State Investment House Inc. vs.

CA
State Investment House Inc. vs. CA
GR No. 101163 January 11, 1993
Bellosillo, J.:
Facts:
Nora Moulic issued to Corazon Victoriano, as security for pieces of jewellery to be sold
on commission, two postdated checks in the amount of fifty thousand each. Thereafter,
Victoriano negotiated the checks to State Investment House, Inc. When Moulic failed to sell the
jewellry, she returned it to Victoriano before the maturity of the checks. However, the checks
cannot be retrieved as they have been negotiated. Before the maturity date Moulic withdrew her
funds from the bank contesting that she incurred no obligation on the checks because the
jewellery was never sold and the checks are negotiated without her knowledge and consent.
Upon presentment of for payment, the checks were dishonoured for insufficiency of funds.
Issues:
1. Whether or not State Investment House inc. was a holder of the check in due course
2. Whether or not Moulic can set up against the petitioner the defense that there was failure or
absence of consideration
Held:
Yes, Section 52 of the NIL provides what constitutes a holder in due course. The evidence shows
that: on the faces of the post dated checks were complete and regular; that State Investment
House Inc. bought the checks from Victoriano before the due dates; that it was taken in good
faith and for value; and there was no knowledge with regard that the checks were issued as
security and not for value. A prima facie presumption exists that a holder of a negotiable
instrument is a holder in due course. Moulic failed to prove the contrary.
No, Moulic can only invoke this defense against the petitioner if it was a privy to the purpose for
which they were issued and therefore is not a holder in due course.
No, Section 119 of NIL provides how an instruments be discharged. Moulic can only invoke
paragraphs c and d as possible grounds for the discharge of the instruments. Since Moulic failed
to get back the possession of the checks as provided by paragraph c, intentional cancellation of
instrument is impossible. As provided by paragraph d, the acts which will discharge a simple
contract of payment of money will discharge the instrument. Correlating Article 1231 of the Civil
Code which enumerates the modes of extinguishing obligation, none of those modes outlined
therein is applicable in the instant case. Thus, Moulic may not unilaterally discharge herself from
her liability by mere expediency of withdrawing her funds from the drawee bank. She is thus
liable as she has no legal basis to excuse herself from liability on her check to a holder in due
course. Moreover, the fact that the petitioner failed to give notice of dishonor is of no moment.
The need for such notice is not absolute; there are exceptions provided by Sec 114 of N

Case: Garcia vs. Llamas

Citation: 417 SCRA 292; G.R. No. 154127 Dec. 8, 2003
FACTS:
Petitioner Romeo Garcia and Eduardo de Jesus borrowed P 400,000 from
respondent Dionisio Llamas on Dec. 23, 1996. Garcia and de Jesus
executed a promissory note for that purpose binding themselves
jointly and severally the loan on or before Jan. 23, 1997 with 5%
interest per month. When the debt was due, they failed to pay.
Despite repeated demands, they still failed to pay prompting Llamas
to institute a collection suit against the two.
Petitioner Garcia in his answer averred that he assumed no
responsibility under the promissory not, for he merely signed it as
an accommodation party for de Jesus. Furthermore, that since de
Jesus already made a payment through the delivery of a check which
was also accepted by Llamas, the obligation was already novated and
superseded. However, the check delivered bounced upon presentment.
De Jesus, on the other hand, averred that Llamas had been in bad
faith in instituting the case against him for there had been a
previous agreement between he and Llamas that the latter would take
as payment de Jesus' retirement benefits which was still on process
while the suit was instituted. De Jesus further averred that he had
already paid a total of P 120,000 by way of interests, the breakdown
as follows: (1) P40,000 collected as advance interest from the
principal of P400,000 because he only in fact received P 360,000 from
that loan; (2) P 40,000 collected from him by Llamas daughter which
was derived from the peso equivalent of his accumulated leave credits
from his employment in the Central Police District Bicutan; (3) P
40,000 collected from him as payment of the interests for the months
of March and April 1997.
RTC rendered a judgment based on the pleadings, ordering Garcia and
de Jesus to pay jointly and severally the amount of P 400,000 plus 5%
interest per month from Jan 23, 1997 less the P120,000 paid by de
Jesus, P 100,000 as atty's fees + P2,000 appearance fee per day in
court, and the cost of suit.
CA said that the RTC erred in rendering a decision based on the

pleadings because de Jesus answer raised some genuinely contentious

issues, therefore, Llamas could not be ipso facto entitled to the RTC
judgment. The case of de Jesus must be remanded to the RTC for
receipt of evidence. On the part of Garcia, CA held that Garcia's
answer failed to raise a single genuine issue, that there could be no
novation, express or implied, and that Llamas acceptance of the
check, as averred by Garcia, could not make de Jesus a sole debtor
for the reason that the obligation incurred was joint and solidary in
the first place and that the check issued bounced upon presentment.
Hence, an appeal to review was filed by petitioner Garcia with the
Supreme Court.
ISSUE:
Whether or not the original obligation as evidenced by a promissory
note was subsequently novated when Llamas accepted the payment of de
Jesus through a check which also subsequently bounced upon
presentment?
HELD:
The check could not have extinguished the obligation because
it bounced upon presentment. By law, the delivery of a check
produces the effect of payment only when it is cashed.
No novation took place because:

1. The parties did not unequivocally declare that the old

obligation had been extinguished by the issuance and the acceptance
of the check, or that the check would take the place of the note.
2. There is no incompatibility between the promissory note and
the check. The check had been issued precisely to answer the
obligation. The note evidences the loan obligation, while the check
answers it. Verily, the 2 can stand together.
There is also no novation by substitution of debtors. In
order to change the person of the debtor, the old debtor must be
expressly released from the obligation and the new debtor to assume

the former's place. In the present case, petitioner Garcia has not
shown that he was expressly released from the obligation, that a
third person was substituted in his place and that the joint and
solidary obligation was cancelled by the solitary undertaking of de
Jesus.

Travel on vs CA

Facts: Travel-On (petitioner) is a travel agency, selling airline ticketson commission basis for
and in behalf of different air-line companies. Arturo Miranda (respondent) had a running credit
line with said agency. He procured tickets from Travel-On on behalf of airline passengers
and derived commissions therefrom. Travel-On filed a suit to collect six (6) checks issued by the
respondent totalling 115,000 pesos. Respondent avers that he has no obligations to petitioner and
argues that the checks that the petitioner is seeking to collect from him were for purposes of
accommodation. The respondents story is that the General Manager of Travel-On asked
respondent to write the checks because she used them as evidence to show the Board of
Directors that the financial condition of the company was sound. Petitioner denies
this accusation.
Issue: Whether or not the checks are evidence of the liability of the respondent to the petitioner
even assuming that they were for purposes of accommodation.
Held: The checks themselves are proof of the indebtedness of the respondent to petitioner. Even
if the checks were for purposes of accommodation, as described in Sec. 29 of the Negotiable
Instruments Law, the respondent would still be liable considering that the petitioner is a holder
for value. A check which is regular on its face is deemed prima facie to have been issued for a
valuable consideration and every person whose signature appears thereon is deemed to have
become a party thereto for value. The rule is quite settled that a negotiable instrument is
presumed to have been given or indorsed for a sufficient consideration unless otherwise
contradicted by other competent evidence. The facts that all checks issued by the respondent to
petitioner were presented for payment by the latter would lead to no other conclusion than that
these checks were intended for enchasment.
There is nothing in the checks themselves or in any other document that states otherwise. The
argument of the respondent that the checks were merely simulated cannot stand without the
clearest and most convincing kinds of evidence. No suchevidence was submitted by the
respondent.

FLORENTINA A. LOZANO, petitioner, vs. THE HONORABLE ANTONIO M.

MARTINEZ, in his capacity as Presiding Judge, Regional Trial Court, National Capital Judicial
Region, Branch XX, Manila, and the HONORABLE JOSE B. FLAMINIANO, in his capacity as

City Fiscal of Manila, respondents.

YAP, J:
Petitioners, charged with Batas Pambansa Bilang 22 (BP 22 for short), popularly known as the
Bouncing Check Law, assail the law's constitutionality.
BP 22 punishes a person "who makes or draws and issues any check on account or for value,
knowing at the time of issue that he does not have sufficient funds in or credit with
the draweebank for the payment of said check in full upon presentment, which check is
subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have
been dishonored for the same reason had not the drawer, without any valid reason, ordered the
bank to stop payment." The penalty prescribed for the offense is imprisonment of not less than 30
days nor more than one year or a fine or not less than the amount of the check nor more than
double said amount, but in no case to exceed P200,000.00, or both such fine and imprisonment at
the discretion of the court. The statute likewise imposes the same penalty on "any person who,
having sufficient funds in or credit with the drawee bank when he makes or draws and issues a
check, shall fail to keep sufficient funds or to maintain a credit to cover the full amount of the
check if presented within a period of ninety (90) days from the date appearing thereon, for which
reason it is dishonored by the drawee bank.
An essential element of the offense is "knowledge" on the part of the maker or drawer of the
check of the insufficiency of his funds in or credit with the bank to cover the check upon its
presentment. Since this involves a state of mind difficult to establish, the statute itself creates
aprima facie presumption of such knowledge where payment of the check "is refused by
thedrawee because of insufficient funds in or credit with such bank when presented within ninety
(90) days from the date of the check. To mitigate the harshness of the law in its application, the
statute provides that such presumption shall not arise if within five (5) banking days from receipt
of the notice of dishonor, the maker or drawer makes arrangements for payment of the check by
the bank or pays the holder the amount of the check.
Another provision of the statute, also in the nature of a rule of evidence, provides that the
introduction in evidence of the unpaid and dishonored check with the drawee bank's refusal to
pay "stamped or written thereon or attached thereto, giving the reason therefor, "shall
constitute primafacie proof of "the making or issuance of said check, and the due presentment to
the drawee for payment and the dishonor thereof ... for the reason written, stamped or attached
by the drawee on such dishonored check."
The presumptions being merely prima facie, it is open to the accused of course to present proof
to the contrary to overcome the said presumptions.
ISSUE: Whether or not (W/N) BP 22 violates the constitutional provision forbidding

imprisonment for debt.

HELD: No.
The gravamen of the offense punished by BP 22 is the act of making and issuing a worthless
check or a check that is dishonored upon its presentation for payment. It is not the non-payment
of an obligation which the law punishes. The law is not intended or designed to coerce a debtor
to pay his debt. The thrust of the law is to prohibit, under pain of penal sanctions, the making of
worthless checks and putting them in circulation. Because of its deleterious effects on the public
interest, the practice is proscribed by the law. The law punishes the act not as an offense against
property, but an offense against public order.
The effects of the issuance of a worthless check transcends the private interests of the parties
directly involved in the transaction and touches the interests of the community at large. The
mischief it creates is not only a wrong to the payee or holder, but also an injury to the public. The
harmful practice of putting valueless commercial papers in circulation, multiplied a thousand
fold, can very wen pollute the channels of trade and commerce, injure the banking system and
eventually hurt the welfare of society and the public interest. The enactment of BP 22 is a
declaration by the legislature that, as a matter of public policy, the making and issuance of a
worthless check is deemed public nuisance to be abated by the imposition of penal sanctions.
ISSUE: W/N BP 22 impairs the freedom to contract.
HELD: No. The freedom of contract which is constitutionally protected is freedom to enter into
"lawful" contracts. Contracts which contravene public policy are not lawful. Besides, we must
bear in mind that checks can not be categorized as mere contracts. It is a commercial instrument
which, in this modem day and age, has become a convenient substitute for money; it forms part
of the banking system and therefore not entirely free from the regulatory power of the state.
ISSUE: W/N it violates the equal protection clause.
HELD: No. Petitioners contend that the payee is just as responsible for the crime as the drawer
of the check, since without the indispensable participation of the payee by his acceptance of the
check there would be no crime. This argument is tantamount to saying that, to give equal
protection, the law should punish both the swindler and the swindled. Moreover, the clause does
not preclude classification of individuals, who may be accorded different treatment under the law
as long as the classification is no unreasonable or arbitrary.

PINEDA V. DELA RAMA

121 SCRA 671

FACTS:
Pineda was caught in a case against the NARIC for his alleged misappropriation
of many cavans of palay. He hired Atty. Dela Rama to delay the filing of the complaint
against him, on alleged representation of the lawyer that he is a friend of the NARIC
administrator. Pineda then issued a promissory note in favor of dela Rama to pay for the
advances that the lawyer made to the administrator to delay the filing of the complaint. Dela
Rama on the other hand contended that the promissory note was for the loan advanced to
Pineda by him. Dela Rama filed an action against Pineda for the collection of the amount of the
note.
HELD: The presumption that a negotiable instrument was issued for valuable consideration
is a rebuttable presumption. It can be rebutted by proof to the contrary.
In the case at bar, the claims of dela Rama that the promissory note was for a loan advanced
to Pineda is unbelievable. The grant of a loan by a lawyer to a moneyed client and whom
he has known for only 3 months cannot be relied on. Pineda had actually just purchased
numerous properties. It is highly illogical that he would loan from dela Rama P9500 for 5 days
apart. Furthermore, the note was void ab initio because the consideration given was to
influence the administrator to delay charges against Pineda. The consideration was void for
being against law and public policy.

CITIBANK vs. SABENIANO Case Digest

CITIBANK vs. SABENIANO
G.R.No. 156132, October 16, 2006
FACTS: Petitioner Citibank is a banking corporation duly authorized under the laws of the USA to do
commercial banking activities n the Philippines. Sabeniano was a client of both Petitioners Citibank
and FNCB Finance. Respondent filed a complaint against petitioners claiming to have substantial

deposits, the proceeds of which were supposedly deposited automatically and directly to
respondents account with the petitioner Citibank and that allegedly petitioner refused to despite
repeated demands. Petitioner alleged that respondent obtained several loans from the former and in
default, Citibank exercised its right to set-off respondents outstanding loans with her deposits and
money. RTC declared the act illegal, null and void and ordered the petitioner to refund the amount
plus interest, ordering Sabeniano, on the other hand to pay Citibank her indebtedness. CA affirmed
the decision entirely in favor of the respondent.
ISSUE: Whether petitioner may exercise its right to set-off respondents loans with her deposits and
money in Citibank-Geneva
RULING: Petition is partly granted with modification.
1. Citibank is ordered to return to respondent the principal amount of P318,897.34 and P203,150.00
plus 14.5% per annum
2. The remittance of US $149,632.99 from respondents Citibank-Geneva account is declared illegal,
null and void, thus Citibank is ordered to refund said amount in Philippine currency or its equivalent
using exchange rate at the time of payment.
3. Citibank to pay respondent moral damages of P300,000, exemplary damages for P250,000,
attorneys fees of P200,000.
4. Respondent to pay petitioner the balance of her outstanding loans of P1,069,847.40 inclusive off
interest.

Firestone Tire vs. CA

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 Fojas-Arca. 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.

FAR EAST BANK AND TRUST COMPANY

vs.

ESTRELLA O. QUERIMITG.R. No. 148582; January 16, 2002FACTS:

On November 24, 1986, respondent Estrella O. Querimit opened a dollar savings account in
petitioner'sHarrison Plaza branch, for which she was issued four (4) Certificates of Deposit with
a total amount of $60,000.00. The certificates were to mature in 60 days, on January 23, 1987,
and were payable to bearerat 4.5% interest per annum. The certificates bore the word "accrued,"
which meant that if they were notpresented for encashment or pre-terminated prior to maturity,
the money deposited with accruedinterest would be "rolled over" by the bank and annual interest
would accumulate automatically. Thepetitioner bank's manager assured respondent that her
deposit would be renewed and earn interestupon maturity even without the surrender of the
certificates if these were not indorsed and withdrawn.In 1989, respondent accompanied her
husband Dominador Querimit to the United States for medicaltreatment. Her husband died then
she returned to the Philippines. She went to petitioner Far East Bankand Trust Company
(FEBTC) to withdraw her deposit but she was told that her husband had withdrawnthe money in
deposit. Through a counsel, respondent requested for an update and payment of thecertificates of
deposit, including interest earned from the petitioner which was denied by the latter.Petitioner
alleged that it had given respondent's late husband an "accommodation" to allow him towithdraw
Estrella's deposit. Petitioner presented certified true copies of documents showing thatpayment
had been made.The trial court rendered judgment for respondent. Court of Appeals affirmed the
decision of the trialcourt. The appeals court stated that petitioner failed to prove that the
certificates of deposit had beenpaid out of its funds, since the evidence stands unrebutted that the
subject certificates of deposit untilnow remain unindorsed, undelivered and unwithdrawn by her.
ISSUE:
Whether or not the subject certificates have already been paid by the petitioner.
HELD:No.
Petitioner bank
failed to prove
that it had already paid Estrella Querimit, the bearer and lawfulholder of the subject certificates
of deposit. The finding of the trial court on this point, as affirmed by theCourt of Appeals, is that
petitioner did not pay either respondent Estrella or her husband the amountsevidenced by the
subject certificates of deposit. A certificate of deposit is defined as a writtenacknowledgment by
a bank or banker of the receipt of a sum of money on deposit which the bank orbanker promises
to pay to the depositor, to the order of the depositor, or to some other person or hisorder, whereby
the relation of debtor and creditor between the bank and the depositor is created. Theprinciples
governing other types of bank deposits are applicable to certificates of deposit, as are the
rulesgoverning promissory notes when they contain an unconditional promise to pay a sum
certain of moneyabsolutely. The principle that payment, in order to discharge a debt, must be

made to someoneauthorized to receive it is applicable to the payment of certificates of deposit.

Thus, a bank will beprotected in making payment to the holder of a certificate indorsed by the
payee, unless it has notice of the invalidity of the indorsement or the holder's want of title. A
bank acts at its peril when it paysdeposits evidenced by a certificate of deposit, without its
production and surrender after properindorsement. As a rule, one who pleads payment has the
burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment,rather than on the plaintiff to prove payment.
The debtor has the burden of showing with legal certaintythat the obligation has been discharged
by payment. In this case, the certificates of deposit were clearlymarked payable to "bearer,"
which means, to "the person in possession of an instrument, document of title or security payable
to bearer or indorsed in blank." Petitioner should not have paid respondent'shusband or any third
party without requiring the surrender of the certificates of deposit.