Republic v.

PNB

FACTS
 Sept 25, 1957- RP files before CFI Mla complaint for escheat of certain unclaimed bank deposits under provisions
of Act 3936 against several banks, one is First Natl City Bank of NY (FN)
 Pursuant to sec 2 of the said Act- defendant banks forwarded to the treasurer of the Phils a statement of deposits
held by them of dead persons or who have not made any deposits nor withdrawals for 10 yrs or more
 It is prayed that these credits and deposits be escheated to the RP
 FN claims that it has inadvertently included in the report items totalling P18.6k w/ch are not w/in the
contemplation of Act 3936 and prayed that said items be not included in the claim of RP
 Court decided that the cashiers/mgr’s checks and demand drafts of those that FN wants to exclude are w/in the
purview of Act 3936 BUT not the telegraphic transfer payment orders (w/ch belong to a diff category) and
complaint was dismissed with regard to the latter
 In motion to recon- court said that the demand drafts are not w/in the said Act
 Terms in sec 1 act 3936
o Unclaimed balances subject to escheat- includes credits or deposits of money or other evidence of indebtedness
in favour of a person unheard of for 10 yrs/more
o Credit- sum credited on the books of a company who appears to be entitled to it; presupposes debtor-creditor
rel; correlative to debts and indebtedness
o Deposits- relationship bet depositor and bank is debtor-creditor

ISSUE
 WON demand drafts and telegraphic orders come w/in the meaning of “credits” or “deposits” employed in the law

HELD: Telegraphic orders come w/in the purview of said act; should be escheated in favour of RP
 Demand draft- bill of exchange payable on demand; an open letter of request from, and an order by, one person on
another to pay a sum of money to a 3rd person on demand or at a future time; “draft” is the common term for all
bills of exchange
 Bill of ex- does not operate as an assignment of funds in the hands of a drawee who is not liable until he accepts
the instrument
 Acceptance of drawee is necessary in order to be liable for a draft
 Drafts and bills of ex need to be presented for acceptance or payment within a reasonable time after issuance or
last negotiation; failure to make will discharge the drawer
 Demand drafts involved in this case have not been presented for acceptance or payment; FN never became a
debtor-payee and as such the drafts cannot be considered as credits subject to escheat
 A demand draft is diff from cashier’s/mgr’s check since latter is a primary obligation of the bank to pay upon
demand
o Cashier’s check- in effect a bill of ex drawn by bank on itself and accepted in advance by the act of issuance;
has same legal effects as a cert of deposit or certified check
 A demand draft is not of the same category as a cashier’s check (w/ch comes w/in the purview of the law)
 Telegraphic payment order- the transaction is for the establishment of a telegraphic or cable transfer; the
purchaser of a telegraphic transfer upon making payment completes the transaction in so far as he is concerned, in
so far as the remitting bank is concerned, still executory until credit is established; if payees in this case, demands
payments of their telegraphic transfers, the bank would have to pay them; it is absurd to say that the drawer banks
are the owners of the said telegraphic payment orders

Sumacad v. Province of Samar

FACTS
 May 1942- Prov of Samar still occupied by Japanese Military Forces- check was issued by said province to
Paulino Santos (S), the postmaster of Borongan, P25k, drawn against PNB Cebu Branch
 S negotiated check to James McGuire (MG)
 After liberation in 1946, MG presented the check to the municipal treasurer of Borongan but was not able or did
not choose to pay the same
 MG wrote letters to Bureau of Post seeking payment; it was referred to PNB
 Apr 25, 1950- PNB requested the Bureau of Post to furnish it with photostatic copies of the check
 As of May 12, 1950- province of Samar still has a deposit of P84.3k in PNB
 May 14, 1950- PNB requested MG to present the check to the provincial treasurer and provincial auditor for
certification
 Aug 22, 1950- MG requested Bureau of Posts to comply with the reqt of PNB so as he could encash it
 Before the check could be certified, province of Samar withdrew P83.5k leaving only P743.43
 MG transferred his rights to the check to the plaintiffs who filed in CFI the present complaint against province of
Samar and PNB
 Decision was rendered in favour the plaintiff; only PNB appealed

ISSUE
 WON PNB should be liable to MG

HELD: Yes. PNB’s liab is subsidiary while Province of Samar’s primarily liable
 Defence of PNB: it did not issue the check; check was never presented with the reqd certification under the
circular of Secretary of Finance; relation bet bank and the province was that of debtor-creditor, that the debtor has
no power to inquire into the obligation of his creditor; no record to show that that bank should withhold the amt of
check before the exhaustion of the deposit, that bank cannot be held solidarily liable and it was the province that is
primarily liable
 SC: There was an implied acceptance of the bank due to:
o Request from the Bureau of Posts for photostatic copies of the check
o Reqt for its presentation by MG to the provincial treasurer and provincial auditor for certification
 Dissenting opinion of Padilla:
o The so-called “implied acceptance” by majority did not create an obligation on the part of PNB
o The withdrawal of the deposit by the province could not be prevented by PNB, nor could it refuse to since it
would then be liable for damages for refusing to allow the withdrawal
o Thus, only Province of Samar is primarily liable

Prudential Bank v. IAC, Phil Rayon Mills Inc and Anacleto R. Chi

FACTS
 Aug 8, 1962- Phil Rayon Mills (PRM) entered into a contract with Nissho Co Ltd of Japan (Nissho) for the
importation of textile machineries
 To effect payment for said machineries PRM opened a LoC with Prudential Bank (PB)
 Drafts were drawn and issued by Nissho which were all paid by PB through its correspondent in Japan, Bank of
Tokyo Ltd
 Two of these drafts were accepted by PRM through its president Anacleto Chi (Chi); the others were not
 Upon arrival of the machineries, PB indorsed the shipping docs to PRM which accepted the same
 To enable to take delivery, PRM executed with PB a trust receipt which was signed by Chi in his capacity as Pres
of PRM
 At the back is printed form to be accomplished by 2 sureties who were to be jointly and severally liable to PB
should PRM fail to pay
 PRM was able to take delivery of the machineries and installed them at its factory in QC
 1967- PRM ceased business operations
 Dec 29, 1969- PRM’s factory was leased by Yupangco Cotton Mills (YCM)
 Jan 5, 1974- all textile machineries in PRM’s factory were sold to AIC Devt Corp (AIC)
 PRM’s obligation from LoC and trust receipt remained unpaid
 Oct 3, 1974- action for collection of the principal amt of P956k was filed against PRM and Chi
o Defense: no CoA; and if there is, such has prescribed and PB is guilty of laches
 Jun 15, 1978- decision of TC: PRM to pay plaintiff (except for the amts in the drafts that were not accepted by
PRM); insofar as Chi is concerned, case is dismissed
 PB appealed decision to IAC which sustained the TC in all respects

ISSUE
 WON the presentment for acceptance of the drafts was indispensable to make PRM liable
 WON PRM liable on the basis of the trust receipt
 WON Chi is jointly and severally liable with PRM; or if not whether he may be considered a guarantor, and
whether the case should have been dismissed due to lack of CoA as there was no prior exhaustion of PRM’s
properties

HELD:
(1) No, presentment for acceptance dispensable to make PRM liable
(2) Yes, PRM liable on the Trust Receipt
(3) Chi is secondarily liable
DECISION: PRM to pay the 12 sight drafts to PB; Chi secondarily liable on the trust receipt
 TC and IAC ruled that PRM could be held liable for the 2 drafts bec these were accepted by the latter after due
presentment; liability for the 10 others did not arise bec these were not presented for acceptance
o SC: we don’t agree; the transaction stemmed from PRM’s application for a commercial LoC to cover its
contract to purchase and import loom and textile machineries from Nissho; PB approved the application
o LoC- engagement by a bank or other person made at the request of a customer that the issuer will honor drafts
or other demands for payment upon compliance with the obligations specified
 Bank substitutes its own promise to pay for the promise to pay of its customers who promises to pay the bank
(amount of funds in the LoC + credit/commitment fees)
o In this case: drawee = PRM; it was for PRM that the checks were presented for payment; there was no need for
acceptance as the issued drafts were sight drafts and presentment is only necessary in cases under sec 143 of
NIL
o Acceptance of a bill- signification by drawee of his assent to the order of the drawer
o Sight drafts under Sec 7 par (a) of NIL are payable on demand (payable at sight)
o Par 8 of trust receipt: “my/our liability for payment at maturity of any accepted draft, BoE or indebtedness” ->
does not pertain to PRM but to PB
o PRM became immediately liable upon payment of PB otherwise Nissho and PB will be placed at the mercy of
PRM even though the latter already had received the imports and PB already had paid for it
o Hibernia Bank and Trust Co. case: purpose of LoC is to insure seller of payment of definite amount; Bank
deals with docs and it has nothing to do with the quality of the merchandise which can be litigated bet vendor
and vendee
 PD No. 115, Trust Receipts Law: entruster, who owns the goods absolute title or security interests over specified
goods, docs or instruments releases such to the possession of the entrustee upon the latter’s execution of a “trust
receipt” wherein entrustee binds himself to hold such goods, etc in trust for the entruster and to sell such with the
obligation to deliver the proceeds to the entruster
o In the present case, PRM already profited from the machinery (through operation and disposition to YCM)
o PRM violated their fiduciary obligations when it converted to its own use the money realized from its
disposition
o PB had already commenced a criminal action under Trust Receipts Law, this is no legal obstacle in the
enforcement of the civ liability in a separate civil action
o Sec 13 of the Law: failure to turn over proceeds punishable under Art 315 par 1(b) of RPC; Civ action is under
Art 33 of the Civ Code wherein estafa falls under fraud
 Chi’s signature at the dorsal portion of the trust receipt did not bind him solidarily with PRM
o Chi is only a guarantor, thus can be held liable after the exhaustion of the properties of PRM under Art 2058 of
the Civ Code
 However, excussion is not a condition for the institution of an action against guarantor (so ok lang na kasama
siya sa case even though di pa siya liable)
o Any doubt as to the solidary guaranty clause should be resolved against PB (contract of adhesion)
o By signing Chi became the sole guarantor
 Penalty clause (Sec 13) of the Trust Receipts Law: If the violation or offense is commited by a juridical entity, the
penalty shall be imposed upon the directors, officers, employees or other officials responsible for the offense
o Penalty refers to imprisonment (di pwedeng makulong ang juridical entity!!)
o Still, the entity is liable for the civ liability

New Pacific Timber v. Seneris

FACTS
 July 19, 1974- a compromise judgment was rendered by Judge Seneris (S) against New Pacific Timber (N) in
accordance with an amicable settlement entered into by the parties under some certain terms and conditions
 N failed to comply with his judgment obligation
 S, upon motion of private respondent Ricardo Tong (T), issued an order for the issuance of the writ of execution
for the amt of P63.13k
 Writ of exec was issued and levied on the ff properties: Unit American Lathe 24”, Unit American Lathe 18”
Cracker Wheeler and Unit Rockford Shaper 24”
 Prior to auction sale, N deposited with the Clerk of Court the sum of P63.13k for payment of the judgment
obligation (P50 k in cashier’s check and P13.13k in cash)
 Private respondent refused to accept the deposit and requested the auction sale to proceed-> from 10am, it started
3pm due to attempts to resolve the case
 Mr. Tañedo and Mr.Librado, representing N asked for time to contact their lawyer but failed to return
 The properties were sold to T, the highest bidder, in the amount of P50k; P13.13k was declared a deficiency
 N contends that there was already a full satisfaction of the judgment with the deposit of the check and cash and
that the auction was invalid for lack of proper notice to the petitioner and its counsel

ISSUE
 WON T can validly refuse to accept the P50k cashier’s check and P13.13k cash

HELD: No. The P50k is good as cash; Auction sale declared null and void.
 S: Sec 63 of the Central Bank Act states that checks representing deposit money are not legal tender and their
acceptance as payment is at the option of the creditor
o Art 1249 of the Civil Code states that payments of debts in money should be in the currency stipulated or in the
currency which is legal tender in the Phils, delivery of mercantile documents of mercantile docs only produce
payment once encashed or through fault of creditor they have been impaired
o T has a right to refuse payment since the P13.13k cash is less than judgment obligation and under Art 1248 of
the Civil Code creditor cannot be compelled to receive partial payments
 SC: The P50k is not an ordinary check BUT A CASHIER’S CHECK of the EQUITABLE BANKING CORP, a
bank of good standing and reputation
o Also a certified crossed check
o Well known practice in business sector that a cashier’s check is deemed as cash
o Further, by certification, the funds are deemed transferred from the credit of the maker to that of the payee or
holder; for all intents and purposes, the holder becomes the depositor
o Where a check is certified by the bank on which it is drawn, CERTIFICATION=ACCEPTANCE
o Certification implies that the check is drawn upon sufficient funds in the hands of the drawee, that they have
been set apart for its satisfaction, and that they shall be so applied whenever check is presented for payment;
understanding that check is good
o The object of certifying the check is for the holder to use it as money
o This is the exception to the Sec 63 of Central Bank Act, “that a check which has been cleared and credited to
the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the
amount credited to his account”
 The check and cash deposited covers the whole amt of judgment obligation, there is no valid reason for T to
refuse acceptance of payment
 It also appears that the cashier’s check was withdrawn and replaced with cash and T still refused acceptance

Velasquez v. Solidbank Corporation

FACTS
 Marlou Velasquez (V) is engaged in export business operating under the name Wilderness Trading (WT);
Solidbank Corp (S) is a domestic banking corp organized under Phil laws
 Case arose out of a business transaction for the sale of dried sea cucumber for export to S. Korea bet seller WT
and buyer Goldwell Trading (GT) of S. Korea; to facilitate payment, GT opened a LoC in favour of WT in the
amt of US$87.5k with the Bank of Seoul, Korea
 Nov 12, 1992- V applied for credit accommodation with S for pre-shipment financing which was granted; first 2
transactions was successful; third export shipment yielded different result
 Feb 22, 1993- for the 3rd shipment, V negotiated a documentary sight draft to be drawn on the LoC and chargeable
to the account of Bank of Seoul (US$59.64k value of shipment)
o Letter of undertaking was executed- under the terms, V promised that the draft will be accepted and paid by the
Bank of Seoul accdg to its tenor; V also held him liable if the sight draft was not accepted
o By vrtue of such- S advanced P1.5M less bank charges and sent all docs to the Bank of Seoul for the export
transaction
 S failed to collect as it was dishonoured by non-acceptance by the Bank of Seoul (reason- late shipment, forged
inspection cert, absence of countersignature of negotiating bank in inspection cert)
 GT also issued a stop payment order on the sight draft because most of the bags of dried sea cucumber exported
contained soil
 Due to the dishonour and stop payment, S demanded restitution of the sum advanced; V failed to heed this
demand
 June 3, 1993- S filed a complaint for recovery of sum of money with RTC Cebu
 V: contends that liability under sight draft was extinguished since S failed to protest its non-acceptance as reqd by
the NIL; letter of undertaking not binding bec it is a superfluous doc; that he did not violate any provision of the
LoC
 RTC ruled in favour of S saying that failure to protest does not extinguish liab since it remains under the letter of
undertaking which he signed and without which S would not have advanced or credited the amount
o V relied on Sec 152 of the NIL; however this should not be a bar to the filing of other appropriate remedies; V
is bound by the letter of undertaking which he expressly obliged himself (to pay on demand all damages
including atty’s fees which plaintiff may suffer by reason of negotiating the draft)
 CA affirmed RTC saying that the contract of undertaking was the law bet them and must be enforced accordingly
(in accordance with Art 1159 of the NCC)
o Also relied on Art 19 and 22 of NCC: doctrine of unjust enrichment
 MR denied

ISSUE
 WON V should be held liable to S under the sight draft or letter of undertaking

HELD: Yes; Not liable under sight draft BUT liable under the letter of undertaking
 V is not liable under sight draft but he is liable under his letter of undertaking; Liab under letter of undertaking not
extinguished by non-protest of dishonour of the sight draft
o V: claims liab under Sec 152 extinguished; liab under letter of undertaking is of a mere guarantor and only an
accessory obligation under the sight draft and SINCE he was discharged from the sight draft, cannot be held
liable under the letter of undertaking
o S: claims that the letter is an independent agreement and not an accessory contract; it would not advance the
amt if not for such letter; would also result to unjust enrichment
o SC: V’s liab under the letter is independent from the sight draft; he may be held liable in either; liab under sight
draft was extinguished for failure to protest
o Sight draft made payable outside the Phils- foreign bill of exchange
o When foreign bill is dishonoured by non-acceptance/non-payment, protest is necessary in order to hold the
drawers/indorsers liable and failure to protest resulted in the discharge; Sec 152 of NIL is explicit:
Sec. 152. In what cases protest necessary. - Where a foreign bill appearing on its face to be such is
dishonored by nonacceptance, it must be duly protested for nonacceptance, by nonacceptance is
dishonored and where such a bill which has not previously been dishonored by nonpayment, it must be
duly protested for nonpayment. If it is not so protested, the drawer and indorsers are discharged.
Where a bill does not appear on its face to be a foreign bill, protest thereof in case of dishonor is
unnecessary.
o V can still be made liable under the letter of undertaking; liability under such letter is direct and primary; liab
subsists even if the sight draft was dishonoured
o The bank would not have agreed to advance if it were not for the letter; the consideration for the letter was V’s
promise to pay S the value of the sight draft if it was dishonoured
o V is not a mere guarantor
 o V bound himself under the letter; he warranted that the sight draft is genuine; that he will be liable for the full
amount upon demand w/o necessity of proceeding against the drawee bank
 V is liable w/o need for S to establish collateral facts as violations of the letter of credit
o V: claims that S failed to prove that 60 out of 71 bags shipped to GT contained soil instead of dried cucumber
o SC: Parties bound to fulfil what is EXPRESSLY STATED; V’s liab under the letter is clear; mere non-
acceptance suffices for liab to attach
o If V disputes the finding of GT, he can file a case against the latter but he cannot dispute his liab under the
letter