Protacio, John Benvincent D.

JD- 2B

Negotiable Instruments Case Digest: Traders Royal Bank v. CA (1997)

FACTS:

November 27, 1979: Filriters Guaranty Assurance Corporation (Filriters) executed a "Detached
Assignment whereby Filriters, as registered owner, sold, transferred, assigned and delivered unto
Philippine Underwriters Finance Corporation (Philfinance) all its rights and title to Central
Bank Certificates of Indebtedness (CBCI) of P500k and having an aggregate value of P3.5M.The
Detached Assignment contains an express authorization executed by the transferor intended to
complete the assignment through the registration of the transfer in the name of Phil Finance
Traders Royal Bank (Traders) entered into a Repurchase Agreement w/ Phil Finance whereby in
consideration of the sum of P500,000.00, PhilFinance sold, transferred and delivered a CBCI w/
a face value of P500K which CBCI was among those previously acquired by PhilFinance from
FilritersPhilFinance failed to repurchase on the agreed date of maturity, April 27, 1981, when the
checks it issued in favor of petitioner were dishonored for insufficient funds Philfinance
transferred and assigned all, its rights and title in the CBCI to Traders Respondent failed and
refused to register the transfer as requested, and continues to do so notwithstanding petitioner's
valid and just title over the same and despite repeated demands in writing Traders prayed for
the registration by the Central Bank of the subject CBCI in its name.

ISSUE:

W/N the CBCI is a negotiable instrument

HELD:

No. THe CBCI is not a negotiable instrument in the absence of words of negotiability within the
meaning of the negotiable instruments law.

The accepted rule is that the negotiability or non-negotiability of an instrument is determined

from the writing, that is, from the face of the instrument itself. A reading of the subject CBCI
indicates that the same os payable to FIlriters Guaranty Assurance Corporation, and to not one
else and not to its order, thus, discounting the petitioner’s submission that the same is a
negotiable instrument. The language of negotiability which characterize a negotiable paper as a
credit instrument is its freedom to circulate as a indebtedness as it merely promise to pay a sum
of money to a specified person or entity for a period of time. It lacks the words of negotiability
which should have served as an expression of consent that the instrument may be transferred by
negotiation. The transfer of the instrument from Philfinance to TRB was merely an assignment,
and is not governed by the negotiable instruments law.
DACLES, ARMANDO DORADO
JD 2B

HSBC vs. CIR

G.R. No. 166018

FACTS:

HSBC performs custodial services on behalf of its investor-clients with respect to their
passive investments in the Philippines, particularly investments in shares of stocks in domestic
corporations. As a custodian bank, HSBC serves as the collection/payment agent. Its investor-
clients maintaining Philippine peso and/or foreign currency accounts, which are managed by the
said bank through electronic messages instruction. The said instructions are standard forms
known in the banking industry as SWIFT, or “Society for Worldwide Interbank Financial
Telecommunication.” Pursuant to these electronic messages of its investor-clients, HSBC
purchased and paid Documentary Stamp Tax (DST) from September to December 1997 and also
from January to December 1998 amounting to P19,572,992.10 and P32,904,437.30, respectively.

BIR, thru its then Commissioner, issued BIR Ruling to the effect that instructions or
advises from abroad on the management of funds located in the Philippines which do not involve
transfer of funds from abroad are not subject to DST. A documentary stamp tax shall be imposed
on any bill of exchange or order for payment purporting to be drawn in a foreign country but
payable in the Philippines.

In view with BIR Ruling, HSBC filed on an administrative claim for the refund
representing erroneously paid DST to the BIR. As its claims for refund were not acted upon by
the BIR, HSBC subsequently brought the matter to the CTA, which favored HSBC and ordered
payment of refund or issuance of tax credit.

ISSUE:

Whether or not the electronic messages are considered transactions pertaining to

negotiable instruments that warrant the payment of DST.

RULING:

NO. The DST under Section 181 of the Tax Code is levied on the acceptance or payment
of “a bill of exchange purporting to be drawn in a foreign country but payable in the Philippines”
and that “a bill of exchange is an unconditional order in writing addressed by one person to
another, signed by the person giving it, requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum certain in money to order or to bearer.”

The electronic messages of HSBC’s investor-clients containing instructions to debit their

respective local or foreign currency accounts in the Philippines and pay a certain named recipient
also residing in the Philippines is not the transaction contemplated under Section 181 of the Tax
Code as such instructions are “parallel to an automatic bank transfer of local funds from a
savings account to a checking account maintained by a depositor in one bank.” Electronic
messages “cannot be considered negotiable instruments as they lack the feature of
negotiability, which, is the ability to be transferred” and that the said electronic messages
are “mere memoranda” of the transaction consisting of the “actual debiting of the local or
foreign currency account in the Philippines” and “entered as such in the books of account
of the local bank,” HSBC.

Furthermore, the instructions given through electronic messages that are subjected to
DST are not negotiable instruments as they do not comply with the requisites of negotiability
under Section 1 of the Negotiable Instruments Law. It is not signed by the investor-clients as
supposed drawers of a bill of exchange; they do not contain an unconditional order to pay a sum
certain in money as the payment is supposed to come from a specific fund or account of the
investor-clients; and, they are not payable to order or bearer but to a specifically designated third
party. Thus, the electronic messages are not bills of exchange. As there was no bill of exchange
or order for the payment drawn abroad and made payable here in the Philippines.
RCBC SAVINGS BANK VS. NOEL M. ODRADA

FACTS:

The herein respondent sold a secondhand Mitsubishi Montero Sport to Teodoro Lim for One Million Five
Hundred and Ten Thousand Pesos (1,510,000.00). Of the total consideration, Six Hundred Ten Thousand
Pesos (610,000.00) was initially paid by Lim and the remaining balance of Nine Hundred Thousand Pesos
(900,000.00) was financed by the Petitioner RCBC Savings Bank through a car loan obtained by Lim.

RCBC issued two manager’s checks payable to Odrada. After the issuance and turn over of the checks to
Odrada but prior to the check’s presentation, Lim notified Odrada in a letter dated April 15 2002 that
there was an issue regarding the roadworthiness of the SUV.

Instead of addressing the issue, Odrada deposited the manager’s checks but the checks were dishonored
apparently upon Lim’s instruction to RCBC.

ISSUE:

1. Whether or not the drawee bank can interpose a personal defense of the purchaser if the holder
of a manager’s check is not a holder in due course.

RULING:

As a general rule, the drawee bank is not liable until it accepts. Accordingly, acceptance is the act which
triggers the operation of the liabilities of the drawee (acceptor) under Sec. 62. However, as can be
gleaned in a long line of cases decided by the Supreme Court, a manager’s check is accepted by the bank
upon its issuance. The distinctive feature of a manager’s check is that it is accepted in advance. As a
result, the drawee bank has the unconditional obligation to pay a manager’s check to a holder in due
course irrespective of any available personal defenses.

However, while the Supreme Court has consistently held that a manager’s check is automatically
accepted, a holder other than a holder in due course is still subject to personal defenses.

Odrada’s action in depositing the manager’s check despite knowledge of the SUVs defects amounted to
bad faith. Hence, the respondent is not a holder in due course and can be subject to any personal
defenses.
SAN PEDRO, Patricia Mae D.

REPUBLIC PLANTERS BANK v. COURT OF APPEALS

Facts: Shozo Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide Garment
Manufacturing, Inc. were authorized to apply for credit facilities with the bank. They signed 9
promissory notes that were issued by Republic Planters Bank. Three years after, the bank filed an
action to recover the sums of money which is covered by the 9 promissory notes. Fermin Canlas
alleged that he is not personally liable for the promissory note as he is acting in behalf of the
corporation.

Issue: WON Fermin Canlas, as the treasurer, is liable for the promissory notes?

Held: YES. Under the Negotiable lnstruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. Where an instrument containing the words "I
promise to pay" is signed by two or more persons, they are deemed to be jointly and severally
liable thereon. An instrument which begins" with "I" ,We" , or "Either of us" promise to, pay,
when signed by two or more persons, makes them solidarily liable. The fact that the singular
pronoun is used indicates that the promise is individual as to each other; meaning that each of the
co-signers is deemed to have made an independent singular promise to pay the notes in full.
Cruz, Juvi Magno

JD-2B 2018-110091

G.R. No. 129910

International Corporate Bank, Inc vs Court of Appeals
September 5, 2006

Facts:

The petitioner accepted for deposit on various dates the 15 checks issued by the Ministry
of Education and Culture which was drawn against the respondent bank. After 24 hours from
submission of the checks to respondent bank for clearing, petitioner paid the value of the checks
and allowed the withdrawals of the deposits. However, on 14 October 1981, respondent returned
all the checks to petitioner without clearing them on the ground that serial numbers were
materially altered. Thus, petitioner instituted an action for collection of sums of money against
respondent to recover the value of the checks.

Issue: Whether the alterations in the serial numbers of the check is a material alteration.

Held: No.

Sections 124 and 125 of Act No. 2031 of the Negotiable Instruments Law provides:

SEC. 124. Alteration of instrument; effect of. ― Where a negotiable instrument is materially
altered without the assent of all parties liable thereon, it is avoided, except as against a party who
has himself made, authorized, or assented to the alteration and subsequent indorsers. But when
an instrument has been materially altered and is in the hands of a holder in due course, not a
party to the alteration, he may enforce payment thereof according to its original tenor.

SEC. 125. What constitutes a material alteration. ― Any alteration which changes: (a) The
date; (b) The sum payable, either for principal or interest; (c) The time or place of payment; (d)
The number or the relations of the parties; (e) The medium or currency in which payment is to be
made; or which adds a place of payment where no place of payment is specified, or any other
change or addition which alters the effect of the instrument in any respect, is a material
alteration.

An alteration is said to be material if it alters the effect of the instrument. It means an

unauthorized change in an instrument that purports to modify in any respect the obligation of a
party or an unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of a party. In other words, a material alteration is one which
changes the items which are required to be stated under Section 1 of the Negotiable Instruments
Law.

The case at the bench is unique in the sense that what was altered is the serial number of
the check in question, an item which, it can readily be observed, is not an essential requisite for
negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration
did not change the relations between the parties. The name of the drawer and the drawee were
not altered. The intended payee was the same. The sum of money due to the payee remained the
same.
 BENJAMIN EVANGELISTA VS. SCREENEX INC.

FACTS:

Evangelista obtained a loan from Screenex Inc. which issued two checks first for Php1, 000,000.00 and
for Php500, 000.00. Then, he signed vouchers of Screenex as evidence of his acceptance of the two
checks for the said loan and to secure its payment he issued two open-dated checks both payable to the
order of Screenex Inc. The said checks were held in safekeeping by Philip Gotuaco, Sr., father-in-law of
Alexander Yu until November 19, 2004.

After the death of Gotuaco, Sr. his family demanded from Evangelista the settlement of the said loan
before they deposited the said checks. Upon presentment the checks issued by Evangelista were
dishonored by the bank therefore, the respondents charged him with Violation of BP. 22 with the
Metropolitan Trial Court of Makati City.

The MeTC acquitted Evangelista for violation of BP 22; however he was ordered to pay his civil obligation
on the grounds that there is no evidence of payment was presented and that the creditor’s possession of
the instrument of credit was sufficient evidence that the debt claimed had not yet been paid.

Yu made an appeal with the RTC, however it only affirmed the decision made by the MeTC. While the
Court of Appeals. Upon filing a petition for review, the Court of Appeals denied the same.

ISSUE:

Wether or not the CA erred in holding that Evangelista is still liable for the total amount indicated in the
2 checks considering that he was already acquitted in the criminal charged for violation of BP 22.

HELD:

In BP 22 cases, the action for the corresponding civil obligation is deemed instituted with the criminal
action. The criminal action for violation of BP 22 necessarily includes the corresponding civil action and
no reservation to file such civil action separately shall be allowed or recognized. This notwithstanding,
the civil action deemed instituted with the criminal action is treated as an independent civil liability
based on contract.

By definition, a check is a bill of exchange drawn on a bank payable on demand. It is an undertaking that
the drawer will pay the amount indicated thereon. Sec 119 of the NIL, however, states that a negotiable
instrument like a check may be discharged by any other act which will discharge a simple contract for the
payment of money. A check is therefore subject to a 10-year prescription of actions upon a written
contract. If the check is undated as in the present case, the cause of action is reckoned from the issuance
of the check. Assuming that Yu had authority to insert the dates in the checks, the fact that he did so
after the lapse of more than 10 years cannot qualify as changes made within a reasonable period. The
cause of action on the checks has become stale, hence time-barred. Prescription has indeed set in.

We therefore have no other recourse but to grant the petition on the ground of prescription. Even if the
defense was belatedly raised before the RTC for the first time on appeal from the ruling of MeTC, we
nonetheless dismiss the complaint, seeking to enforce civil liability of Evangelista based on the undated
checks. Holding Evanglista liable for the 2 checks has already prescribed.

Santos, John Mark Rommel C. JD – 2B

Negotiable instrument

ALLIED BANKING CORP. v LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and
PRODUCERS BANK,

G.R. No. 133179

VELASCO, JR., J

FACTS: On September 21, 1983, FCC had deposited a money market placement for respondent
Producers Bank which was received and acknowledged in a letter. The placement matured on October 25,
1983 and was rolled-over until December 5, 1983. FCC demanded payment of the proceeds of the
placement the same day.

Before FCC’s demand, on November 14, 1983, Lim Sio Wan deposited with petitioner Allied
Banking Corporation (Allied) a money market placement of P 1,152,597.35 for a term of 31 days to
mature on December 15, 1983. On December 5, 1983, a person claiming to be Lim Sio Wan called up
Allied, and instructed the latter to pre-terminate Lim Sio Wans money market placement, to issue a
managers check representing the proceeds of the placement, and to give the check to one Deborah Dee
Santos who would pick up the check. The manager’s check was issued in the name of Lim Sio Wan, as
payee. The check was cross-checked For Payees Account Only and given to Santos. Thereafter, the said
managers check was deposited in the account of Filipinas Cement Corporation (FCC) at respondent
Metropolitan Bank and Trust Co. (Metrobank), with the forged signature of Lim Sio Wan as indorser.

In short, the Allied check was deposited in FCC’s account in Metrobank purportingly
representing the proceeds of FCC’s money market placement proceeds.

To clear the check and in compliance with the requirements of the Philippine Clearing House
Corporation (PCHC) Rules and Regulations, Metrobank stamped a guaranty on the check, which reads:
All prior endorsements and/or lack of endorsement guaranteed.

The check was sent to Allied through the PCHC. Upon the presentment of the check, Allied
funded the check even without checking the authenticity of Lim Sio Wans purported indorsement. Thus,
the amount on the face of the check was credited to the account of FCC

On the date of maturity of her money market placement, Lim Sio Wan tried to withdraw the same
and was informed that she called to preterminate it a few days earlier. She denied giving any instructions
and receiving the proceeds thereof. She desisted from further complaints when she was assured by the
banks manager that her money would be recovered. However, upon subsequent demand Allied refused to
pay Lim Sio Wan. Thus she filed with the RTC a Complaint against Allied to recover the proceeds of her
money market placement. Allied filed a third party complaint against Metrobank and Santos. The trial
and appellate court ordered Allied to pay sixty (60%) percent Metrobank forty (40%) of the amount of
plus 12% interest per annum.

ISSUE/S:

Is petitioner’s liability to the extent of 60% of amount adjudged demandable and Metrobank to the extent
of 40% as guarantor of all endorsement on the check, it being the collecting bank?

RULING:

Yes, the 60:40 ratio of the liabilities of Allied and Metrobank must be upheld.

Section 66 in relation to Sec. 65 of the Negotiable Instruments Law provides:

Section 66. Liability of general indorser.Every indorser who indorses without qualification, warrants to all
subsequent holders in due course;

a) The matters and things mentioned in subdivisions (a), (b) and (c) of the next preceding section; and

b) That the instrument is at the time of his indorsement valid and subsisting;

And in addition, he engages that on due presentment, it shall be accepted or paid, or both, as the case may
be according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled
to pay it.

Section 65. Warranty where negotiation by delivery, so forth.Every person negotiating an instrument by
delivery or by a qualified indorsement, warrants:

a) That the instrument is genuine and in all respects what it purports to be;

b) That he has a good title of it;

c) That all prior parties had capacity to contract;

d) That he has no knowledge of any fact which would impair the validity of the instrument or render it
valueless.

But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the
immediate transferee.

The provisions of subdivision (c) of this section do not apply to persons negotiating public or corporation
securities, other than bills and notes.

As provided in Section 66 in relation to Sec. 65 of the Negotiable Instruments Law, the warranty “that the
instrument is genuine and in all respects what it purports to be” covers all the defects in the instrument
affecting the validity thereof, including a forged indorsement. Thus, the last indorser will be liable for the
amount indicated in the negotiable instrument even if a previous indorsement was forged. We held in a
line of cases that “a collecting bank which indorses a check bearing a forged indorsement and presents it
to the drawee bank guarantees all prior indorsements, including the forged indorsement itself, and
ultimately should be held liable therefor.” However, this general rule is subject to exceptions. One such
exception is when the issuance of the check itself was attended with negligence.

Therefore, in the case above, Allied Bank was negligent in issuing the manager’s check and in
transmitting it to Santos without even a written authorization

The liability of Allied Bank, however, is concurrent with that of Metrobank as the last indorser of the
check. Given the relative participation of Allied and Metrobank to the instant case, both banks cannot be
adjudged as equally liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank must be
upheld.

DEL ROSARIO, MARIAN B. NEGOTIABLE INSTRUMENTS

 G.R. No. 75954 October 22, 1992
PEOPLE OF THE PHILIPPINES, petitioner,
versus
Judge DAVID G. NITAFAN, RTC, Branch 52, Manila, and K.T. LIM respondents.

FACTS OF THE CASE:

Private respondent K.T. Lim was charged before respondent court with violation of B.P.
22 in an Information alleging ––

“That on . . . January 10, 1985, in the City of Manila . . . the said accused did then and
there wilfully, unlawfully and feloniously make or draw and issue to Fatima Cortez Sasaki . . .
Philippine Trust Company Check No. 117383 dated February 9, 1985 . . . in the amount of
P143,000.00, . . . well knowing that at the time of issue he . . . did not have sufficient funds in or
credit with the drawee bank . . . which check . . . was subsequently dishonored by the drawee
bank for insufficiency of funds, and despite receipt of notice of such dishonor, said accused
failed to pay said Fatima Cortez Sasaki the amount of said check or to make arrangement for full
payment of the same within five (5) banking days after receiving said notice.”

On 18 July 1986, private respondent moved to quash the Information of the ground that
the facts charged did not constitute a felony as B.P. 22 was unconstitutional and that the check he
issued was a memorandum check which was in the nature of a promissory note, in effect, civil in
nature. On 1 September 1986, respondent judge, ruled that B.P. 22 was unconstitutional, issued
the questioned Order quashing the Information. Hence, this petition for review on certiorari.

ISSUES:

1. Whether or not a memorandum check issued postdated in partial payment of a pre-existing

obligation is within the coverage of B.P. 22.

RULING/RATIONALE:

1. Yes. A memorandum check issued postdated in partial payment of a pre-existing

obligation is within the coverage of B.P. 22.A memorandum check is in the form of an ordinary
check, with the word "memorandum", "memo" or "mem" written across its face, signifying that
the maker or drawer engages to pay the bona fide holder absolutely, without any condition
concerning its presentment. Such a check is an evidence of debt against the drawer, and although
may not be intended to be presented, has the same effect as an ordinary check, and if passed to
the third person, will be valid in his hands like any other check.

A memorandum check comes within the meaning of Sec. 185 of the Negotiable
Instruments Law which defines a check as "a bill of exchange drawn on a bank payable on
demand." A check is also defined as " [a] written order or request to a bank or persons carrying
on the business of banking, by a party having money in their hands, desiring them to pay, on
presentment, to a person therein named or bearer, or to such person or order, a named sum of
money.

A memorandum check, upon presentment, is generally accepted by the bank. Hence it

does not matter whether the check issued is in the nature of a memorandum as evidence of
indebtedness or whether it was issued is partial fulfilment of a pre-existing obligation, for what
the law punishes is the issuance itself of a bouncing check and not the purpose for which it was
issued. The mere act of issuing a worthless check, whether as a deposit, as a guarantee, or even
as an evidence of a pre-existing debt, is malum prohibitum.

A memorandum check must therefore fall within the ambit of B.P. 22 which does not
distinguish but merely provides that "[a]ny person who makes or draws and issues any
check knowing at the time of issue that he does not have sufficient funds in or credit with the
drawee bank . . . which check is subsequently dishonoured,.is punishable. Ubilex no
distinguitnecnosdistingueredebemus.

Santos, Jedd J.
JD – 2B
CALTEX (PHILIPPINES), INC.

vs

COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY

GR No. 97753 August 10, 1992

Facts:

Security Bank issued certificates of time deposits to Angel dela Cruz. The same were given by
dela Cruz to petitioner in connection with his purches of fuel products from the latter. On a later date, dela
Cruz approached the branch manager of Security Bank and 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. Petitioner then
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.

Issue: WON the CTDs in question are negotiable instruments.

Held:

Yes, the CTDs in question are negotiable. The documents provide that the amounts 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 dela 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 specifically to Angel dela Cruz, 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.

RODRIGO RIVERA vs. SPOUSES SALVADOR CHUA AND VIOLETA S. CHUA

 G.R. No. 184458, January 14, 2015

PEREZ, J.:

FACTS: The parties were friends of long standing having known each other since 1973. On 24
February 1995, Rivera obtained a loan from the Spouses Chua:

PROMISSORY NOTE

120,000.00

FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C.

CHUA and VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine
Currency (₱120,000.00) on December 31, 1995.

It is agreed and understood that failure on my part to pay the amount of (120,000.00) One
Hundred Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent
to FIVE PERCENT (5%) interest monthly from the date of default until the entire obligation is
fully paid for.

Should this note be referred to a lawyer for collection, I agree to pay the further sum equivalent
to twenty percent (20%) of the total amount due and payable as and for attorney’s fees which in
no case shall be less than ₱5,000.00 and to pay in addition the cost of suit and other incidental
litigation expense.

Any action which may arise in connection with this note shall be brought in the proper Court of
the City of Manila.

Manila, February 24, 1995

(SGD.) RODRIGO RIVERA

In October 1998, Rivera issued and delivered to the Spouses Chua, as payee, a check
numbered 012467, dated 30 December 1998, in the amount of 25,000.00 and on 21 December
1998, another check numbered 013224, duly signed and dated, but blank as to payee. The second
check was issued, as per understanding by the parties, and the amount of 133,454.00 with “cash”
as payee. Both checks were dishonored for the reason “account closed.”

Due to Rivera’s unjustified refusal to pay, respondents were constrained to file a suit on
11 June 1999.

In his Answer with Compulsory Counterclaim, Rivera countered, among others, that the
subject Promissory Note was forged and that here was no demand for payment of the amount of
120,000.00 prior to the encashment of PCIB Check No. 0132224. Respondents presented
documentary and oral evidence of NBI Senior Document Examiner Antonio Magbojos who
concluded that the questioned signature appearing in the Promissory Note and the Rivera’s
specimen signatures on other documents written by one and the same person.

The MeTC ruled in Spouses Chua’s favor. On appeal, the RTC affirmed the MeTC
decision but deleted the award of attorney’s fees. The CA also affirmed Rivera’s liability under
the Promissory Note but reduced the imposition of interest on the loan from 60% to 12% per
annum.

Both parties appealed before the SC. Respondent’s petition for review on certiorari was
denied for failure to show any reversible on the CA ruling concerning the correct rate of interest
on Rivera’s indebtnesses under the Promissory Note. Rivera continued to deny that he executed
the Promissory Note and alleged that the Spouses Chua “never demanded payment for the loan
nor interest thereof (sic) from [Rivera] for almost four (4) years from the time of the alleged
default in payment.

ISSUE: Whether or not the promissory note is negotiable instrument, thus the Negotiable
Instruments Law (NIL) applies to this case.

RULING:

The Court held that the subject promissory note is not a negotiable instrument and the
provisions of the NIL do not apply to this case. Section 1 of the NIL requires the concurrence of
the following elements to be a negotiable instrument:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.

The Promissory Note in this case is made out to specific persons, herein respondents, the
Spouses Chua, and not to order or to bearer, or to the order of the Spouses Chua as payees.
However, even if Rivera’s Promissory Note is not a negotiable instrument and therefore outside
the coverage of Section 70 of the NIL which provides that presentment for payment is not
necessary to charge the person liable on the instrument, Rivera is still liable under the terms of
the Promissory Note that he issued.
Nuevo, Joyce Anne M. JD-2B

G.R. No. 154740 April 16, 2008

HENRY DELA RAMA CO., petitioner,

vs.
ADMIRAL UNITED SAVINGS BANK, respondent.

Facts: On February 28, 1983, Admiral United Savings Bank (ADMIRAL) extended a loan of
Five Hundred Thousand Pesos (P500,000.00) to petitioner Henry Dela Rama Co (Co), with
Leocadio O. Isip (Isip) as co-maker. The loan was evidenced by Promissory Note No. A1-
0414 dated February 28, 1983 and payable on or before February 23, 1984, with interest at the
rate of 18% per annum and service charge of 10% per annum. The note also provided for
liquidated damages at the rate of 3% per month plus incidental cost of collection and/or legal
fees/cost, in the event of non-payment on due date.

Co and Isip failed to pay the loan when it became due and demandable. Demands for payment
were made by ADMIRAL, but these were not heeded. Consequently, ADMIRAL filed a
collection case against Co and Isip with the RTC of Quezon City, docketed as Civil Case No. Q-
48543.

Co then filed a third party complaint against Metropolitan Rentals & Sales, Inc. (METRO
RENT). He averred that the incorporators and officers of METRO RENT were the ones who
prodded him in obtaining a loan of P500,000.00 from ADMIRAL. The proceeds of the loan were
given to the directors and officers of METRO RENT, who assured him of prompt payment of the
loan obligation. METRO RENT also assured him that he would be discharged from all liabilities
under the promissory note, but it did not make good its promise. Traversing the third party
complaint, METRO RENT denied receiving the loan proceeds from Co. It claimed that the loan
was Co’s personal loan from which METRO RENT derived no benefit, thus, it cannot be held
liable for the payment of the same.7

In due course and after hearing, the RTC rendered a Decision on May 18, 1991, dismissing the
complaint.

ADMIRAL appealed the dismissal of the complaint to the CA.

Issue: Whether or not the petitioner can be held liable?

Ruling: Yes, Co can be held liable.

Under Sec. 60 of the Negotiable instruments Law

Liability of maker. - The maker of a negotiable instrument, by making it, engages that he will
pay it according to its tenor, and admits the existence of the payee and his then capacity to
indorse.

The document, bearing Co’s signature, speaks for itself. Co has not questioned the genuineness
and due execution of the note. By signing the promissory note as a maker, Co acknowledged
receipt of the loan amounting to P500,000.00, and undertook to pay the same, plus interest, to
ADMIRAL on or before February 28, 1984. Thus, he cannot validly set up the defense that he
did not receive the value of the note or any consideration therefor.

Co has not denied the authenticity and due execution of the promissory note. He, however,
asserts that he is not legally bound by said document because he merely acted as an
accommodation party for METRO RENT. He claimed the he signed the note only for the
purpose of lending his name to METRO RENT, without receiving value therefor.

At any rate, Co’s assertion that he merely acted as an accommodation party for METRO RENT
cannot release him from liability under the note.
Under Section 29 of Negotiable Instruments Law. An accommodation party who lends his name
to enable the accommodated party to obtain credit or raise money is liable on the instrument to a
holder for value even if he receives no part of the consideration. 13 He assumes the obligation to
the other party and binds himself to pay the note on its due date. By signing the note, Co thus
became liable for the debt even if he had no direct personal interest in the obligation or did not
receive any benefit therefrom.

In sum, the CA committed no reversible error in holding Co liable for the payment of the loan.
ROBERT DINO, Petitioner, vs. MARIA LUISA JUDAL-LOOT, joined by her husband
VICENTE LOOT, Respondents.
G.R. No. 170912. April 19, 2010
CARPIO, J.:

The Facts

On December 1992, Vivencia Ompok Consing, a member of a syndicate posed as an

owner of several parcels of land situated in Canjulao, Lapu-lapu City, she approached petitioner
Robert Dino and induced him to lend the group ₱3,000,000.00 to be secured by a real estate
mortgage on the properties. Consing even offered to execute a Deed of Absolute Sale covering
the properties. Then, Dino issued three Metrobank checks with a total of ₱3,000,000.00, one of
which is Check No. C-MA-142119406-CA which is post-dated February 13, 1993 in the amount
of ₱1,000,000.00 payable to Vivencia Ompok Consing and/or Fe Lobitana.

Upon investigation of Dino, he learned and realize that he had been deceived, he then
advised Metrobank to stop payment of his checks. However, only the payment of Check No. C-
MA- 142119406-CA was ordered stopped, because the other two checks were already encashed
by the payees.

Then, Lobitana negotiated and indorsed Check No. C-MA- 142119406-CA to Judal-Loot
in exchange for cash in the sum of ₱948,000.00, but before Judal-Loot accepted the check, they
first inquired from the Metrobank, Cebu-Mabolo Branch if the subject check was sufficiently
funded, to which Metrobank answered in the positive. But when Judal-Loot deposited the check
with Metrobank, Cebu-Mabolo Branch, the same was dishonored by the drawee bank for reason
"PAYMENT STOPPED."

Hence this petition.

The Issue

Whether Sps. Judal-Loot are holders in due course of Metrobank Check No. C-MA
142119406 CA as to entitle them to collect the face value of the check from its drawer or
petitioner Dino.

The Ruling

No. They are not holders in due course.

Under Section 52 of the Negotiable Instruments Law, it defines a holder in due course, as
a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it has
been previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.

In the case at bar, respondents Sps. Judal-Loot had the duty to ascertain the Lobitana’s
title, being the indorser, to the check or the nature of her possession. This they failed to do so.
Their verification from Metrobank on the funding of the check does not amount to determination
of Lobitana’s title to the check. Failing in this respect, respondents are guilty of gross negligence
amounting to legal absence of good faith, contrary to Section 52(c) of the Negotiable Instruments
Law. Hence, respondents are not deemed holders in due course of the subject check.

However, it doesn’t mean they cannot recover on the check, although they cannot obliged
Dino to pay the face value of the check because of the defense of absence or failure of
consideration, which Dino sufficiently established in this case. Sps. Judal-Loot can collect from
the immediate indorser, which is Lobitana. Significantly, Lobitana did not appeal the trial court’s
decision, finding her solidarily liable to pay, among others, the face value of the subject check.
Therefore, the trial court’s judgment has long become final and executory as to Lobitana.

WHEREFORE, we GRANT the petition. We SET ASIDE the 16 August 2005 Decision and 30
November 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 57994.

SO ORDERED.

CAPIRAL, CHELA T.
JD 2B
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:
.Whether or not treasury warrants are negotiable instruments

Held:

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 2 nd, 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.

ANICETE, RESHEL V.

JD - 2B
PHILIPPINE NATIONAL BANK (PNB) vs. RODRIGUEZ
G.R. No. 170325, September 26, 2008

Doctrine: Fictitious Payee Rule

FACTS:

Spouses Erlando and Norma Rodriguez were engaged in the informal lending business and had a discounting
arrangement with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB
employees which also maintains current and savings accounts with Philippine National Bank (PNB)

PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks
issued to members whenever the association was short of funds. As was customary, the spouses would
replace the postdated checks with their own checks issued in the name of the members.

It was PEMSLA’s policy not to approve applications for loans of members with outstanding debts. To subvert
this policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan
accounts. They took out loans in the names of unknowing members, without the knowledge or consent of the
latter. The officers carried this out by forging the indorsement of the named payees in the checks

Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from
the named payees. This irregular procedure was made possible through the facilitation of Edmundo Palermo,
Jr., treasurer of PEMSLA and bank teller in the PNB Branch. This became the usual practice for the parties.

November 1998-February 1999: spouses issued 69 checks totalling to P2,345,804. These were payable to 47
individual payees who were all members of PEMSLA. PNB eventually found out about these fraudulent acts
and to put a stop to this scheme, PNB closed the current account of PEMSLA.

As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason
“Account Closed.” The amounts were duly debited from the Rodriguez account. Spouses filed a civil complaint
for damages against PEMSLA, the Multi-Purpose Cooperative of Philnabankers (MCP), and PNB. PNB credited
the checks to the PEMSLA account even without indorsements. PNB violated its contractual obligation to them
as depositors - so PNB should bear the losses

RTC favored Spouses Rodriguez and CA affirmed.

ISSUE:

Whether the subject checks are payable to order or to bearer and who bears the loss.

RULING:

A check is “a bill of exchange drawn on a bank payable on demand.” It is either an order or a bearer
instrument.

As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is
considered as a bearer instrument.

Under Section 30 of the NIL, an order instrument requires an indorsement from the payee or holder before it
may be validly negotiated. A bearer instrument, on the other hand, does not require an indorsement to be
validly negotiated. It is negotiable by mere delivery.
Under Section 9(c) of the NIL, a check payable to a specified payee may nevertheless be considered as a bearer
instrument if it is payable to the order of a fictitious or non-existing person, and such fact is known to the
person making it so payable. Thus, checks issued to “Prinsipe Abante” or “Si Malakas at si Maganda,” who are
well-known characters in Philippine mythology, are bearer instruments because the named payees are
fictitious and non-existent.

For the fictitious-payee rule to be available as a defense, PNB must show that the makers did not intend for
the named payees to be part of the transaction involving the checks. At most, the bank’s thesis shows that the
payees did not have knowledge of the existence of the checks. This lack of knowledge on the part of the
payees, however, was not tantamount to a lack of intention on the part of respondents-spouses that the payees
would not receive the checks’ proceeds. Considering that respondents-spouses were transacting with PEMSLA
and not the individual payees, it is understandable that they relied on the information given by the officers of
PEMSLA that the payees would be receiving the checks.

Verily, the subject checks are presumed order instruments. This is because, as found by both lower courts,
PNB failed to present sufficient evidence to defeat the claim of respondents that the named payees were the
intended recipients of the checks’ proceeds. The bank failed to satisfy a requisite condition of a fictitious-
payee situation – that the maker of the check intended for the payee to have no interest in the transaction.

Because of a failure to show that the payees were “fictitious” in its broader sense, the fictitious-payee rule
does not apply. Thus, the checks are to be deemed payable to order. Consequently, the drawee bank bears the
loss.

PERONA, MAY–ANNE DB.

JD 2B

SINCERE Z. VILLANUEVA VS. MARLYN P. NITE

G.R. No. 148211 July 25, 2006
FACTS: Marlyn P. Nite took out a loan of P409,000 from Sincere Z. Villanueva. To secure the
loan, Nite issued Villanueva an Asian Bank Corporation (ABC) check in the amount of P325,500
dated February 8, 1994. The check was dishonored due to material alteration of the date,
changing it to June 8, 1994. Nite, through her representative Emily P. Abojada, remitted
P235,000 to Villanueva as partial payment of the loan. The balance of P174, 000 was to be paid
on a much later date.

Barely 6 days after receipt of the partial payment of P235,000.00 and agreeing that the balance of
P174,000.00 shall be paid on or before December 8, 1994, Villanueva filed his complaint against
ABC for the full amount of the dishonored check in the sum of P320,500.00 without impleading
petitioner. The apparent haste by which Villanueva filed his complaint and his failure to implead
Nite clearly shows his intent to prevent her from opposing his action.

Notwithstanding the foregoing, six (6) days later Villanueva instituted an action for collection
with damages for the whole amount of the issued check. He does not deny knowledge of such
payment neither of the fact that he concurred in settling the balance of P174,000.00 on December
8, 1994.

ISSUE: Whether or not Villanueva has a cause of action against Asian Bank Corporation.

HELD: No. Villanueva cannot sue Asian Bank Corporation.

Invoking Sections 185 and 189 of the Negotiable Instruments Law:

Sec. 185. Check, defined. – A check is a bill of exchange drawn on a bank payable on
demand. Except as herein otherwise provided, the provisions of this Act applicable to a
bill of exchange payable on demand apply to a check.9 (emphasis ours)

Sec. 189. When check operates as an assignment. – 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 the check.
(emphasis ours)

if a bank refuses to pay a check (notwithstanding the sufficiency of funds), the payee-holder
cannot, in view of the cited sections, sue the bank. The payee should instead sue the drawer who
might in turn sue the bank. Section 189 is sound law based on logic and established legal
principles: no privity of contract exists between the drawee-bank and the payee. Indeed, in this
case, there was no such privity of contract between ABC and petitioner.

Villanueva should not have sued ABC. Contracts take effect only between the parties, their
assigns and heirs, except in cases where the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by provision of law. None of the foregoing
exceptions to the relativity of contracts applies in this case.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CA-
G.R. SP No. 44971 is AFFIRMED in toto.

Costs against petitioner.

NEW PACIFIC TIMBER & SUPPLY COMPANY, INC., Petitioner, vs. HON. ALBERTO
V. SENERIS, RICARDO A. TONG and EX-OFFICIO SHERIFF HAKIM S.
ABDULWAHID, Respondents.

G.R. No. L-41764 December 19, 1980]

Facts: Herein petitioner is the defendant in a complaint for collection of a sum of money filed by
the private respondent. A compromise judgment was rendered by the respondent Judge against
New Pacific Timber. For failure of the petitioner to comply with his judgment obligation, a writ
of execution was issued for the amount of P63,130.00 pursuant to which, the Ex-Officio Sheriff
levied upon the following personal properties of the petitioner. Prior to the auction sale,
petitioner deposited with the CFI, in his capacity as Ex-Officio Sheriff of Zamboanga City, the
sum of P63,130.00

Private respondent refused to accept the check as well as the cash deposit. Private respondent
requested the scheduled auction to proceed if the petitioner cannot produce the cash.

In the course of the proceedings, Deputy Sheriff Castro sold the levied properties item by item to
the private respondent as the highest bidder in the amount of P50,000.00. As a result, thereof, the
Ex-Officio Sheriff declared a deficiency of P13,130.00.

Petitioner filed an ex-parte motion for issuance of certificate of satisfaction of judgment. This
motion was denied by the respondent Judge. Petitioner now questions said order as there was
already a full satisfaction of the judgment before the auction sale was conducted.

Issue: Whether or not the private respondent can validly refuse acceptance of the payment of the
judgment obligation in Cashier’s check which it deposited with the Ex-Officio Sheriff before the
date of the scheduled auction sale.

Held: No valid reason for the private respondent to have refused acceptance of the payment of
the obligation in his favour. It is to be emphasized in this connection that the check deposited by
the petitioner in the amount of P50,000.00 is not an ordinary check but a Cashier’s Check of the
Equitable Banking Corporation, a bank of good standing and reputation. As testified to by the
Ex-Officio Sheriff with whom it has been deposited, it is a certified crossed check. It is a well-
known and accepted practice in the business sector that a Cashier’s Check is deemed as cash.
Moreover, since the said check had been certified by the drawee bank, by the certification, the
funds represented by the check are transferred from the credit of the maker to that of the payee or
holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank, with
rights and duties of one in such situation.

The exception to the rule enunciated under Section 63 of the Central Bank Act to the effect “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” shall
apply in this case.

Bank of the Philippine Islands vs. Roxas, G.R. No. 157833, October 15, 2007
Petitioner vs. Respondents
Roxas sold vegetable oil to the Cawili spouses. As payment, the Cawili spouses issued a personal check.
But the personal check was dishonoured. The Cawili spouses replaced the dishonoured check with a
cashier’s check from the BPI to be drawned against the account of Mrs. Cawili. Again, the cashier’s check
was also dishonoured because Mrs. Cawili’s account closed. Thus, Roxas filed a complaint to the RTC for
the collection of the sum of money covering the value of the dishonoured, including prayer for damages
and cost of suit. BPI argued that the cashier’s check was dishonoured because of lack of consideration.
Soon enough, the RTC rendered judgment against BPI and ordered the latter to pay the sum of money
covering the value of the check plus damages and cost of suit. Not satisfied, BPI appealed to the CA but
the latter affirmed the RTC. Hence, BPI petitioned to the SC for Review on Certiorari. BPI reasoned that
Roxas is not a holder in due course since Roxas did not “...took it in good faith and for value;” (Section 52
of the Negotiable Instruments Law). Since the element of "value" is not present, therefore, Roxas could
not be a holder in due course.
ISSUE: Is Roxas a holder in due course when he held a cashier’s check that was dishonoured for lack of
consideration or value, i.e., the account from which the check should be drawn closed? YES. PETITION
DENIED. CA AFFIRMED.
RULES/REASONS: Section 25 of the NIL states:
SEC. 25. Value, what constitutes. – Value is any consideration sufficient to support a simple contract. An
antecedent or pre-existing debt constitutes value; and is deemed as such whether the instrument is
payable on demand or at a future time.
A value "in general terms may be some right, interest, profit or benefit to the party who makes
the contract or some forbearance, detriment, loan, responsibility, etc. on the other side."
A cashier’s check is really the bank’s own check and may be treated as a promissory note with the bank
as the maker. The check becomes the primary obligation of the bank which issues it and constitutes a
written promise to pay upon demand. This Court took judicial notice of the "well-known and accepted
practice in the business sector that a cashier’s check is deemed as cash." This is because the mere
issuance of a cashier’s check is considered acceptance thereof.

Siccion Liza, B.
JD-2B

Metropolitan and Trust Company

VS.
Renato D. Cabilzo
 GR No. 154469

Facts:

Renato D. Cabilzo was one of Metro Bank’s clients who maintained a current account
with Metro Bank Pasong Tamo Branch. On November 12, 1994, Cabilzo issued a Check
payable to “CASH” and postdated on November 24,1994 in the amount of P 1,000.00. The check
was drawn against Cabilzo’s account with Metrobank Pasong Tamo, to a certain Mr Marquez, as
his sales commission.

The check was presented to Westmont Bank for payment. In turn, indorsed the check to
Metro Bank for appropriate clearing. After a thorough examination including the availability of
funds and authenticity of signatures. The Metro Bank cleared the check for encashment in
accordance with PCHC rules.

Upon receipt of the check, Cabilzo discovered that Metro Bank check which he issued on
November 12, 1994 in the amount of P 1,000.00 was altered to P 91,000.00 and the date
November 24, 1994 was changed to November 14, 1994. Hence, Cabilzo demanded that Metro
Bank re-credit the amount of P 91,000.00 to his account. However Metro Bank refused reasoning
that it has to refer the matter first to its legal division for appropriate action.

Issue:

WON the Court of Appeal gravely erred in holding Metro Bank, as drawee bank liable
for the alterations on the subject check bearing the authentic signature of the drawer thereof.

Ruling:

The Petition is deny.

An alteration is said to be material if it changes the effect of the instrument. It means that
an unauthorized change in an instrument that purports to modify in any respect the obligation of
a party or an unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of a party. In other words, a material alteration is one which
changes the items which are required to be stated under section 1 of the NIL.

Section 1 of the Negotiable Instruments Law provides:

Section 1. Form of negotiable Instruments- An instrument to be negotiable must conform to the

following requirements:

(A) It must be in writing and signed by the maker or drawer;

(B) Must contain an unconditional promise or order to pay a sum certain in money;
(C) Must be payable on demand or at a fixed determinable future time.
(D) Must be payable to order or to bearer and;
(E) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

Also pertinent is the following provision in the NIL which states:

Section 125. What constitutes material alteration- Any alteration which changes:

(a) The date;

(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relation of the parties;
 (e) The medium or currency in which payment is to be made;

Or which adds a place of payment where no place is specified, or any other change or addition
which alters the effect of the instrument in any respect is a material alteration.

In the case at Bar, the check was altered so that the amount was increased from P 1,000.00 and
the date was changed from November 24, 1994 to November 24, 1994. Apparently, since the
entries altered were among those enumerated under Section 1 and 125, namely, the sum of
money payable and the date of the check, the instant controversy therefore squarely falls within
the purview of material alteration.

Section 124. Alteration of instruments; effect of.- Where a negotiable instrument is materially
altered without the assent of all parties liable thereon, it is avoided, except as against a party who
has himself made, authorized, ad assented to the alteration and subsequent indorsers.

But when the instrument has been materially altered and is in the hands of a holder in due course
not a party to the alteration, he may enforce the payment thereof according to its original tenor.

Indubitably, Cabilzo was not the one who made nor authorized the alteration. Neither did he
assent to the alteration by his express or implied acts. There is no showing that he failed to
exercise such reasonable degree of diligence required of a prudent man which could have
otherwise prevented the loss. As correctly ruled by the appellate court, Cabilzo was never remiss
in the preparation and issuance of the check, and there were no indicia of evidence that would
prove otherwise. Indeed, Cabilzo placed asterisk before and after the amount in words and
figures in order to forewarn the subsequent holders that nothing follows and after the amount
indicated other than the one specified between the asterisks.

In the present case, it is obvious that Metro Bank was remiss in that duty and violated that
relationships. As observed by the CA, there are material alterations on the check that are visible
to the naked eye. However, Metro Bank failed to detect such alterations which could not escape
the attention of even an ordinary person. This negligence was exacerbated by the fact that as
found by the trial court, the check in question was examined by the cash custodian whose
functions do not include the examinations of checks indorsed for payment against drawer’s
account, obviously, the employee allowed by Metro Bank to examine the check was not verse
and competent to handle such duty. These factual findings of the trial court is conclusive upon
this court especially when such findings was affirmed appellate court.

Payment made under materially altered instrument is not payment done in accordance with the
instruction of the drawer. When the drawee bank pays a materially altered check, it violates the
terms of the check, as well as its duty to charge its client’s account only for bonafide
disbursements he had made. Since the drawee bank, in the instant case, did not pay according to
the original tenor of the instrument, as directed by the drawer, then it has no right to claim
reimbursement from the drawer, much less, the right to deduct the erroneous payment it made
from the drawer’s account which it was expected to treat with utmost fidelity.

TORRES, Mark Anthony Alonzo Negotiable Instruments Law

Juris Doctor, 2B Judge JAIME SAMONTE

Equitable PCI Bank v. Ong

G.R. No. 156207, September 15, 2006
CHICO-NAZARIO, J.:

Facts:
 Warliza Sarande deposited in her account at Philippine Commercial International Bank a
check in the amount of P225,000.00. Sarande was then informed that said check has been
cleared. Relying on such assurance, she issued two (2) checks where one was issued to
respondent Rowena Ong Owing to a business transaction. The latter then requested PCI Bank to
convert the proceeds thereof into a manager's check, which the PCI Bank obliged. When Ong
deposited the manager's check in her account with Equitable Banking Corporation, she received
a check return-slip informing her that PCI Bank had stopped the payment of the said check on
the ground of irregular issuance. Ong then filed a complaint for sum of money against herein
petitioner. Petitioner countered that the check was returned as the account against which it was
drawn was already closed.

Issue:
Whether petitioner bank is liable to pay the questioned check.

Held:
Yes. By admitting it committed an error, clearing the manager's check of Sarande and
issuing in favor of Ong not just any check but a manager's check for that matter, PCI Bank's
liability is fixed.

Since the Bank had certified that check, such certification is equivalent to acceptance and
petitioner bank as drawee bank is bound on the instrument upon certification and it is immaterial
to such liability in favor of the plaintiff who is a holder in due course whether the drawer had
funds or not with the defendant-bank or the drawer was indebted to the bank for more than the
amount of the check.

The certifying bank has all the liabilities under Sec. 62 of the Negotiable Instruments
Law which refers to liability of acceptor. It may be true that said check was actually not funded
but since plaintiff became a holder in due course, defendant-bank cannot interpose a defense of
want or lack of consideration because that defense is equitable or personal and cannot prosper
against a holder in due course pursuant to Section 28 of the Negotiable Instruments Law.

Therefore, when the aforementioned check was endorsed and presented by the plaintiff
and certified to and accepted by defendant-bank in the purchase of PCIB Manager's Check No.
1983 in the amount of P132,000.00, there was a valid consideration.

Moreover, what Ong obtained from PCI Bank was not just any ordinary check but a
manager's check.

A manager's check is an order of the bank to pay, drawn upon itself, committing in effect
its total resources, integrity and honor behind its issuance. By its peculiar character and general
use in commerce, a manager's check is regarded substantially to be as good as the money it
represents.

A manager's check stands on the same footing as a certified check. The effect of
certification is found in Section 187, Negotiable Instruments Law. which provides: "Where a
check is certified by the bank on which it is drawn, the certification is equivalent to an
acceptance." By accepting said check and issuing in turn a manager's check in exchange thereof,
PCI Bank assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments
Law.

Ferdinand C. Sunga 2B

EULALIO PRUDENCIO and ELISA T. PRUDENCIO

vs.

THE HONORABLE COURT OF APPEALS

Facts:
 Eulalio Prudencio and Elisa Prudencio mortgage their property to Phillipine National
Bank to guarantee a loan of P1000 extended to Domingo Prudencio.

Sometime in 1955 Jose Tribio a relative of Prudencio and attorney-in-fact called the
Prudencio's asking them to mortgaged thier property to secure the loan of P10,000 to be used as
fund for the construction of a municipal building which they contracted. After some persuasion
appellants signed on December 23, 1955 the 'Amendment of Real Estate Mortgage', mortgaging
their said property to the PNB to guaranty the loan of P10,000.00 extended to the Company. The
terms and conditions of the original mortgage for Pl,000.00 were made integral part of the new
mortgage for P10,000.00 and both documents were registered with the Register of Deeds of
Manila. On the same date, Jose Toribio, in the same capacity as attorney-in- fact of the Company,
executed also the 'Deed of Assignment' assigning all payments to be made by the Bureau to the
Company on account of the contract for the construction of the Puerto Princesa building in favor
of the PNB. This notwithstanding, the Bureau with approval of the bank, conditioned however
that they should be for labor and materials,

The Bureau made three payments to the company. The last request was denied by the
bank, averring that the account was long overdue; the remaining balance of the contract price
should be applied to the loan. The company abandoned the work and as consequence, the
Bureau rescinded the contract and assumed the work. Later on, the appellants wrote to
the PNB that since the latter has authorized payments to the company instead of on
account of the loan guaranteed by the mortgage, there was a change in the conditions of the
contract without the knowledge of appellants, which entitled the latter to cancel the mortgage
contract.

Issue:

WON Prudencio’s is liable as an accommodation party

Ruling:

NO, Prudencio shall is not liable. An accommodation party, Prudentio can on only be
liable if PNB was a Holder in Due-Course. PNB an immediate party or in privy to the
promissory note, that is, it had dealt directly with the petitioners knowing fully well that the latter
only signed as accommodation makers but more important, it was the Deed of Assignment
executed by the Construction Company in favor of PNB which principally moved the petitioners
to sign the promissory note also in favor of PNB. Petitioners were made to believe and on that
belief entered into the agreement that no other conditions would alter the terms thereof and yet,
PNB altered the same. Therefore, PNB is not a holder in due course. Thus, the petitioners can
validly set up their personal defense of release from the real estate mortgage against PNB.

Vitor, Mark Bryant B. JD 2B

METROPOLITAN BANK AND TRUST COMPANY (formerly ASIANBANK

CORPORATION)
vs.
BA FINANCE CORPORATION and MALAYAN INSURANCE CO., INC.
G.R. No. 179952 December 4, 2009

Facts:

Lamberto Bitanga obtained from BA Finance a loan to secure which he mortgaged his car
to BA Finance. Bitanga thus had the mortgaged car insured by respondent to Malayan Insurance.
The car was stolen, on Bitangas claim, Malayan Insurance issued a check payable to the order of
B.A. Finance Corporation and Lamberto Bitanga for P224,500, drawn against China Bank. The
check was crossed with the notation For Deposit Payees Account Only. Without the indorsement
or authority of his co-payee BA Finance, Bitanga deposited the check to his account with the
Asianbank, now merged with Metrobank and subsequently withdrew the entire proceeds of the
check. Bitanga’s loan became past due, but despite demands, he failed to settle it. BA Finance
thereupon demanded the payment of the value of the check from Asianbank but to no avail,
prompting it to file a complaint for sum of money and damages against Asianbank and Bitanga
alleging that, inter alia, it is entitled to the entire proceeds of the check.

Issue:

Whether or Not Metrobank is liable for the check

Ruling:

Yes, the provision of the Negotiable Instruments Law provides that a collecting bank,
(Asianbank in this case) where a check is deposited and which indorses the check upon
presentment with the drawee bank, is an indorser. This is because in indorsing a check to the
drawee bank, a collecting bank stamps the back of the check with the phrase "all prior
endorsements and/or lack of endorsement guaranteed" and, for all intents and purposes, treats the
check as a negotiable instrument, hence, assumes the warranty of an indorser. Without
Asianbank’s warranty, the drawee bank (China Bank in this case) would not have paid the value
of the subject check. Petitioner, as the collecting bank or last indorser, generally suffers the loss
because it has the duty to ascertain the genuineness of all prior indorsements considering that the
act of presenting the check for payment to the drawee is an assertion that the party making the
presentment has done its duty to ascertain the genuineness of prior indorsements. Hence
Metrobank is liable for the entire amount of the proceeds of the check.

Anna Patricia G. Ramos

JD-2B

RAMON K. ILUSORIO, petitioner, vs. HON. COURT OF APPEALS, and THE MANILA
BANKING CORPORATION, respondents.

G.R. No. 139130. November 27, 2002.

Facts:

Ramon K Ilusorio was the Managing Director of Multinational Investment Bancorporation and
also a depositor in good standing of Manila Banking Corporation. He entrusted his credit cards,
checkbook, blank checks and passbooks to his secretary, Katherine Eugenio who was also in
charge of verifying and reconciling the statements of his checking account.

Between the dates September 5, 1980 and January 23, 1981, Eugenio encashed and deposited to
her personal account about 17 checks drawn against Ilusorio’s account at Manila Banking
Corporation with a total amount of P119,634.34. Ilusorio did not bother to check his statement of
account until a business partner told him that he saw Eugenio using his(petitioner) credit card.
Ilusorio fired Eugenio and filed a complaint against her of Estafa thru Falsification of
commercial documents due to the forged signatures she made in the checks. Ilusorio then
requested respondent bank to credit back and restore to its account the value of the checks
which was encashed by Eugenio.

Ilusorio claims that Manila Bank is liable for damages for its negligence in failing to detect the
discrepant checks. On the other hand, Manila Banking Corporation points out that Section 23[13]
of the Negotiable Instruments Law is inapplicable, considering that the fact of forgery was never
proven.

Issue:

Whether or not Manila Banking Corporation is liable for damages for failing to detect the forged
checks.

Ruling:

No, it was Ilusorio who was found to be negligent. He accorded his secretary with an unusual
degree of trust and unrestricted access to his finances. Furthermore, despite the fact that the bank
was regularly sending statements of account, he failed to check them until he found out that his
secretary was using his credit cards.

Ilusorio has the burden of proving that the bank was negligent in failing to detect the discrepancy
in the signatures on the checks. Ilusorio had to establish the fact of forgery which he failed to do
by failing to submit his specimen signatures for NBI to conclusively establish forgery.
Furthermore, the Bank was not negligent in verifying the checks as they verified the drawer’s
signatures against their specimen signatures and in doubt, referred to more experienced verifier
for further verification.

JUANITA SALAS, petitioner,

vs.
HON. COURT OF APPEALS and FIRST FINANCE & LEASING
CORPORATION, respondents.

FACTS:

On February 6, 1980, Juanita Salas bought a motor vehicle from the Violago Motor Sales
Corporation for P58,138.20 as evidenced by a promissory note. This note was subsequently
endorsed to Filinvest Finance & Leasing Corporation (hereinafter referred to as private
respondent) which financed the purchase.

Petitioner defaulted in her installments beginning May 21, 1980 allegedly due to a discrepancy in
the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales
invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when
the vehicle figured in an accident on 9 May 1980.

Imputing fraud, bad faith and misrepresentation against VMS for having delivered a different
vehicle to petitioner, the latter prayed she may be absolved from the obligation under the
contract.

Petitioner argues that in the light of the provision of the law on sales by description 4 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.

She contends that it is not necessary, as opined by the appellate court, to implead VMS as a party
to the case before it can be made to answer for damages because VMS was earlier sued by her
for "breach of contract with damages" before the Regional Trial Court of Olongapo City, Branch
LXXII, docketed as Civil Case No. 2916-0.

Private respondent in its comment, prays for the dismissal of the petition and counters that the
issues raised and the allegations adduced therein are a mere rehash of those presented and
already passed upon in the court below, and that the judgment in the "breach of contract" suit
cannot be invoked as an authority as the same is still pending determination in the appellate
court.

ISSUE: Whether or not the subject promissory note is a negotiable instrument which will bar
completely all the available defenses of the petitioner against private respondent.

HELD:

Indubitably, the basis of private respondent's claim against petitioner is a promissory note which
bears all the earmarks of negotiability. It has 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. 9

It was negotiated by indorsement in writing on the instrument itself payable to the Order of
Filinvest Finance and Leasing Corporation 10 and it is an indorsement of the entire instrument. 11

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. 12

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. 13 This being so, petitioner cannot set up
against respondent the defense of nullity of the contract of sale between her and VMS.

Hence, the assailed decision was AFFIRMED

ENRIQUEZ, PRINCESS JAMANE ANNE

JD 2B

JOHN DY VS. PEOPLE OF THE PHILIPPINES

Facts:

John Dy is a distributor of W.L. Foods merchandise in Naga City. He often pays through
cash or checks, which he entrusts to his drivers who shall collect the merchandise from the main
office of W.L. Foods in Quezon City. On June 24, 1992, one of Dy’s drivers collected and
received P106,592 worth of goods, and in return, handed over a blank Far Eastern Bank and
Trust Co. post-dated check. On June 31, 1992, the same driver received the goods amounting to
over P226,000, and the driver, then, handed another blank FEBTC post-dated check. Evelyn
Ong, following the amount of merchandise received by Dy, wrote the sum payable in the two
blank checks they received. However, when presented for payment, the first check was
dishonored by FEBTC for insufficiency of funds, and the other check was dishonored due to the
stop payment order by Dy. William Lim, the owner of W.L. Foods, demanded payment from Dy
but the latter did not respond. Thus, Lim filed a complaint against Dy in violation of Batas
Pambansa blg. 22 and for committing two counts of estafa. Dy contends that Ong, the accountant
of W.L. Foods, has no authority to put the amount in the checks, thus the said checks were
ineffectively issued.

Issue: Whether or not the accountant has the right to put the amount in the checks.

Ruling: Yes because Section 14 expressly provides that when an instrument is wanting of
any material particular, the person in possession of the instrument has the prima facie authority
to complete it by filling up the blanks therein. Therefore, Evelyn Ong, being in possession of the
instrument, having her authority granted by Lim, the owner of W.L. foods, can insert the original
tenor of the obligation or debt, to which Dy owes the company.

QUIRINO GONZALES LOGGING CONCESSIONAIRE v. THE

COURT OF APPEALS. G.R. No. 126568. April 30, 2003.
FACTS:

Petitioner Quirino Gonzales Logging Concessionaire (QGLC) applied for credit accommodation
which the Bank approved. Their obligation was secured by a real estate mortgage of parcels of land.
QGLC executed a promissory note in which they defaulted. The Bank foreclosed the property and
was subsequently owned by the Bank. The Bank then filed a complaint for a sum of money in regards
to the unpaid notes.

The notes were payable 30 days after date and provided for the solidary liability in their non-
payment at maturity. Petitioners deny having received the value of the promissory notes.

The RTC sided with petitioner but the CA reversed the decision.

ISSUE: Whether the promissory notes were valid.

RULING:

Petitioner claims that they signed the notes in blank but did not receive the value of the notes. They
also admit the genuineness and due execution of the notes. The promissory notes were negotiable as
they met the requirements of Sec. 1 of the NIL. The notes are prima facie deemed to have issued for
consideration.

In any case, it is no defense that the promissory notes were signed in blank as Section 14 of the
Negotiable Instruments Law concedes the prima facie authority of the person in possession of
negotiable instruments, such as the notes herein, to fill in the blanks.

The SC remanded the issue concerning the notes to the court of origin.

Bautista, John Joshua J. JD 2B

G.R. No. 176697 September 10, 2014

CESAR V. AREZA and LOLITA B. AREZA, vs. EXPRESS SAVINGS BANK, INC. and
MICHAEL POTENCIANO.

Facts:

The petitioners sold a motor vehicle to Gerry Mambuay where the latter paid petitioners
with nine (9) Philippine Veterans Affairs Office (PVAO) checks payable to different payees and
drawn against the Philippine Veterans Bank (drawee), each valued at Two Hundred Thousand
Pesos (₱200,000.00). Petitioners deposited the checks in their savings account with the Express
Savings Bank that was deposited with the depositary bank, Equitable-PCI Bank. Equitable-PCI
Bank presented the checks to the drawee, the Philippine Veterans Bank, which honored the
checks. However, the subject checks were returned by PVAO to the drawee on the ground that
the amount on the face of the checks was altered from the original amount of ₱4,000.00 to
₱200,000.00. After informing Express Savings Bank that the drawee dishonored the checks,
Equitable-PCI Bank debited the deposit account of ESB in the amount of P1.8M. Express
Savings Bank then withdrew the amount of P1.8M representing the returned checks from
petitioners saving account.

Issue:

Whether or not Express Savings Bank had the right to debit ₱1,800,000.00 from
petitioners’ accounts.

Held:

Express Savings Bank has no rights to debit the amount from the account. A
depositary/collecting bank where a check is deposited, and which endorses the check upon
presentment with the drawee bank, is an endorser. As the bank that collected the issued checks,
Express Savings Bank is liable for the materially altered checks. Under Section 66 of the
Negotiable Instruments Law, an endorser warrants “that the instrument is genuine and in all
respects what it purports to be; that he has good title to it; that all prior parties had capacity to
contract; and that the instrument is at the time of his endorsement valid and subsisting.” Express
Savings Bank cannot pass the liability back to the petitioners have insufficient evidence in
proving that there was negligence on their part that contributed to the material alteration.

The defense of Express Savings Bank, of using Section 124 is not acceptable by the
court. Section 124 states that a material alteration avoids an instrument except as against an
assenting party and subsequent indorsers, but a holder in due course may enforce payment
according to its original tenor. Thus, when the drawee bank pays a materially altered check, it
violates the terms of the check, as well as its duty to charge its client’s account only for bona fide
disbursements he had made. Philippine Veterans Bank in this case, is only liable to the extent of
the check prior to alteration. Since Philippine Veterans Bank paid the altered amount of the
check, it may pass the liability back as it did, to Equitable-PCI Bank,the collecting bank. The
collecting banks, Equitable-PCI Bank and the Bank, are ultimately liable for the amount of the
materially altered check. It cannot further pass the liability back to the petitioners absent any
showing in the negligence on the part of the petitioners which substantially contributed to the
loss from alteration

PNB VS CA AND DEVT BANK

Facts:
DECS issued a check in favor of Abante Marketing containing a specific serial number, drawn
against PNB. The check was deposited by Abante in its account with Capitol and the latter
consequently deposited the same with its account with PBCOM which later deposited it with
petitioner for clearing. The check was thereafter cleared. However, on a relevant date, petitioner
PNB returned the check on account that there had been a material alteration on it. Subsequent
debits were made but Capitol cannot debit the account of Abante any longer for the latter had
withdrawn all the money already from the account. This prompted Capitol to seek reclarification
from PBCOM and demanded the recrediting of its account. PBCOM followed suit by doing the
same against PNB. Demands unheeded, it filed an action against PBCOM and the latter filed a
third-party complaint against petitioner.

Issue:

WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A

MATERIAL ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.

HELD: An alteration is said to be material if it alters the effect of the instrument. It means an
unauthorized change in thIe instrument that purports to modify in any respect the obligation of a
party or an unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of the party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of the NIL. In this case,
the alleged material alteration was the alteration of the serial number of the check in issue—
which is not an essential element of a negotiable instrument under Section 1. PNB alleges that
the alteration was material since it is an accepted concept that a TCAA check by its very nature is
the medium of exchange of governments, instrumentalities and agencies. As a safety measure,
every government office or agency is assigned checks bearing different serial numbers. But this
contention has to fail. The check’s serial number is not the sole indicia of its origin. The name of
the government agency issuing the check is clearly stated therein. Thus, the check’s drawer is
sufficiently identified, rendering redundant the referral to its serial number. Therefore, there
being no material alteration in the check committed, PNB could not return the check to PBCOM.
It should pay the same.

G.R. No. 227005, June 19, 2017 BDO UNIBANK, INC., Petitioner, v. ENGR. SELWYN LAO,
DOING BUSINESS UNDER THE NAME AND STYLE "SELWYN F. LAO
CONSTRUCTION" AND "WING AN CONSTRUCTION AND DEVELOPMENT
CORPORATION" AND INTERNATIONAL EXCHANGE BANK (NOW UNION BANK OF
THE PHILIPPINES), Respondents.

FACTS: Lao entered into a transaction with Everlink, through its authorized representative Wu,
under which, Everlink would supply him with "HCG sanitary wares. For the down payment, he
issued two (2) Equitable crossed checks payable to Everlink. Lao averred that when the checks
were encashed. Later, Lao learned that the checks were deposited in two different bank accounts
at respondent International Exchange Bank, now respondent Union Bank of the Philippines
(Union Bank). He was later informed that the two bank accounts belonged to Wu and a company
named New Wave Plastic (New Wave). Consequently, Lao was prompted to file a complaint
against Everlink and Wu for their failure to comply with their obligation and against BDO for
allowing the encashment of the two (2) checks. BDO asserted that the collecting bank, Union
Bank and that as the drawee bank, its obligations consist in examining the genuineness of the
signatures appearing on the checks, and paying the same if there were sufficient funds in the
account under which the checks were drawn. Thereafter, Lao filed an Amended Complaint,
wherein he impleaded Union Bank as additional defendant for allowing the deposit of the
crossed checks in two bank accounts other than the payee's, in violation of its obligation to
deposit the same only to the payee's account.

ISSUE:

Whether or not a collecting bank assumes responsibility for a crossed check as a general
endorser in accordance with Section 66 of the NIL.

HELD:

Yes. The liability of the drawee bank is based on its contract with the drawer and its duty to
charge to the latter's accounts only those payables authorized by him. A drawee bank is under
strict liability to pay the check only to the payee or to the payee's order. On the other hand, the
liability of the collecting bank is anchored on its guarantees as the last endorser of the check.
Under Section 66 of the Negotiable Instruments Law, an endorser warrants "that the instrument
is genuine and in all respects what it purports to be; that he has good title to it; that all prior
parties had capacity to contract; and that the instrument is at the time of his endorsement valid
and subsisting." The payment by BDO was in violation of Lao's instruction because the same
was not issued in favor of Everlink, or was even endorsed by the latter to New Wave. Clearly,
BDO violated its duty to charge to Lao's account only those payables authorized by him. Further,
it could not have escaped its attention that the subject checks were crossed checks. Jurisprudence
dictates that the effects of crossing a check are: (1) that the check may not be encashed but only
deposited in the bank; (2) that the check may be negotiated only once - to one who has an
account with a bank; and (3) that the act of crossing the check serves as a warning to the holder
that the check has been issued for a definite purpose so that he must inquire if he has received the
check pursuant to that purpose. The effects of crossing a check, thus, relate to the mode of
payment, meaning that the drawer had intended the check for deposit only by the rightful person,
i.e., the payee named therein.