Philippine Education Co. vs.

Soriano
L-22405

June 30, 1971

Dizon, J.:

Facts:
Enrique Montinola sought to purchase from Manila Post Office ten money
orders of 200php each payable to E. P. Montinola. Montinola offered to pay with the
money orders with a private check. Private check were not generally accepted in
payment of money orders, the teller advised him to see the Chief of the Money Order
Division, but instead of doing so, Montinola managed to leave the building without
the knowledge of the teller. Upon the disappearance of the unpaid money order, a
message was sent to instruct all banks that it must not pay for the money order
stolen upon presentment. The Bank of America received a copy of said notice.
However, The Bank of America received the money order and deposited it to the
appellants account upon clearance. Mauricio Soriano, Chief of the Money Order
Division notified the Bank of America that the money order deposited had been
found to have been irregularly issued and that, the amount it represented had been
deducted from the banks clearing account. The Bank of America debited appellants
account with the same account and give notice by mean of debit memo.
Issue:
Whether or not the postal money order in question is a negotiable instrument
Held:
No. It is not disputed that the Philippine postal statutes were patterned after similar
statutes in force in United States. The Weight of authority in the United States is that
postal money orders are not negotiable instruments, the reason being that in
establishing and operating a postal money order system, the government is not
engaged in commercial transactions but merely exercises a governmental power for
the public benefit. Moreover, some of the restrictions imposed upon money orders by
postal laws and regulations are inconsistent with the character of negotiable
instruments. For instance, such laws and regulations usually provide for not more
than one endorsement; payment of money orders may be withheld under a variety of
circumstances.

PBCom vs Aruego
Philippine Bank of Commerce vs. Aruego
GR L-25836-37, 31 January 1981, 102 scra 530
--agents
FACTS:
To facilitate payment of the printing of a periodical called World Current Events.,
Aruego, its publisher, obtained a credit accommodation from the Philippine Bank of

Commerce. For every printing of the periodical, the printer collected the cost of
printing by drawing a draft against the bank, said draft being sent later to Aruego for
acceptance. As an added security for the payment of the amounts advanced to the
printer, the bank also required Aruego to execute a trust receipt in favor of the bank
wherein Aruego undertook to hold in trust for the bank the periodicals and to sell the
same with the promise to turn over to the bank the proceeds of the sale to answer for
the payment of all obligations arising from the draft. The bank instituted an action
against Aruego to recover the cost of printing of the latters periodical. Aruego
however argues that he signed the supposed bills of exchange only as an agent of
the Philippine Education Foundation Company where he is president.
ISSUES:
Whether Aruego can be held liable by the petitioner although he signed the
supposed bills of exchange only as an agent of Philippine Education Foundation
Company.
RULING:
Aruego did not disclose in any of the drafts that he accepted that he was signing as
representative of the Philippine Education Foundation Company. For failure to
disclose his principal, Aruego is personally liable for the drafts he accepted, pursuant
to Section 20 of the NIL which provides that when a person adds to his signature
words indicating that he signs for or on behalf of a principal or in a representative
capacity, he is not liable on the instrument if he was duly authorized; but the mere
addition of words describing him as an agent or as filing a representative character,
without disclosing his principal, does not exempt him from personal liability.

Metropolitan Bank & Trust Company vs. Court of Appeals

G.R. No. 88866

February, 18, 1991

Cruz, J.:
Facts:
Eduardo Gomez opened an account with Golden Savings and deposited 38
treasury warrants. All warrants were subsequently indorsed by Gloria Castillo as
Cashier of Golden Savings and deposited to its Savings account in Metrobank
branch in Calapan, Mindoro. They were sent for clearance. Meanwhile, Gomez is not
allowed to withdraw from his account, later, however, exasperated over Floria
repeated inquiries and also as an accommodation for a valued client Metrobank
decided to allow Golden Savings to withdraw from proceeds of the warrants. In turn,
Golden Savings subsequently allowed Gomez to make withdrawals from his own
account. Metrobank informed Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded the refund by Golden Savings
of the amount it had previously withdrawn, to make up the deficit in its account. The
demand was rejected. Metrobank then sued Golden Savings.

Issue:
1. Whether or not Metrobank can demand refund agaist Golden Savings with regard
to the amount withdraws to make up with the deficit as a result of the dishonored
treasury warrants.
2. Whether or not treasury warrants are negotiable instruments

Held:
No. Metrobank is negligent in giving Golden Savings the impression that the
treasury warrants had been cleared and that, consequently, it was safe to allow
Gomez to withdraw. Without such assurance, Golden Savings would not have
allowed the withdrawals. Indeed, Golden Savings might even have incurred liability
for its refusal to return the money that all appearances belonged to the depositor,
who could therefore withdraw it anytime and for any reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings
deposited them to its account with Metrobank. Golden Savings had no clearing
facilities of its own. It relied on Metrobank to determine the validity of the warrants
through its own services. The proceeds of the warrants were withheld from Gomez
until Metrobank allowed Golden Savings itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings
assumed that they were genuine and in all respects what they purport to be, in
accordance with Sec. 66 of NIL. The simple reason that NIL is not applicable to non
negotiable instruments, treasury warrants.

No. The treasury warrants are not negotiable instruments. Clearly stamped
on their face is the word: non negotiable. Moreover, and this is equal significance, it
is indicated that they are payable from a particular fund, to wit, Fund 501. An
instrument to be negotiable instrument must contain an unconditional promise or
orders to pay a sum certain in money. As provided by Sec 3 of NIL an unqualified
order or promise to pay is unconditional though coupled with: 1st, an indication of a
particular fund out of which reimbursement is to be made or a particular account to
be debited with the amount; or 2nd, a statement of the transaction which give rise to
the instrument. But an order to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source of the payment to be made
on the treasury warrants makes the order or promise to pay not conditional and the
warrants themselves non-negotiable. There should be no question that the exception
on Section 3 of NIL is applicable in the case at bar.

CALTEX V. CA- Negotiable Instruments

12 SCRA 448
FACTS:
Security bank issued Certificates of Time Deposits to Angel dela Cruz. The same
were given by Dela Cruz to petitioner in connection to his purchase of fuel products
of the latter. On a later date, Dela Cruz approached the bank manager,
communicated the loss of the certificates and requested for a reissuance.
Upon compliance with some formal requirements, he was issued replacements.
Thereafter, he secured a loan from the bank where he assigned the certificates
as security. Here comes the petitioner, averred that the certificates were not
actually lost but were given as security for payment for fuel purchases. The bank
demanded some proof of the agreement but the petitioner failed to comply.
The loan matured and the time deposits were terminated and then applied to the
payment of the loan. Petitioner demands the payment of the certificates but
to
no
avail.
SECURITY
AND
6778
Ayala
Metro
SUCAT
CERTIFICATE
Rate
Date

of

Maturity

TRUST
Ave.,
Makati
Manila,
OFFICEP
OF

FEB.

23,

1984

FEB

No.

22,

1982,

BANK
COMPANY
90101
Philippines
4,000.00
DEPOSIT
16%
19____

This is to Certify that B E A R E R has deposited in this Bank the sum of

PESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 &
00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days.
after date, upon presentation and surrender of this certificate, with interest
at
the
rate
of
16%
per
cent
per
annum.
(Sgd.

Illegible)

(Sgd.

Illegible)

AUTHORIZED SIGNATURES
HELD:
CTDs are negotiable instruments. The documents provide that the amounts
deposited shall be repayable to the depositor. And who, according to the
document, is the depositor? It is the "bearer." The documents do not say that the
depositor is Angel de la Cruz and that the amounts deposited are
repayable specifically to him. Rather, the amounts are to be repayable to the
bearer of the documents or, for that matter, whosoever may be the bearer at
the
time
of
presentment.

If it was really the intention of respondent bank to pay the amount to Angel
de la Cruz only, it could have with facility so expressed that fact in clear and
categorical terms in the documents, instead of having the word "BEARER" stamped
on the space provided for the name of the depositor in each CTD. On the
wordings of the documents, therefore, the amounts deposited are repayable to
whoever may be the bearer thereof. Thus, petitioner's aforesaid witness merely
declared
that
Angel
de
la
Cruz
is
the
depositor "insofar as the bank is concerned," but obviously other parties not
privy to the transaction between them would not be in a position to know that
the depositor is not the bearer stated in the CTDs. Hence, the situation would
require
any party
dealing
with
the
CTDs
to
go
behind
the
plain import of what is written thereon to unravel the agreement of the
parties thereto through facts aliunde. This need for resort to extrinsic evidence
is what is sought to be avoided by the Negotiable Instruments Law and calls
for
the
application
of
the
elementary
rule
that
the
interpretation of obscure words or stipulations in a contract shall not favor the party
who
caused
the
obscurity.
The next query is whether petitioner can rightfully recover on the CTDs. This
time, the answer is in the negative. The records reveal that Angel de la Cruz, whom
petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs
amounting to P1,120,000.00 to petitioner without informing respondent bank
thereof at any time. Unfortunately for petitioner, although the CTDs are
bearer instruments, a valid negotiation thereof for the true purpose and agreement
between it and De la Cruz, as ultimately ascertained, requires both delivery and
indorsement. For, although petitioner seeks to deflect this fact, the CTDs were
in reality delivered to it as a security for De la Cruz' purchases of its fuel products.
Any doubt as to whether the CTDs were delivered as payment for the fuel products
or as a security has been dissipated and resolved in favor of the latter by
petitioner's
own
authorized
and
responsible
representative himself.
In a letter dated November 26, 1982 addressed to respondent Security Bank,
J.Q. Aranas, Jr., Caltex Credit Manager, wrote: ". . . These certificates of
deposit were negotiated to us by Mr. Angel dela Cruz to guarantee his
purchases
of
fuel
products."
This
admission
is
conclusive
upon petitioner, its protestations notwithstanding. Under the doctrine of
estoppel, an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying
thereon

CEBU INTERNATIONAL V. CA
316 SCRA 488
FACTS:
Petitioner is a quasi-banking institution involved in money market
transactions. Alegre invested with petitioner P500,000. Petitioner issued then a
promissory note, which would mature approximately after a month. The note
covered for Alegres placement plus interest. On the maturity of the note, petitioner

issued a check payable to Alegre, covering the whole amount due. It was drawn
from petitioners current account in BPI. When the wife of Alegre tried to deposit
the
check,
the
bank
dishonored
the
check. Petitioner was notified of this matter and Alegre demanded the
immediate payment in cash. In turn, petitioner promised to replace the check
on the impossible premise that the first issued be returned to them. This prompted
Alegre to file a complaint against petitioner and petitioner in turn, filed a case
against BPI for allegedly unlawfully deducting from its account counterfeit
checks.
The
trial
court
decided
in
favor
of
Alegre.
ISSUE:
Whether or not the Negotiable Instruments Law is applicable to the money
market
transaction
held
between petitioner and Alegre?
HELD:
Considering the nature of the money market transaction, Article 1249 of the
CC is the applicable provision should be applied. A money market has been
defined to be a market dealing in standardized short-term credit instruments
where lenders and borrowers dont deal directly with each other but through a
middleman or dealer in the open market. In a money market transaction, the
investor is the lender who loans his money to a borrower through a middleman
or
dealer.
In the case at bar, the transaction is in the nature of a loan. Petitioner
accepted the check but when he tried to encash it, it was dishonored. The holder
has an immediate recourse against the drawer, and consequently could
immediately file an action for the recovery of the value of the check.
Further, in a loan transaction, the obligation to pay a sum certain in money may be
paid in money, which is the legal tender or, by the use of a check. A check is not
legal
tender,
and
therefore
cannot
constitute
valid
tender
of
payment.

Firestone Tire & rubber Co. vs. Court of Appeals

GR No. 113236

March 5, 2001

Quisumbing, J.:
Facts:
Forjas-Arca Enterprise Company is maintaining a special savings account
with Luzon Development Bank, the latter authorized and allowed withdrawals of
funds though the medium of special withdrawal slips. These are supplied by FojasArca. Fojas-Arca purchased on credit with FirestoneTire & Rubber Company, in
payment Fojas-Arca delivered a 6 special withdrawal slips. In turn, these were

deposited by the Firsestone to its bank account in Citibank. With this, relying on such
confidence and belief Firestone extended to Fojas-Arca other purchase on credit of
its products but several withdrawal slips were dishonored and not paid. As a
consequence, Citibank debited the plaintiffs account representing the aggregate
amount of the two dishonored special withdrawal slips. Fojas-Arca averred that the
pecuniary losses it suffered are a caused by and directly attributes to defendants
gross negligence as a result Fojas-Arca filed a complaint.

Issue:
Whether or not the acceptance and payment of the special withdrawal slips
without the presentation of the depositors passbook thereby giving the impression
that it is a negotiable instrument like a check.

Held:
No. Withdrawal slips in question were non negotiable instrument. Hence, the
rules governing the giving immediate notice of dishonor of negotiable instrument do
not apply. The essence of negotiability which characterizes a negotiable paper as a
credit instrument lies in its freedom to circulate freely as a substitute for money. The
withdrawal slips in question lacked this character

ANG TEK LIAN VS CA

Negotiable Instruments Law Negotiable Instruments in General 87 Phil 383
Indorsement to Cash Bearer Instrument
In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him
P4,000.00. He said that he meant to withdraw from the bank but the banks already
closed. In exchange, he gave Lee Hua a check which is payable to the order of cash.
The next day, Lee Hua presented the check for payment but it was dishonored due to
insufficiency of funds. Lee Hua eventually sued Ang Tek Lian. In his defense, Ang Tek
Lian argued that he did not indorse the check to Lee Hua and that when the latter
accepted the check without Ang tek Lians indorsement, he had done so fully aware of
the risk he was running thereby.
ISSUE: Whether or not Ang Tek Lian is correct.
HELD: No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to
the order of cash is a check payable to bearer hence a bearer instrument, and the bank
may pay it to the person presenting it for payment without the drawers indorsement.
Where a check is made payable to the order of cash, the word cash does not purport
to be the name of any person, and hence the instrument is payable to bearer. The
drawee bank need not obtain any indorsement of the check, but may pay it to the person
presenting it without any indorsement.