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Monthly Archives: March 2014

Metropolitan Bank and Trust Co. v. Court of Appeals [G.R. No. 88866. February 18, 1991]

FACTS

Various treasury warrants drawn by the Philippine Fish Marketing Authority were subsequently indorsed by Golden Savings. Petitioner allowed Golden Savings to withdraw thrice from uncleared treasury warrants as the former was exasperated over persistent inquiries of the latter after one week. Warrants were later dishonored by the Bureau of Treasury.

ISSUE

(a) Whether or not treasury warrants are negotiable instruments.

(b) Whether or not petitioner’s negligence would bar them for recovery.

RULING

(a) NO. The indication of fund as the source of the payment to be made on the treasury warrants makes the order or promise to pay “not unconditional” and the warrants themselves non-negotiable. Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were “genuine and in all respects what they purport to be,” in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants.

(b) YES. Metrobank was indeed negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw the proceeds thereof from his account with it. Without such assurance, Golden Savings would not have allowed the withdrawals; with such assurance, there was no reason not to allow the withdrawal. However, withdrawals released after the notice of the dishonor may be debited as it will result to unjust enrichment.

 

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Philippine Bank of Commerce v. Aruego [G.R. Nos. L-25836-37. January 31, 1981]

FACTS

Aruego signed instruments, labeled bills of exchange, as follows:

“JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO”

Philippine Bank of Commerce filed an action against Aruego. The sum sought to be recovered represents the cost of the printing of “World Current Events,” a periodical published by the latter. To facilitate the payment of the printing Aruego obtained a credit accommodation from the plaintiff. Thus, for every printing of the “World Current Events,” the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft against Philippine Bank of Commerce, said draft being sent later to the Aruego for acceptance. Aruego contends that he signed the drafts only as an accommodation party and as such, should be made liable only after a showing that the drawer is incapable of paying. He also contends that the drafts signed by him were not really bills of exchange but mere pieces of evidence of indebtedness because payments were made before acceptance.

 

ISSUES:

(a)   Whether or not the drafts may be considered negotiable bills of exchange.

(b)   Whether or not Aruego may be held liable only as an agent.

(c)   Whether or not an accommodation party is liable.

RULING

(a) YES. Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writting addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of exchange. The nature of acceptance is important only in the determination of the kind of liabilities of the parties involved, but not in the determination of whether a commercial paper is a bill of exchange or not.

(b) NO. For failure to disclose his principal, Aruego is personally liable for the drafts he accepted. Section 20 of the Negotiable Instruments Law provides that “Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability.”

(c) YES. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of the taking of the instrument knew him to be only an accommodation party. In lending his name to the accommodated party, the accommodation party is in effect a surety for the latter. He lends his name to enable the accommodated party to obtain credit or to raise money. He receives no part of the consideration for the instrument but assumes liability to the other parties thereto because he wants to accommodate another. In the instant case, Aruego signed as a drawee/acceptor. Under the Negotiable Instrument Law, a drawee is primarily liable. Thus, he should not have signed as an acceptor/drawee because in doing so, he became primarily and personally liable for the drafts.

 

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Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corp. [G.R. No. 74917. January 20, 1988]

FACTS

Equitable Bank drew six crossed manager’s check payable to certain member establishments of Visa Card. Subsequently, the checks were deposited with Banco De Oro (BDO) to the credit of its depositor. Following normal procedures and after stamping at the back of the checks the usual endorsements,BDOsent the checks for clearing through the Philippine Clearing House Corporation (PCHC). Accordingly, Equitable Banking paid the checks; its clearing account was debited for the value of the checks and BDO’s clearing account was credited for the same amount. Thereafter, Equitable Banking discovered that the endorsements appearing at the back of the checks and purporting to be that of the payees were forged and/or unauthorized or otherwise belong to persons other than the payees.Equitable Banking presented the checks directly to BDO for the purpose of claiming reimbursement from the latter. However, BDO refused to accept such direct presentation and to reimburse Equitable Banking for the value of the checks.

ISSUES

(a) Whether or not BDO is estopped from claiming that checks under consideration are non-negotiable instruments.

(b) Whether or not BDO can escape liability by reasons of forgery.

(c) Whether or not only negotiable checks are within the jurisdiction of PCHC.

 

RULING

(a) YES. BDO having stamped its guarantee of “all prior endorsements and/or lack of endorsements” is now estopped from claiming that the checks under consideration are not negotiable instruments. The checks were accepted for deposit by the petitioner stamping thereon its guarantee, in order that it can clear the said checks with the respondent bank. By such deliberate and positive attitude of the petitioner it has for all legal intents and purposes treated the said cheeks as negotiable instruments and accordingly assumed the warranty of the endorser when it stamped its guarantee of prior endorsements at the back of the checks. It led the said respondent to believe that it was acting as endorser of the checks and on the strength of this guarantee said respondent cleared the checks in question and credited the account of the petitioner. Petitioner is now barred from taking an opposite posture by claiming that the disputed checks are not negotiable instrument.

(b) NO. A commercial bank cannot escape the liability of an endorser of a check and which may turn out to be a forged endorsement. Whenever any bank treats the signature at the back of the checks as endorsements and thus logically guarantees the same as such there can be no doubt said bank has considered the checks as negotiable.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.

(c)  NO. PCHC’s jurisdiction is not limited to negotiable checks only. The term check as used in the said Articles of Incorporation of PCHC can only connote checks in general use in commercial and business activities. Thus, no distinction. Ubi lex non distinguit, nec nos distinguere debemus. Checks are used between banks and bankers and their customers, and are designed to facilitate banking operations. It is of the essence to be payable on demand, because the contract between the banker and the customer is that the money is needed on demand.

 

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Caltex Inc. v. Court of Appeals [G.R. No. 97753. August 10, 1992]

FACTS

On various dates, Security Bank and Trust Company (SBTC), through its Sucat Branch issued 280 certificates of time deposit (CTD) in favor of one Angel dela Cruz who later lost them.

Date of Maturity FEB. 23, 1984 FEB 22, 1982, 19____ 

This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000& 00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days. after date, upon presentation and surrender of this certificate, with interest at the rate of 16% per cent per annum. 

(Sgd. Illegible)

Caltex (Phils.) Inc. went to the SBTCSucat branch and presented for verification the CTDs declared lost by Angel dela Cruz alleging that the same were delivered to herein plaintiff “as security for purchases made with Caltex Philippines, Inc.” by said depositor. SBTC rejected Caltex’s demand and claim. Caltex sued SBTC but case was dismissed rationalizing that CTD’s are non-negotiable instruments.

ISSUE

Whether or not Certificate of Time Deposit (CTD) is a negotiable instrument.

RULING

YES. The CTDs in question undoubtedly meet the requirements of the law for negotiability under Section 1 of the Negotiable Instruments Law. The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself.  In the construction of a bill or note, the intention of the parties is to control, if it can be legally ascertained. Here, if it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in the documents, instead of having the word “BEARER” stamped on the space provided for the name of the depositor in each CTD.

While the writing may be read in the light of surrounding circumstances in order to more perfectly understand the intent and meaning of the parties, yet as they have constituted the writing to be the only outward and visible expression of their meaning, no other words are to be added to it or substituted in its stead.

 

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Philippine Education Co. Inc. v. Soriano [G.R. No. L-22405. June 30, 1971]

FACTS

Enrique Montinola sought to purchase from the Manila Post Office ten (10) money orders each payable to E.P. Montinola. After the postal teller had made out money orders, Montinola offered to pay for them with a private checks were not generally accepted in payment of money orders, the teller advised him to see the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave building with his own check and the ten(10) money orders without the knowledge of the teller. Upon discovery of the disappearance of the unpaid money orders, an urgent message was sent to all postmasters, and the following day notice was likewise served upon all banks, instructing them not to pay anyone of the money orders aforesaid if presented for payment. The Bank of America received a copy of said notice three days later. It debited appellant’s account with the same amount and gave it advice thereof by means of a debit memo.

ISSUE

Whether or not postal money orders are negotiable instruments.

RULING

NO. Postal money orders are not negotiable instruments. Our postal statutes were patterned after statutes in force in the United States. For this reason, ours are generally construed in accordance with the construction given in the United States to their own postal statutes, in the absence of any special reason justifying a departure from this policy or practice. The weight of authority in the United States is that postal money orders are not negotiable instruments, the reason behind this rule being that, in establishing and operating a postal money order system, the government is not engaging in commercial transactions but merely exercises a governmental power for the public benefit.It is to be noted in this connection that some of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the character of negotiable instruments. For instance, such laws and regulations usually provide for not more than one endorsement; payment of money orders may be withheld under a variety of circumstances.

 

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Sesbreño v. Court of Appeals [G.R. No. 89252. May 24, 1993]

FACTS

Petitioner Raul Sesbreño made a money market placement in the amount of P300,000.00 with the Philippine Underwriters Finance Corporation (“Philfinance”). The latter issued a Certificate of Confirmation of Sale “without recourse” from Delta Motors Corporation Promissory Note, a Certificate of securities indicating the sale to petitioner, with the notation that the said security was in custodianship of Pilipinas Bank, andpost-dated checks payable with petitioner as payee, Philfinance as drawer. Petitioner approached private respondent Pilipinas Bank and handed her a demand letter informing the bank that his placement with Philfinance had remained unpaid and outstanding, and that he in effect was asking for the physical delivery of the underlying promissory note. Pilipinas did not deliver the Note, nor any certificate of participation in respect thereof, to petitioner.

ISSUES

(a) Whether or not Pilipinas Bank is liable for its action.

(b)Whether or not non-negotiable instruments are transferrable.

RULING

(1) YES. Private respondent Pilipinas bank is liable for damages plus legal interest thereon by arising out of its breach of duty. By failing to deliver the Note to the petitioner as depositor-beneficiary of the thing deposited, Pilipinas effectively and unlawfully deprived petitioner of the Note deposited with it. Whether or not Pilipinas itself benefitted from such conversion or unlawful deprivation inflicted upon petitioner, is of no moment for present purposes.In the case at bar, the custodian-depositary bank Pilipinas refused to deliver the security deposited with it when petitioner first demanded physical delivery thereof. Instead of complying with the demand of the petitioner, Pilipinas purported to require and await the instructions of Philfinance, in obvious contravention of its undertaking under the DCR to effect physical delivery of the Note upon receipt of “written instructions” from petitioner Sesbreño.

(2) YES. A non-negotiable instrument may, obviously, not be negotiated; but it may be assigned or transferred, absent an express prohibition against assignment or transfer written in the face of the instrument. It is important to bear in mind that the negotiation of a negotiable instrument must be distinguished from the assignment or transfer of an instrument whether that be negotiable or non-negotiable. Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiated either by indorsement thereof coupled with delivery, or by delivery alone where the negotiable instrument is in bearer form. A negotiable instrument may, however, instead of being negotiated, also be assigned or transferred. The legal consequences of negotiation as distinguished from assignment of a negotiable instrument are, of course, different.

 

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Philippine Airlines v. Court of Appeals [G.R. No. L-49188. January 30, 1990]

FACTS

Amelia Tan was found to have been wronged by Philippine Air Lines (PAL). She filed her complaint in 1967. After ten (10) years of protracted litigation in the Court of First Instance and the Court of Appeals, Ms. Tan won her case. Almost twenty-two (22) years later, Ms. Tan has not seen a centavo of what the courts have solemnly declared as rightfully hers. Through absolutely no fault of her own, Ms. Tan has been deprived of what, technically, she should have been paid from the start, before 1967, without need of her going to court to enforce her rights. And all because PAL did not issue the checks intended for her, in her name. Petitioner PAL filed a petition for review on certiorari the decision of Court of Appeals dismissing the petition for certiorari against the order of the Court of First Instance (CFI) which issued an alias writ of execution against them. Petitioner alleged that the payment in check had already been effected to the absconding sheriff, satisfying the judgment.

ISSUE

Whether or not payment by check to the sheriff extinguished the judgment debt.

 

 

RULING

NO.  The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding sheriff.In the absence of an agreement, either express or implied, payment means the discharge of a debt or obligation in money and unless the parties so agree, a debtor has no rights, except at his own peril, to substitute something in lieu of cash as medium of payment of his debt. Strictly speaking, the acceptance by the sheriff of the petitioner’s checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt. The check as a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A check, whether a manager’s check or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3).

 

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