, Ong demanded in his complaint that petitioner pay the value of the two checks from the bank on whose gross negligence he imputed his loss.
The bank did not present evidence to the contrary, but simply contended that since plaintiff Ong claimed to have never received the originals of the two (2) checks in question from Island
Securities, much less to have authorized Tanlimco to receive the same, he never acquired ownership of these checks. Thus, he had no legal personality to sue as he is not a real party in interest. Petitioner argues, respondent cannot sue petitioner because under Section 51 of the Negotiable Instruments Law] it is only when a person becomes a holder of a negotiable instrument can he sue in his own name. Petitioner also cites Article 1249 of the Civil Code explaining that a check, even if it is a manager‘s check, is not legal tender. Hence, the creditor cannot be compelled to accept payment thru this means Issues: W/N respondent Ong has a cause of action against petitioner Westmont Bank; and W/N Ong is barred to recover the money from Westmont Bank due to laches. Ruling: Petitioner‘s claim that respondent has no cause of action against the bank is clearly misplaced. As defined, a cause of action is the act or omission by which a party violates a right of another. The essential elements of a cause of action are: (a) a legal right or rights of the plaintiff, (b) a correlative obligation of the defendant, and (c) an act or omission of the defendant in violation of said legal right. The complaint filed before the trial court expressly alleged respondent‘s right as payee of the manager‘s checks to receive the amount involved, petitioner‘s correlative duty as collecting bank to ensure that the amount gets to the rightful payee or his order, and a breach of that duty because of a blatant act of negligence on the part of petitioner which violated respondent‘s rights. Since the signature of the payee, in the case at bar, was forged to make it appear that he had made an indorsement in favor of the forger, such signature should be deemed as inoperative and ineffectual. Petitioner, as the collecting bank, grossly erred in making payment by virtue of said forged signature. The payee, herein respondent, should therefore be allowed to recover from the collecting bank. The collecting bank is liable to the payee and must bear the loss because it is its legal duty to ascertain that the payee‘s endorsement was genuine before cashing the check DOCTRINE OF DESIRABLE SHORT CUT—plaintiff uses one action to reach, by desirable short cut, the person who ought to be ultimately liable as among the innocent persons involved in the transaction. In other words, the payee ought to be allowed to recover directly from the collecting bank, regardless of whether the check was delivered to the payee or not. Laches may be defined as the failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier. In the case at bar, it cannot be said that respondent sat on his rights. He immediately acted after knowing of the forgery by proceeding to seek help from the Tanlimco family and later the Central Bank, to remedy the situation and recover his money from the forger, Paciano Tanlimco. Only after he had exhausted possibilities of settling the matter amicably with the family of Tanlimco and through the CB, about five months after the unlawful transaction took place, did he resort to making the demand upon the petitioner
and eventually before the court for recovery of the money value of the two checks. These acts cannot be construed as undue delay in or abandonment of the assertion of his rights.
Associated Bank vs CA Merle Reyes is engaged in the business of ready to wear garments. She was issued 6 crossed checks by her customers as payments for her services. The 6 crossed checks had their faces written the words ―payee‘s account only‖. When she proceeded to her clients for to pick up the checks, she was informed that the checks were deposited with the petitioner Associated Bank by a certain Rafael Sayson who encashed the same. With this, Reyes demanded refund from Associated Bank, contending that the checks are crossed checks and should have only be deposited with Reyes‘ account with Prudential Bank. Associated Bank argued that she does not have a cause of action against the bank and that she should have gone against the companies which drew the checks. Furthermore, the bank alleged that the checks were indorsed to Sayson by Reyes‘s husband, Eddie Reyes. The trial court held in favor of Reyes, and also did the CA upon appeal of the bank where it held that the crossed checks are for payee's account only; and that Reyes had clearly shown that she had never authorized anyone to deposit the said checks nor to encash the same; that the bank is in clear violation of the instruction attached to the crossed checks that such checks were to be paid exclusively to the payee‘s account. WON the petitioner is liable to reimburse the amount. (1.) Yes, the petitioner is liable for reimbursement. Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally on the left top portion of the checks. The six checks in the case at bar had been crossed and issued ―for payee‘s account only.‖ This signifies that the drawers (Reyes‘ clients) had intended the same for deposit only by the person indicated, to wit, Reyes. Crossed checks are subject to the following conditions, to wit; 1. that the check may not be encashed but only deposited in the bank; 2. that the check may be negotiated only once –– to one who has an account with a bank; 3. and that the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose. (2.) The allegation that the husband indorsed the check will not hold water. Associated Bank is still liable on account that the husband is not authorized to make indorsements. And even if the endorsements were forged, as alleged, Associated Bank would still be liable to Reyes for not verifying the endorser‘s authority. There is no substantial difference between an actual foreging of a name to a check as an endorsement by a person not authorized to make the signature.
Tan vs CA The petitioner Ramon Tan acquired a cashier‘s check from PCIB Puerto Princesa, payable to his order. He deposited the check to his account with RCBC. RCBC however erroneously sent the cashier‘s check for clearing, with the same being returned for being ―misrouted‖. Relying on the common knowledge that a cashier's check was as good as cash and the fact that the cashier's check was accepted, Tan issued two (2) personal checks, one in favor of one Go Lac, and other was for MS Development Trading Corporation. The said check was returned for insufficiency of funds (22) twenty-two days after the day the cashier's check was deposited. Tan filed a complaint against RCBC for damages due to the bounced checks. He alleged that his good repute with his business peers was besmirched due to the dishonor of the checks which was imputable to the negligence of RCBC. RCBC on the other hand contended that the ―misrouting‖ was due to the fault of Tan, arguing that Tan is guilty of negligence on account that the latter used the wrong deposit slip. (Tan used a local deposit slip instead of a regional deposit slip). The RTC ruled in favor of Tan. However, the decision was reversed upon appeal of RCBC with the CA. The CA held that the proximate cause of the loss was due to Tan‘s mistake in filling up the wrong deposit slip. Furthermore, RCBC was not remiss in its obligation to rectify the mistake by contacting Tan and his daughter. Lastly, the refusal of RCBC to credit the said amount to Tan‘s account is in compliance with Resolution 2202 of the monetary board which provides that ―no drawings should be made against uncollected deposits‖ and that immediate payment without awaiting for clearance of a cashiers check is discretionary to the bank. WON the dishonor was imputable to Tan‘s negligence in filling up the wrong slip. (1.) No, RCBC had been remiss with its duty to Tan. RCBC cannot raise as a defense that it is merely complying with the order of the Tan to have the cashier‘s check cleared, with the latter filling up a local check deposit. It is aware that there exists a patent mistake in filling up the wrong deposit slip. Bank transactions pass through an intensive system of counterchecks performed by bank personnel. With this, the teller should not have accepted the local deposit slip knowing for a fact that cashier‘s check was
clearly a regional check. Bank personnel are reposed trust by the depositors that they will render irreproachable service. (2.) A cashier's check is a primary obligation of the issuing bank and accepted in advance by its mere issuance. A cashier's check represents the bank‘s irreproachable promise to pay, committing in effect its total resources, integrity and honor behind the check. A cashier's check, in general use in the commercial world is, regarded substantially to be as good as the money which it represents. PCIB, by issuing the check created an unconditional credit in favor of any collecting bank. The exercise of discretion of RCBC should have taken in mind the gravity of the cashier‘s check, hence it should have allowed the credit of Tan‘s account. Allied banking vs Lim Sio Wan Lim Sio Wan deposited an amount with Allied Bank a money market placement for a term of 31 days. However, before the expiration of the said term, a person claiming to be Lim Sio Wan called Allied and requested for the pre-termination of the placement and ordered Allied to issue a manager‘s check representing the proceeds thereof. Impersonator notified Allied that one Deborah Santos would pick up the checks. Allied acceded to the order of the impersonator, but issued crossed checks ―for payee‘s account only‖. The manager‘s checks were deposited to the account of Filipinas Cement Corporation (FCC) with Metrobank. The Lim‘s signature as indorser was forged. It turns out, Santos was a money market trader of Producer‘s Bank. Santos handled the account of FCC. When the placement of FCC matured, Santos paid the check of Lim Sio Wan to FCC‘s account with Metrobank. The allied check was made as payment to FCC. Metrobank, upon accepting the check, stamped on the checks ―all prior indorsement / lack of indorsement guaranteed‖. When the check was presented to Allied, it immediately paid the amount without ascertaining the genuiness of Lim‘s signature. Lim sought to recover the amount from Allied, but to no avail. Hence the complaint filed by Lim against Allied. The trial court ruled in favor of Lim, ordering Allied to pay the amount. Upon appeal, the CA modified the decision, holding that Allied is liable partly for (60%), and that Metrobank is liable for the (40%). The petitioner appealed with the SC. WON Allied and Metrobank should be solely liable to Lim Sio Wan. (1.) Yes, they are both liable for their negligence. Producers Bank must be held liable to Allied and Metrobank for the amount of the check which Allied and Metrobank are adjudged to pay Lim Sio Wan based on a proportion of 60:40. Allied is negligent in issuing the manager's check and in transmitting it to Santos without even a written authorization by Lim. In fact, Allied did not even exert any earnest effort to ascertain that such order of pre – termination was that of Lim Sio Wan.
Allied's negligence must be considered as the proximate cause of the resulting loss. Metrobank is also liable as it indorsed the check without verifying the authenticity of Lim Sio Wan's indorsement and it accepted the checks despite the fact that it was cross-checked payable to payee's account only. (2.) [A] money market is a market dealing in standardized short-term credit instruments. In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. Lim Sio Wan, as creditor of the bank, is entitled to payment upon her request, upon maturity of the placement, or until the bank is released from its obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains unextinguished, especially due to the fact that Lim never authorized Santos to pre terminate nor withdraw the interest thereon. Far East Bank vs Gold Palace The respondent Gold Palace is a jewelry store, located in SM North Edsa. One Samuel Tagoe, a Malaysian, purchased from the respondent store several pieces of jewelry. Tagoe offered to pay through means of a Foreign Draft issued by United Overseas Bank (UOB), addressed to the Land Bank, and payable to the respondent shop. The proprietor of the shop deposited the draft with the petitioner Far East Bank. The latter withheld the release of the jewelries to Tagoe until the draft has been cleared. After a few days, the draft has been cleared and Gold Palace released to Tagoe the said jewelries. (Gold Palace issued to Tagoe a check as change) Far East (collecting bank) presented the draft to Land Bank (drawee bank), UOB‘s account with Land Bank was debited, and the account of the respondent with Far East Bank was debited. After 3 weeks, Land Bank informed Far East that the draft had been materially altered, the amount which was originally for P300 was altered to P380,000. Far East reimbursed the full amount to Land Bank. Then after, the latter debited a portion of the amount from the respondent‘s account without the latter‘s knowledge. Far East demanded Gold Palace to return the remaining balance, but was unheeded, hence the suit for recovery of sum of money. The trial court held in favor of Far East Bank, holding that Gold Palace is liable for its warranties as a general indorser. Upon appeal, the CA reversed the decision, holding that because of the failure of far East to undergo proceedings on protest of the foreign bill, Far East could not charge Gold Palace on its secondary liability as an indorser. The petitioner sough recourse from the SC. WON Gold Palace should be liable for the altered draft. (1.) No, Gold Palace is not liable. Land Bank accepted and paid the amount of the bill unconditionally. Under the NIL, it is provided that the ―acceptor, by accepting the instrument, engages that he will pay it according to the tenor of his acceptance.‖
Actual payment by the drawee is greater than acceptance, which is merely a promise in writing to pay. The payment of a check includes its acceptance. In the present case, Land Bank cannot repudiate anymore the payment it made to a holder in due course, which is Far East Bank. Land Bank should have verified the amount on the check with UOB before accepting and paying it. (2.) It is wrong for Far East to debit the account of Gold Palace. When Gold Palace deposited the check with Far East, it, became an agent of the Gold Palace for the collection of the amount in the draft
When payment is made by the drawee bank and the collecting bank being able to collect, it closed the transaction insofar as the drawee and the holder of the check are concerned, converted the check into a mere voucher which foreclosed the recovery by the drawee of the amount paid. The principal-agent relationship between the payee and the collecting bank had ceased. The collecting bank could not debit the respondent's account for the amount it refunded to the drawee bank.
Security Bank vs RCBC The petitioner Security Bank issued a manager‘s check for 8M, payable to "CASH," in favor of Guidon Construction and Development Corporation (GCDC). On the same day, the check was deposited by Continental Manufacturing Corporation (CMC) with RCBC which immediately honored the P8M check and allowed CMC to withdraw. Subsequently, GCDC issued a "Stop Payment Order" to Security Bank, claiming that the P 8M check was released to a 3rd party by mistake. Security Bank abided with the order, dishonored and returned the manager‘s check to RCBC. RCBC then filed a complaint with the trial court for damages against Security Bank. RCBC contended that the manager‘s check issued by Security Bank is substantially as good as the money it represents because by its peculiar character, its issuance has the effect of an advance acceptance. On the other hand, Security Bank argued that RCBC violated the Money Board Resolution no. 2202 of the Central Bank which provides that ―all banks to verify the genuineness and validity of all checks before allowing drawings of the same before clearing the same‖. Security Bank insists that RCBC should bear the consequences of allowing CMC to withdraw the amount of the check before it was cleared. The trial court ruled in favor of RCBC, ordering Security Bank to pay the latter of the amount. The CA affirmed the decision upon appeal. The petitioner sought recourse from the SC. WON Security Bank should be held liable for its manager's check (1.) Yes, Security Bank is liable to RCBC by reason of the manager‘s check. What was issued by Security Bank was not merely and ordinary check but a manager‘s check. A manager‘s check is ―one drawn by a bank‘s manager upon the bank itself, and such is deemed as a certified check which is accepted by the bank.‖ As the bank’s own check, a manager’s check becomes the primary obligation of the bank and is accepted in advance by the act of its issuance
RCBC cannot be faulted with regard to the trust and confidence it reposed to the manager‘s check. In immediately crediting the amount of P8 million to CMC‘s account, it relied on the integrity and honor of the check as it is regarded in commercial transactions. (2.) With regard to the Money Board Resolution, it is provided that of the check for clearing is a manager‘s check, it is discretionary to the bank to WON pay it before clearing. With this, RCBC cannot be faulted in immediately paying the amount on account that such is discretionary to it. (3.) The liability of Security bank is that of a drawer which undertakes that the instrument, upon presentment, will be accepted or paid or both.
BANK OF AMERICA NT & SA V. PHILIPPINE RACING CLUB Facts:
PRCI has an account with Bank of America (paseo de roxas branch)
The authorized signatories were its president and vice president
To ensure continuity of operations, the president and the vp, before going out of the country for corp. business, pre-signed several checks and entrusted them to the accountant. The internal arrangement was, in the event there was need to make use of the checks, the accountant would prepare the corresponding voucher and thereafter complete the entries on the pre-signed checks.
Someone presented to Bank of America bank for encashment a couple of PRC‘s checks with the indicated value of P110,000.00 each
The two (2) checks had similar entries with similar infirmities and irregularities. On the space where the name of the payee should be indicated (Pay To The Order Of) the following 2-line entries were instead typewritten: on the upper line was the word ―CASH‖ while the lower line had the following typewritten words, viz: ―ONE HUNDRED TEN THOUSAND PESOS ONLY.‖ Despite the highly irregular entries on the face of the checks, defendant-appellant bank, without as much as verifying and/or confirming the legitimacy of the checks considering the substantial amount involved and the obvious infirmity/defect of the checks on their faces, encashed said checks.
PRC demanded Bank of America to pay. The bank refused
Issue: whether the proximate cause of the wrongful encashment of the checks in question was due to (a) petitioner‘s failure to make a verification regarding the said checks with the respondent in view of the
misplacement of entries on the face of the checks or (b) the practice of the respondent of pre-signing blank checks and leaving the same with its employees. Ruling: Although not in the strict sense ―material alterations,‖ the misplacement of the typewritten entries for the payee and the amount on the same blank and the repetition of the amount using a check writer were glaringly obvious irregularities on the face of the check. Clearly, someone made a mistake in filling up the checks and the repetition of the entries was possibly an attempt to rectify the mistake. Also, if the check had been filled up by the person who customarily accomplishes the checks of respondent, it should have occurred to petitioner‘s employees that it would be unlikely such mistakes would be made. All these circumstances should have alerted the bank to the possibility that the holder or the person who is attempting to encash the checks did not have proper title to the checks or did not have authority to fill up and encash the same. As noted by the CA, petitioner could have made a simple phone call to its client to clarify the irregularities and the loss to respondent due to the encashment of the stolen checks would have been prevented. In the case at bar, extraordinary diligence demands that petitioner should have ascertained from respondent the authenticity of the subject checks or the accuracy of the entries therein not only because of the presence of highly irregular entries on the face of the checks but also of the decidedly unusual circumstances surrounding their encashment. . Indeed, it is highly uncommon for a corporation to make out checks payable to ―CASH‖ for substantial amounts such as in this case. However, we do agree with petitioner that respondent‘s officers‘ practice of pre-signing of blank checks should be deemed seriously negligent behavior and a highly risky means of purportedly ensuring the efficient operation of businesses. It should have occurred to respondent‘s officers and managers that the pre-signed blank checks could fall into the wrong hands as they did in this case where the said checks were stolen from the company accountant to whom the checks were entrusted. Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the loss, petitioner will still emerge as the party foremost liable in this case. In instances where both parties are at fault, this Court has consistently applied the doctrine of last clear chance (the one who had a last clear opportunity to avoid the impending harm but failed to do so is chargeable with the consequences thereof) in order to assign liability In the case at bar, petitioner cannot evade responsibility for the loss by attributing negligence on the part of respondent because, even if we concur that the latter was indeed negligent in pre-signing blank checks, the former had the last clear chance to avoid the loss. To reiterate, petitioner‘s own operations manager admitted that they could have called up the client for verification or confirmation before honoring the dubious checks. In the interest of fairness, however, we believe it is proper to consider respondent‘s own negligence to mitigate petitioner‘s liability. Article 2179 of the Civil Code.
We also cannot ignore the fact that the person who stole the pre-signed checks subject of this case from respondent‘s accountant turned out to be another employee, purportedly a clerk in respondent‘s accounting department. As the employer of the ―thief,‖ respondent supposedly had control and supervision over its own employee. This gives the Court more reason to allocate part of the loss to respondent. Following established jurisprudential precedents, we believe the allocation of sixty percent (60%) of the actual damages involved in this case (represented by the amount of the checks with legal interest) to petitioner is proper under the premises. Respondent should, in light of its contributory negligence, bear forty percent (40%) of its own loss.
BANK OF AMERICA V. ASSOCIATED CITIZEN‘S BANK Facts:
BA-Finance granted Miller a credit line facility through which the latter could assign or discount its trade receivables with the former. Miller‘s authorized representatives Uy Kiat Chung, Ching Uy Seng, and Uy Chung Guan Seng executed a Continuing Suretyship Agreement with BAFinance whereby they jointly and severally guaranteed the full and prompt payment of any and all indebtedness which Miller may incur with BA-Finance.
Miller discounted and assigned several trade receivables to BA-Finance by executing Deeds of Assignment in favor of the latter. In consideration of the assignment, BA-Finance issued four checks payable to the ―Order of Miller Offset Press, Inc.‖ with the notation ―For Payee‘s Account Only.‖ These checks were drawn against Bank of America
The four checks were deposited by Ching Uy Seng, then the corporate secretary of Miller, in Account No. 989 in Associated Citizens Bank (Associated Bank) which is a joint bank account under the names of Ching Uy Seng and Uy Chung Guan Seng. Associated Bank stamped the checks with the notation ―all prior endorsements and/or lack of endorsements guaranteed,‖ and sent them through clearing.
Later, the drawee bank, Bank of America, honored the checks and paid the proceeds to Associated Bank as the collecting bank.
When Miller failed to deliver to BA-Finance the proceeds of the assigned trade receivables, BAFinance filed a collection suit against Miller and impleaded the three representatives of the latter. Miller, Uy Kiat Chung, and Uy Chung Guan Seng filed a joint answer with cross-claim against Ching Uy Seng,wherein they denied that (1) they received the amount covered by the four Bank of America checks, and (2) they authorized their co-defendant Ching Uy Seng to transact business with BA-Finance on behalf of Miller. Uy Kiat
Chungand Uy Chung Guan Seng also denied having signed the Continuing Suretyship Agreement with BA-Finance.
BA-Finance filed an Amended Complaint impleading Bank of America as additional defendant for allegedly allowingencashment and collection of the checks by person or persons other than the payee named thereon.
Issue: Whether the Court of Appeals erred in rendering judgment finding (1) Bank of America liable to pay BAFinance the amount of the four checks; (2) Associated Bank liable to reimburse Bank of America the amount of the four checks; and (3) Ching Uy Seng and/or Uy Chung Guan Seng liable to pay Associated Bank the amount of the four checks Ruling: Bank of America is liable to pay BA-Finance the amount of the four checks. The bank on which a check is drawn, known as the drawee bank, is under strict liability, based on the contract between the bank and its customer (drawer), to pay the check only to the payee or the payee‘s order. A drawee should charge to the drawer‘s accounts only the payables authorized by the latter; otherwise, the drawee will be violating the instructions of the drawer and shall be liable for the amount charged to the drawer‘s account. The effect of crossing a check relates to the mode of payment, meaning that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named therein. The effects of crossing a check as follows: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once – to one who has an account with a bank; and (c) the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose; otherwise, he is not a holder in due course. In this case, the four checks were drawn by BA-Finance and made payable to the ―Order of Miller Offset Press, Inc.‖ The checks were also crossed and issued ―For Payee‘s Account Only.‖ Clearly, the drawer intended the check for deposit only by Miller Offset Press, Inc. in the latter‘s bank account. Thus, when a person other than Miller, i.e., Ching Uy Seng, a.k.a. Robert Ching, presented and deposited the checks in his own personal account (Ching Uy Seng‘s joint account with Uy Chung Guan Seng), and the drawee bank, Bank of America, paid the value of the checks and charged BA-Finance‘s account therefor, the drawee Bank of America is deemed to have violated the instructions of the drawer, and therefore, is liable for the amount charged to the drawer‘s account.
Associated Bank liable to reimburse Bank of America the amount of the four checks. The collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements considering that the act of presenting the check for payment to the drawee is an assertion that the party making the presentment has done its duty to ascertain the genuineness of the endorsements. When Associated Bank stamped the back of the four checks with the phrase ―all prior endorsements and/or lack of endorsement guaranteed,‖ that bank had for all intents and purposes treated the checks as negotiable instruments and, accordingly, assumed the warranty of an endorser. Being so, Associated Bank cannot deny liability on the checks. Ching Uy Seng and/or Uy Chung Guan Seng liable to pay Associated Bank the amount of the four checks It is well-settled that a person who had not given value for the money paid to him has no right to retain the money he received
PHILIPPINE NATIONAL BANK V. SPOUSES CHEAH Facts:
Ofelia Cheah agreed to clear and encash Filipina Tuazon‘s check for a service fee of 2.5%. Filipina Tuazon is a friend of Ofelia‘s friend.
The check is a Bank of America check drawn against Bank of America Alhambra Branch in California, USA, with a face amount of $300,000.00, payable to cash. Because Adelina does not have a dollar account in which to deposit the check, she asked Ofelia if she could accommodate Filipina‘s request since she has a joint dollar savings account with her Malaysian husband Cheah Chee Chong (Chee Chong) with PNB Buendia Branch.
Ofelia and Adelina went to PNB Buendia Branch and was informed that the process of clearing the subject check would normally takes 15 days
Ofelia deposited Filipina‘s check. PNB then sent it for clearing through its correspondent bank, Philadelphia National Bank. Five days later, PNB received a credit advice from Philadelphia National Bank that the proceeds of the subject check had been temporarily credited to PNB‘s account
The following day, PNB Buendia Branch, after deducting the bank charges, credited $299,248.37 to the account of the spouses Cheah. Acting on Adelina‘s instruction to withdraw the credited amount, Ofelia that day personally withdrew $180,000.00 Adelina was able to withdraw the
remaining amount the next day after having been authorized by Ofelia. Filipina received all the proceeds.
The Cable Division of PNB Head Office in Escolta, Manila received a SWIFT message from Philadelphia National Bank informing PNB of the return of the subject check for insufficient funds. However, the PNB Head Office could not ascertain to which branch/office it should forward the same for proper action. The message was misrouted.
PNB Buendia Branch learned about the bounced check when it received a debit advice, followed by a letter from Philadelphia National Bank to which the SWIFT message was attached. Informed about the bounced check and upon demand by PNB Buendia Branch to return the money withdrawn, Ofelia immediately contacted Filipina to get the money back. But the latter told her that all the money had already been given to several people who asked for the check‘s encashment.
In their effort to recover the money, spouses Cheah then sought the help of the National Bureau of Investigation. Said agency‘s Anti-Fraud and Action Division was later able to apprehend some of the beneficiaries of the proceeds of the check and recover from them $20,000.00. Criminal charges were then filed against these suspect beneficiaries.
PNB sent a demand letter to spouses Cheah for the return of the amount of the check, froze their peso and dollar deposits in the amounts of P275,166.80 and $893.46, and filed a complaint against them for Sum of Money
Issue: Who should bear the loss? Ruling:
PNB‘s act of releasing the proceeds of the check prior to the lapse of the 15-day clearing period was the proximate cause of the loss.
―Proximate cause is ‗that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred.‘ The payment of the amounts of checks without previously clearing them with the drawee bank especially so where the drawee bank is a foreign bank and the amounts involved were large is contrary to normal or ordinary banking practice. Clearly, PNB‘s disregard of its preventive and protective measure against the possibility of being victimized by bad checks had brought upon itself the injury of losing a significant amount of money. It bears stressing that ―the diligence required of banks is more than that of a Roman pater familias or a good father of a family. The highest degree of diligence is expected.‖ PNB miserably failed to do its duty of exercising extraordinary diligence and reasonable business prudence.
The spouses Cheah are guilty of contributory negligence and are bound to share the loss with the bank
Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. Ofelia failed to observe caution in giving her full trust in accommodating a complete stranger and this led her and her husband to be swindled. Considering that Filipina was not personally known to her and the amount of the foreign check to be encashed was $300,000.00, a higher degree of care is expected of Ofelia which she, however, failed to exercise under the circumstances. Another circumstance which should have goaded Ofelia to be more circumspect in her dealings was when a bank officer called her up to inform that the Bank of America check has already been cleared way earlier than the 15-day clearing period. The fact that the check was cleared after only eight banking days from the time it was deposited or contrary to what Garin told her that clearing takes 15 days should have already put Ofelia on guard. She should have first verified the regularity of such hasty clearance considering that if something goes wrong with the transaction, it is she and her husband who would be put at risk and not the accommodated party. However, Ofelia chose to ignore the same and instead actively participated in immediately withdrawing the proceeds of the check. In any case, the complaint against the spouses Cheah could not be dismissed. As PNB‘s client, Ofelia was the one who dealt with PNB and negotiated the check such that its value was credited in her and her husband‘s account. Being the ones in privity with PNB, the spouses Cheah are therefore the persons who should return to PNB the money released to them. All told, the Court concurs with the findings of the CA that PNB and the spouses Cheah are equally negligent and should therefore equally suffer the loss. The two must both bear the consequences of their mistakes.
Lozano vs Martinez The bouncing checks law was approved on April 3, 1979. With this, several informations were filed against numerous defendants for violation of the bouncing checks law. During trial, the accused filed a motion to quash the information, arguing that the acts charged imputed against them did not constitute an offense, the statute being unconstitutional. The trial courts in all of the cases granted the motion and dismissed the case, aside from one (People vs Nitafan) wherein the trial court declared the law unconstitutional. Several parties sought recourse from the SC. WON BP 22 is constitutional. (1.) Yes, the BP 22 is constitutional. BP 22 punishes a person who a. Makes or draws and issues any check on account or for value, b. The drawer knows at the time of issue that he does not have sufficient funds or credit with the drawee bank for the payment of said check in full upon presentment, c. The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer, without any valid reason, ordered the bank to stop payment,.
It also punishes ― a. Any person who, having sufficient funds in or credit with the drawee bank when he draws a check, b. Shall fail to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon, c. For which reason it is dishonored by the drawee bank.
On of the essential elements that must be proven as a fact for a successful prosecution is that the drawer has knowledge that he does not have sufficient funds in his account with the drawee when he drew the check. The law also creates a presumption of such knowledge if the check is dishonored due to insufficient funds when the check is presented within (90) days form its issuance. The law is constitutional because it prohibits the issuance of worthless checks which is damaging to the integrity of negotiable instruments as substitute for legal tender. What it punishes is not the non payment of debt of the accused, but the issuance of a bum check. It partakes the nature of a penal law which does not pertain to crimes against property, but crimes against public order. Flooding the system with worthless checks is like pouring garbage into the bloodstream of the nation's economy.
The issuance of such checks causes deleterious effects to businesses. By injecting valueless commercial papers in circulation, it can pollute the channels of trade and commerce, injure the banking system and eventually hurt the welfare of society and the public interest.
Recuerdo vs People Yolanda Floro is engaged in the jewelry business. The latter sold a 3-karat loose diamond stone valued at P420,000 to the petitioner. To settle the balance, the petitioner issued 9 postdated checks, all drawn against her account at the Prudential Bank. When Yolanda deposited the checks to the collecting bank, Liberty Savings and Loan Association, only 3 out of the 9 checks were cleared. The remaining 5 were dishonored due to ―closed account‖ of the petitioner. With this, the complainant sent a demand letter to the petitioner, but was unheeded. She then filed an information against the petitioner for violation of PB 22. It is argued by the prosecution that the petitioner had knowledge of such insufficiency of funds on account that the check was dishonored when it was presented within (90) days from its issuance (presumption), and that the petitioner, upon receipt of notice of dishonor, failed to settle the amount within (5) banking days after receipt of such notice. The trial court convicted the petitioner, hence the recourse of the latter with the SC, arguing that the statute is unconstitutional on account that it violates the constitutional prohibition for non imprisonment for debt and is a bill of attainder; the legislature preemptively determined the guilt of the accused. The latter also argued that the checks that were dishonored were not intended to be presented for encashment on account of her agreement with Yolanda; that she may have the jewelry appraised, and whatever the appraisal is will be the purchase price. Consequently, appraisal was only for P160,000, hence the purchase price was already paid by the checks that were cleared. WON BP 22 is unconstitutional. (1.) The law is constitutional. The contention of the petitioners that the parties intended that the checks were not meant to be encashed does not hold water. Though the said checks were not meant for encashment, the same has the same effect like any other check. BP 22 does not take into consideration the intention of the contracting parties as to the purpose of the check. (2.) The law will automatically apply when the drawer issues a check, with total disregard to the intention of the latter in the issuance of such, and that the check is subsequently dishonored for insufficient funds. (3.) In the matter of evidence, the testimony of the employees of the bank to prove that the check was truly dishonored is not necessary. The complainant is a competent witness to prove the essential elements of the crime. Futhermore, the stamp ―dishonored due to insufficient fund/closed account‖ by the bank on the face of the check operates a conclusive proof of such dishonor by the drawee bank.
(4.) It is not a bill of attainder on account that the elements of the crime must still be proved first by the prosecution through evidence. The presumptions under BP 22 are prima facie only and may be proven otherwise by competent evidence.
People vs Nitafan The accused Lim was charged with the crime under BP 22 for issuing a ―memorandum check on Philippine Trust bank in favor of the complainant Cortez, which was subsequently dishonored by the drawee bank for insufficient funds. The accused failed to settle the obligation within (5) banking days from the receipt of the notice of dishonor. The accused filed a motion to quash on the ground that what was issued is a ―memorandum check‖ which partakes the nature of a promissory not, not a check; hence such is beyond the ambit of BP 22. The trial court granted the motion and dismissed the case. The OSG filed the present appeal on certiorari with the SC, arguing in favor of the constitutionality of the statute. The accused – appealee argued that a ―memorandum check‖ is not a check but a promissory note, but a memorandum of indebtedness or ―a mere promise to pay‖, and such must be sued not in a criminal action, but in a civil action. WON memorandum checks are covered under BP 22. (1.) Yes, memorandum checks are covered. A memorandum check is an ordinary check on its face, where the word‖ memorandum‖ or ―memo‖ is written on its face. A memorandum check, upon presentment, is generally accepted by the bank. Hence it does not matter whether the check issued is in the nature of a memorandum as evidence of indebtedness. What the law punishes is the issuance of a bouncing check with total disregard as to the nature or usage of such. The mere act of issuing a worthless check whether as a deposit, guarantee, or even as an evidence of a preexisting debt, is malum prohibitum. (2.) BP 22 does not take into consideration the intention of the parties as to the purpose, nature or usage of a check. As long as it is dishonored due to insufficient funds and that the drawer knew of such insufficiency during issuance will suffice for the law to apply. It would frustrate the purpose of BP 22 in limiting the issuance of bum checks if the intention of the parties would be used to escape criminal liability.
People vs Chua The complainant Tian alleged that sometime in 1988 his sister-in-law, Lim, introduced to him the accused Chua. Chua wanted to borrow money in the amount of P200,000. The complainant agreed to Chua‘s request and gave her the amount of P230,000 in cash, in consideration of which the accused issued to him six (6) checks . When the six (6) checks became due, Chua told him not to deposit the same on account that they were not funded. The accused instead replaced them with (4) checks, and endorsed to him (2) checks owned by one Rosario and de Guzman. Upon presentment, the checks were dishonored by their respective banks for insufficient funds. Tian then sent two letters of demand by registered mail to Chua but both mails were returned by the Post Office as unclaimed. On the other hand, Chua denied knowing Tian and issuing checks to him. The accused Chua was convicted for the crime of estafa and four counts of violation of BP 22. The accused Chua sough an appeal with the SC. WON Chua may be convicted of estafa and BP 22. (1.) The accused must be acquitted for Estafa (315 (2d)) which punishes the drawing of worthless checks issued for the purpose of inducing another to extend a loan to the drawer. The issuance of the checks by Chua was not the inducing factor which impelled Tian to extend a loan to Chua. The inducement came from the complainant‘s sister, Lim who encouraged the former to extend the loan to Chua. Lim was financially interested in the interest earning loan. The checks that bounced were replacement checks issued in payment for a pre – existing obligation; hence such checks could not be considered the means employed by Chua to impel Tian to extend a loan. (2.) However, Chua is liable under BP 22 for issuing four replacement checks. The law makes the mere act of issuing a worthless check punishable as a special offense. The gravamen of the offense under this law is the act of issuing a worthless check or a check that is dishonored upon its presentment for payment
People vs Cuyugan The accused Cuyugan was charged with the crime under BP 22 and estafa under art 315 (2d). The complainant Norma Abagat is engaged in the business of supplying construction materials to the Philippine Air Force. He alleged that the accused Cuyugan sought for an extension of a loan for to be used for the purchase of some materials for the Air Force. Worthy to note that Cuyugan is the wife of the cousin of Norma Abagat. The loan was given by the complainant, and in consideration of which, the accused issued several checks to guarantee the payment of such loan. Upon due presentment of the checks, the drawee bank dishonored such due to insufficient funds. Despite the receipt of the demand letter by the complainants, the accused failed to settle. The complainants charged Cuyugan with the aforesaid violations. However, the BP 22 cases were dismissed earlier. After trial, the trial court convicted the accused for the crime of estafa (315 (2d)). The accused sought recourse from the SC. WON the accused may be convicted of estafa and BP 22. (1.) No, the accused may not be convicted of estafa. Estafa under 315 (2d) of the RPC is committed by issuing checks (post dated or not) to serve as an inducement for the extension of a loan. The offender must be able to obtain money or property from the offended party because of the issuance of a check whether postdated or not. It must be that the accused could not have parted with the money or property of the complainant without the issuance of the said checks. In the present case, the complainant Abagat extended the loan due to mere liberality towards the accused who is the wife of her cousin, as well as for the purpose of collecting interest. It was not proven beyond reasonable doubt that the loan was extended because of the fraudulent issuance of the said checks. (2.) The accused however must be convicted under BP 22 for the issuance of worthless checks. In the case at bar however, the she was not accordingly charged with BP 22 on account that the same were earlier dismissed. It cannot be said that violations under BP 22 is necessarily included in the crime of estafa. The said offenses are distinct and different from each other; estafa is malum in se in which malice must be proven; BP 22 is malum prohibitum, in which malice need not be proven. The crimes admit different elements, hence must be prosecuted separately. In the case at bar, what was charged was merely estafa and not BP 22. Hence it is proper that the accused be acquitted and be ordered for release.
Cueme vs People The accused Cueme was the general manager of Agro Corporation and AMF trading. The complainant was Simolde, a bank teller of BPI. The two harbored a close relationship on account that both of them are from Davao. Simolde extended several loans in favor of the accused, to which the accused Cueme issued several postdated crossed checks in favor of the latter. Upon presentment of the said checks, the drawee bank (BPI) dishonored the same due to insufficiency of funds. The demands of the complainant were left unheeded, hence the accused was charged with violations under BP 22. The accused argued during trial that the checks were pre – signed by her, but is not intended to be given to Simolde. She alleged that it was Simolde who procured the said checks from Agro Corp.‘s secretary (Gabuan), and that Simolde wrote on the checks the dates, names and amounts for the purposes of showing the checks to the possible investors of Agro Corp. Gabuan corroborated the allegation of Cueme, alleging that Cueme and Simolde were like sisters and that Simolde borrowed the pre - signed checks from her for the purpose of showing it to potential investors of Agro Corp. The trial court convicted the accused for violating BP 22 by issuing worthless checks. The CA affirmed the trial court‘s decision upon appeal. The accused now sought recourse from the SC. She argues that the checks were pre – signed but not intended to be given to Simolde; and that such checks were just intended to be shown to the would – be investors of Agro Corp. WON the accused is guilty under BP 22. (1.) Yes, the accused is guilty of violating BP 22. There are two ways of violating BP 22, to wit; a. By issuing checks when the drawer knows that the account to which the check shall be charged to do not have sufficient funds. b. By having sufficient funds on the date of issue, but failing to maintain sufficient balance to answer for the check when it is presented within (90) days from issue.
In the present case, the accused is charged with the first type. The defense of the accused admits issues of evidence that must be resolved during trial with the trial court and during appeal with the CA; hence such resolutions are conclusive upon the SC. (2.) The allegation of petitioner that the checks were merely intended to be shown to prospective investors of her corporation is not a defense. The gravamen of the offense punished under B.P. Blg. 22 is the act of making or issuing a worthless check or a check that is dishonored upon its presentment for payment.
The checks issued, even assuming they were not intended to be encashed or deposited in a bank, produce the same effect as ordinary checks. What is controlling is not the intention of the parties as to the usage of the check, but the fact that a check is issued and was subsequently dishonored due to DAIF. Section 1 of B.P. Blg. 22 provides that the fine to be imposed on the offender shall be "not less than but not more than double the amount of the check, which fine shall in no case exceed (P200,000.00). Thus, petitioner should be made to pay only the maximum of P200,000.00, not 220,000 as ruled by the trial court.
Wong vs People The petitioner Wong was the agent of Limtong Press Inc. which is engaged in the business of pringting calendars. The clients of Limtong Press would send a purchase order to its office; then it would deliver the said calendars to the clients. Wong, as an agent, would collect the payment form the clients in form of checks that would be remitted to Limtong Press Inc. Wong however did not manage to remit several payments. With this, Wong was compelled by Limtong Press to issue several checks in payment for the unremitted payments of the customers. Before maturity of the checks, Wong advised Limtong Press not to encash the same and promised that he would replace the checks within (30) days. Wong reneged on his promise. Limtong Press deposited the said checks but were dishonored due to ―account closed‖. Wong did not manage to settle within (5) days from the receipt of the notice of dishonor, hence Limtong filed a criminal action against Wong for violation of BP 22. Wong interposed as defense that he issued the said checks not as payment for the unremitted payment of is clients, but as to guarantee the orders of his present customers. After trial, the trial court convicted the accused. The CA affirmed the decision upon appeal of the latter, hence the present recourse with the SC. (2nd issue) The accused contends that he cannot be prosecuted under BP 22 on account that the purpose of the checks (bounced) was for guaranteeing payment of his customers; and that the customers already paid Limtong Press, hence Limtong Press is not a holder for value anymore on account that it had been paid already. (1st issue) The accused contend that the checks were deposited 157 days after its maturity date, hence the presumption of knowledge of insufficiency does not apply to him. WON the accused may be prosecuted for issuing checks (bounced) that are meant to guarantee payment (such payment is paid subsequently). (1.) Yes, the accused is still liable. The issue of whether or not the checks were made as a guarantee is already resolved by the trial court and the CA, holding that the checks are for payment for the unremitted accounts. (2.) The accused is still liable despite the presentment 157 days after date. The (90) day period for presentment is merely to create the presumption that the drawer has knowledge of the insufficiency. It is not an element of the crime. Under NIL, (sec 186), a check must be presented within a reasonable time from issuance, or else the drawer would be discharged from liability to the extent caused by such delay. By current bank practice, a check will be considered stale if such is presented beyond 6 months (180) days from date.
In the present case, the complainant presented the check on the 157th day, hence the check did not yet turned stale. Only the presumption of knowledge of insufficiency of funds was lost, but such knowledge could still be proven by direct or circumstantial evidence. As found by the trial court, private respondent did not deposit the checks because of the reassurance of petitioner that he would issue new checks.
Nagrampa vs People The petitioner Nagrampa bought a backhoe excavator from FEDCOR Trading. As payment, the petitioner issued 2 checks in favor of FEDCOR, drawable against Security Bank. The equipment was delivered when the salesman of FEDCOR assured that the checks were good. However, the checks were dishonored by the drawee bank upon presentment due to account of the petitioner was already closed. Hence the criminal action filed by the private respondent FEDCOR for Estafa and BP 22 against Nagrampa. During trial, Nagrampa argued that the agreement between him and FEDCOR (through its sales agent) that the check are to be returned if the machinery bought is in good running condition. He alleged that the machinery was repeatedly sent to FEDCOR for repairs, but to no avail. He submits that he cannot be held guilty for Estafa on account that there was no damage to FEDCOR considering that the machinery became unserviceable. He also submits that he is not liable for BP 22 on account that the checks that were issued by him were presented merely after (5) months from the date of the checks despite obligation imposed by BP 22 to the payee to present the checks for payment within (90) days from date. The trial court convicted the accused of the charged, as well as the CA upon appeal. The petitioner sought recourse form the SC, arguing that he is not liable for under BP 22 on account that FEDCOR failed to present the checks within the (90) day period. WON the payee must present the checks within (90) days for the purpose of making the drawer liable for BP 22. (1.) No, the (90) day period under BP 22 is merely to give rise to the prima facie presumption that the drawer had knowledge of the insufficiency of funds in his account with the drawee bank. It does not mean that if the payee failed to present the same within (90) days from date, then the drawer would be exempt to pay. (2.) If the check was not presented within the (90) day period, no presumption against the accused arises. However, the knowledge of insufficiency of funds may be proven by other evidence. (3.) The petitioner invoked Admin Circular 12- 2000 which provides that the courts have the discretion to dispense with the penal provision (incarceration) under BP 22 and to just merely impose a fine IF THE ACCUSED INDICATES THAT HE ACTED IN GOOD FAITH OR THERE IS A CLEAR MISTAKE OF FACT WITOUT THE NEGLIGENCE OF THE ACCUSED.
In this case, when petitioner issued the subject postdated checks even though he had no more account with the drawee bank, having closed it more than four years before he drew and delivered the checks, he manifested utter lack of good faith or wanton bad faith.
Ting vs CA Juliet Ting owned and managed a furniture business. She earlier issued several checks in favor of the private respondent Tagle for payment of certain obligations. However, due to financial difficulties, Juliet requested her Husband, Victor Ting, and the latter‘s sister, (Emily Chan), to take over her business. The 2 agreed for such takeover and subsequently replace the checks that Juliet Ting gave to Tagle. In turn, the 2 issued their own checks to replace Juliet‘ checks. The assignment however did not materialize. Juliet now replace the checks that was given by Victor and Emily to Tagle. However, Tagle did not return the checks issued by Victor and Emily, and encashed it. Upon encashment, the drawee bank dishonored the same for insufficient funds. Tagle now filed a case for BP 22 against Vicotr and Emily. Tagle testified during trial that she sent her notice of dishonor to the accused through means of registered mail, as evidenced by the copy of the demand letter and the return card. The trial court convicted the accused, and so did the CA upon appeal. The petitioners sought recourse form the SC. WON the accused may be held liable under BP 22 despite lack of proof of sending notice of dishonor. (1.) No, the accused may not be held liable for BP 22 due to failure to prove guilt beyond reasonable doubt. In cases involving BP 22, it involves 2 elements, to wit; 1. issuance of the checks and subsequent dishonor. 2. that the drawer had knowledge of insufficiency of funds upon presentment. The law provides for a prima facie presumption that the drawer had knowledge of such insufficiency when the check was presented within (90) days from issue and was dishonored, unless the drawer settles the obligation WITHIN (5) BANKING DAYS FROM RECIEPT OF NOTICE OF DISHONOR. (2.) In the present case, what is important is the sending of notice of dishonor. The complainant merely presented testimonial evidence and documentary evidence (copy of demand letter and return card // registered mail). Under the rules on Civil Procedure (applied also in criminal cases), return cards in leiu of sending demand letters is not sufficient evidence to prove proper service of demand letter.
Such REGISRTY RECIEPT must be accompanied by AN AFFIDAVIT OR TESTIMONY OF SENDING PERSON OR ENTITY, ATTESTING THAT SUCH WAS TRULY SENT TO THE RECIPIENT. The case for BP 22 cannot be sustained due to insufficient evidence to prove guilt beyond reasonable doubt.
Danao vs CA The accused Danao, through the intercession of one Estrada, contracted with the private complainant Macasieb who was in the business of discounting checks. The accused issued to Macasieb (2) post dated checks drawable against Monte De Piedad Bank in consideration of a loan from Macasieb. Upon presentment by Macasieb, the checks were dishonored due to account closed. Macasieb, through counsel, sent demand letters to the accused, but to no avail. Hence the criminal action filed against Danao for violation of BP 22. Durong trial, the private complainant did not present any evidence to prove proper service of the notice of dishonor (documentary and testimonial) The trial court convicted Danao, and also did the Ca upon appeal. The accused sought recourse from the SC. WON the lack of evidence proving proper service // receipt of the demand letter by the accused will lead to an acquittal in cases involving BP 22. (1.) Yes, evidence proving receipt of the demand letter by the accused is indispensible. Although the elements of BP 22 are present; 1. issuance and subsequent dishonor 2. knowledge of insufficiency by the drawer. In BP 22 cases, a prima facie presumption arises that the drawer has such knowledge if the check was presented and dishonored within (90) days from date, unless the drawer settled the account within (5) banking days from RECIEPT OF NOTICE OF DISHONOR // DEMAND LETTER. In the present case, there exist no evidence proving that the accused truly received the notice of dishonor. Without any proof of receipt, it cannot be presumed that the accused knew of such insufficiency. If the accused would be held liable for BP 22 despite lack of reciept of demand letter // notice of dishonor, then the accused would be deprived of his statutory right to settle the obligation within (5) banking days. (2.) Proof of service or receipt of the demand letter (notice of dishonor) is crucial in prosecuting BP 22 cases; lack of such would lead to acquittal of the accused. (PWEDE PANG BA DEMURRER) (3.) Factual – payment was actually made, proven through judicial admission of the complainant herself when she was being cross examined.
Domagsang vs CA The accused Josephine Domagsang obtained a loan from Garcia (metrobank VP). In consideration of the loan, Domagsang issued eighteen (18) postdated checks to Garcia. When presented for payment, the said checks bounced for the reasons "Account Closed". Ignacio demanded payment by calling up Domagsang at her office. However, Domagsang failed to pay. Both the RTC and Court of Appeals convicted Domagsang of the crime. The latter appealed to the Supreme Court. WON a verbal notice of dishonor or demand to pay sufficient to convict the accused for BP 22. (1.) No, a verbal demand is not sufficient. Although Section 2 of B.P. Blg. 22 does state that the notice of dishonor be in writing, Section 3 states that where there are no sufficient funds in or credit with the drawee bank, such fact shall always be explicitly stated in the notice of dishonor or refusal. A mere oral notice or demand to pay would appear to be insufficient for conviction under the law. Both the spirit and letter of the Bouncing Checks Law require for the act to be punished there under not only that the accused issued a check that is dishonored, but that likewise the accused has actually been notified in writing of the fact of dishonor. The consistent rule is that penal statutes have to be construed strictly against the State and liberally in favor of the accused. Domagsang was acquitted of the crime. However, she was ordered to pay Ignacio the total face value of the dishonored checks as it was established that she failed to pay her debt.
Rico vs People The accused Rico is a ―pakyaw‖ contractor who purchases construction materials from Ever Lucky Commercial. Rico issued 5 post-dated checks as payment for some purchases. The checks were dishonored due to insufficiency of funds as well as due to ―closed account‖. Ever Lucky immediately made demands for Rico to pay up. No formal letter of demand was sent to Rico. Ever Lucky eventually sued Rico for violation of Batas Pambansa 22. Won the accused may be held liable under BP 22 despite the lack of a written demand for payment // notice of dishonor. (1.) No, the accused must be served by a written demand // notice of dishonor. The law enumerates the elements of violation of B.P. 22, namely (1) the making, drawing and issuance of any check to apply for account or for value; (2) the knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. In the case at bar, the prosecution merely proved the existence of the 1st and 3rd elements. However, it failed to prove that Rico has knowledge of the insufficiency of funds in the drawee bank when the checks were presented for payment DUE TO THE LACKOF THE WRITTEN DEMAND. (2.) Under the law, a prima facie presumption arises that the drawer has knowledge of insufficiency when the check is presented and dishonored within ninety (90) days from the date of the check, unless if within 5 days from receiving the notice of dishonor, the accused shall have paid or made arrangement to pay in full. In the case at bar, no notice of dishonor was sent to Rico hence the presumption did not arise. And so since the presumption did not arise, it was up to the prosecution to prove Rico‘s knowledge of insufficiency which it failed to do.
Yo Oh vs CA The accused Yu Oh bought from the private complainant Solid Gold Traders several pieces of jewelry. Yu Oh initially failed to pay and was sued by Solid Gold for specific performance. The case was dismissed on account of the compromise agreement between the parties, whereby Yu Oh would issue several post dated checks in favor of the private complainants. However, the checks were dishonored by the drawee bank (Equitable Bank), hence the criminal action filed by the latter against the accused for violation of BP 22. The accused alleged that the private complainant did not present any evidence showing that she was served with written notice of dishonor // demand letter, hence there exist insufficiency of evidence that warrants the dismissal of the case. The trial court convicted the latter, and such was affirmed by the CA upon appeal. The accused sought recourse from the SC, arguing that 1. The trial court case no jurisdiction to hear BP 22 cases in view of RA 7691 which transferred original jurisdiction over BP 22 cases from the RTC to MTC. (in conjunction with Art 22. Of the RPC, giving penal laws retroactive effect). 2. The lack of a written notice of dishonor // demand letter warrants an acquittal. WON the accused may be held for BP 22 despite the lack of notice. (1.) Yes, the lack of notice of dishonor // demand letter will lead to an acquittal. In cases of BP 22, 3 elements must concur, namely; (1) the making, drawing and issuance of any check to apply for account or for value; (2) the knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. The lack of service of notice of dishonor or demand letter will not satisfy the second element. Lack of which does not give rise to the fact that the drawer has knowledge of insufficiency.
(2.) As to the question of lack of jurisdiction of the trial court in view of RA 7691, the law cannot be given retroactive effect, in conjunction with Art. 22 of the RPC on account that IT IS NOT A PENAL LAW. It does not apply to the case at bar. It is a basic principle in remedial law that jurisdiction shall be determined by the law which was in effect upon the commencement of the action. RTC retains its jurisdiction.
Tadeo vs People The wife of the accused Tadeo maintained a leasehold agreement with the complainant Sison, who was the lessor. The wife of the accused incurred rental arrears. To settle the obligation, the accused Tadeo issued several checks in favor of the complainant. Upon presentment however, the checks were dishonored for insufficiency of funds. Despite the notice of dishonor being sent to the accused, payment was not made. Hence the criminal action filed by the complainant against Tadeo for violation of BP 22. After presentation of evidence by the prosecution, the accused filed his demurrer to evidence on the grounds of insufficiency of evidence. He argued that the prosecution did not present the testimony of the representative of the drawee bank to testify as to the dishonor. The trial court denied the demurrer, and so did the CA upon resolving the accused‘s petition for certiorari (65). The accused sought recourse from the SC, arguing that the demurrer must have been granted, in view of the compulsory testimony of the bank respresentative. WON testimony of the bank representative is compulsory for the proper prosecution of cases involving BP 22. (1.) No, such testimony is neither required nor compulsory. Under BP 22, a notation read as ―drawn against insufficient funds‖ stamped or written on the dorsal side of the checks dispenses with the need for the testimony of the bank representative. (2.) The testimony of the bank representative is not an essential element of the crime nor a piece of evidence which carries a heavy weight in prosecuting BP 22 cases. (3.) The sole testimony of the complainant is sufficient to prove the (3) elements of the crime of BP 22.
A legal presumption arises that petitioner had knowledge of the making of the checks, the due presentment to the drawee bank for payment, the dishonor and the reason therefor written, stamped or notice of dishonor attached by the drawee bank to the returned checks
Vaca and Nieto v. CA
Facts:
Vaca – president and owner of Ervine International Inc. Nieto – Ervine‘s purchasing manager March 10, 1988 – Petitioners issued a check for P10,000 to the General Agency for Reconnaissance, Detection, and Security, Inc. (GARDS) in partial payment of the security services rendered by GARDS to Ervine. The check was drawn on the China Banking Corporation (CBC). When deposited in the Philippine Commercial International Bank (PCIBank), the check was dishonored for insufficiency of funds. March 29, 1988 – GARDS sent a letter to Ervine demanding payment within 7 days. Petitioners did not pay. April 13, 1988 – petitioners issued another check for P19,860.16 to GARDS. The check was drawn on the Associated Bank. The voucher accompanying it stated that the check was to replace the dishonored check and the P9,860.16 balance being partial payment for Ervine's outstanding account. The check and the voucher were received after 2 days but GARDS did not return the dishonored check. GARDS‘ operation manager filed a criminal complaint against the petitioners for violation of BP 22. RTC dismissed the case upon motion of the prosecution because Ervine already paid the amount of the check After more than a year, GARDS filed another criminal complaint for BP 22 against petitioners. RTC found the petitioners guilty. CA affirmed RTC‘s decision. MR denied.
Issue: W/N Petitioners are guilty of violating BP 22 Ruling: Yes. Guilty. The elements of the offense penalized under B.P. Blg. 22 are: (1) making, drawing, and issuance of any check to apply to account or for value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor of the check for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. The maker's knowledge is presumed from the dishonor of the check for insufficiency of funds In this case, after being notified on March 29, 1988 of the dishonor of their previous check, petitioners gave GARDS a check for P19,860.16. They claim that this check had been intended by them to replace the bad check they had previously issued to the GARDS. Based on the testimony of a GARDS accountant, however, the Court of Appeals found that the check was actually payment for two bills, one for the period of January 16 to January 31, 1988 in the amount of P9,930.08 and another one for the period of March 16 to March 31, 1988 in the same amount. But even if such check was intended to replace the bad one, its issuance on April 13, 1988 — 15 days after petitioners had been notified on March 29, 1988 of the dishonor of their previous check — cannot negate the presumption that petitioners knew of the insufficiency of funds to cover the amount of their previous check. Sec. 2 of B.P. Blg. 22 requires that such check be given within five (5) days from the notice of dishonor to them
Petitioners contend that, in accordance with the ruling in Lao v. Court of Appeals, they should be acquitted because the preparation of checks is the responsibility of the company accountant and all they do is sign the checks. They claim that they rely on the word of the accountant that there are sufficient funds in the bank to pay for the checks. Petitioners in this case cannot pretend ignorance of the insufficiency of funds. While it may be true that it was the company's accountant who actually prepared the rubber check, the fact remains that petitioners are the owners and officers of the company. Sec. 1 of B.P. Blg. 22 provides that "Where the check is drawn by a corporation, company, or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act. The affidavit of desistance of the GARDS president claiming that this case was simply the result of a misunderstanding (mere accounting difference) between GARDS and petitioners and that the former did not really suffer any damage from the dishonor of the check is nothing but a last-minute attempt to save them from punishment. Even if the payee suffered no damage as a result of the issuance of the bouncing check, the damage to the integrity of the banking system cannot be denied. Damage to the payee is not an element of the crime Petitioners pray that, in the alternative, the penalty be modified by deleting the sentence of imprisonment and, in lieu thereof a fine in an increased amount be imposed on them. In support of their plea, they allege that they do not have any record of prior conviction; that Eduardo Vaca is of advanced age (late 60s); and, that they come from good families. Petitioners are first-time offenders. They are Filipino entrepreneurs who presumably contribute to the national economy. Apparently, they brought this appeal, believing in all good faith, although mistakenly, that they had not committed a violation of BP 22. Otherwise, they could simply have accepted the judgment of the trial court and applied for probation to evade a prison term. A fine in an amount equal to double the amount of the check involved is an appropriate penalty to impose on each of the petitioners.
Lim v. People Facts:
Rosa Lim went to Seguan‘s store to purchase pieces of jewelry. Lim wrote a check payable to ―cash‖ drawn on Metrobank in the amount of P300,000.
The next day, Lim again purchased jewelry from Seguan. Lim wrote a chack payable to ―cash‖ drawn on Metrobank in the amount of P241,668 and sent a check to Seguan through a certain Nadera
Upon depositing the checks, the checks were returned with a notice of dishonor. The account from which the checks were drawn was already closed.
Upon demand, petitioner promised to pay Seguan the amounts of the two dishonored checks. She never did
Two informations against Lim were filed. Offense: violation of BP 22
RTC found Lim guilty. CA affirmed.
Petitioner never denied issuing the two checks. She argued that the checks were not issued to Seguan (Lim claims she doesn‘t know Seguan) and that they had no pre-existing transaction. The checks were issued to Aurelia Nadera as mere guarantee and as a security arrangement to cover the value of jewelry she was to sell on consignment basis
Issue: W/N Lim is guilty Ruling: Yes. Guilty. The elements of B.P. Blg. 22 are: (1) The making, drawing and issuance of any check to apply for account or for value; (2) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and (3) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment." The first and last elements of the offense are admittedly present. To escape liability, she must prove that the second element was absent, that is, at the time of issue of the checks, she did not know that her funds in the bank account were insufficient. She did not prove this. B.P. No. 22, Section 2 creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present. If not rebutted, it suffices to sustain a conviction The gravamen of B.P. No. 22 is the act of making and issuing a worthless check or one that is dishonored upon its presentment for payment. And the accused failed to satisfy the amount of the check or make arrangement for its payment within five (5) banking days from notice of dishonor. The act is malum prohibitum. Why and to whom the check was issued is irrelevant in determining culpability. The terms and conditions surrounding the issuance of the checks are also irrelevant] Unlike in estafa, under B. P. No. 22, one need not prove that the check was issued in payment of an obligation, or that there was damage. The damage done is to the banking system
However, the penalty imposed on petitioner must be modified. In Vaca v. Court of Appeals, it was held that in determining the penalty to be imposed for violation of B.P. No. 22, the philosophy underlying the Indeterminate Sentence Law applies. The philosophy is to redeem valuable human material, and to prevent unnecessary deprivation of personal liberty and economic usefulness with due regard to the protection of the social order. The prison sentence imposed on petitioners is deleted, and imposed on them only a fine double the amount of the check issued. Consequently, the prison sentences imposed on petitioner are deleted. The two fines imposed for each violation, each amounting to P200,000.00 are appropriate and sufficient.
Tan v. Mendez Facts:
Petitioners Steve Tan and Marciano Tan are the owners of Master Tours and Travel Corporation and operators of Philippine Lawin Bus Co., Inc., while respondent Fabian Mendez, Jr. is the owner of three gasoline stations
Petitioners opened a credit line for their buses‘ lubricants and fuel consumption with respondent. At the same time, the latter was also designated by petitioners as the booking and ticketing agent of Philippine Lawin Bus Co.
Under such arrangement, petitioners‘ drivers purchased on credit fuel and various oil products for its buses through withdrawal slips issued by petitioners, with periodic payments to respondent through the issuance of checks. On the other hand, respondent remitted the proceeds of ticket sales to petitioners also through the issuance of checks. Sent together with respondent‘s remittance are the remittances of the ticket sales in the Baao Booking office, which is managed separately and independently by another agent, Elias Bacsain.
Petitioners issued several checks to respondent as payment for oil and fuel products. One of these is FEBTC check no. 704227 dated June 4, 1991 in the amount of P58,237.75, as payment for gasoline and oil products procured during the period May 2 to 15, 1991. Said check was dishonored by the bank upon presentment for payment for being drawn against insufficient funds. Respondent sent a demand letter dated June 21, 1991 to petitioners demanding that they make good the check or pay the amount thereof, to no avail.
Information for BP 22 violation was filed against petitioners before the RTC
At the trial, the prosecution presented Fabian Mendez, Jr., the private complainant, and Mulry Mendez. They testified that FEBTC check no. 704227 and other checks in the amount of P235,387.33 were dishonored upon presentment for payment to the bank and that they called petitioners‘ attention regarding the matter. They sent a demand letter to petitioners asking them to make good the check or pay the value thereof, but petitioners did not heed the request.
The defense presented petitioner Marciano Tan and Isidro Tan as witnesses. In his testimony, Marciano averred that he cannot be held liable for violation of B.P. 22 because the amount subject of the check had already been extinguished by offset or compensation against the collection from ticket sales from the booking offices. He presented a memorandum dated June 10, 1991 showing the return to respondent of various unencashed checks in the total amount of P66,839.25 representing remittance of ticket sales
On rebuttal, respondent disputed petitioners‘ claim of payment through offset or compensation. He claimed that the amount of the four unencashed checks totaling P66,839.25 could not have offset the amount of the dishonored checks since petitioners‘ total obligations at that time had already reached P906,000. Moreover, even if compensation took place, it should have been applied to an alleged earlier obligation of P235,387.33. Respondent also claimed that compensation did not take place as there was no application of payment made by the petitioners in their memorandum dated June 10,1991.
RTC convicted the petitioners. CA affirmed.
Issue: W/N the petitioners are guilty Ruling: Yes. Guilty. All the elements of BP 22 are present in this case. Petitioner Marciano admitted that he drew the subject check as payment for the fuel and oil products of respondents. He knew at that time that there were no sufficient funds to cover the check because he had uncollected receivables.
The law has made the mere act of issuing a bum check a malum prohibitum. The gravamen of the offense under this law is the act of issuing a worthless check or a check that is dishonored upon its presentment for payment. Thus, even if there had been payment, through compensation or some other means, there could still be prosecution for violation of B.P. 22. Court of Appeals affirmed the findings of the trial court that the alleged compensation is not supported by clear and positive evidence. Petitioners‘ defense of compensation is unavailing because petitioners did not clearly specify in the memorandum which dishonored check is being offset. Applying Article 1289 in relation to Article 1254 of the Civil Code, the unencashed checks amounting to P66,839.25 should have been applied to the earlier dishonored check amounting to P235,387.33 which is more onerous than the subject check amounting to only P58,237.75. We also note that no compensation can take place between petitioners and respondent as respondent is not a debtor of petitioners insofar as the two checks representing collections from the Baao ticket sales are concerned. Article 1278 of the Civil Code requires, as a prerequisite for compensation, that the parties be mutually and principally bound as creditors and debtors. Finally, while we sustain the conviction of petitioners, we deem it appropriate to modify the penalties imposed. Supreme Court Administrative Circular No. 12-2000, as clarified by Administrative Circular No. 13-2001, established a rule of preference in imposing penalties in B.P. 22 cases. Section 1 of B.P. 22 imposes the following alternative penalties for its violation, to wit: (a) imprisonment of not less than 30 days but not more than one year; or (b) a fine of not less than but not more than double the amount of the check which fine shall in no case exceedP200,000; or (c) both such fine and imprisonment at the discretion of the court. The clear tenor and intention of Administrative Circular No. 12-2000 is not to remove imprisonment as an alternative penalty, but to lay down a rule of preference in the application of the penalties provided for in B.P. 22. Where the circumstances of the case, for instance, clearly indicate good faith or a clear mistake of fact without taint of negligence, the imposition of a fine alone may be considered as the more appropriate penalty. In this case, we note that petitioners had exerted efforts to settle their obligations. The fact of returning the unencashed checks to respondent indicates good faith on the part of petitioners. Absent any showing that petitioners acted in bad faith, the deletion of the penalty of imprisonment in this case is proper Svendsen v. People Facts:
Cristina Reyes (Reyes) extended a loan to James Svendsen (Svendsen) in the amount of P200,000, to bear interest at 10% a month. After Svendsen had partially paid his obligation, he failed to settle the balance which had reached P380,000 inclusive of interest.
Cristina thus filed a collection suit against petitioner, which was eventually settled when petitioner paid herP200,000 and issued in her favor an International Exchange Bank check postdated February 2, 1999 in the amount of P160,000 representing interest. The check was cosigned by one Wilhelm Bolton
The check was dishonored. DAIF.
Cristina, through counsel, thus sent a letter to petitioner by registered mail informing him that the check was dishonored by the drawee bank, and demanding that he make it good within five (5) days from receipt. No avail.
Cristina filed a complaint against Svendsen and his co-signatory to the check, Bolton, for violation of B.P. Blg. 22. An information was filed before the MeTC.
MeTC forund Svendsen guilty. Bolton remained at large so the trial court never acquired jurisdiction over him. RTC and CA affirmed.
Petitioner argues that the appellate court erred in finding that the first element of violation of B.P. Blg. 22 – the making, drawing, and issuance of any check "to apply on account or for value" – was present, as the obligation to pay interest is void, the same not being in writing and the 10% monthly interest is unconscionable; in holding him civilly liable in the amount of P160,000 to private complainant, notwithstanding the invalidity of the interest stipulation; and in violating his right to due process when it convicted him, notwithstanding the absence of proof of receipt by him of a written notice of dishonor.
Issue: W/N the petitioner is guilty Ruling: Not guilty. Petitioner admits having issued the postdated check to Cristina. The check, however, was dishonored when deposited for payment in Banco de Oro due to DAIF. Hence, the first and the third elements of BP 22 are present in the case. However, the evidence for the prosecution failed to prove the second element. While the registry receipt, which is said to cover the letter-notice of dishonor and of demand sent to petitioner, was presented, there is no proof that he or a duly authorized agent received the same. Receipts for registered letters including return receipts do not themselves prove receipt; they must be properly authenticated to serve as proof of receipt of the letters. Not only must there be a written notice of dishonor or demand letters actually received by the drawer of a dishonored check, but there must also be proof of receipt thereof that is properly authenticated, and not mere registered receipt and/or return receipt. Not so important in the svendsen ruling: Petitioner is civilly liable, however. For in a criminal case, the social injury is sought to be repaired through the imposition of the corresponding penalty, whereas with respect to the personal injury of the victim, it is sought to be compensated through indemnity, which is civil in nature. The decision of the MeTC, which was affirmed on appeal by the RTC and the appellate court, ordering petitioner "to pay private complainant Cristina C. Reyes civil indemnity in the total amount of P160,000 representing his civil obligation covered by subject check," deserves circumspect examination, however, given that the obligation of petitioner to pay 10% interest per month on the loan is unconscionable and against public policy. While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905, nothing therein grants lenders carte blanche to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. Stipulations authorizing such interest are contra bonos mores, if not against the law.
They are, under Article 1409 of the New Civil Code, inexistent and void from the beginning. The interest rate of 10% per month agreed upon by the parties in this case being clearly excessive, iniquitous and unconscionable cannot thus be sustained. This Court deems it fair and reasonable then, consistent with existing jurisprudence, to adjust the civil indemnity toP16,000, the equivalent of petitioner‘s unpaid interest on the P200,000 loan at 12% percent per annum as of February 2, 1999, the date of the check, plus 12% per annum interest to be computed from April 29, 1999, the date of judicial demand (date of the filing of the Information) up to the finality of this judgment. After the judgment becomes final and executory until the obligation is satisfied, the total amount due shall bear interest at 12% per annum.
Walter Wilkie v. Atty. Limos (admin case) Facts:
Wilkie engaged the services of respondent regarding his intention of adopting his wife‘s nephew, Reynal Alsaen Taltalen.
Notwithstanding their lawyer and client relationship, on March 30, 2003, respondent borrowed money from complainant in the amount of P250,000.00. The loan agreement was evidenced by a Contract of Loan with a stipulation of interest in the amount of 24% per annum and that respondent will issue two (2) post dated checks representing the principal amount of P250,000.00 and the interest in the amount of P60,000.00.
When the checks became due, complainant deposited the same to his account at Equitable PCI Bank but to his surprise and dismay, the checks were returned as they were drawn against insufficient funds. Despite demands made, respondent failed to pay her obligation so criminal complaints were filed against respondent before Branch 2,Municipal Trial Court of San Fernando City, La Union.
A Complaint dated April 27, 2005 initially filed with the Integrated Bar of the Philippines (IBP), La Union Chapter, and forwarded to the IBP, National Office in Pasig City, by Mr. Walter Wilkie against Atty. Sinamar E. Limos.
respondent failed to file an answer.
The Board of Governors of the IBP passed a resolution reprimanding Atty. Limos with a stern warning that a repetition of similar conduct will be dealt with more severely
The Commission on Bar Discipline transmitted the notice of resolution to the SC
Notably, the transmittal included the letter dated December 11, 2006 of the respondent explaining her failure to attend the hearing and pleading for the consideration of the members of the IBP Board of Governors. According to respondent, she was not able to attend the mandatory conference/hearing because she was physically unfit at that time. Her office staff whom she relied upon to receive communications for the office went on leave without her knowledge and she was made to believe that the administrative complaint would be withdrawn in view of the Affidavit of Desistance dated August 24, 2005 executed by complainant. Respondent claimed that her loan from complainant was actually an accommodation she extended in behalf of a client, Hilario Inocencio. She issued the postdated checks on the belief that Inocencio will send her the funds to cover the said checks pursuant to their agreement. To this day, however, Inocencio had not complied with his promise in spite of the loan having been fully paid by respondent
on August 21, 2005 to the complainant who had filed cases against her for violation of BP 22. Inocencio‘s demise had left her without any recourse. To support her allegations, respondent attached to her letter the Affidavit of Desistance and the Order of the MTC, San Fernando, La Union, dated August 31, 2005 dismissing the criminal cases for violation of BP 22 against her (respondent). Issue: W/N Atty Limos should be subject to administrative discipline Ruling: Yes. We have held that the issuance of checks which were later dishonored for having been drawn against a closed account indicates a lawyer‘s unfitness for the trust and confidence reposed on her. It shows a lack of personal honesty and good moral character as to render her unworthy of public confidence. The issuance of a series of worthless checks also shows the remorseless attitude of respondent, unmindful to the deleterious effects of such act to the public interest and public order. Respondent, however, to secure her exoneration from the consequence of her act in issuing worthless checks, heavily relies on the complainant‘s Affidavit of Desistance dated August 24, 2005. But such reliance is misplaced because while the complainant filed his affidavit with the trial court, he did not do the same thing in this case. In any event, the Court has consistently frowned upon the desistance of complainants because of legal and jurisprudential injunction. Section 5, Rule 139-B of the Rules of Court provides in part: Sec. 5. Service or dismissal. – . . . . No investigation shall be interrupted or terminated by reason of the desistance, settlement, compromise, restitution, withdrawal of the charges, or failure of the complainant to prosecute the same. Accordingly, an administrative sanction on the respondent is warranted. We disagree, however, with the recommended sanction of reprimand by the IBP Board of Governors for being not commensurate to the gravity of the wrong committed by respondent. Under Sec. 27, Rule 138 of the Rules of Court, a member of the Bar may be disbarred or suspended from his office as attorney by the Supreme Court for any deceit, malpractice, or other gross misconduct in such office, grossly immoral conduct, or by reason of his conviction of a crime involving moral turpitude, or for any violation of the oath which he is required to take before admission to practice, or for a willful disobedience of any lawful order of a superior court, or for corruptly or willfully appearing as an attorney for a party to a case without authority to do so. The criminal cases filed by the complainant have been dismissed and this is the first time a complaint of such nature has been filed against the respondent. Under these circumstances, the Court rules and so holds that a suspension of three months from the practice of law would be sufficient sanction on the respondent.
Mitra v. People Facts:
Petitioner Eumelia R. Mitra (Mitra) was the Treasurer, and Florencio L. Cabrera, Jr. (now deceased) was the President, of Lucky Nine Credit Corporation (LNCC), a corporation engaged in money lending activities.
Between 1996 and 1999, private respondent Felicisimo S. Tarcelo (Tarcelo) invested money in LNCC. As the usual practice in money placement transactions, Tarcelo was issued several checks equivalent to the amounts he invested plus the interest on his investments. The checks, signed by Mitra and Cabrera, were issued by LNCC to Tarcelo.
Checks were dishonored. Reason: account closed
Seven informations for violation of BP 22 were filed before the MTCC.
MTCC found Mitra and Cabrera guilty
Mitra and Cabrera appealed to the Batangas RTC contending that: they signed the seven checks in blank with no name of the payee, no amount stated and no date of maturity; they did not know when and to whom those checks would be issued; the seven checks were only among those in one or two booklets of checks they were made to sign at that time; and that they signed the checks so as not to delay the transactions of LNCC because they did not regularly hold office there
RTC affirmed MTCC decision. Cabrera died. CA dismissed Mitra‘s petition for review
Issue: W/N Mitra is guilty Ruling: Guilty Mitra posits in this petition that before the signatory to a bouncing corporate check can be held liable, all the elements of the crime of violation of BP 22 must first be proven against the corporation. The corporation must first be declared to have committed the violation before the liability attaches to the signatories of the checks. The Court finds Itself unable to agree with Mitra‘s posture. The third paragraph of Section 1 of BP 22 reads: "Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act." This provision recognizes the reality that a corporation can only act through its officers. Hence, its wording is unequivocal and mandatory – that the person who actually signed the corporate check shall be held liable for a violation of BP 22. This provision does not contain any condition, qualification or limitation. Mitra alleges that there was no proper service on her of the notice of dishonor and, so, an essential element of the offense is missing. This contention raises a factual issue that is not proper for review. It is not the function of the Court to re-examine the finding of facts of the Court of Appeals. Our review is limited to errors of law and cannot touch errors of facts unless the petitioner shows that the trial court overlooked facts or circumstances that warrant a different disposition of the case or that the findings of fact have no basis on record. Hence, with respect to the issue of the propriety of service on Mitra of the
notice of dishonor, the Court gives full faith and credit to the consistent findings of the MTCC, the RTC and the CA. Findings of the lower court: The defense postulated that there was no demand served upon the accused, said denial deserves scant consideration. Positive allegation of the prosecution that a demand letter was served upon the accused prevails over the denial made by the accused. Though, having denied that there was no demand letter served on April 10, 2000, however,the prosecution positively alleged and proved that the questioned demand letter was served upon the accused on April 10, 2000, that was at the time they were attending Court hearing before Branch I of this Court. In fact, the prosecution had submitted a Certification issued by the other Branch of this Court certifying the fact that the accused were present during the April 10, 2010 hearing. With such straightforward and categorical testimony of the witness, the Court believes that the prosecution has achieved what was dismally lacking in the three (3) cases of Betty King, Victor Ting and Caras – evidence of the receipt by the accused of the demand letter sent to her. The Court accepts the prosecution‘s narrative that the accused refused to sign the same to evidence their receipt thereof. To require the prosecution to produce the signature of the accused on said demand letter would be imposing an undue hardship on it. As well, actual receipt acknowledgment is not and has never been required of the prosecution either by law or jurisprudence. With the notice of dishonor duly served and disregarded, there arose the presumption that Mitra and Cabrera knew that there were insufficient funds to cover the checks upon their presentment for payment.
Llamado vs CA (co accused Pascual) The accused Llamado was the treasurer of the Pan Asia Finance Corporation. The private complainant Leon Gaw delivered to accused the amount of P180,000.00, with the assurance that it will be repaid on November 1983, with 12% interes, plus a share in the profits of the corporation. Upon delivery of the money, the accused Ricardo Llamado signed and handed over a Philippine Trust Company postdated check to the private complainant as payment for the cash delivered by the latter. Upon presentment of the check, the drawee bank dishonored the same due to a stop payment order and insufficiency of funds. The complainant went to the secretary of the accused, demanding the replacement of the check, but such was unheeded. The accused then made an arrangement for payment with the complainant, but did not materialize as well. The complainant filed BP 22 cases against the accused. The accused contended that it is a company practice that he, as treasurer, would pre sign checks for the immediate disbursements of funds for the company. He further alleged that it was his co – accused Pascual who negotiated the same to the complainant. The trial court convicted the accused, hence the recourse with the SC. WON the accused may be held guilty under BP 22, despite the fact that he merely pre signed the checks and was not the one who negotiated the same. (1.) No, the lack of involvement in the transaction is not a defense in BP 22.He made himself succeptible to be prosecuted under BP 22 by pre signing the checks. As Treasurer of the corporation who signed the check in his capacity as an officer of the corporation, lack of involvement in the negotiation for the transaction is not a defense. (2.) The petitioner argued that the check was not negotiated for valuable consideration. The court disagreed, holding that it was negotiated for the amount of 180,000 pesos. (3.) The petitioner‘s contention that the check was just a mere guarantee, hinged upon the condition that the cash of the complainant would be returned if the partnership does not materialize does not matter. To determine the reason for which checks are issued, or the terms and conditions for their issuance, will greatly erode the faith the public reposes in the stability of commercial paper.
Petitioner's argument that he should not be held personally liable for the amount of the check because it was a check of the Pan Asia Finance Corporation and he signed the same in his capacity as Treasurer of the corporation, is also untenable. The third paragraph of Section 1 of BP Blg. 22 states: Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.
PNB v. HON. SE, JR. Facts:
Noah‘s Ark Sugar Refinery issued 5 warehouse receipts (quedans). 2 of the quedans were negotiated and endorsed to Ramos, while the other 3, to Zoleta. Ramos and Zoleta used these 5 quedans as security for 2 loan agreements from PNB. The said quedans were endorsed to PNB. When Ramos and Zoleta failed to pay the loans, PNB demanded that Noah‘s Ark deliver the sugar stocks. Noah‘s Ark refused. PNB filed with the RTC a verified complaint against Noah‘s Ark and 3 of its officers (sole proprietors) for Specific Performance with Damages and Application for Writ of Attachment. RTC denied the Application for Preliminary Attachment.
Defendants filed an answer with counterclaim and third party complaint saying that they are the owners of sugar stocks because they agreed to sell to the persons who deposited said sugar stocks the total volume of sugar covered by the quedans; however the checks issued for the payment were dishonored (payment stopped.) They averred that the vendees and the first endorsers did not acquire ownership therefore the 2nd endosers did not acquire better right than the original owners/1st endorsers. The originals owners said that the sale were merely simulated as it is a part of a banking scheme by Noah‘s Ark PNB filed for motion of summary judgment. RTC denied. CA reversed RTC and ordered the RTC to render summary judgment in favor of PNB. RTC dismissed the complaint against private respondents for lack of cause of action and likewise dismissed private respondents‘ counterclaim against PNB and 3rd party complaint, as well as the 3rd party defendant‘s counterclaim PNB filed an appeal with the SC by way of Petition for Review on Certiorari SC ordered private respondents to deliver the sugar stocks to PNB. Private Respondents filed before the RTC an Omnibus Motion seeking deferment of the proceedings until private respondents are heard on their claim for warehouseman‘s lien. RTC granted said motion and set reception of evidence on their claim for warehouseman‘s lien. PNB seeks the nullification of the orders.
Issue: W/N the orders of the RTC judge is legal as they were issued after the SC had denied with finality private respondents‘ contention that the PNB could not compel them to deliver the stocks of sugar in their warehouse covered by the endorsed quedans or pay the value of the said stocks of sugar. Ruling: Imperative is the right of the warehouseman to demand payment of his lien at this juncture, because, in accordance with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods by surrendering possession thereof. In other words, the lien may be lost where the warehouseman surrenders the possession of the goods without requiring payment of his lien, because a warehouseman‘s lien is possessory in nature. SC failed to see any taint of abuse of discretion on the part of the public respondent in issuing the questioned orders which recognized the legitimate right of Noah‘s Ark, after being declared as warehouseman, to recover storage fees before it would release to the PNB sugar stocks covered by the five (5) Warehouse Receipts. The prior SC resolution did not preclude private respondents‘ unqualified right to establish its claim to recover storage fees which is recognized under Republic Act No. 2137. Neither did the Court of Appeals‘ decision restrict such right. The SC certainly did not foreclose private respondents‘ inherent right as warehouseman to collect storage fees and preservation expenses as stipulated n the face of each of the Warehouse Receipts and as provided for in the Warehouse Receipts Law (R.A. 2137.) No separate action is needed to enforce the payment of storage fees. He may enforce the lien before delivering the sugar stocks.
Gonzales v. Go Tiong Facts: Go Tiong owned a rice mill and a warehouse. He obtained a license to engage in the business of a bonded warehouseman. To secure the performance of his obligations, Luzon Surety Co. executed a Guaranty Bond. Go Tiong insured the warehouse and the palay deposited with Alliance Surety and Insurance Company. Before obtaining his license, Go Tiong received palay deposits from Gonzales for which he issued ordinary receipts. After obtaining his license, Go Tiong again received deposits from Gonzales. Gonzales demanded the value of his deposits but was told by Go Tiong to come back after 2 days. Ganzales did, but was asked again to come back. A few days later, the warehouse was burned to the ground. Prior to the fire, there were deposits from other clients. A total 5,847 sacks of palay were deposited – in excess of the 5000 sacks allowed under his license Gonzales filed a claim with the Bureau of Commerce but he withdrew such claim. Gonzales filed an action against Go Tiong and Luzon Surety for the value of his palay plus damages. Gonzales later renewed his claim with the Bureau of Commerce
While action was pending, the entered into an amicable settlement but Go Tiong still failed to pay Gonzales so Gonzales pushed through the court action.
Issues: W/N the claim was covered by the Civil Code, not the Bonded Warehouse Law since the receipts issued were ordinary receipts W/N the fire extinguished liability because the deposits were gratuitous Ruling: COVERED BY BONDED WAREHOUSE LAW The kind or nature of the receipts issued by him for the deposits is not very material much less decisive. Though it is desirable that receipts issued by a bonded warehouseman should conform to the provisions of the Warehouse Receipts Law, said provisions in our opinion are not mandatory and indispensable in the sense that if they fell short of the requirements of the Warehouse Receipts Act, then the commodities delivered for storage become ordinary deposits and will not be governed by the provisions of the Bonded Warehouse Act. Under Section 1 of the Warehouse Receipts Act, one would gather the impression that the issuance of a warehouse receipt in the form provided by it is merely permissive and directory and not obligatory: Bonded Warebouse Act as amended permits the warehouseman to issue any receipt, thus: . . . . "receipt" as any receipt issued by a warehouseman for commodity delivered to him. As to the contention that the deposits made by the plaintiff were free because he paid no fees therefor, it would appear that Go Tiong induced plaintiff to deposit his palay in the warehouse free of charge in order to promote his business The defense that the palay was destroyed by fire and thus loss of the thing exempts the obligor in a contract of deposit from depositing the goods is not a proper defense. The fact that Go Tiong exceeded the limit of his authorized deposit militates against his defense of non-liability. The Luzon Surety claims that the amicable settlement by and between Gonzales and Go Tiong constituted a material alteration of its bond, thereby extinguishing and discharging its liability. It is evident, however, that while there was an attempt to settle the case amicably, the settlement was never consummated Consolidated Terminals Inc. v. Artex Development Facts: CTI received deposits of raw cotton and agreed to keep them Luzon Brokerage Corporation until the consignee thereof, Paramount Textile Mills, Inc., had opened the corresponding letter of credit in favor of shipper, Adolph Hanslik Cotton of Corpus Christi, Texas By virtue of a forged permit to deliver imported goods, purportedly issued by the Bureau of Customs, Artex was able to obtain delivery of the bales of cotton after paying storage and handling charges. At the time the merchandise was released to Artex, the letter of credit had not yet been opened and the customs duties and taxes due on the shipment had not been paid CTI sought to recover possession of the cotton by means of a writ of replevin. The writ could not be executed so CTI then filed an amended complaint by transforming its original complaint into an action for the recovery from Artex. CTI in its affidavit for manual delivery of personal property and in its original complaint alleged that Artex acquired the cotton from Paramount Textile Mills, Inc., the consignee. Artex alleged in its motion to dismiss that it was not shown in the delivery permit that Artex was the entity that presented that document to the CTI. Artex further averred that it returned the cotton to Paramount Textile Mills, Inc. when the contract of sale between them was rescinded because the cotton did not conform to the stipulated specifications as to quality RTC judge sustained Artex‘s motion to dismiss which CTI did not oppose
CTI contends that Artex acted wrongfully in depriving CTI of the possession of the merchandise because Artex presented a falsified delivery permit Issue: W/N CTI, as a warehouseman, has a cause of action for repossession against Artex Ruling: NO CAUSE OF ACTION Its amended complaint does not clearly show that, as warehouseman, it has a cause of action for damages against Artex. The real parties interested in the bales of cotton were Luzon Brokerage Corporation as depositor, Paramount Textile Mills, Inc. as consignee, Adolph Hanslik Cotton as shipper and the Commissioners of Customs and Internal Revenue with respect to the duties and taxes. These parties have not sued CTI for damages or for recovery of the bales of cotton or the corresponding taxes and duties.
Si Cong Bieng vs HSBC Certain negotiable warehouse receipts were pledge by Otto Ranft to the defendant HSBC to secure the payment of his preexisting debts to the latter. The WH receipts covered bales of hemp. However, Ranft died on June 26, 1926. Before dying, Ranft contracted with the plaintiff for the purchase of hemp, the payment of which shall be done after its delivery. The hemp purchased from the plaintiff were not paid on account of Ranft‘s death, hence it sought to recover the goods. However, it discovered that the goods were deposited with the defendant HSBC. The plaintiff sought a claim in the intestate proceedings of the decedent. The plaintiff then after sought a claim against the defendant for the return of the quedan (WH receipt) covering the bales of hemp. The bank argued that it was a holder of the quedans in due course. The RTC held in favor of the plaintiff, holding that the bank knew that the quedans and the goods covered by it were not owned by Ranft when the latter indorsed the quedans to it. WON the negotiation is improper. (1.) No, the negotiation of receipts is not impaired by fraud, mistake or duress or done by the person in breach of his duty, provided that the present holder had no knowledge of the fraud, mistake or duress, AND have paid it in good faith an for value. (2.) With proper negotiation, the bank acquired the rights under sec. 41, such that it is acquired the title of the person who negotiated the receipt to it, and the title of the person to whose order the goods are deliverable. The bank is not responsible for the loss; the negotiable quedans were duly negotiated to the bank and as far as the record shows, there has been no fraud on the part of the defendant. Martinez vs PNB The estate of Rodriguez was indebted to PNB for the crop loan obtained by the estate for its sugar business. Subsequently, the administratrix of the estate indorsed in favor of the defendant bank (PNB) (2) quedans covering piculs of sugar deposited with Bogo – Medellin Milling.
The sugar piculs however were destroyed during the Japanese invasion. It was contended that the administratrix requested the bank to sell the sugar to prevent it from being lost due to the war, but the bank refused, hence the piculs were destroyed. The present administrator of the estate filed a complaint with the trial court against PNB for recovery of the sum of the sugar which was lost. The trial court dismissed the complaint, holding that the transfer of quedans to the PNB did not transfer ownership of the sugar to PNB, hence the said piculs were still owned by the estate and it must suffer the loss. WON the bank owned the piculs upon receipt of the quedans (1.) No, the sugar piculs were still owned by the estate. The quedans were just mere security for payment of the crop loan. Under the civil code art 2088, the mortgagee or pledgee does not become the owner of the property nor convert and appropriate such property to himself. The only remedy of the mortgagee or pledgee is to have the property sold in public auction and collect the proceeds thereof. (2.) The argument that the bank did not exercise due diligence in preserving the goods does not hold water on account that the cause for the loss is beyond the control of the bank, namely war. Dissent of Paras (1.) The bank is the owner of the quedans as well as the goods covered by it on account of the negotiation of the estate to it. the quedans were duly indorsed to the bank. Under sec 41 of the WH receipts law, the indorsee (person to whome the receipt is negotiated) acquires the following rights, to wit; a. title to the goods covered by the receipts b. the obligation of the WH man to hold the goods for him c. as if the latter contracted directly with the WH man. The bank acquired the ownership of the sugar covered by said quedans, hence the loss of the article should be borne by the defendant bank (2.) The fact that the quedans were made as security for the payment of a loan did not prevent the bank from acquiring ownership, since the only effect of the transfer was that the debtor could reacquire said ownership upon payment of his obligation. The relation of the pledgor and pledge in WH receipts is substantially similar with the relationship between the vendor and vendee, with right of repurchase. (pacto de retro?)
Roman vs Asia Banking Corp This case involves an insolvency proceeding of one Umberto De Poli. During trial, the petitioner Roman claimed a lien over bales of tobacco which are under the possession of De Poli. The respondent bank also claimed a right over such bales. It was discovered that the said bales were purchased by De Poli from Roman. The trial court held in favor of the bank, holding that Roman is vested with a vendor‘s lien over the goods and that such right is superior than that of the bank. It held that the bank is not a purchaser, but merely a pledgee.
WON the vendor‘s lien is superior than the right of the purchaser. (1.) No, the vendor‘s lien is not superior than the right of the purchaser. Under sec. 49 of the WH receipts law, no seller's lien or right of stoppage in transitu shall defeat the rights of any purchaser for value in good faith to whom such receipt has been negotiated. The term ―purchaser‖ includes the mortgagee and pledge, under sec 58 (a) of the said law. (2.) The receipt is negotiable. The doubt as to its negotiability is of no moment. A warehouse receipt, like any other document, must be interpreted according to its evident intent. Even if it is non – negotiable, the failure of the warehouse man to mark it as ―non – negotiable‖ can make the receipt negotiable provided that the holder of such purchased it for value and supposed it as to be negotiable. American Foreign Bank Corp vs Herridge Umberto De Poli, a warehouseman, issued a warehouse receipt covering several bales of ―Cayagan Tobacco‖. On the face of the receipt was written ―I certify that I am the owner of the merchandise described herein‖. De Poli then indorsed it to the petitioner bank for security for a bank overdraft. De Poli was thenafter became insolvent. The claimant bank motioned with the insolvency court to order the assignee Herridge to deliver the warehouse receipt to it. Herridge denied, arguing that the bank is not the owner of the receipt, nor has a lien over it. Herrdige further asserted that the warehouse receipt was issued to the bank only to serve as a security of the insolvent‘s overdraft. (There was a question as to the identity of the bales of tobacco. The warehouse receipt stated therein ―Cagayan Tobacco, while the petitioner bank claimed ―Isabela Tobacco) WON the receipt is non negotiable due to the difference between the description of the goods in the receipt and the goods that are actually in the warehouse. (1.) The assignee merely stands in the shoes of the insolvent. His duty is to protect the creditor and he is not in the position to act like a judgment creditor with an unsatisfied lien. He is merely an assignor. (2.) As to the discrepancy, De Poli explained that the difference only pertained to the grade of the tobacco, and not the identity. The intention of the parties to the transaction must prevail against the technical description of the tobaccos involved. The receipt is negotiable. (2.) The negotiation of De Poli of the receipt in favor of the bank gave rise to the right of ownership of the bank over the bales of tobacco. The consignee was ordered to deliver the bales of tobacco to the bank, upon payment of the said bank of the liens and charges thereon. BPI et al vs Herridge Umberto de Poli was engaged in the business of exporting tobacco, hemp and maguey. De Poli sustained accounts with the petitioner banks from which De Poli would issue checks to purchase the said goods.
The goods are then sent to his warehouse and De Poli would indorse warehouse receipts in favor of the petitioner to serve as security. De Poli was subsequently declared insolvent. An assignee of the insolvent was appointed. During the insolvency proceeding, various banks asserted ownership over the goods, as evidenced by warehouse receipts. Other creditors of De Poli argued that such receipts are not negotiable. The other creditors argued that the petitioner banks were made as indorsees of the receipts on account that the receipts were merely to secure the debts of De Poli, hence they are not the owners thereof. (The banks are preferred creditors) WON the receipts are negotiable (1.) Yes, they are negotiable. All the receipts complied with the requirements under Sec. 2. The receipt is not marked ―non – negotiable, and is properly indorsed by De Poli. As instruments of credit, warehouse receipts play a very important role in modern commerce and the present day tendency of the courts is towards a liberal construction of the law in favor of a bona fide holder of such receipts (2.) Section 58 provides that within the meaning of the Act ―to ―purchase‖ includes to take as mortgagee or ―pledgee‖ and ―purchaser‖ includes mortgagee and pledgee.‖
Kheng Hua Paper vs CA The Sea Land Service is a shipping company operating in the Ph. It received in its Hong Kong terminal a sealed container containing unsorted waste paper for shipment to the petitioner Kheng Hua Paper. Sea Land issued a bill of lading thereto. When the shipment arrived at Manila International Container Port, the Sea Land gave notice of such arrival to Kheng Hua, but the latter did not respond thereto. Consequently, the period within which Kheng Hua must discharge the shipment from the container expired. The shipment was only discharged after 481 days. It accrued demurrage charges. The plaintiff filed a collection suit and damages against Khen Hua. In its answer, Kheng Hua contended that 1. It purchased 50 metric tons of paper from Ho Kee Paper, and that the amount delivered was in excess (the remaining balance for shipment is 10 metric tons, and what was delivered was 20 metric tons) 2. The acceptance of Sea Land of the Shipment was in violation of Central Bank rules and Customs law. 3. That Sea Land has no cause of action against Kheng Hua on account that it was Ho Kee which contracted with them.
The RTC held in favor of Sea Land and ordered Kheng Hua to pay for the demurrage fees and litigation expenses. Upon appeal of Khen Hua, the CA affirmed the decision of the trial court. WON Kheng Hua accepted the bill of lading sent by Sea Land. (1.) Yes, it accepted the bill of lading. The petitioner admitted that it accepted the bill of lading right after the arrival of the shipment. It has been afforded the opportunity to scrutinize the contents of the bill. However, it informed Sea Land that it would not accept the shipment only after 481 days from the arrival of such. The petitioners inaction may be inferred as implied acceptance of the bill. (2.) A bill of lading has 2 functions: a.It‘s a receipt for the goods shipped. b.A contract by w/c the shipper (Ho Kee), carrier (SLSI) & consignee (Keng Hua) undertake specific responsibilities and obligations. Delivery & acceptance of a bill of lading, with full knowledge of its contents, gives rise to the presumption that the same was a perfected & binding contract. Both RTC & CA ruled that the bill of lading was a valid & perfected contract among the 3 parties. Sec. 17 of the bill of lading provided that the shipper & consignee were liable for the payment of demurrage charges for failure to discharge the shipment beyond the grace period, thus making Keng Hua liable.
Reliance Commodities vs Daewoo Industries Reliance Commodities and Daewoo entered into a contract of sale where Daewoo undertook to ship and deliver to Reliance several tons of pig iron. First contract was consummated but Daewoo fell short of 135.655 metric tons. However, Reliance‘s application for a letter of credit was denied by the China Banking Corporation for the reason that it has exceeded its foreign exchange allocation. Because of the failure to secure a letter of credit, Daewoo was forced to sell the merchandise to another buyer at a lower price. Reliance filed an action for damages against Daewoo for the recovery of the value of the short delivery of 135.655 metric tons of the merchandise. Daewoo filed a counterclaim, contending that Reliance was guilty of breach of contract when it failed to open a letter of credit as required in the second contract. Trial court ruled that Reliance is entitled to short delivery price. However, it also held that Reliance is liable for breach of contract for its failure to open a letter of credit. The decision of the trial court was affirmed by the Ca upon appeal.
WON the failure of the importer // seller (Reliance) to open a letter of credit makes it liable to the exporter // buyer (Daewoo) (1.) Yes, the importer‘s failure to secure a letter of credit in favor of the exporter renders the former liable for breach of contract. Reliance and Daewoo had a perfected contract. The failure of Reliance to open the appropriate letter of credit did not prevent the birth of the contract, and neither did such failure extinguish the contract. The opening of the latter of credit was a mere mode of payment which does not affect the already perfected contract. The opening of the letter of credit is not a condition precedent for the perfection of the contract. The contract between the parties had already sprung into legal existence and was enforceable.
Johannes Schuback vs CA The plaintiff Johannes Schuback was contracted by the defendant SJ trading for the purchase of spare parts for buses. Several purchase orders were sent by the defendant to the plaintiff. With this, Schuback managed to order and receive the parts from its suppliers and paid for it. Schuback notified the defendant to open a letter of credit in its favor. The defendant however did not respond to the request. Schuback made a formal demand for the opening of the LC, but to no avail, hence the present suit. The trial court held in favor of Schuback and ordered the defendant to pay actual damages and unearned profits. The CA, upon appeal, reversed the trial court decision, holding that there was not perfected contract between the parties. WON there exists a perfected contract between the parties.
(1.) Yes, there is a perfected contract between the parties. A contract of sale is perfected upon meeting of the minds between the parties as to the object and the price. Under Art. 1319 of the civil code, ―consent is manifested by meeting of the offer and acceptance as to the thing and the cause which constitutes the contract. In the present case, there is consent between the parties, the petitioner making its offer on Dec. 14 1981, while the respondent accepting it on Dec. 24, 1981. (2.) The opening of the latter of credit was a mere mode of payment which does not affect the already perfected contract. The opening of the letter of credit is not a condition precedent for the perfection of the contract.
Feati Bank and Trust vs CA Villaluz agreed to sell to Axel 2,000 cubic meters of lauan logs. On the arrangements made by the consignee, Security Pacific Bank of LA issued in favor of Villaluz a letter of credit for the purchase of the logs. The letter of credit was mailed to the Feati Bank and Trust Company with the instruction that it must ―forward the letter of credit to the beneficiary.‖ The logs were thereafter loaded on a vessel but Axel Christiansen refused to issue the certification required in paragraph 4 of the letter of credit despite the demands of Villaluz. The logs however were still shipped and received by consignee, to whom Christiansen sold the logs.
Because of the absence of the certification by Christiansen, the Feati Bank and Trust company refused to advance the payment on the letter of credit. Villaluz filed a case for specific performance against Christiansen and Feati Bank. Christiansen however left the PH and Villaluz filed an amended complaint making Feati Bank and Trust Company solidarily liable with Christiansen. Trial court held that Feati Bank was liable for refusing to negotiate the letter of credit despite lack of certification, considering that the letter of credit is irrevocable. The notifying bank, Feati Bank, by accepting the instructions from the issuing bank, assumed the very same undertaking as the issuing bank. The Court of Appeals affirmed the decision of the trial court thus this petition for review. WON a correspondent bank is to be held liable under the letter of credit despite non-compliance by the beneficiary with the terms thereof. (1.) No, the notifiying bank is not liable. The notifiying bank is only obligated to notify the seller of the existence of a letter of credit issued to his favor. A notifying bank is not a privy to the contract between the buyer and seller. In the present case, the petitioner‘s refusal to negotiate with Villaluz cannot be said to constitute a breach. Villaluz has no cause of action against the notifying bank for payment on account that the notifying bank is not the confirming bank. (2.) It is the confirming bank who may be compelled to pay by virtue of the letter of credit. (3.) An irrevocable letter of credit is different from a confirmed letter of credit. The latter cannot e revoked by the issuing bank without the consent of the buyer and the seller. A confirmed letter of credit pertains to the kind of obligations undertaken by the correspondent bank.
Prudential Bank vs IAC Philippine Rayon Mills entered into a contract with Nissho Corporation of Japan for the importation of textile machineries under a five-year deferred payment plan. To effect payment for said machineries, Philippine Rayon Mills opened a commercial letter of credit with the Prudential Bank in favor of Nissho. Against this letter of credit, drafts were drawn and issued by Nissho, which were all paid by the Prudential Bank through its correspondent in Japan. Two of these drafts were accepted by Philippine Rayon Mills while the others were not. Petitioner bank instituted an action for the recovery of the sum of money it paid to Nissho as Philippine Rayon Mills was not able to pay its obligations arising from the letter of credit. The respondent court ruled ten drafts were not presented to and accepted by Rayon Mills, hence no valid demand for payment may be made by Prudential Bank.
The petitioner bank however claims that the drafts were sight drafts which did not require presentment for acceptance to Philippine Rayon. WON presentment for acceptance of the drafts was indispensable to make Philippine Rayon liable thereon. (1.) No, presentment for acceptance is not necessary in on sight drafts. There is no need for acceptance as the issued drafts are sight drafts. Presentment for acceptance is necessary only in the cases expressly provided for in Section 143 of the Negotiable Instruments Law (NIL). The said section provides that presentment for acceptance must be made: (a) Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the instrument; or (b) Where the bill expressly stipulates that it shall be presented for acceptance; or (c) Where the bill is drawn payable elsewhere than at the residence or place of business of the drawee. In no other case is presentment for acceptance necessary in order to render any party to the bill liable. Obviously then, sight drafts do not require presentment for acceptance. (2.) An irrevocable letter of credit is different from a confirmed letter of credit. The latter cannot e revoked by the issuing bank without the consent of the buyer and the seller. A confirmed letter of credit pertains to the kind of obligations undertaken by the correspondent bank.
Lee vs CA Charles Lee, as President of MICO, requested for a credit line with PBCom secured by several real estate mortgages which were all granted. Such was renewed by the issuance of several promissory notes The petitioner Lee and company executed Surety Agreements in favor of PBCom whereby the petitioners guaranteed the payment of overdrafts, promissory notes, LETTERS of CREDIT and TRUST RECIEPTS and other obligations of every kind and nature, for which MICO may be held accountable by PBCom. Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand for payment, but such remained unheeded. With this, PBcom extrajudicialy foreclosed the REMs. PBCom also demanded payment from the sureties. However, they refused to acknowledge their obligations to PBCom under the surety agreements.-
PBcom filed an action to render the sureties liable on account that MICO had no properties to answer for its obligations. Petitioners denied having received the loans, hence the foreclosure of the REMs were void. The trial court dismissed the suit, holding that PBcom failed to prove that the proceeds of the loan were ever delivered to MICO, hence there was absence of consideration. The CA reversed the decision of the trial court, holding that the controlling law is the NIL (sec 24) which provides that ―every negotiable instrument is presumed to have been issued for valuable consideration‖ The CA held that while the subject promissory notes and letters of credit issued by the PBCom made no mention of delivery of cash, it is presumed that said negotiable instruments were issued for valuable consideration. WON there is sufficient consideration with respect to the drafts issued in connection with the Letters of Credit. (1.) Yes, they were met with sufficient consideration. However, Letters of Credit and Trust Receipts are not negotiable instruments. But drafts issued in connection with the letters of credit are negotiable instruments. Hence, while the presumption of consideration under the negotiable instruments law may not necessarily be applicable to trust receipts and letters of credit, the presumption that the drafts drawn in connection with the letter of credit have sufficient consideration apply. PBCOM won.
