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Negotiable Instruments

By mjmanalo29 Jan 11, 2013 21002 Words
The Negotiable Instruments Law
Case Digest

Table of Contents
Associated Bank (Now Westmont Bank) vs. Vicente Henry Tan4
Banco De Oro vs. Equitable Banking Corp.6
BPI Family Bank vs. Edgardo Buenaventura, Myrna Lizardo And Yolanda Tica7
Natividad Gempesaw vs. The Honorable Court of Appeals and Philippine Bank Of Communications11
The Great Eastern Life Insurance Co. vs. Hongkong & Shanghai Banking Corporation and Philippine National Bank12
Jai Alai Corporation of the Philippines vs BPI14
Philippine Commercial International Bank (PCIB) vs Court of Appeals15
Philippine National Bank vs Hon.Romulo S.Quimpo17
Republic of the Phil vs Equitable Banking Corp18
Samsung Construction Philippines vs. Far East bank21
San Carlos Milling Co., Ltd. v. BPI and China Banking Corp.23
Traders Royal Bank vs. Radio Philippines Network Inc.25
Travel-On vs. Court of Appeals28
Tuazon vs Heirs of Bartolome Ramos31
United General Industries, Inc. vs Jose Paler and Jose De La Rama33
Westmont Bank vs Ong34
Republic Bank vs Mauricia T.Ebrada36
Firestone Tire & Rubber Company Of The Philippines vs. Ines Chaves & Co., Ltd., et al.38
Caltex (Philippines), Inc., vs. Court Of Appeals And Security Bank And Trust Company39
Consolidated Plywood Industries, Inc., Henry Wee, and Rodolfo T. Vergara vs. Ifc Leasing and Acceptance Corporation40
Juanita Salas vs. Hon. Court of Appeals and First Finance & Leasing Corporation42
Ramon K. Ilusorio vs. Hon. Court of Appeals, and the Manila Banking Corporation44
Myron C. Papa vs. A.U. Valencia and Co. Inc., Felix Peñarroyo, Sps. Arsenio B. Reyes & Amanda Santos, and Delfin Jao45
Hongkong and Shanghai Banking Corporation Limited vs. Cecilia Diez Catalan47
Ernestina Crisologo-Jose vs. Court of Appeals and Ricardo S. Santos, Jr.49
Far East Realty Investment Inc. vs. The Honorable Court of Appeals, Dy Hian Tat, Siy Chee and Gaw Suy An51
Luis S. Wong vs. Court of Appeals and People of The Philippines53
Michael A. Osmeña vs. Citibank, N.A., Associated Bank and Frank Tan55
Benito Sy Y Ong vs. People of the Philippines And Court of Appeals57
Far East Bank & Trust Company vs. Diaz Realty, Inc.59
Raul Sesbreño vs. Hon. Court of Appeals, Delta Motors Corporation and Pilipinas Bank62
Victoria Vda. De Gaston vs. Republic of the Philippines64
Spouses Natalio and Felicidad Salonga vs. Spouses Manuel and Nenita Concepcion and Florencia Realty Corporation66

Case 1:
Full Title:
ASSOCIATED BANK (Now WESTMONT BANK), petitioner,
vs.
VICENTE HENRY TAN, respondent.
G.R. No. 156940
December 14, 2004
Associated Bank (Now Westmont Bank) vs. Vicente Henry Tan
Story:
A post-dated check in the amount of 101,000.00 was deposited by Vicente Henry Tan, a businessman and a regular depositor-creditor of the Associated Bank, with the said bank which was issued to him by a certain Willy Cheng. The check was duly entered in his bank record in the amount of 297,000.00 from the original deposit of 196,000.00. Allegedly, upon advice and instruction of the bank that the check was already cleared and backed up by sufficient funds, Tan, on the same date, withdrew a sum of 240,000.00. The next day, because he has issued several checks to his business partners, Tan deposited the amount of 50,000.00, making the existing balance 107,793.45. However, his suppliers and business partners went back to him declaring that the checks he issued bounced for insufficiency of funds. Thereafter, Tan, thru his lawyer, informed the bank to take positive steps regarding the matter for he has adequate and sufficient funds to pay the amount of the subject checks. Nonetheless, the bank did not bother nor offer any apology regarding the incident. Consequently, Tan, as plaintiff, sued the bank for damages.

Issue:
Whether or not the petitioner, which is acting as a collecting bank, has the right to debit the account of its client for a check deposit which was dishonored by the drawee bank.

Decision:
While banks are granted by law the right to debit the value of a dishonored check from a depositor’s account, they must do so with the highest degree of care, so as not to prejudice the depositor unduly. The fiduciary nature of banking, previously imposed by case law, is now enshrined in Republic Act No. 8791 or the General Banking Law of 2000. Section 2 of the law specifically says that the State recognizes the “fiduciary nature of banking that requires high standards of integrity and performance.” Did petitioner treat respondent’s account with the highest degree of care? From all indications, it did not. It is undisputed -- nay, even admitted -- that purportedly as an act of accommodation to a valued client, petitioner allowed the withdrawal of the face value of the deposited check prior to its clearing. That act certainly disregarded the clearance requirement of the banking system. Such a practice is unusual, because a check is not legal tender or money and its value can properly be transferred to a depositor’s account only after the check has been cleared by the drawee bank. Under ordinary banking practice, after receiving a check deposit, a bank either immediately credit the amount to a depositor’s account; or infuse value to that account only after the drawee bank shall have paid such amount. Before the check shall have been cleared for deposit, the collecting bank can only “assume” at its own risk -- as herein petitioner did -- that the check would be cleared and paid out. Reasonable business practice and prudence, moreover, dictated that petitioner should not have authorized the withdrawal by respondent of P240,000 on October 1, 1990, as this amount was over and above his outstanding cleared balance of P196,793.45. Hence, the lower courts correctly appreciated the evidence in his favor.

Case 2:
Full Title:
Banco De Oro vs. Equitable Banking Corp.
157 SCRA 188
Jan. 20, 1988

Story:
Six crossed Manager’s checks which are payable to member establishments of Visa Card were drawn by Banco de Oro. These were deposited to Aida Trencio’s account with Equitable Bank. The checks were sent for clearing through Philippine Clearing House Corporation (PCHC). These were cleared and paid by Banco de Oro. Later on, Banco de Oro discovered that the endorsements at the back of the checks were forged and unauthorized. With this reason, Banco de Oro presented the checks to Equitable Bank for reimbursement but the latter refused. So, Banco de Oro filed a case against Equitable Bank.

Issue:
Whether or not BDO can collect reimbursement from Equitable Bank

Decision:
Banco de Oro contends that PCHC did not have the authority because the clearing rules only apply to genuinely negotiable checks. However the Supreme Court ruled that “checks” as used in the PCHC Articles of Incorporation refers to checks in general use in commercial and business activities so it cannot be conceived to be limited to negotiable checks only. Furthermore, the Court said, the involvement of Oro and Equitable in the clearing operations of PCHC is an indication of their submission to its jurisdiction. In addition to this, the act of Oro stamping its guarantee in order to clear the checks with Equitable shows that Oro, for all legal intents and purposes, treated the checks as negotiable and accordingly assumed the warranty of the endorser. Therefore Oro cannot deny its liability as it assumed the liability of an endorser. The Court continued “Thus we hold that while the drawer (Equitable) generally owes no duty of diligence to the collecting bank (Oro), the law imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it for the purpose of determining their genuineness and regularity. The collecting bank being primarily engaged in banking holds itself out to the public as the expert and the law holds it to a high standard of conduct.”

Case 3:
Full Title:
BPI Family Bank, Petitioner
vs.
Edgardo Buenaventura, Myrna Lizardo And Yolanda Tica, Respondents G.R. No. 148196
BPI Family Bank vs. Edgardo Buenaventura, Myrna Lizardo And Yolanda Tica Story:
Officers of the International Baptist Church and International Baptist Academy in Malabon, Metro Manila, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica filed a complaint for “Reinstatement of Current Account/Release of Money plus Damages” against BPI Family Bank (BPI-FB) on May 23, 1990 at the Manila RTC, docketed as Civil Case No. 90-53154. They claim that on August 30, 1989, they accepted from Amado Franco BPI-FB Check No. 129004 which is dated August 29, 1989 in the amount of P500,000.00, issued jointly by Eladio and Joseph Teves. Furthermore, they opened Current Account No. 807-065314-0 with BPI-FB Branch at Bonifacio Market, Edsa, Caloocan City and deposited the check as initial deposit. The check was cleared and the amount was credited against their Current Account. On September 3, 1989, they drew a check for P91,270.00 which was dishonoured because the account was “closed”, in spite of the balance in the Current Account of P490,328.50. Thereafter they learned from BPI-FB that their account had been frozen upon the instruction of Severino P. Coronacion, VP of BPI-FB on the ground that the source of fund was illegal or unauthorized. Buenaventura et al. demanded the reinstatement of the account, but BPI-FB refused.

Issue:
Manila RTC rendered its decision, finding that:  BPI-FB had no right to unilaterally freeze the deposits of Buenaventura,et al. since the latter had no participation in any fraud that may have attended the prior fund transfers from FMIC to Tevesteco; as holders in good faith and for value of the BPI-FB Check No. 129004, their rights to the sum embodied in the said check should have been respected; BPI-FB’s unilateral action of freezing the Current Account amounted to an unlawful confiscation of their  property without due process.

Decision:
The court ruled in favour of Buenaventura, et al.
The defendant was asked to:
1. To pay the plaintiff the sum of P490,328.50 representing the balance of the plaintiff’s deposit under Account No. 807-065-313-0 which was unlawfully frozen by the bank and finally debited against said account with legal rate of interest from date of closure;

2. To pay the sum of P200,000.00 as moral damages;
 
3. To pay the amount of P50,000.00 as exemplary damages to serve as an example and lesson to serve as a deterrent for similar action which the bank may take against its depositors in the future (originally 200,000 but the court reduced it to 50,000)  

4.  To pay the sum of P50,000.00 as attorney’s fees.

Case 4:
Full Title:
ADALIA FRANCISCO, petitioner,
vs.
COURT OF APPEALS , HERBY COMMERCIAL & CONSTRUCTION CORPORATION AND JAIME C. ONG, respondents GR No 116320
29 Nov 1999
Francisco vs. Court Of Appeals
Story:
Adalia Francisco, president of A. Francisco Realty & Development Corporation (AFRDC), had a contract with Jaime Ong, president of Herby Commercial & Construction Corporation (HCCC) stating that HCCC will lead a housing project by AFRDC in San Jose Del Monte, Bulacan and will be financed by the Government Service Insurance System (GSIS). It was also agreed that terms of payment by Francisco to Ong was on the basis of completed housing units and developed lands delivered and accepted by AFRDC and the GSIS. AFRDC and GSIS also put up an account with the Insular Bank of Asia & America (IBAA) in the amount of P4, 000,000.00 from which checks would be issued and will be co-signed by Francisco and GSIS Vice President Armando Diaz. Ong was also authorized by Francisco to collect the payments directly from GSIS. On February 10, 1978, HCCC filed a complaint against Francisco, AFRDC and the GSIS for the collection of the unpaid balance in the amount of P515, 493.89 for completed and delivered housing units and developed lands. Yet, after a few months, the parties have executed a Memorandum Agreement which had the following stipulations: HCCC had already turned over 83 housing units which have been accepted and paid for by the GSIS; the GSIS also acknowledged that it owed HCCC an amount of P520, 177.50 representing incomplete construction of housing units incomplete land development and 5% retention fee which will be paid when the housing units and the incomplete developed land were completed; it was also stated that HCCC owed AFRDC an amount of P180, 234.91 but the parties agreed that the amount will be paid out of the proceeds of the 40 housing units still to be turned in to the AFRDC. The court had dismissed the case after the Memorandum Agreement was issued. A year after, after an examination of GSIS’ records, Ong discovered that Diaz and Francisco had signed seven checks, drawn against the IBAA and payable to HCCC for completed work yet none of them was received by Ong. It was later found out that Diaz had entrusted Francisco the said checks since she promised to give the checks to Ong. Francisco didn’t really deliver the checks, instead she forged the signature of Ong and showed that Ong indorsed the checks to her and then she deposited the checks to her personal savings account. This event had prompted Ong to file a complaint against Francisco charging estafa thru falsification of commercial documents.

Issue:
Whether petitioner cannot be held liable on the questioned checks by virtue of the Certification executed by Ong giving her the authority to collect such checks from the GSIS.

Decision:
The Court of Appeals agreed with the lower court’s finding that Francisco forged the signature of Ong on the checks to make it appear as if Ong had indorsed the said checks and that, after indorsing the checks for a second time by signing her name at the back of the checks, Francisco deposited said checks in her savings account with IBAA. The checks were proved to be forged and were examined by an NBI handwriting expert making the findings established. However, the petitioner, Francisco, claims that she was, in any event, authorized to sign Ong's name on the checks by virtue of the Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC from the GSIS, including the questioned checks. But to her dismay, her alternative defense also failed. According to the Negotiable Instruments Law, an agent, when so signing, should indicate that he is merely signing in behalf of the principal and must disclose the name of his principal; otherwise he shall be held personally liable. Even assuming that Francisco was authorized by HCCC to sign Ong's name, still, Francisco did not indorse the instrument in accordance with law. Instead of signing Ong's name, Francisco should have signed her own name and expressly indicated that she was signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate her act of forgery. Therefore, because of the event that it was proven that Francisco forged the signature of Ong, she is liable to pay Ong with compensatory damages in the amount of P370,475.00, but with a modification as to the interest rate which shall be six percent (6%) per annum, to be computed from the date of the filing of the complaint since the amount of damages was alleged in the complaint; however, the rate of interest shall be twelve percent (12%) per annum from the time the judgment in this case becomes final and executory until its satisfaction and the basis for the computation of this twelve percent (12%) rate of interest shall be the amount of P370,475.00 with other conditions in case of breach of obligation.

Case 5:
Full Title:
NATIVIDAD GEMPESAW, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents. L.B. Camins for petitioner.
Angara, Abello, Concepcion, Regals & Cruz for private respondent G.R. No. 92244
February 9, 1993
Natividad Gempesaw vs. The Honorable Court of Appeals and Philippine Bank Of Communications Story:
Natividad Gempesaw is a businesswoman who owns several grocery stores entrusted the preparation of checks to her bookkeeper, Alicia Galang. The following checks were to be issued as payments for her business’ suppliers and for her business’ transations. From 1984 to 1986, 82 checks amounting to P1,208,606.89, were prepared and were supposed to be delivered to Gempesaw’s clients as payees named thereon. However, through Galang, these checks were never delivered to the supposed payees. Instead these checks were fraudulently indorsed in the form of forgery to Alfredo Romero and Benito Lam.

Issue:
The petitioner claims whether or not she should be refunded by the drawee bank the money that was lost due to the forged indorsements.

Decision:
The case is hereby ordered REMANDED to the trial court for the reception of evidence to determine the exact amount of loss suffered by the petitioner, considering that she partly benefited from the issuance of the questioned checks since the obligation for which she issued them were apparently extinguished, such that only the excess amount over and above the total of these actual obligations must be considered as loss of which one half must be paid by respondent drawee bank to herein petitioner.

Case 6:
Full Title:
THE GREAT EASTERN LIFE INSURANCE CO., plaintiff-appellant,
vs.
HONGKONG & SHANGHAI BANKING CORPORATION and PHILIPPINE NATIONAL BANK, defendants-appellees. G.R. No. L-18657
The Great Eastern Life Insurance Co. vs. Hongkong & Shanghai Banking Corporation and Philippine National Bank Story:
The plaintiff is the Great Eastern Life Insurance Co., and the Hongkong & Shanghai Banking Corporation (HSBC) And Philippine National Bank, and each is duly licensed to do its respective business in the Philippines Islands. On May 3, 1920, the plaintiff drew its check for P2,000 on the Hongkong and Shanghai Banking Corporation with whom it had an account, payable to the order of Lazaro Melicor. E. M. Maasim then obtained possession of the check fraudulently then forged Melicor's signature, as an endorser, and then personally endorsed and then presented it to the Philippine National Bank . The amount of the check was then placed to his account. After paying the check, the Philippine national Bank endorsed the check to the Hongkong and Shanghai Banking Corporation the next day. The Hongkong and Shanghai Banking Corporation then paid it and charged the amount of the check to the account of the plaintiff. The Hongkong Shanghai Banking Corporation rendered a bank statement to the plaintiff showing that the amount of the check was charged to its account, and no objection was then made to the statement. After about four months when the check was charged to the account of the plaintiff, it was discovered that Lazaro Melicor, to whom the check was made payable, never received it, and that his signature, as an endorser, was forged by Maasim, who presented and deposited it to his private account in the Philippine National Bank. The plaintiff then promptly made a demand upon the Hongkong and Shanghai Banking Corporation that the amount of the forged check should be returned to its account, which the bank refused to do, The plaintiff commenced this action to recover the P2,000 which was paid on the forged check. On the petition of the Shanghai Bank, the Philippine National Bank was made defendant. The Shanghai Bank denies any liability, but prays that, if a judgment should be rendered against it, in turn, it should have like judgment against the Philippine National Bank which denies all liability to either party. Upon the issues being joined, a trial was had and judgment was rendered against the plaintiff and in favor of the defendants, from which the plaintiff appeals, claiming that the court erred in dismissing the case, notwithstanding its finding of fact, and in not rendering a judgment in its favor, as prayed for in its complaint.

Issue:
The main issue in this case is who is responsible for the refund to the drawer of the amount of the check drawn and payable to order, when its value was collected by a third person by means of forgery of the signature of the payee. It is a question whether it is the drawee, the last indorser, who ignored the forgery at the time of making the payment, or the forger who will be rendered responsible for the refund.

Decision:
The lower court decided that either bank incurred in any responsibility arising from that crime, nor was either of the said banks by subsequent acts, guilty of negligence or fault. The lower court said that the the National Bank should not be held responsible for the payment of made to Maasim in good faith of the amount of the check, because the indorsement of Maasim is unquestionable and his signature perfectly genuine, and the bank was not obliged to identify the signature of the former indorser. Neither could the Hongkong and Shanghai Banking Corporation be held responsible in making payment in good faith to the National Bank, because the latter is a holder in due course of the check in question. It is said that the two defendant banks cannot be held civilly responsible for the consequences of the falsification or forgery of the signature of Lazaro Melicor, the National Bank having had no notice of said forgery in making payment to Maasim, nor the Hongkong bank in making payment to National Bank.

This is said to be a fundamental error.
The money on deposit of Shanghai Bank and it has no right to pay it out to anyone except for the plaintiff or its order. In this case, the Shanghai Bank was ordered to pay the P2,000 to Melicor, and the money was actually paid to Maasim and was never paid to Melicor, and he never paid to Melicor, and he never personally endorsed the check, or authorized any one to endorse it for him, and the alleged endorsement was a forgery. It is admitted that the Philippine National Bank cashed the check upon a forged signature, and placed the money to the credit of Maasim, who was a forger. The Philippine National Bank had no license or authority to pay the money to Maasim or anyone else upon a forge signature. It was its legal duty to know that Melicor’s endorsment was genuine before cashing the check. Its remedy is against Maasim to whom it paid the money. The judgment of the lower court is then reversed, and the decision entered here in favor of the plaintiff and against the Hongkong and Shanghai Banking Corporation for the P2,000, with interest thereon from November 8, 1920 at the rate of 6 per cent per annum, and the costs of this action, and a corresponding judgment will be entered in favor of the Hongkong Shanghai Banking Corporation against the Philippine National Bank for the same amount, together with the amount of its costs in this action. So ordered.

Case 7:
Full Title:
Jai Alai Corporation of the Philippines vs BPI
[66 SCRA 229]
GR No. L – 29432

Story:
A petitioner deposited several checks in its current account with a respondent bank. The checks were acquired from Antonio J. Ramirez. Ramirez was a sales agent of Inter-Island Gas Service Inc., and a regular bettor in the Jai-Alai games. These checks were credited to the petitioner’s account momentarily. Ramirez then resigned and Inter-Island found out that the indorsements on the checks were forgeries. Inter-Island informed all the parties involved and filed a criminal complaint against Ramirez. The bank then debited the petitioner’s account and returned the checks. The petitioner drew a check to its account but it was dishonored because after debiting the said checks, its funds became insufficient. Hence, the petitioner filed a complaint in opposition to the bank.

Issue:
Whether BPI had the right to debit from petitioner's current account the value of the checks with the forged indorsements and was not liable for damages

Decision:
The respondent bank acted within legal bounds when it debited the petitioner’s current account. Under Section 23, a forged signature is wholly inoperative and no right to discharge it or enforce its payment can be acquired through or under the forged signature except against a party who cannot invoke the forgery. Thus it did not create a creditor-debtor relationship between the petitioner and the bank. The respondent bank was to collect from the drawee bank the sum of the said checks. The petitioner then shall shoulder the loss.

Case 8:
Full Title:
Philippine Commercial International Bank (PCIB) vs Court of Appeals 350 SCRA 446

Story:
On October 19, 1977, the plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41, in favor of the Commissioner of Internal Revenue as payment of its percentage or manufacturer’s sales taxes for the third quarter of 1977. The said check was deposited with the defendant IBAA (now PCIB) and was then cleared at the Central Bank. The proceeds of the check was paid to IBAA as collecting or depository bank upon presentment with the defendant Citibank. The proceeds of the same Citibank check of the plaintiff was never paid to or received by the payee thereof, the Commissioner of Internal Revenue. As a consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, Ford was compelled to make a second payment to the Bureau of Internal Revenue of its percentage/manufacturers’ sales taxes for the third quarter of 1977 and that said second payment of Ford in the amount of P4,746,114.41 was duly received by the Bureau of Internal Revenue. It addition, the defendant Citibank further admitted that during the time of the transactions in question, plaintiff had been maintaining a checking account with Citibank; that Citibank Check No. SN-04867 which was drawn and issued by the plaintiff in favor of the Commissioner of Internal Revenue was a crossed check in that, on its face were two parallel lines and written in between said lines was the phrase “Payee’s Account Only”; and that defendant Citibank paid the full face value of the check in the amount of P4,746,114.41 to the defendant IBAA (now PCIB). It has also been duly established that for the payment of plaintiff’s percentage tax for the last quarter of 1977, the Bureau of Internal Revenue issued Revenue Tax Receipt No. 18747002, dated October 20, 1977, designating therein in Muntinlupa, Metro Manila, as the authorized agent bank of Metrobank, Alabang branch to receive the tax payment of the plaintiff. On December 19, 1977, plaintiff’s Citibank Check No. SN-04867, together with the Revenue Tax Receipt No. 18747002, was deposited with defendant IBAA, through its Ermita Branch. The latter accepted the check and sent it to the Central Clearing House for clearing on the same day, with the indorsement at the back “all prior indorsements and/or lack of indorsements guaranteed.” Thereafter, defendant IBAA presented the check for payment to defendant Citibank on same date, December 19, 1977, and the latter paid the face value of the check in the amount of P4,746,114.41. Consequently, the amount of P4,746,114.41 was debited in plaintiff’s account with the defendant Citibank and the check was returned to the plaintiff. Ford, the plaintiff discovered that its Citibank Check No. SN-04867 in the amount of P4,746,114.41 was not paid to the Commissioner of Internal Revenue upon verification. Hence, in separate letters dated October 26, 1979, addressed to the defendants, the plaintiff notified the latter that in case it will be re-assessed by the BIR for the payment of the taxes covered by the said checks, then plaintiff shall hold the defendants liable for reimbursement of the face value of the same. Both defendants denied liability and refused to pay. In a letter dated February 28, 1980 by the Acting Commissioner of Internal Revenue addressed to the plaintiff, Ford was officially informed, among others, that its check in the amount of P4, 746,114.41 was not paid to the government or its authorized agent and instead it was encashed by unauthorized persons, hence, plaintiff has to pay the said amount within fifteen days from receipt of the letter. Upon advice of the plaintiff’s lawyers, plaintiff on March 11, 1982, paid to the Bureau of Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiff’s percentage tax for the third quarter of 1977. As a consequence of defendant’s refusal to reimburse plaintiff of the payment it had made for the second time to the BIR of its percentage taxes, plaintiff filed on January 20, 1983 its original complaint before this Court. On December 24, 1985, defendant IBAA was merged with the Philippine Commercial International Bank (PCIB) with the latter as the surviving entity. Defendant Citibank maintains that; the payment it made of plaintiff’s Citibank Check No. SN-04867 in the amount of P4,746,114.41 “was in due course”; it merely relied on the clearing stamp of the depository/collecting bank, the defendant IBAA that “all prior indorsements and/or lack of indorsements guaranteed”; and the proximate cause of plaintiff’s injury is the gross negligence of defendant IBAA in indorsing the plaintiff’s Citibank check in question. On December 19, 1977 it was admitted that when the proceeds of plaintiff’s Citibank Check No. SN-048867 was paid to defendant IBAA as collecting bank, plaintiff was maintaining a checking account with defendant Citibank.

Issue:
Whether or not PCIB and Citibank are liable for the tortuous acts of their employees.

Decision:
Citibank and IBAA (now PCIB) were jointly and severally ordered to pay the plaintiff the amount of P4,746,114.41 representing the face value of the plaintiff’s Citibank Check No. SN-04867, with interest thereon at the legal rate starting January 20, 1983 which is the date when the original complaint was filed until the amount is fully paid, plus costs. In the case of the defendant Citibank’s cross-claim, the cross-defendant IBAA (now PCIB) is ordered to reimburse Citibank for whatever amount the latter has paid or may pay to the plaintiff. The counterclaims asserted by the defendants against the plaintiff, as well as that asserted by the cross-defendant against the cross-claimant were dismissed for lack of merits and costs against the defendants. SO ORDERED.

Case 9:
Full Title:
PHILIPPINE NATIONAL BANK petitioner,
vs.
HON. ROMULO S. QUIMPO, Presiding Judge, Court of First Instance of Rizal, Branch XIV, and FRANCISCO S. GOZON II, respondents. G.R. No. L-53194
March 14, 1988
Philippine National Bank vs Hon.Romulo S.Quimpo
Story:
Francisco Gozon was a depositor of the Philippine National Bank (PNB Caloocan). Ernesto Santos, Gozon’s friend, took a check from the latter’s checkbox which was left in the car, filled it up for the amount of P5000, forged Gozon’s signature and encashed it. Gozon learned about the transaction upon receipt of the bank’s statement of his account, and requested the bank to recredit the amount of his account. The bank refused.

Issue:
Who shall bear the loss resulting from the forged check?

Decision:
The bank bears the loss. The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or depositor on the check being encashed. It is expected to use reasonable business prudence in accepting and cashing a check being encashed or presented to it. 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.

Case 10:
Full Title:
REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, 
vs.
EQUITABLE BANKING CORPORATION, defendant-appellee.
G.R. No. L-15894      
January 30, 1964
Republic of the Phil vs Equitable Banking Corp
Story:
The Republic of the Philippines seeks to recover the sum of P17,100, representing the aggregate value of four (4) treasury warrants from the Equitable Banking Corporation paid to said bank by the Treasurer of the Philippines thru the Clearing Office of the Central Bank of the Philippines.

The Republic of the Philippines, hereinafter referred to as the Government, seeks to recover: (1) from the Equitable Banking Corporation — in case G.R. No. L-15894, the sum of P17,100, representing the aggregate value of four (4) treasury warrants paid to said bank by the Treasurer of the Philippines thru the Clearing Office of the Central Bank of the Philippines; and (2) from the Bank of the Philippine Islands — in G.R. No. L-15895, the total sum of P342,767.63, representing the aggregate value of twenty-four (24) warrants similarly paid by the Treasurer to the PI Bank. These claims for refund are based upon a common ground — although said twenty-eight (28) warrants were executed on genuine government forms, the signature thereon of the drawing office and that of the representative of the Auditor General in that office are forged. Four (4) warrants involved were deposited with the Equitable Bank by its depositors or customers, namely, Robert Wong, Lu Chill Kau and Chung Ching. In due course, the Equitable Bank cleared the warrants, thru the Clearing Office, then collected the corresponding amounts from the Treasurer and credited said amounts to the accounts of the respective depositors. On January 15, 1958, the Treasurer notified the Equitable Bank of the alleged defect of said warrants and demanded reimbursement of the amounts and this demand was rejected by the Equitable Bank. Hence the institution of G.R. No. L-15894 (Civil Case No. 19600 of the Court of First Instance of Manila), against the Equitable Bank for, the recovery of P17,100.00. Upon leave of the lower court, the Equitable Bank filed a third-party complaint against Robert Wong, Lu Chill Kau and Chung Ching in G.R. No. L-15894, for whatever reimbursements the Equitable Bank may respectively be sentenced to make to the Government. This case was jointly heard with G.R. No. L-15895 (Civil Case No. 19599 of the Court of First Instance of Manila), against the Bank of the Philippine Islands, for the recovery of P342,767.63, who also filed a similar complaint with the Corporacion (24 warrants).

The clearing of the twenty-eight (28) warrants – 24 from Bank of the Philippine Islands and 4 from Equitable Bank, thru the Clearing Office was made pursuant to the "24-hour clearing house rule", which had been adopted by the Central Bank in a conference with representatives and officials of the different banking institutions in the Philippines. The rule is embodied in Section 4, subsection (c) of Circular No. 9 of the Central Bank, dated February 17, 1949 (Exhibit B), as amended by the letter of the Governor of the Central Bank, dated June 4, 1949 (Exhibit D). The twenty-eight (28) warrants were cleared and paid by the Treasurer, in view which the PI Bank and the Equitable Bank credited the corresponding amounts to the respective depositors of the warrants and then honored their checks for said amounts. Thus, the Treasury had not only been negligent in clearing its own warrants, but had, also, thereby induced the PI Bank and the Equitable Bank to pay the amounts thereof to said depositors. The gross nature of the negligence of the Treasury becomes more apparent when seeing that each one of the twenty-four (24) warrants involve in G.R. No. L-15895 was for over P5,000, and, hence; beyond the authority of the auditor of the Treasury — whose signature thereon had been forged — to approve. In other words, the irregularity of said warrants was apparent the face thereof, from the viewpoint of the Treasury. Moreover, the same had not advertised the loss of genuine forms of its warrants. Neither had the PI Bank nor the Equitable Bank been informed of any irregularity in connection with any of the warrants involved in these two (2) cases, until after December 23, 1952, — or 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, for which the PI Bank and the Equitable Bank should not and cannot be penalized.

Issue:
Can the Republic of the Philippines recover the sum of P17,100, representing the aggregate value of four (4) treasury warrants from the Equitable Banking Corporation paid to said bank by the Treasurer of the Philippines thru the Clearing Office of the Central Bank of the Philippines?

Decision:
The Equitable Bank had not been informed of any irregularity in connection with any of the warrants involved until after December 23, 1952, — or 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, for which the Equitable Bank should not and cannot be penalized. Where a loss, which must be borne by one of two parties alike innocent of forgery, can be traced to the neglect or fault of either, it is reasonable that it would be borne by him, even if innocent of any intentional fraud, through whose means it has succeeded, (Phil. National Bank v. National City Bank of New York, 63 Phil. 711, 723.) Generally, where a drawee bank otherwise would have a right of recovery against a collecting or indorsing bank for its payment of a forged check its action will be barred if it is guilty of an unreasonable delay in discovering the forgery and in giving notice? thereof. (C.J.S. 769-700.). Where defendant bank, on presentation to it on September 2, of forged check drawn on another bank, paid part of amount to presenter, drawee paying check through clearing house on said day, held that the latter, not giving notice of forgery until December 5, could not hold defendant for amount so paid. (First State Bank & Trust Co. v. First Nat. Bank, 145 N. E. 382, 314 Ill. 269, affirming 234 Ill. App. 39.)

Case 11:
Full Title:
Samsung Construction Philippines vs. Far East bank
436 SCRA 402

Story:
Plaintiff Samsung Construction Company Philippines, Inc. (“Samsung Construction”), maintained a current account with defendant Far East Bank and Trust Company (“FEBTC”) at the latter’s Bel-Air, Makati branch. The sole signatory to Samsung Construction’s account was Jong Kyu Lee (“Jong”), its Project Manager, while the checks remained in the custody of the company’s accountant, Kyu Yong Lee (“Kyu”). On 19 March 1992, a certain Roberto Gonzaga presented for payment FEBTC Check No. 432100 to the bank’s branch in Bel-Air, Makati . The check, payable to cash and drawn against Samsung Construction’s current account, was in the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00). The bank teller, Cleofe exercise the bank procedure in encashment using check. She then asked Gonzaga to submit proof of his identity, and the latter presented three (3) identification cards.The bank officer Syfu also noticed Jose Sempio III (“Sempio”), the assistant accountant of Samsung Construction , who supported the claim of Gonzaga. Syfu showed the check to Sempio, who vouched for the genuineness of Jong’s signature. Confirming the identity of Gonzaga, Sempio said that the check was for the purchase of equipment for Samsung Construction. Satisfied with the genuineness of the signature of Jong, Syfu authorized the bank’s encashment of the check to Gonzaga. The following day Kyu, discovered that a check in the amount of Nine Hundred Ninety Nine Thousand Five Hundred Pesos (P999,500.00) had been encashed. Kyu perused the checkbook and found that the last blank check was missing. He reported the matter to Jong, who then proceeded to the bank. Jong learned of the encashment of the check, and realized that his signature had been forged. The Bank Manager reputedly told Jong that he would be reimbursed for the amount of the check. Jong proceeded to the police station and consulted with his lawyers. Subsequently, a criminal case for qualified theft was filed against Sempio before the Laguna court. FEBTC on the other hand, said that it was still conducting an investigation on the matter. Unsatisfied, Samsung Construction filed aComplaint on 10 June 1992 for violation of Section 23 of the Negotiable Instruments Law, before the Regional Trial Court (“RTC”) of Manila , Branch 9. During the trial, both sides presented their respective expert witnesses to testify on the claim that Jong’s signature was forged. Samsung Corporation, which had referred the check for investigation to the NBI, presented Senior NBI Document Examiner Roda B. Flores. She testified that based on her examination, she concluded that Jong’s signature had been forged on the check. On the other hand, FEBTC, which had sought the assistance of the Philippine National Police (PNP), presented Rosario C. Perez, a document examiner from the PNP Crime Laboratory. She testified that her findings showed that Jong’s signature on the check was genuine.

Issue:
Whether or not the signature of Jong in the subject check was forged?

Decision:
Wherefore, premises considered, the instant Petition is denied. The Decision dated 8 March 2002 and the Resolution dated 26 July 2002 of the Court of Appeals are affirmed with modification that exemplary damages in the amount of P50,000.00 be awarded. Costs against the petitioner.

Case 12:
Full Title:
SAN CARLOS MILLING CO., LTD., plaintiff-appellant,
vs.
BANK OF THE PHILIPPINE ISLANDS and CHINA BANKING CORPORATION, defendants-appellees. Gibbs and McDonough and Roman Ozaeta for appellant.
Araneta, De Joya, Zaragosa and Araneta for appellee Bank of the Philippine Islands. G.R. No. L-37467
December 11, 1933
San Carlos Milling Co., Ltd. v. BPI and China Banking Corp.
Story:
* The plaintiff gave a general power of attorney to Baldwin relative to the dealings with BPI, one of the banks in Manila in which plaintiff maintained a deposit * Wilson, a principal employee of the plaintiff, conspiring with a messenger-clerk in plaintiff’s Manila office, requested a telegraphic transfer from its principal office in Hawaii, to the China Banking Corporation of Manila of $100,000, likewise a bank in which plaintiff maintained. * Upon its receipt, the China Banking Corporation issued a manager’s check payable to plaintiff or order following the instructions of a letter affixed with the forged signature of Baldwin. * A Manager’s check on the China Banking Corporation payable to plaintiff or order was receipted for by the messenger-clerk of the plaintiff which was indorsed to BPI again under a forged signature of Baldwin as an agent. * BPI thereupon credited the current account of plaintiff and passed the cashier’s check in the ordinary course of business through the clearing house, where it was paid by the China Banking Corporation. * The next day, Dolores presented a check to BPI for the sum of P200,000, purporting to be signed by Baldwin as agent. * Shortly thereafter the crime was discovered, and upon the defendant bank refusing to credit plaintiff with the amount withdrawn this suit was brought.

Issue:
Whether BPI and China Banking Corporation should be held liable to plaintiff

Decision:
Only BPI should be held liable. China Banking Corporation, drew its check payable to the order of plaintiff and delivered it to plaintiff’s agent who was authorized to received it. A bank that cashes a check must know to whom it pays. In connection with the cashier’s check, this duty was therefore upon the Bank of the Philippine Island, and the China Banking Corporation was not bound to inspect and verify all endorsements of the check, even if some of them were also those of depositors in the bank. It has a right to rely upon the endorsement of the BPI when it gave the latter bank credit for its own cashier’s check. Even if it is treated that China Banking Corporation’s cashier’s check be the same as the check of a depositor and hold the China Banking Corp. indebted to plaintiff, the Court at the same time has to hold that BPI was indebted to the China Banking Corp. in the same amount. As, however, the money was in fact paid to plaintiff corporation, the Court must hold that the China Banking Corp. is indebted neither to plaintiff nor to BPI, and the judgment as it absolved the China Banking Corp. from responsibility is affirmed. As to BPI, a bank is bound to know the signature of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. The bank paid out its money because it relied upon the genuineness of the purported signature of Baldwin. The proximate cause of loss was due to the negligence of the BPI in honoring and cashing the two forged checks.

Case 13:
Full Title:
Traders Royal Bank vs. Radio Philippines Network Inc., Intercontinental Broadcasting Corporation, and Banahaw Broadcasting Network, through the board of administrators, and Security Bank and Trust Company, respondents.

Story:
On April 15, 1985, the Bureau of Internal Revenue (BIR) assessed plaintiffs Radio Philippines Network (RPN), Intercontinental Broadcasting Corporation (IBC), and Banahaw Broadcasting Corporation (BBC) of their tax obligations for the taxable years 1978 to 1983. On March 25, 1987, Mrs. Lourdes C. Vera, plaintiffs’ comptroller, sent a letter to the BIR requesting settlement of plaintiffs’ tax obligations. The BIR granted the request and accordingly, on June 26, 1986, plaintiffs purchased from defendant Traders Royal Bank (TRB) three (3) manager’s checks with check numbers 30652, 30650, and 30796 with the amounts of P4 155 835.00, P3 949 406.12, and P1 685 475.75 respectively to be used as payment for their tax liabilities Defendant TRB, through Aida Nuñez, TRB Branch Manager at Broadcast City Branch, turned over the checks to Mrs. Vera who was supposed to deliver the same to the BIR in payment of plaintiffs’ taxes. Sometime in September, 1988, the BIR again assessed plaintiffs for their tax liabilities for the years 1979-82. It was then they discovered that the three (3) managers checks (Nos. 30652, 30650 and 30796) intended as payment for their taxes were never delivered nor paid to the BIR by Mrs. Vera. Instead, the checks were presented for payment by unknown persons to defendant Security Bank and Trust Company (SBTC), Taytay Branch as shown by the bank’s routing symbol transit number (BRSTN 01140027) or clearing code stamped on the reverse sides of the checks. Due to the failure of the plaintiffs to settle their taxes, the BIR issued warrants of levy, distraint and garnishment against them. Thus, they were constrained to enter into a compromise and paid BIR P18,962,225.25 in settlement of their unpaid deficiency taxes. In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs and against the defendants by : a. Condemning the defendant Traders Royal Bank to pay actual damages in the sum of Nine Million Seven Hundred Ninety Thousand and Seven Hundred Sixteen Pesos and Eighty-Seven Centavos (P9,790,716.87) broken down as follows: 1. To plaintiff RPN-9 - P4,155,835.00

2. To Plaintiff IBC-13 - P3,949,406.12
3. To Plaintiff BBC-2 - P1,685,475.72
plus interest at the legal rate from the filing of this case in court. b) Condemning the defendant Security Bank and Trust Company, being collecting bank, to reimburse the defendant Traders Royal Bank, all the amounts which the latter would pay to the aforenamed plaintiffs;

c) Condemning both defendants to pay to each of the plaintiffs the sum of Three Hundred Thousand (P300,000.00) Pesos as exemplary damages and attorney’s fees equivalent to twenty-five percent of the total amount recovered; and d) Costs of suit.

Issue:
A petition was made by TRB for the following errors: (a) the Honorable Court of Appeals manifestly overlooked facts which would justify the conclusion that negligence on the part of RPN, IBC and BBC bars them from recovering anything from TRB, (b) the Honorable Court of Appeals plainly erred and misapprehended the facts in relieving SBTC of its liability to TRB as collecting bank and indorser by overturning the trial court’s factual finding that SBTC did endorse the three (3) managers checks subject of the instant case, and (c) the Honorable Court of Appeals plainly misapplied the law in affirming the award of exemplary damages in favor of RPN, IBC and BBC. In reply, respondents RPN, IBC, and BBC state that TRB’s petition raises questions of fact in violation of Rule 45 of the 1997 Revised Rules on Civil Procedure which restricts petitions for review on certiorari of the decisions of the Court of Appeals on pure questions of law. RPN, IBC and BBC maintain that the issues of whether or not respondent networks had been negligent were already passed upon both by the trial and appellate courts, and that the factual findings of both courts are binding and conclusive upon this Court. SBTC denies liability on the ground that it had no participation in the negotiation of the checks, emphasizing that the BRSTN imprints at the back of the checks cannot be considered as proof that respondent SBTC accepted the disputed checks and presented them to Philippine Clearing House Corporation for clearing. The 3 checks were payable to the BIR. It was established, however, that said checks were never delivered or paid to the payee BIR but were in fact presented for payment by some unknown persons who, in order to receive payment therefor, forged the name of the payee. Despite this fraud, petitioner TRB paid the 3 checks in the total amount of P9,790,716.87. Petitioner must know that where a check is drawn payable to the order of one person and is presented for payment by another and purports upon its face to have been duly indorsed by the payee of the check, it is the primary duty of petitioner to know that the check was duly indorsed by the original payee and, where it pays the amount of the check to a third person who has forged the signature of the payee, the loss falls upon petitioner who cashed the check. Its only remedy is against the person to whom it paid the money.

Decision:
The appellant Security Bank and Trust Company is not liable. While the other appellant, Traders Royal Bank, is solely liable for the appellees for the damages and cost of suit. Since TRB did not pay the rightful holder or other person or entity entitled to receive payment, it has no right to reimbursement. Petitioner TRB was remiss in its duty and obligation, and must therefore suffer the consequences of its own negligence and disregard of established banking rules and procedures.

Case 14:
Full Title:
TRAVEL-ON, INC., petitioner,
vs.
COURT OF APPEALS and ARTURO S. MIRANDA, respondents
G.R. No. L-56169
June 26, 1992
Travel-On vs. Court of Appeals
Story:
* Petitioner Travel-On is a travel agency selling airline tickets on commission basis for and in behalf of different airline companies. * While, private respondent Arturo S.Miranda had a revolving credit line with petitioner. He procured tickets from petitioner on behalf of airline passengers and derived commissions there from. * On June, 1972, Petitioner Travel-on filed a suit against Miranda for the collection of the 6checks he issued to petitioner, with a total face amount of P115K. * The complaint alleged that from August1969 to January 1970, petitioner sold and delivered various airline tickets to respondent at a total price of P278,201.57; that to settle said account, private respondent paid various amounts in cash and in kind, and thereafter issued six (6) postdated checks amounting toP115,000.00 which were all dishonored by the drawee banks. * Further, Travel-on alleged that in March1972, private respondent made another payment of P10,000.00 reducing his indebtedness to P105,000.00. * As his answer, Miranda admitted that he had transactions with Travel-on but claimed that he had already fully paid and even over paid his obligations and that refunds were in fact due to him. * He also argued that he had issued the postdated checks for purposes of accommodation, as he had in the past accorded similar favors to petitioner. * In support of his theory that the checks were issued for accommodation, Miranda testified that he had issued the checks in the name of Travel-On in order that its General Manager, Montilla, could show to Travel-On's Board of Directors that the accounts receivable of the company were still good. He further stated that Montilla tried to encash the same, but that these were dishonored and were subsequently returned to him after the accommodation purpose had been attained. * Montilla, on the other hand explained that the "accommodation" extended to Travel-Onby private respondent related to situations where one or more of its passengers needed money in Hongkong, and upon request of  Travel-On respondent would contact his friends in Hongkong to advance Hongkong money tothe passenger. The passenger then paid Travel-On upon his return to Manila and which payment would be credited by Travel-On to respondent's running account with it. * The trial court ruled that Miranda’s indebtedness to Travel-on was not satisfactorily established and that thepostdated checks were issued not for the purpose of encashment to pay his indebtedness but to accommodate the General Manager of Travel-On to enable her to show to the Board of Directors that Travel-On was financially stable. * CA affirmed the RTCs ruling.

Issue:
1. WON the checks issued by Miranda to Travel-on were accommodation checks. 2. WON Miranda is liable to Travel-on for the issuance of 6 checks.

Decision:
1. No accommodation transaction was shown in the case at bar. * In accommodation transactions recognized by the NIL, an accommodating party lends his credit to the accommodated party, by issuing or indorsing a check which is held by a payee or indorsee as a holder in due course, who gave full value therefor to the accommodated party. The latter, in other words, receives or realizes full value which the accommodated party then must repay to the accommodating party, unless of course the accommodating party intended to make a donation to the accommodated party. But the accommodating party is bound on the check to the holder in due course who is necessarily a third party and is not the accommodated party. Having issued or indorsed the check, the accommodating party has warranted to the holder in due course that he will pay the same according to its tenor. * In the case at bar, Travel-On was payee of all six (6) checks, it presented these checks for payment at the drawee bank but the checks bounced. Travel-On obviously was not an accommodated party; it realized no value on the checks which bounced.

2. SC holds Miranda liable for the 6 checks.
* The checks involved in this case constituted as the evidence of indebtedness of Miranda to Travel-on. * Travel-On id entitled to the benefit of the statutory presumption that it was a holder in due course, that the checks were supported by valuable consideration. As maker of the checks, Miranda did not successfully rebut these presumptions. He only claimed that he had issued the checks to Travel-On as payee to "accommodate" its General Manager. It will be seen that this claim was in fact a claim that the checks were merely simulated, that private respondent did not intend to bind himself thereon. Only evidence of the clearest and most convincing kind will suffice for that purpose; no such evidence was submitted by Miranda. * Upon the other hand, the "accommodation" or assistance extended to Travel-On's passengers abroad as testified by the General Manager involved, was not the accommodation transactions recognized by the NIL, but rather the circumvention of then existing foreign exchange regulations by passengers booked by Travel-On, which incidentally involved receipt of full consideration by private respondent. * As the checks constitute the best evidence of Miranda's liability to Travel-On, the amount of such liability is the face amount of the checks, reduced only by the P10,000.00 which Travel-On admitted in its complaint

Case 15:
Full Title:
Tuazon vs Heirs of Bartolome Ramos
463 SCRA 408

Story:
Between the period of May 2, 1988 and June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from Bartolome Ramos. That of this quantity only 4,437 cavans have been paid for, leaving unpaid 3,889 cavans valued at P1,211,919.00.  In payment therefore, the spouses Tuazon issued Traders Royal Bank checks. But when these checks were encashed, all of the checks bounced due to insufficiency of funds. Before issuing said checks, Tuazon spouses already knew that they had no available fund to support the checks, and they failed to provide for the payment of these despite repeated demands made on them.           Because of the said insufficiency of the fund of the spouses, they conspired with the Buenaventura spouses to defraud them as creditors by executing fictitious sales of their properties.  Included in these said fictitious sales were their residential house and lots at Nueva Ecija and 2 cars. As a result of the said sales, the titles of these properties issued in the names of spouses Tuazon were cancelled and new ones were issued in favor of the Buenaventura spouses.           The Tuazon spouses denied having purchased rice from Bartolome Ramos.  They alleged that it was Magdalena Ramos, wife of Bartolome Ramos, who owned and traded the merchandise and Maria Tuazon was merely her agent.  They argued that it was Evangeline Santos who was the buyer of the rice and issued the checks to Maria Tuazon as payments therefore.  In good faith, the checks were received Maria Tuazon from Evangeline Santos and turned over to Ramos without knowing that these were not funded.  And it is for this reason that the Tuazon spouses have been insisting on the inclusion of Evangeline Santos as responsible party, and her non-inclusion was a fatal error.  Refuting that the sale of several properties were fictitious or simulated, spouses Tuazon contended that these were sold because they were then meeting financial difficulties but the disposals were made for value and in good faith and done before the filing of the suit.  To continuously defend themselves, they argued that there was no sales invoice, official receipts or like evidence to prove this.  They insisted that they were merely agents and should not be held liable. The Buenaventura spouses were included in the case and the suit filed against Evangeline Santos by the Tuazon spouses was denied by the court.

Issue:
The Tuazon spouses raised if whether or not the Court of appeals made a mistake in acclaiming that the spouses are not the agents of Mr. Ramos. They also raised if whether or not the Court of Appeals made a mistake in giving a final verdict of the case despite of denying their suit against Evangeline Santos whom which they claim as the responsible party.

Decision:
The Bartolome heirs won the case and with this, the Tuazon spouses are obliged to do and pay the following: 1. The sum of P1,750,050.00, with interests from the filing of the second amended complaint; 2. The sum of P50,000.00, as attorney’s fees;

3. The sum of P20,000.00, as moral damages
4. And to pay the costs of suit

Case 16:
Full Title:
United General Industries, Inc. vs Jose Paler and Jose De La Rama G.R. No. L-30205
March 15, 1982

Story:
On January 20, 1962, Jose Paler and wife Purificacion Paler (defendant) purchased from United General Industries, Inc. (plaintiff) Zenith 23” TV set with serial No. 3493594 on installment basis. To secure the payment, Jose Paler and his wife executed in favor of the plaintiff a promissory note in the amount of P2,690.00. To consider the guarantee of the payment of the aforementioned promissory, defendant Jose Paler and his wife constituted a chattel mortgage over the television set in favor of the plaintiff which mortgage was duly registered in the chattel mortgage registry.

Issue:
Defendant Jose Paler and his wife violated the terms and conditions of the chattel mortgage so the plaintiff filed a criminal action against the Palers for estafa under Art. 319 of the Revised Penal Code with the City Fiscal's Office of Pasay City. To settle extra-judicially Jose Paler and his co-defendant, Jose de la Rama, executed in favor of plaintiff a promissory note dated April 11, 1964 in the amount of P3,083.58 and notwithstanding repeated demands, the said defendants failed to pay the plaintiff the sum of P3,083.58 with 1% interest per month from April 11, 1964 until full payment is made.

Decision:
The judgment is rendered in favor of the plaintiff and against the defendants, sentencing said defendants to pay to the plaintiff the sum of P3,083.58, with 12% interest thereon per annum from the date the complaint was filed on October 14, 1965 until full payment is made and attorney's fees in the sum of P250.00.

Case 17:
Full Title:
Westmont Bank vs Ong
373 SCRA 212
G.R. No. 132560
January 30, 2002

Story:
Respondent Eugene Ong maintained a current account with petitioner, formerly the Associated Banking Corporation, but now known as Westmont Bank. On an unspecified date in May 1976, Ong sold his shares of stocks stocks through Island Securities Corporation. To pay Ong, Island Securities purchased two (2) Pacific Banking Corporation manager’s checks both dated May 4, 1976, issued in the name of Eugene Ong as payee but he did not receive any check or checks. Ong’s signatures were forged by his friend, Paciano Tamlinco. Moreover, the checks were deposited in his own account with petitioner. 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 and quickly ran away. Ong then seek for payment from Tamlinco’s family before he filed a complaint with the Central Bank. As his efforts were delusive to recover his money, he filed an action against the petitioner. After 5 months after the discovery of the fraud, Ong cry foul and demanded in his complaint that petitioner pay the value of the two checks from the bank on whose gross negligence he imputed his loss.  In his suit, he insisted that he did not “deliver, negotiate, endorse or transfer to any person or entity” the subject checks issued to him and asserted that the signatures on the back were spurious. 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.  The bank then filed a demurrer to evidence which was denied.

Issue:
Essentially there are two main issues in this case:
(1) whether or not respondent Ong has a cause of action against petitioner Westmont Bank; and (2) whether or not Ong is barred to recover the money from Westmont Bank due to laches.

Decision:
On February 8, 1989, after trial on the merits, the Regional Trial Court of Manila, Branch 38, rendered a decision, thus: IN VIEW OF THE FOREGOING, the court hereby renders judgment for the plaintiff and against the defendant, and orders the defendant to pay the plaintiff: 1.  The sum of P1,754,787.50 representing the total face value of the two checks in question, exhibits “A” and “B”, respectively, with interest thereon at the legal rate of twelve percent (12%) per annum computed from October 7, 1977 (the date of the first extrajudicial demand) up to and until the same shall have been paid in full; 2.  Moral damages in the amount of P250,000.00;

3.  Exemplary or corrective damages in the sum of P100,000.00 by way of example or correction for the public good; 4.  Attorney’s fees of P50,000.00 and costs of suit.
Defendant’s counterclaims are dismissed for lack of merit.

Case 18:
Full Title:
July 31, 1975
G.R. No. L-40796
REPUBLIC BANK, plaintiff-appellee,
vs.
MAURICIA T. EBRADA, defendant-appellant.
Sabino de Leon, Jr. for plaintiff-appellee.
Julio Baldonado for defendant-appellant.
Republic Bank vs Mauricia T.Ebrada
Story:
Martin Lorenzo, who has been dead for almost eleven years, was issued a check. At the back of the check, Martin Lorenzo apparently indorsed the check to Ramon Lorenzo, from Ramon Lorenzo to Delia Dominguez and then from Dominguez to Ebrada. She has encashed the check to the Republic Bank’s office at Escolta. The Bureau of Treasury requested the bank to refund the amount with the information that the payee’s (Lorenzo) indorsement on the reverse side of the check was a forgery. The Bank sued Ebrada before the city court when she refused to return the money. The rule was for the Bank, so the case was elevated to the CFI which likewise rendered an adverse decision against Ebrada. An appeal was filed.

Issue:
Whether the lower court made a mistake in ordering Ebrada to pay the face value of the subject check after finding that the drawer issued the subject check to a person already deceased for 11-1/2 years and that Ebrada did not benefit from encashing the said check.

Decision:
As last indorser, Ebrada was supposed to have warranted that she has a good title to said check. It turned out, that the signature of the original payee of the check, Martin Lorenzo was a forgery because he was already dead almost 11 years before the check in question was issued by the Bureau of treasury. However, the existence of one forged signature therein will NOT render void all the other negotiations of the check with respect to the other parties whose signature are genuine. It is only the negotiation predicated on the forged indorsement that should be declared inoperative. This means that negotiations of the check in question from Martin Lorenzo, the original payee, to Ramon R. Lorenzo, the second indorser, should be declared of no effect, but the negotiation of the aforesaid check from Ramon R Lorenzo to Adeliada Dominquez, the third indorser, and from Adelaida Dominguez to the defendant-appellant who did not know of the forgery, should be considered valid and enforceable, barring any claim of forgery. The drawee of a check can recover from the holder the money paid to him on a forged instrument. It is not supposed to be its duty to ascertain whether signatures of the payee or indorser are genuine or not. This is because the indorser is supposed to warrant to the drawee that the signatures of the payee and previous indorsers are genuine, warranty not extending only to holders in due course, Ebrada, upon receiving the check in question from Dominguez, was duty-bound to ascertain whether the check in question was genuine before presenting it to the plaintiff Bank for payment. Although Ebrada to whom the plaintiff Bank paid the check was not proven to be the author of the supposed forgery, yet the last indorser of the check, she has warranted that she has a good title to it even if in fact she did not because the payee of the check was already dead 11 years before the check was issued. “IN VIEW OF THE FOREGOING, the judgment appealed from is hereby affirmed in toto with costs against defendant-appelant.”

Case 19:
Full Title:
October 19, 1966
G.R. No. L-17106
[18 SCRA 356]
FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, plaintiff-appellee, vs.
INES CHAVES & Co., LTD., ET AL., defendants-appellants.
Nariano M. de Joya and Luis R. Lara, Jr. for defendants-appellants. Herminio B. Alcid for plaintiff-appellee.
Firestone Tire & Rubber Company Of The Philippines vs. Ines Chaves & Co., Ltd., et al. Story:
Firestone Tire and Rubber Co. of the Philippines filed a complaint against Ines Chaves & Co., Ltd. in the Court of First Instance of Manila, for the collection of P6,241.75, plus interest and attorney's fees, after Chaves issued a dishonored check to Firestone. The payment of interest at the legal rate and an additional amount equal to 25 per cent of the principal as attorney's fees after finding appellants guilty of bad faith in issuing the check, which was returned for insufficiency of funds, was ordered by the trial court. Chaves alleged that they were not in bad faith because Firestone knew that there were no funds to back it up and that such funds would be available when the check becomes due. This fact accordingly has been made known to Firestone.

Issue:
Whether or not the issuance of a check which was subsequently dishonored amount to bad faith.

Decision:
Since there is a policy that no premium should be placed on the right to litigate, as a general rule, the attorney's fees cannot be recovered as part of damages. However, where a person issues a postdated check without funds to cover it and informs the payee of this fact, he cannot be held guilty of estafa because there is no deceit. But in this case, there is nothing in the record to show that Firestone knew that there were no funds in the bank when it accepted the check from the appellants, much less that Chaves "agreed" to take the check with knowledge of the lack of funds. On the contrary, by issuing a check, Chaves in effect represented to Firestone that there were funds in the bank. Thus, the lower court correctly found Chaves' conduct wanting in good faith. The court ruled against the appellants. “WHEREFORE, the decision appealed from is affirmed, with costs against appellants.”

Case 20:
Full Title:
August 10, 1992
G.R. No. 97753
[212 SCRA 448]
CALTEX (PHILIPPINES), INC., petitioner, 
vs.
COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents. Bito, Lozada, Ortega & Castillo for petitioners.
Nepomuceno, Hofileña & Guingona for private.
Caltex (Philippines), Inc., vs. Court Of Appeals And Security Bank And Trust Company Story:
Private respondent issued 280 certificates of time-deposits (CTDs) in favor of Angel Dela Cruz with an aggregate amount of P 1,120,000.00. Dela Cruz delivered the CTDs to herein the petitioner in connection with his purchase of fuel products from the latter. Thereafter, Dela Cruz informed the Branch Manager of the private respondent that he lost all the CTDs and with an affidavit of loss, 280 replacement CTDs were issued in favor of the depositor. Dela Cruz then negotiated and obtained a loan from respondent bank in the amount of P 875,000.00 and he authorized Deed of Assignment of Time Deposit which stated that he surrenders to private respondent full control of the time deposits and further authorizes the said bank to pre-terminate, set-off, and apply the said time deposits to the payment of whatever amount or amounts may be due on the loan upon its maturity. From then, the private respondent was informed formally by the petitioner telling the former of latter’s decision to pre-terminate the said CTDs as his decision after the said surrender by Dela Cruz of the CTDs. Private respondent then rejected and demanded for the payment of the full value of the CTDs. Petitioner filed instant complaint.

Issue:
Who is liable and who is favored in the said negotiable instrument (CTDs)

Decision:
On appeal, respondent court affirmed the lower court’s dismissal of the complaint stating that the CTDs are payable, not to whoever purports to be the ‘bearer’ but only to specified person indicated therein, the depositor. In effect, appellee bank acknowledges its depositor Angel dela Cruz as the person who made the deposit and further engages itself to pay said depositor the amount indicated thereon at the stipulated date. “WHEREFORE, on the modified premises above set forth, the petition is DENIED and the appealed decision is hereby AFFIRMED.”

Case 21:
Full Title:
April 30, 1987
G.R. No. 72593
[149 SCRA 448-459]
CONSOLIDATED PLYWOOD INDUSTRIES, INC., HENRY WEE, and RODOLFO T. VERGARA, petitioners,  vs.
IFC LEASING AND ACCEPTANCE CORPORATION, respondent.
Carpio, Villaraza & Cruz Law Offices for petitioners.
Europa, Dacanay & Tolentino for respondent.
Consolidated Plywood Industries, Inc., Henry Wee, and Rodolfo T. Vergara vs. Ifc Leasing and Acceptance Corporation Story:
Plywood Industries Inc., known as the petitioner, is a corporation engaged in the logging business. They needed two (2) additional units of tractors for its logging activities. Industrial Products Marketing is the corporation that sells tractor devices. They transacted with the Plywood Industries and sell their two second-hand Allis Crawler Tractors. Additionally, they gave their assurance that what they sold would be fit for its purpose. They also gave the petitioner a warranty of 90 days for the performance of the sold items. Upon relying on the skill and judgment of the seller corporation, the two tractors were purchased on installment, through petitioners Wee and Vergara, president and vice-president, paid the amount of P 210, 000 as down payment. They issued the sales invoice for the 2 units of tractors and a deed of sale with chattel mortgage with a promissory note. After 14 days one of the tractors malfunctioned and after 9 days, the other tractor likewise broke down. It was found to be beyond repair. That will lead to the delay of the work of the logging company. The company asks for its warranty. Petitioner asked the seller-assignor to pull out the units and have them reconditioned, and offer them for sale. Yet no response was received from the seller company.

Issue
Whether the promissory note in question is a negotiable instrument or not

Decision
The instrument is not negotiable because under the law without the words 'or order' or 'to the order of,' the instrument is payable only to the person designated therein and is therefore non-negotiable. The respondent is not a holder in due course; it had actual knowledge of the fact that it was subject to the condition that the tractors -sold were not defective. It is a mere assignee of the subject promissory note. The respondent couldn’t recover the purchase price from petitioners because seller-assignor is guilty of breach of warranty. The promissory note cannot be used as evidence in any court because the requisite documentary stamps have not been affixed or cancelled. Thus, the petitioner may raise against the respondent all defenses available to it as against the seller-assignor. “WHEREFORE, in view of the foregoing, the decision of the respondent appellate court dated July 17, 1985, as well as its resolution dated October 17, 1986, are hereby ANNULLED and SET ASIDE. The complaint against the petitioner before the trial court is DISMISSED.”

Case 22:
Full Title:
January 22, 1990
G.R. No. 76788
JUANITA SALAS, petitioner, 
vs.
HON. COURT OF APPEALS and FIRST FINANCE & LEASING CORPORATION, respondents. Arsenio C. Villalon, Jr. for petitioner.
Labaguis, Loyola, Angara & Associates for private respondent. Juanita Salas vs. Hon. Court of Appeals and First Finance & Leasing Corporation Story:
On February 6, 1980, Juanita Salas bought a motor vehicle from the Violago Motor Sales Corp. (VMS) for P 58,138.20 as evidence by a promissory note. This note was subsequently endorsed to Filinvest Finance &Leasing Corp. (FFLC)  On May 21, 1980, Salas defaulted in her installments allegedly due to discrepancies in the engine and chassis number of the vehicle delivered and discovery of certificate of reg. and deed of mortgage. Imputing fraud, bad faith and misrepresentation against VMS for having delivered a different vehicle to petitioner, the latter prayed for a reversal of the trial court's decision so that she may be absolved from the obligation under the contract. Petitioner's motion for reconsideration was denied; hence, the present recourse. In the petition before us, petitioner assigns twelve (12) errors which focus on the alleged fraud, bad faith and misrepresentation of Violago Motor Sales Corporation in the conduct of its business and which fraud, bad faith and misrepresentation supposedly released petitioner from any liability to private respondent who should instead proceed against VMS. Petitioner argues that in the light of the provision of the law on sales by description which she alleges is applicable here, no contract ever existed between her and VMS and therefore none had been assigned in favor of private respondent.

Issue:
Whether the promissory note in question is a negotiable instrument which will bar completely all the available defenses of the petitioner against private respondent

Decision:
The questioned promissory note is a negotiable instrument, having complied with the requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to pay the amount of P58,138.20; [c] it is payable at a fixed or determinable future time which is "P1,614.95 monthly for 36 months due and payable on the 21 st day of each month starting March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales Corporation, or order and as such, [e] the drawee is named or indicated with certainty. It was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation and it is an indorsement of the entire instrument.  Under the circumstances, there appears to be no question that Filinvest is a holder in due course, having taken the instrument under the following conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation. Accordingly, respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof.  This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS. Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in that the vehicle she purchased was different from that actually delivered to her, this matter cannot be passed upon in the case before us, where the VMS was never impleaded as a party. Whatever issue is raised or claim presented against VMS must be resolved in the "breach of contract" case. “IN VIEW OF THE FOREGOING, the assailed decision is hereby AFFIRMED. With costs against petitioner.”

Case 23:
Full Title:
November 27, 2002
G.R. No. 139130            
RAMON K. ILUSORIO, petitioner, 
vs.
HON. COURT OF APPEALS, and THE MANILA BANKING CORPORATION, respondents. Ramon K. Ilusorio vs. Hon. Court of Appeals, and the Manila Banking Corporation Story:
Petitioner is a prominent businessman and was the Managing Director of Multinational Investment Bancorporation and the Chairman and/or President of several other corporations. He was a depositor in good standing of respondent bank, the Manila Banking Corporation. As he was then running about 20 corporations, and was going out of the country a number of times, petitioner entrusted to his secretary, Katherine E. Eugenio, his credit cards and his checkbook with blank checks. It was also Eugenio who verified and reconciled the statements of said checking account. The appellant had put so much trust and confidence in the said secretary, by entrusting not only his credit cards with her but also his checkbook with blank checks. He also entrusted to her the verification and reconciliation of his account. While the bank was sending him the monthly Statements of Accounts, he was not personally checking the same. His testimony did not indicate that he was out of the country during the period covered by the checks. Petitioner fired Eugenio and instituted a criminal action against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. Private respondent, through an affidavit executed by its employee, Mr. Dante Razon, also lodged a complaint for estafa thru falsification of commercial documents against Eugenio on the basis of petitioners statement that his signatures in the checks were forged. The banks standard operating procedure that whenever a check is presented for encashment or clearing, the signature on the check is first verified against the specimen signature cards on file with the bank. The NBI suggested that petitioner be asked to submit seven (7) or more additional standard signatures executed before or about, and immediately after the dates of the questioned checks. Petitioner, however, failed to comply with this request. Petitioner elevated the case to the Court of Appeals.

Issue:
* Whether or not petitioner has a cause of action against private respondent * Whether or not private respondent, in filing an estafa case against petitioner’s secretary, is barred from raising the defense that the fact of forgery was not established

Decision:
The instant petition is denied for lack of merit. The assailed decision of the Court of Appeals dated January 28, 1999 in CA-G.R. CV No. 47942, is affirmed.

Case 24:
Full Title:
January 23, 1998
G.R. No. 105188
248 SCRA 643
MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte, petitioner,  vs.
A.U. VALENCIA and CO. INC., FELIX PEÑARROYO, SPS. ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents. Myron C. Papa vs. A.U. Valencia and Co. Inc., Felix Peñarroyo, Sps. Arsenio B. Reyes & Amanda Santos, and Delfin Jao Story:

Myron Papa, acting as attorney-in-fact of Angela Butte, allegedly sold a parcel of land in La Loma, Quezon City to Felix Penarroyo. However, prior to the alleged sale, the land was mortgaged by Butte to Associated Banking Corporation along with other properties and after the alleged sale but prior to the property’s release by delivery, Butte died. The Bank refused to release the property despite Penarroyo’s unless and until the other mortgaged properties by Butte have been redeemed and because of this Penarroyo settled to having the title of the property annotated. It was later discovered that the mortgage rights of the Bank were transferred to one Tomas Parpana, administrator of the estate of Ramon Papa Jr. and his since then been collecting rents. Despite repeated demands of Penarroyo and Valencia, Papa refused to deliver the property which led to a suit for specific performance. The trial court ruled in favor of Penarroyo and Valencia. On appeal to the CA, and ultimately in relation to negotiable instruments, Papa averred that the sale of the property was not consummated since the PCIB check issued by Penarroyo for payment worth 40000 pesos was not encashed by him. However, the CA saw the contrary and that Papa in fact encashed the check by means of a receipt. Finally on appeal to the SC, Papa cited that according to Art 1249 of the Civil Code, payment of checks only produce effect once they have been encashed and he insists that he never encashed the check. He further alleged that if check was encashed, it should have been stamped as such or at least a microfilm copy. It must be noted that the check was in possession of Papa for ten (10) years from the time payment was made to him.

Issue:
Whether or not the check was encashed and can be considered as valid payment

Decision:
“WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court of Appeals, dated 27 January 1992 is AFFIRMED.” On 27 January 1992, the Court of Appeals rendered a decision, affirming with modification the trial court's decision, thus, “WHEREFORE, the second paragraph of the dispositive portion of the appealed decision is MODIFIED, by ordering the defendant-appellant to deliver to plaintiff-appellees the owner's duplicate of TCT No. 28993 of Angela M. Butte and the peaceful possession and enjoyment of the lot in question or, if the owner's duplicate certificate cannot be produced, to authorize the Register of Deeds to cancel it and issue a certificate of title in the name of Felix Peñarroyo. In all other respects, the decision appealed from is AFFIRMED. Costs against defendant-appellant Myron C. Papa” On 29 June 1987, the trial court rendered a decision, the dispositive portion of which reads: WHEREUPON, judgment is hereby rendered as follows:

1)  Allowing defendant to redeem from third-party defendants and ordering the latter to allow the former to redeem the property in question, by paying the sum of P14,000.00 plus legal interest of 12% thereon from January 21, 1980; 2)  Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix Peñarroyo covering the property in question and to deliver peaceful possession and enjoyment of the said property to the said plaintiff, free from any liens and encumbrances; Should this not be possible, for any reason not attributable to defendant, said defendant is ordered to pay to plaintiff Felix Peñarroyo the sum of P45,000.00 plus legal interest of 12% from June 15, 1973; 3)  Ordering plaintiff Felix Peñarroyo to execute and deliver to intervenor a deed of absolute sale over the same property, upon the latter’s payment to the former of the balance of the purchase price of P71,500.00; Should this not be possible, plaintiff Felix Peñarroyo is ordered to pay intervenor the sum of P5,000.00 plus legal interest of 12% from August 23, 1973; and 4)  Ordering defendant to pay plaintiffs the amount of P5,000.00 for and as attorney’s fees and litigation expenses. SO ORDERED

Case 25:
Full Title:
October 18, 2004
G.R. No. 159590
[440 SCRA 498 (2004)]
HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED (14 HSBC), petitioner,  vs.
CECILIA DIEZ CATALAN, respondent.
Hongkong and Shanghai Banking Corporation Limited vs. Cecilia Diez Catalan Story:
Thomson issued five HSBANK checks payable to Catalan, in March 1997, amounting to HK$3,200,000.00. When it was deposited was returned by HSBANK purportedly for reason of "payment stopped" pending confirmation, despite the fact that the checks were duly funded. Thompson wrote the bank to facilitate the payment of checks. Thomson died and Catalan forwarded her demand to HSBC TRUSTEE. She also forwarded the photocopies of the checks. Unsatisfied with the photocopies, the bank demanded the original copies as a condition for the acceptance of the checks. Catalan went to Hong Kong at her own expense. HSBC TRUSTEE despite receipt of the original checks, refused to pay Catalan’s claim. Having seen and received the original of the checks, upon its request, HSBC TRUSTEE is deemed to have impliedly accepted the checks. Moreover, the refusal of HSBANK and HSBC TRUSTEE to pay the checks is equivalent to illegal freezing of one’s deposit. On August 16, 1999, Phoenix Lam, Senior Vice President of HSBC TRUSTEE, in obvious disregard of her valid claim, informed Catalan that her claim is disapproved.  HSBANK and Catalan filed separate motions for partial reconsideration.

Issue:
Whether the HSBank and HSBC TRUSTEE are liable for the amount plus damages to Catalan

Decision:
In order to be liable to the abuse of rights principle, the following elements must occur: (a) that there is a legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another. The court therefore is convinced that the allegations there are in the nature of an action based on tort under Article 19 of the Civil Code. Catalan sued the HSBANK and HSBC TRUSTEE for unjustified and willful refusal to pay the value of the checks. HSBANK claims that Catalan has no cause of action because under Section 189 of the Negotiable Instruments Law, "a check of itself does not operate as an assignment of any part of the funds to the credit of the drawer with the bank, and the bank is not liable to the holder unless and until it accepts or certifies it." However, HSBANK is not being sued on the value of the check itself but for how it acted in relation to Catalan’s claim for payment despite the repeated directives of the drawer Thomson to recognize the check the latter issued. The petition is DENIED.

Case 26:
Full Title:
September 15, 1989
G.R. No. 80599
[177 SCRA 594]
ERNESTINA CRISOLOGO-JOSE, petitioner, 
vs.
COURT OF APPEALS and RICARDO S. SANTOS, JR. in his own behalf and as Vice-President for Sales of Mover Enterprises, Inc., respondents. Melquiades P. de Leon for petitioner.
Rogelio A. Ajes for private respondent.
Ernestina Crisologo-Jose vs. Court of Appeals and Ricardo S. Santos, Jr. Story:
Atty. Oscar Z. Benares, the president of Movers Enterprises, to accommodate its clients issued Check No. 093553 drawn against Traders Royal Bank, dated June 14, 1980, in the amount of P45,000.00 in  favor  of  petitioner Ernestina Crisologo-Jose on April 30, 1980. This  was  in consideration of a quitclaim by petitioner over a parcel of land, which the Government Service Insurance System(GSIS) agreed to sell to spouses  Ong,  with  the  understanding  that upon approval of the compromise agreement, the check will be encashed accordingly. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, at that time, the treasurer of Mover Enterprises was not available; Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check as an alternate story. Plaintiff Ricardo S. Santos, Jr. did sign the check. As the compromise agreement wasn't approved during the expected period of time, the aforementioned check was replaced by Atty. Benares with another Traders Royal Bank check bearing No. 379299 dated August 10, 1980, in the same amount of P45,000.00. This replacement check was also signed by Atty. Oscar Z. Benares and by the plantiff Ricardo S. Santos, Jr. upon deposit of the checks by petitioner, it was dishonored for insufficiency of funds. This prompted Crisologo-Jose to file a case against Atty. Bernares and Santos for violation of Batas Pambansa Blg. 22 with the Quezon City Fiscal's Office. Meanwhile during the preliminary investigation, Santos tried to tender a cashier’s check No. CC 160152 for P45, 000.00 dated April 10, 1981 to the defendant but petitioner refused to accept such. The plaintiff encashed the aforesaid cashier's check and subsequently deposited said amount of P45, 000.00 with the Clerk of Court on August 14, 1981. The trial court held that consignation wasn't applicable to the case at bar but was reversed by the Court of Appeals.

Issue:
Petitioner, Crisologo-Jose, claims that the accommodation party in this case is Mover Enterprises, Inc. and not private respondent who merely signed the check in question in a representative capacity; hence, Ricardo S. Santos is not liable thereon under the Negotiable Instruments Law. Consequently, to be considered an accommodation party, a person must (1) be a party to the instrument, signing as maker, drawer, acceptor, or indorser, (2) not receive value therefor, and (3) sign for the purpose of lending his name for the credit of some other person. Based on the abovementioned prerequisites, it is not a valid justification that the accommodation party did not collect any valuable consideration when he executed the instrument. From the perspective of contract law, he varies from the usual notion of a debtor therein in the sense that he has not received any valuable consideration for the instrument he signs. Nevertheless, he is liable to a holder for value as if the contract was not for accommodation. Another issue is that the petitioner contends that the Court of Appeals make a mistake in holding that the consignation of the sum of P45, 000.00 was proper under Article 1256 of the Civil Code. As earlier deliberated, however, respondent Santos is an accommodation party and is, hence, liable for the value of the check. The fact that he was only a co-signatory does not undermine him from his personal liability. A co-maker or co-drawer under the circumstances in this case is as much an accommodation party as the other co-signatory in an accommodation instrument.

Decision:
Upon the discussion on the preceding consideration, the Supreme Court finds that the plaintiff-appellant acted within legal rights when he consigned the amount of P45, 000.00 on August 14, 1981, between August 7, 1981, the date when plaintiff-appellant receive the notice of non-payment, and August 14, 1981, the date when the debt due was deposited with the Clerk of Court (a Saturday and a Sunday which are not banking days) intervened. The fifth banking day fell on August 14, 1981. Therefore, no criminal liability has yet attached to plaintiff-appellant when he deposited the amount of P45, 000.00 with the Court on August 14, 1981. The Supreme Court modified the decision of respondent court in CA-G.R. CV No. 05464 by setting aside and declaring without force and effect its pronouncements and findings insofar as the merits of Criminal Case No. Q-14867 and the liability of the accused therein are concerned.

Case 27:
Full Title:
October 5, 1988
G.R. No. L-36549
FAR EAST REALTY INVESTMENT INC., petitioner-appellant, 
vs.
THE HONORABLE COURT OF APPEALS, DY HIAN TAT, SIY CHEE and GAW SUY AN, respondents-appellees. Crispino P. Reyes for petitioner-appellant.
Uy and Bacabac Law Offices for respondents-appellees
Far East Realty Investment Inc. vs. The Honorable Court of Appeals, Dy Hian Tat, Siy Chee and Gaw Suy An Story:
Private respondents asked the petitioner to extend an accommodation loan in the sum of P4,500.00. Respondents delivered to the petitioner a check for P4,500.00, drawn by Dy Hian Tat, and signed by them at the back of said check, with the assurance that after one month from September 13, 1960, the said check would be redeemed by them by paying cash in the sum of P4,500.00, or the said check can be presented for payment on or immediately after one month. Petitioner agreed and extended an accommodation loan The aforesaid check was presented for payment to the China Banking Corporation, but said check bounced and was not cashed by said bank, for the reason that the current account of the drawer thereof had already been closed. Petitioner demanded payment from the private but the latter failed and refused to pay notwithstanding repeated demands. Both private respondents raised the defense that both have been wholly discharged by delay in presentment of the check for payment. The Lower Court ruled in favor of the petitioner. However, this was reversed by the CA upon appeal by the respondents, ruling that the check was not given as collateral to guarantee a loan secured since the check passed through other hands before reaching the petitioner and the said check was not presented within a reasonable time. Hence this petition. Petitioner argues that presentment for payment and notice of dishonor are not necessary as when funds are insufficient to meet a check, thus the drawer is liable, whether such presentment and notice be totally omitted or merely delayed.

Issue:
* Whether or not presentment for payment can be dispense with * Whether or not presentment for payment and notice of dishonor of the questioned check were made within reasonable time

Decision:
Presentment and notice of dishonor were not made within a reasonable time. The judgment sought to be reviewed, which ordered private respondents to pay, jointly and severally, the petitioner the sum of P4,500.00 plus interest at the rate of 14% per annum, from September 13, 1960,until fully paid, plus the sum of P1,000.00 as attorney's fees, is hereby reversed; complaint is dismissed; but for lack of sufficient merit, the claim of defendants for attorney's fees and damages is overruled; costs are however adjudged against plaintiff in all instances.

Case 28:
Full Title:
February 2, 2001
G.R. No. 117857      
LUIS S. WONG, petitioner, 
vs.
COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents. Luis S. Wong vs. Court of Appeals and People of The Philippines Story:
Petitioner Wong was an agent of Limtong Press Inc. (LPI), a manufacturer of calendars. LPI would print sample calendars, and then give them to agents to present to customers. The agents would get the purchase orders of customers and forward them to LPI. After printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would come around to collect the payments. Petitioner, however, had a history of unremitted collections, which he duly acknowledged in a confirmation receipt he co-signed with his wife. Hence, petitioner’s customers were required to issue post-dated checks before LPI would accept their purchase orders. In early December 1985, Wong issued six (6) post-dated checks totalling P18, 025.00, all dated December 30, 1985 and drawn payable to the order of LPI. These checks were initially intended to guarantee the calendar orders of customers who failed to issue post-dated checks. However, following company policy, LPI refused to accept the checks as guarantees.  Instead, the parties agreed to apply the checks to the payment of petitioner’s unremitted collections for 1984 amounting to P18, 077.07. LPI waived the P52.07 difference. Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them within 30 days.  However, petitioner reneged on his promise.  Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were returned for the reason “account closed.” The dishonor of the checks was evidenced by the RCBC return slip. On June 20, 1986, complainant through counsel notified the petitioner of the dishonor. Petitioner failed to make arrangements for payment within five (5) banking days. On August 30, 1990, the Court finds the accused Luis S. Wong “GUILTY beyond reasonable doubt of the offense of Violations of Section 1 of Batas Pambansa Bilang 22 in THREE (3) Counts and is hereby sentenced to serve an imprisonment of FOUR (4) MONTHS for each count; to pay Private Complainant Manuel T. Limtong the sums of Five Thousand Five Hundred (P5,500.00) Pesos, Six Thousand Four Hundred Ten (P6,410.00) Pesos and Three Thousand Three Hundred Seventy-Five (P3,375.00) Pesos corresponding to the amounts indicated in Allied Banking Checks Nos. 660143451, 66[0]143464 and 660143463 all issued on December 30, 1985 together with the legal rate of interest from the time of the filing of the criminal charges in Court and pay the costs.” Petitioner appealed his conviction to the Court of Appeals. On October 28, 1994, it affirmed the trial court’s decision in toto.[9] Petitioner insists that the checks were issued as guarantees for the 1985 purchase orders (PO’s) of his customers. He contends that private respondent is not a “holder for value” considering that the checks were deposited by private respondent after the customers already paid their orders. Instead of depositing the checks, private respondent should have returned the checks to him. Petitioner further assails the credibility of complainant considering that his answers to cross-examination questions included: “I cannot recall, anymore” and “We have no more record.”  In his Comment, the Solicitor General concedes that the checks might have been initially intended by petitioner to guarantee payments due from customers, but upon the refusal of LPI to accept said personal checks per company policy, the parties had agreed that the checks would be used to pay off petitioner’s unremitted collections. Petitioner’s contention that he did not demand the return of the checks because he trusted LPI’s good faith is contrary to human nature and sound business practice, according to the Solicitor General.

Issue:
Whether or not the prosecution was able to establish beyond reasonable doubt all the elements of the offense penalized under B.P. Blg. 22.

Decision:
“WHEREFORE, the petition is DENIED.  Petitioner Luis S. Wong is found liable for violation of Batas Pambansa Blg. 22 but the penalty imposed on him is hereby MODIFIED so that the sentence of imprisonment is deleted. Petitioner is ORDERED to pay a FINE of (1) P6, 750.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12057, (2) P12, 820.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12058, and (3) P11, 000.00, equivalent to double the amount of the check involved in Criminal Case No. CBU-12055, with subsidiary imprisonment in case of insolvency to pay the aforesaid fines.  Finally, as civil indemnity, petitioner is also ordered to pay to LPI the face value of said checks totaling P18,025.00 with legal interest thereon from the time of filing the criminal charges in court, as well as to pay the costs.”

Case 29:
Full Title:
March 23, 2004
G.R. No. 141278            
[426 SCRA 159]
MICHAEL A. OSMEÑA, petitioner, 
vs.
CITIBANK, N.A., ASSOCIATED BANK and FRANK TAN, respondents. Michael A. Osmeña vs. Citibank, N.A., Associated Bank and Frank Tan Story:
On February 22, 1991, the petitioner filed with the Regional Trial Court of Makati an action for damages against the respondents Citibank, N.A. and Associated Bank. The case was labeled as Civil Case No. 91-538. The petitioner’s complaint was that the Manager’s Check no. 20-015301 in the amount of P1,545,000 payable to Frank Tan that he purchased from Citibank (drawee bank) on or about August 25, 1989 was deposited by the respondent Associated Bank, Rosario Branch to the account of a certain Julius Dizon under Savings Account No. 19877.

Issue:
The clearing and/or payment by the respondents of the check to an improper party and the absence of any indorsement by the payee thereof, respondent Frank Tan, is a clear violation of the respondents’ obligations under the Negotiable Instruments Law and standard banking practice. Considering that the petitioner’s intended payee for the check, the respondent Frank Tan, did not receive the value thereof, the petitioner demanded from the respondents Citibank and the Associated Bank the payment or reimbursement of the value of the check. The respondents, however, obstinately refused to heed his repeated demands for payment and/or reimbursement of the amount of the check. Hence, the petitioner was compelled to file this complaint praying for the restitution of the amount of the check, and for moral damages and attorney’s fees. On June 17, 1991, the petitioner filed an Amended Complaint impleading Frank Tan as an additional defendant. The petitioner stated that the check was purchased by him as payment for the loan he obtained from Frank Tan. Since Frank Tan did not receive any amount because the check was deposited to the account of a certain Julius Dizon, he then seeks reimbursement from either or both respondents Citibank and/or Associated Bank. The respondent Associated Bank answered to the amended complaint that respondent Frank Tan and Julius Dizon are one and the same. “Julius Dizon” is the assumed Filipino name of Frank Tan Guan Leng, respondent Frank Tan’s real Chinese name. Since they are of the same identity, respondent Associated Bank contested that it did not commit any violation of its duties and responsibilities because the proceeds of the check went and was credited respondent Frank Tan, a.k.a. Julius Dizon. The petitioner’s complaint is self-serving hence, the petitioner’s claim for damages is baseless, unfounded and without legal basis. The respondent Citibank also answered to the amended complaint of the petitioner stating that the payment of the check was made by it in due course and in the exercise of its regular banking function. Since a manager’s check is normally payable to a third person which is normally unknown to the drawee bank, in this case Citibank, it is not the responsibility of Citibank to check the existence of the third party payee. Its only responsibility when paying a check is to examine the genuineness of the check being paid. It also claimed that it is the responsibility of the depository bank, in this case Associated Bank, to ascertain the genuineness of the indorsement of the payee. It is their responsibility to make sure that the check was properly indorsed by the payee.

Decision:
* Defendant Frank Tan to pay Michael Osmeña the amount of Php1,545,000 with interest thereon at 12% per annum starting January 1990 (date of extra-judicial demand) until the full amount is paid; * Dismissing the complaint against Citibank and Associated Bank; * Dismissing the counter-claims and the cross-claim of Citibank against Associated Bank for lack of merit. With costs against defendant Frank Tan.

Case 30:
Full Title:
April 24, 1989
G.R. No. L-85785
[172 SCRA 685]
BENITO SY y ONG, petitioner, 
vs.
PEOPLE OF THE PHILIPPINES PHILIPPINES and COURT OF APPEALS, respondents. Law Firm of Raymundo A. Armovit for petitioner.
The Solicitor General for respondent.
Benito Sy Y Ong vs. People of the Philippines And Court of Appeals Story:
In January 1986 "Panama" engaged petitioner, an insurance agent, to obtain marine insurance in the amount of P3M to cover its log shipment from Palawan to Manila. As instructed, on l4 January l986 petitioner secured Marine Insurance Policy No. OAC-M-86/002 from Oriental Assurance Corporation ("Oriental", for short), with a face value of P3M (Exhibit "A"). Only the duplicate original of the Policy was left with "Panama". On 15 January 1986, "Panama" gave petitioner Philippine Bank of Communication Check No. 291616 in the amount of P6,000.00 payable to "Oriental" for the policy coverage of P3M. On 28 January 1986 some of the logs valued at P1.2M were lost when the barge transporting the shipment encountered rough seas in the vicinity of Dumaran Island, Palawan. "Panama" filed a claim for loss against "Oriental" only to be informed by the latter that its marine insurance coverage was only for P1M and that petitioner had paid a premium of only P2,712.50 (Exhibit "D") Contending that petitioner had misappropriated the difference of P3,287.50 for his personal use and benefit to its prejudice, "Panama" charged petitioner with Estafa. a) Petitioner had never, at any one time, dealt with prosecution witness, Te Peng Men. It was only through one Tau Tian that petitioner had any contact with "Panama". b) "Oriental" had issued a Marine Insurance Policy in the amount of P3M in favor of "Panama" through petitioner's efforts. c) However, Tau Tian requested petitioner to return the Policy since the rate was quite high and "Panama" wanted to pay only P6,000.00. Thereafter, Tau Tian returned the original of the Policy to petitioner but retained the duplicate copy. Tau Tian instructed petitioner to obtain a reduction of the premium from P8,137.50 to P6,000.00. d) Since petitioner was not able to secure a reduction in the premium, he obtained instead a P1M policy from "Oriental" paying for that purpose a premium of P2,712.50. In addition, he obtained a P2M policy from the First Integrated Insurance Co., Inc. paying a premium therefor of P3,255.00. The two policies totalled P3M and the premiums paid reached P5,967.50, or almost P6,000.00. e) The real reason why "Panama" was not able to recover on the aforementioned policies was because the policy of "Oriental" was for total loss only and not for partial loss. In fact, even the Tan Gatue Adjustment Company sustained the rejection of "Panama's" claim for that reason.

Issue:
Whether or not all the essential elements of estafa are present

Decision:
WHEREFORE, the judgment under review is hereby AFFIRMED. With costs against petitioner-accused, Benito Sy y Ong

Case 31:
Full Title:
August 23, 2001
G.R. No. 38588
363 SCRA 659
Far East Bank & Trust Company vs. Diaz Realty, Inc.,
Far East Bank & Trust Company vs. Diaz Realty, Inc.
Story:
In August 1973, Diaz and company contracted a loan from Pacific Banking Corporation (PaBC) amounting to P 720,000, with interest of 12% per annum which was later increased to 14%, 16%, 18% and 20% respectively. The loan was secured by a real estate mortgage over two parcels of land owned by Diaz Realty both located in Davao City. Allied Company leased an office space in the building constructed in the land mortgaged in 1981 and was further agreed that the monthly rental payments of Allied Company shall be directly paid to the mortgagee (PaBC) for the lessor’s account. Allied bank paid the monthly rentals to PaBC in accordance with the contract. On July 5, 1985, Central Bank closed PaBC, placed it under receivership, and appointed Renan Santos as its liquidator. In December 1986, Far East Bank Trust Company purchased the credit of Diaz & Company in favor of PaBC but Diaz was notified about the said purchase of credit only in March 23, 1988. According to FEBTC, on March 23, 1988, Antonio Diaz (President of Diaz & Company and Vice-President of Diaz Realty) went to PaBC’s office which by then housed FEBTC and was told that the latter had acquired PaBC. Diaz was told by cashier Ramon Lim that as of the said date, his outstanding balance with his loan is P 1,447,142.03. Diaz asked the defendant to make an accounting of Allied Bank’s monthly rental payments. In December 14, 1988, Diaz furnished a check to FEBTC in the amount of P 1,450, 000 to avoid further payments of interests and other penalties. However, FEBTC did not accept it as payment; instead, Diaz was asked to deposit the same to defendant’s Davao City Branch Office, pending the approval of Central Bank liquidator Renan Santos. In the meantime, Diaz asked the defendant to reduce the interest from 20% to 12% per annum; no reply was received from FEBTC. The defendant asked Diaz to change the P 1,450,000 payment to a money market placement which he obeyed and that which expired in April 14, 1989. When there was still no response from the defendant on whether or not it will accept his tender of payment, he filed his case at the Davao Regional Trial Court. In its responsive pleading, the defendant set up the following affirmative defenses: that in December 1986, FEBTC purchased from PaBC the account of Diaz for a total consideration of P 1,828, 875 and that despite the purchase PaBC Davao branch continued to collect interests and penalty charges on the loan from  January 6, 1988 to July 8, 1988. It was not FEBTC but PaBC that collected the interest rates mentioned in the complaint and it is not true that FEBTC imposed exorbitant interest rates. That as a matter of fact, FEBTC tried to negotiate with the plaintiffs and that FEBTC has no knowledge of the rates imposed previously by PaBC. Therefore, FEBTC could not be held responsible for transactions which took place before the purchase and that defendant acted at the right time to settle the account.

Issue:
* Whether or not the CA correctly ruled that the validity of the tender of payment was not properly raised in the RTC and could not thus be raised in the appeal. * Whether or not the CA erred in failing to apply settled jurisprudential principles militating against the private respondent’s contention that a valid tender of payment had been made by it. * Whether or not the CA correctly found that the transaction between petitioner and PaBC was an ‘innefective novation’ and that the consent of private respondents was necessary therefor. * Whether or not the CA erred in refusing to apply the rate of interest freely stipulated upon by the parties to the respondent’s obligation. * Whether or not the CA committed an irreconcilable error in ordering the parties to re-negotiate the terms of the contract while finding at the same time that the mortgage contract containing the lease was valid. * Whether or not the petition, as argued by private respondent raises questions of fact not reviewable by certiorari.

Decision:
For a valid tender of payment, it is necessary that there be a fusion of intent, ability and capability to make good such offer, which must be absolute and must cover the amount due.  Though a check is not legal tender, and a creditor may validly refuse to accept it if tendered as payment, one who in fact accepted a fully funded check after the debtor’s manifestation that it had been given to settle an obligation is estopped from later on denouncing the efficacy of such tender of payment. A. A check does not constitute legal tender, and that a creditor may validly refuse it. It must be emphasized, however, that this dictum does not prevent a creditor from accepting a check as payment. Meaning, the creditor has the option and the discretion of refusing or accepting it. Therefore, since the petitioner bank did not refuse respondent’s check, and since the check was cleared, it served as a valid tender of payment. B. The transfer of credit from PaBC to FEBTC is not an ineffective novation but instead a mere assignment of credit. Even so, FEBTC had the right to collect the full value of the credit from Diaz, ubject to the terms as originally agreed upon in the Promissory Note. C. Petitioner bank as assignee of respondent’s credit is entitled to the full interest rate of 20% in the computation of debt of Diaz as stipulated in the August 26, 1983 agreement. However, since there was a valid tender f payment made on November 14, 1988, the accrual of interest shall stop at that date. Thus, Diaz should pay FEBTC the principal amount of P 1,067,000 plus accrued interet thereon at 20% until November 14, 1988 less interest payments given to PaBc from December 1986-July 8, 1988. After that, interest should be computed at 12% per annum until full payment.

The petition is hereby denied. The decision of the CA is affirmed with the following modifications: respondent Diaz Realty is ordered to pay FEBTC its principal obligation amounting to P 1,067,000 with interest thereon computed ar 20% per annum until November 14, 1988 less any interest payments made to PaBC. Thereafter, interest shall be computed at 12% per annum until fully paid.

Case 32:
Full Title:
May 24, 1993
G.R. No. 89252
RAUL SESBREÑO, petitioner, 
vs.
HON. COURT OF APPEALS, DELTA MOTORS CORPORATION AND PILIPINAS BANK, respondents. Salva, Villanueva & Associates for Delta Motors Corporation. Reyes, Salazar & Associates for Pilipinas Bank.

Raul Sesbreño vs. Hon. Court of Appeals, Delta Motors Corporation and Pilipinas Bank Story:
Raul Sesbreño, petitioner, made a money market placement in the amount of P300,000.00 with the Philippine Underwriters Finance Corporation (“Philfinance”, Cebu Branch), 9 February, 1981. The placement had a term of 32 days and would thus mature on 13 March 1981. On 9 February, 1981, PhilFinance also issued the following documents to Sesbreño: a) Certificate of Confirmation of Sale (No. 20496) of a Delta Motors Corporation Promissory Note (No. 2731) for a term of 32 days; 17% per annum. b) Certificate of Securities Delivery Receipt (No. 16587) indicating the sale of the note, with a notation saying that the said security was in the hands of Pilipinas Bank. c) Post-dated checks payable on 13 March 1981 (with Sesbreño as payee, and PhilFinance as drawer), against the Insular Bank of Asia and America, in the amount of P304,533.33. On 13 March 1981, Sesbreño sought to encash the post-dated checks issued by Philfinance but the checks were dishonored for having been drawn against insufficient funds. On 2 April 1981, petitioner found out that the security had been issued on 10 April 1980 and was bound to mature on 6 April 1981. The security had a face value of P2,300,833.33, with PhiFinance as the payee, and Delta Motors as the maker. Also, the face of the promissory note was stamped with “NON NEGOTIABLE”. Sesbreño made several demand letters asking Pilipinas Bank for the delivery of the promissory note (DMC PN No. 2731). Pilipinas Bank did not ever release the note, or any instrument related thereto, to Sesbreño.

Issue:
Whether non-negotiability of a promissory note prevents its assignment

Decision:
The negotiability of an instrument should be distinguished from its assignability. A non-negotiable instrument, though it cannot be negotiated, may be assigned or transferred, if the face of the instrument does not expressly prohibit its assignment or transfer. The words “NON-NEGOTIABLE” stamped on the instrument did not destroy its assignability. Herein, DMC PN No. 2731, although marked “non-negotiable”, was not stamped with “"non-transferrable" or "non-assignable." It did not contain any stipulation prohibiting PhilFinance from assigning or transferring the abovementioned note, in whole or in part.

Case 33:
Full Title:
March 30, 1967
G.R. No. L-20320        
[19 SCRA 684]    
IN THE MATTER OF THE TESTATE ESTATE OF THE DECEASED GERMAN GASTON.  VICTORIA VDA. DE GASTON, administratrix and appellee, 
vs.
REPUBLIC OF THE PHILIPPINES, claimant and appellant.
Office of the Solicitor General for claimant and appellant.
Arsenio Al. Acuña for administratrix and appellee.
Victoria Vda. De Gaston vs. Republic of the Philippines
Story:
Petitioners who are sugar producers, sugarcane planters and millers, who have come to this Court in their individual capacities and in representation of other sugar producers, filed with the Supreme Court a petition praying for a Writ of mandamus to order respondent Philippine Sugar Commission (PHILSUCOM) which was superseded by its co-respondent Sugar Regulatory Administration (SRA) and Republic Planters Bank, a commercial banking corporation, implement the privatization of the Bank by the transfer and distribution of the shares of stock of the said Bank which is in the name of PHILSUCOM to the sugar producers, millers and planters, who are the true and beneficial owners thereof. PHILSUCOM and SRA argued that no trust results and that the stabilization fees collected are considered government funds, that the transfer of shares of stock from PHILSUCOM to the sugar producers would be irregular, if not illegal.

Issue:
Whether the stabilization fees collected from sugar planters and millers pursuant to Section 7 of P.D. No. 388 are funds in trust for them, or public funds

Decision:
The Supreme Court held that the stabilization fees collected are in the nature of a tax which constitutes public funds, which is within the power of the State to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a "Special Fund," a "Development and Stabilization Fund," almost Identical to the "Sugar Adjustment and Stabilization Fund" created under Section 6 of Commonwealth Act 567. The tax collected is not in a pure exercise of the taxing power. The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose that of "to uphold the growth and development of the sugar industry and all its components, stabilization of the domestic market including the foreign market the fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them state funds, even though they are held for a special purpose. Since it is levied for a special purpose the fees collected should be part of the special fund. Once the purpose has been fulfilled or abandoned, the balance of the special fund, if any, is to be transferred to the general funds of the Government. The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law. That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fired for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are to be benefited from the expenditure of the funds derived from it. To rule in petitioners' favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, "and all its components, stabilization of the domestic market," including the foreign market the industry being of vital importance to the country's economy and to national interest. WHEREFORE, the Writ of mandamus is denied and the Petition hereby dismissed. No costs.

Case 34:
Full Title:
September 20, 2005
G.R. No. 151333
[470 SCRA 291]
SPOUSES NATALIO and FELICIDAD SALONGA, Petitioners, 
vs.
SPOUSES MANUEL and NENITA CONCEPCION and FLORENCIA REALTY CORPORATION, Respondent. Spouses Natalio and Felicidad Salonga vs. Spouses Manuel and Nenita Concepcion and Florencia Realty Corporation Story:

The spouses Natalio and Felicidad Salonga owned 8 parcels of land in Dagupan with the following Transfer of Certificate of Title (TCT)Nos : 40886, 40887, 43547, 35156, 49460, 49459, 26506 (their residential area), and 53650 (with building being leased by traders). The couple then secured a several loans from different banks and executed Real Estate Mortgage over their land properties in favor of the banks: a loan from Associated Bank (AB) and Real Estate Mortgate over land properties TCT no.40886, 40887, 43547, 35156 and 49459; from Philippine National Bank (PNB) over TCT No. 26506; from Development Bank of the Philippines (DBP) over TCT No. 53650 including the commercial building; and from Rural Bank of Malasiqui, Inc. (RBMI) over TCT No. 49460. On July 16, 1990, an earthquake damaged the spouses’ commercial building and thus severely affecting their business. Consequently, the Salongas could no longer pay their loans. The banks then foreclosed their mortgages. On September 4, 1991, RBM sold at public auction property covered by TCT No. 49460. On November 21, 1991, DBP sold property covered by TCT No. 53650. On October 1, 1992, AB filed a petition with the Regional Trial Court (RTC) for the foreclosure of the Real Estate Mortgage of the spouses over the five properties for the satisfaction of their P 571, 132.70 balance as of August 31, 1992. On December 10, 1992, the sheriff set the sale at public auction. The worried Salongas then secured a P 500,000 loan from Manuel and Nenita Concepcion to repay their loan from PNB. On November 6, 1992, the Concepcions remitted the payment to PNB with additional P 2,756.85 for surcharges and was issued a receipt. On November 11, 1992, PNB issued Deed of Release of Real Estate Mortgage delivered to Manuel Concepcion together with the receipt and owner’s duplicate of TCT No. 26506. The Salongas then secured another loan from the Concepcions to settle their mortgage with AB. Manuel Concepcion paid P 200,000.00 on December 8, 1992, P200,000.00 on December 21, 1992, and P 186,520.50 on January 18, 1993 for the account of the Salongas. Concepcion then received receipts and owner’s duplicate of the five titles. A P2,042,377.19 loan was again made to secure the Salongas’ mortgage with DBP. Again, Concepcion received the receipt and owner’s duplicate of TCT No. 53650. After all the borrowings from the Concepcions, the spouses were required to pay 3% of the loans as monthly interest, and a 5% commission if the property was sold to third parties.

Issue:
The Salongas failed to pay the Concepcions which resulted to execution of Deed of Absolute Sale in favor of the Concepcions on August 31, 1993 for the amount P 575,000.00. On September 30, 1993, the Concepcions executed a Deed of Absolute Sale covering TCT Nos. 40886, 40887, and 43547 to Florencia Realty Corporation for P 600,000.00. The Salongas then again executed a deed of absolute sale of TCT Nos. 53650 and 26506 to Concepcion for P 1,500,000.00. In 1994, the daughter of the spouses Salonga returned and offered to redeem the properties sold to Concepcion. The latter had said that the properties have been officially transferred and can only be redeemed for the amount of P 10,000,000. The spouses Salonga filed a complaint for the annulment that the two deeds of sale, saying that it did not reflect their true agreements.

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