Case #14 at 14% per annum from 2 October 1980 until full payment, with costs
SALAS, vs. HON. COURT OF APPEALS against Salas. Salas' motion for reconsideration was denied. Salas
Facts: On 6 February 1980, Juanita Salas bought a motor vehicle
from the Violago Motor Sales Corporation (VMS) for P58,138.20 as
evidenced by a promissory note. This note was subsequently
endorsed to Filinvest Finance & Leasing Corporation (Fininvest)
which financed the purchase. Salas defaulted in her installments
beginning 21 May 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. This failure to pay prompted Filinvest
to initiate Civil Case 5915 for a sum of money against Salas before
the Regional Trial Court of San Fernando, Pampanga. In its decision
dated 10 September 1982, the trial court rendered judgment ordering
Salas to pay Filinvest the sum of P28,414.40 with interest thereon at
the rate of 14% from 2 October 1980 until the said sum is fully paid;
and the further amount of P1,000.00 as attorney's fees. The court
dismissed Salas' counterclaim. Both Salas and Filinvest appealed
the aforesaid decision to the Court of Appeals. Imputing fraud, bad
faith and misrepresentation against VMS for having delivered a
different vehicle to Salas, the latter prayed for a reversal of the trial
court's decision so that she may be absolved from the obligation
under the contract. On 27 October 1986, the Court of Appeals
rendered its decision, modifying the trial court's decision. The
appellate court ordered Salas to pay Filinvest the sum of P54,908.30
filed the petition for review on certiorari.
Issue: Whether or not the promissory note is a negotiable instrument
which will bar completely all the available defenses of the petitioner
against private respondent
Held: No. Petitioner cannot set up against respondent the defense of
nullity of the contract of sale between her and VMS. A careful study
of the questioned promissory note shows that it is a negotiable
instrument, having complied with the requisites under the law as
follows: [a] it is in writing and signed by the maker Juanita Salas; [b]
it contains an unconditional promise to pay the amount of
P58,138.20; [c] it is payable at a fixed or determinable future time
which is "P1,614.95 monthly for 36 months due and payable on the
21st day of each month starting March 21, 1980 thru and inclusive of
Feb. 21, 1983;" [d] it is payable to Violago Motor Sales Corporation,
or order and as such, [e] the drawee is named or indicated with
certainty. It was negotiated by indorsement in writing on the
instrument itself payable to the Order of Filinvest Finance and
Leasing Corporation and it is an indorsement of the entire
instrument. Under the circumstances, there appears to be no
question that Filinvest is a holder in due course, having taken the
instrument under the following conditions: [a] it is complete and
regular upon its face; [b] it became the holder thereof before it was
overdue, and without notice that it had previously been dishonored;
[c] it took the same in good faith and for value; and [d] when it was
negotiated to Filinvest, the latter had no notice of any infirmity in the
instrument or defect in the title of VMS Corporation. Accordingly,
respondent corporation holds the instrument free from any defect of
title of prior parties, and free from defenses available to prior parties
among themselves, and may enforce payment of the instrument for
the full amount thereof.
Doctrine: The instrument in order to be considered negotiable must
contain the so-called “words of negotiability — i.e., must be payable
to “order” or “bearer”.
Case#16
G.R. No. 190432
April 25, 2017
Asia Brewery, Inc. and Charlie S. Go, Petitioners,
Vs
Equitable PCI Bank (now Banco De Oro-EPCI, Inc.), Respondents
Facts:
- Within the period of September 1996 to July 1998, 10 checks
and 16 demand drafts (collectively, “instruments”) were
issued in the name of Charlie Go. The instruments, with a
total value of P3,785,257.38, bore the annotation “endorsed
by PCI Bank, Ayala Branch, All Prior Endorsement And/Or
Lack of Endorsement Guaranteed.” All the demand drafts,
except those issued by the Lucena City and Ozamis
branches of Allied Bank, were crossed.
In their Complaint, petitioners narrate:
10. None of the above checks and demand drafts set out
under the First, Second, Third, Fourth, Fifth, and Sixth
Causes of Action reached payee, co-plaintiff Charlie S. Go.
11. All of the above checks and demand drafts fell into the
hands of a certain Raymond U. Keh, then a Sales
Accounting Manager of plaintiff Asia Brewery, Inc., who
falsely, willfully, and maliciously pretending to be the payee,
co-plaintiff Charlie S. Go, succeeded in opening accounts
with defendant Equitable PCI Bank in the name of Charlie
Go and thereafter deposited the said checks and demand
drafts in said accounts and withdrew the proceeds thereof to
the damage and prejudice of plaintiff Asia Brewery, Inc.
Raymond Keh was allegedly charged with and convicted of
theft and ordered to pay the value of the checks, but not a
single centavo was collected, because he jumped bail and
left the country while the cases were still being tried.
Issues:
1. Whether or not a payee of negotiable instrument
acquires interest with respect thereto until its delivery
 2. Whether or not a bank may be held liable for the
collection of money if the check was forged or
unauthorized
Ruling:
1. No. Delivery of an instrument means transfer of
possession, actual or constructive, from one person to
another. Without the initial delivery of the instrument
from the drawer to the payee, there can be no liability on
the instrument. Moreover, such delivery must be
intended to give effect to the instrument. As in the case
at bar, there was no actual delivery of the said checks to
the co-petitioner as it was delivered to a wrong person.
Therefore, a payee of a negotiable instrument acquires
no interest with respect thereto until its delivery.
2. Yes. In the said case of Associated Bank vs. Court of
Appeals, it was held that the "weight of authority is to the
effect that 'the possession of a check on a forged or
unauthorized indorsement is wrongful, and when the
money is collected on the check, the bank can be held
for moneys had and received.' The proceeds are held for
the rightful owner of the payment and may be recovered
by him. The position of the bank taking the check on the
forged or unauthorized indorsement is the same as if it
had taken the check and collected without indorsement
at all. The act of the bank amounts to conversion of the
check.” In the case at bar, the respondent is held liable
for the money collected by the wrong person who
presented the check thus, there is a course of action for
the claims of the plaintiff.  
Doctrine:
- Sec. 16.  Delivery; when effectual; when presumed .  - Every
contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. As between immediate parties and
as regards a remote party other than a holder in due
course, the delivery, in order to be effectual, must be
made either by or under the authority of the party making,
drawing, accepting, or indorsing, as the case may he; and, in
such case, the delivery may be shown to have been
conditional, or for a special purpose only, and not for the
purpose of transferring the property in the instrument. But
where the instrument is in the hands of a holder in due
course, a valid delivery thereof by all parties prior to him so
as to make them liable to him is conclusively presumed. And
where the instrument is no longer in the possession of a
party whose signature appears thereon, a valid and
intentional delivery by him is presumed until the
contrary is proved.
Case#17
Sesbreno v. Court of Appeals
GR No. 89252; May 24, 1993
Doctrine: The non-negotiability of the instrument doesn’t mean that it
is non-assignable or transferable. It may still be assigned or
transferred in whole or in part, even without the consent of the
promissory note since consent is not necessary for the validity of the
assignment.
Facts:
On February 9, 1981, petitioner Raul Sesbreno made a
money market placement with the Philippines Underwriters Finance
Corporation (Philfinance) which would mature on March 13, 1981.
Philfinance issued to petitioner a certificate of confirmation of sale
with promissory note, a certificate of securities delivery receipt, and
post-dated checks. When petitioner sought to encash the post-dated
checks, the same were dishonored for having been drawn against
insufficient funds. Petitioner then issued a demand letter to private
respondent bank, but the note was never released nor any
instrument related thereto. Petitioner also made a written demand
letter upon private respondent Delta as maker for the partial
satisfaction of the promissory note, explaining that Philfinance, as
payee thereof, had assigned to him said note. Delta, however,
denied any liability to petitioner on the promissory note. As petitioner
has failed to collect his investment and interest thereon, he filed an
action for damages with the RTC against private respondent Delta
and Pilipinas Bank. The complaint was dismissed and was affirmed
by the CA on appeal.
Issue:
Whether or not a non-negotiable promissory note may be
assigned.
Held:
The negotiation of a negotiable instrument must be
distinguished from the assignment or transfer of an instrument
whether that be negotiable or non-negotiable. Only an instrument
qualifying as a negotiable instrument under the relevant statute may
be negotiated either by indorsement coupled with delivery, or by
delivery alone where the negotiable instrument is in bearer form. A
negotiated instrument may, however, instead of being negotiated,
also be assigned or transferred. The legal consequences as
distinguished from assignment of a negotiable instrument are, of
course, different. A non-negotiable instrument may, obviously, not be
negotiated; but may be assigned or transferred, absent an express
prohibition against assignment or transfer written in the face of the
instrument.
The promissory note, while marked “non-negotiable”, was
not at the same time stamped “non-transferable” or “non-assignable”.
It contained no stipulation which prohibited Philfinance from
assigning or transferring, in whole or in part, that note.

CASE #18
G.R. No. 167567
San Miguel Corporation v. Puzon, Jr.
September 22, 2010
Facts:
Respondent Puzon, owner of Bartenmyk Enterprises, was
a dealer of beer products of petitioner San Miguel Corporation
(SMC). He purchased SMC products on credit. To ensure payment
and as a business practice, SMC required him to issue postdated
checks equivalent to the value of the products purchased on credit
before the same were released to him. Said checks were returned
to Puzon when the transactions covered by these checks were
paid or settled in full.
During the respondent’s visit at the SMC Sales Office, he
allegedly requested to see BPI Check No. 17657. However, when
he got hold of BPI Check No. 27903 which was attached to a bond
paper together with BPI Check No. 17657 he allegedly immediately
left the office with his accountant, bringing the checks with them.
SMC sent a letter to Puzon demanding the return of the
said checks. Puzon ignored the demand hence SMC filed a
complaint against him for theft with the City Prosecutor's Office of
Parañaque City.
The Prosecuter, Secretary of Department of Justice and
the Court of Appeals ruled in favor of the petitioner. The CA ruled
that the checks were issued by Puzon merely as a security for the
payment of his purchases and that these were not intended to be
encashed. It thus concluded that SMC did not acquire ownership of
the checks as it was duty bound to return the same checks to
Puzon after the transactions covering them were settled.
Issue: Whether or not the ownership of the checks was transferred
to petitioner San Miguel Corporation.
Held: No.
Section 12 of the Negotiable Instruments Law provides
that “The instrument is not invalid for the reason only that it is
antedated or postdated, provided this is not done for an illegal or
fraudulent purpose. The person to whom an instrument so dated
is delivered acquires the title thereto as of the date of delivery.”
Note however that delivery as the term is used in the
aforementioned provision means that the party delivering did so for
the purpose of giving effect thereto. Otherwise, it cannot be said
that there has been delivery of the negotiable instrument. Once
there is delivery, the person to whom the instrument is delivered
gets the title to the instrument completely and irrevocably.
 In this case, if the subject check was given by Puzon to
SMC in payment of the obligation, the purpose of giving effect to
the instrument is evident thus title to or ownership of the check was
transferred upon delivery. However, if the check was not given as
payment, there being no intent to give effect to the instrument, then
ownership of the check was not transferred to SMC. Evidence of
SMC failed to establish that the check was given in payment of the
obligation of Puzon. There was no provisional receipt or official
receipt issued for the amount of the check. What was issued was a
receipt for the document, a "POSTDATED CHECK SLIP." Hence,
the check was accepted, not as payment, but in accordance with
the long-standing policy of SMC to require its dealers to issue
postdated checks to cover its receivables.
Therefore, the ownership was not transferred to San
Miguel Corporation.
CASE# 19
G.R. No. 111190
De la Victoria vs Burgos
June 27, 1995
Facts: Petitioner Loreto De la Victoria, City Fiscal of Mandaue City,
was served a Notice of Garnishment directing him not to disburse,
transfer, release, or convey to any other person except to the deputy
sheriff concerned the salary checks, monies, or cash due or
belonging to Assistant City Fiscal Benvenido M. Mabanto Jr., under
penalty of law. The Notice was served after the Regional Trial Court
ordered Mabanto to pay private respondent Raul H. Sesbreño
damages in the amount of P11,000.00. Petitioner De la Victoria
moved to quash the notice of garnishment contending that he is not
in possession of anything of value belonging to Mabanto, Jr., except
his salary and RATA checks. However, he added that said checks do
not belong to Mabanto, Jr. because they were not yet delivered to
him. He also claimed that since it does not belong to Mabanto, Jr.
yet, it is still considered public funds hence could not be subject to
garnishment.
Issue: Whether Mabanto Jr. owns the said checks which is still in the
possession of petitioner De la Victoria hence subject to garnishment.
Held: No. Mabanto, Jr. does not own the checks. Section 16 of the
Negotiable Instruments Law provides that “Every contract on a
negotiable instrument is incomplete and revocable until delivery of
the instrument for the purpose of giving effect thereto…”. Delivery
means the transfer of the possession of the instrument by the maker
or the drawer with intent to transfer title to the payee and recognize
him as the holder thereof.
In this case, Assistant City Fiscal Mabanto Jr’s salary is sourced from
public funds. He receives his compensation in the form of checks
from the Department of Justice through petitioner De la Victoria as
City Fiscal of Mandaue City and head of office. Since the checks had
not yet been physically delivered to Mabanto, Jr., they did not belong
to him and still had the character of public funds. Therefore, the
checks belong to the government and may not be garnished to
satisfy the judgment of payment of damages in favor of Sesbreño in
consideration of public policy.
Doctrine: A check still in the hands of the maker or its duly
authorized representative is not owned by the payee until its physical
delivery to the latter.
relying on the assurance of the President of Plastic Corporation,
instructed the cashier to accept the checks for deposit and credit
them to the account of said Plastic Corporation. The petitioner Bank
instituted actions against Sima Wei and the other defendants. The
trial court dismissed the case stating that the former had no cause of
action against the latter. The CA affirmed the trial court’s decision.
Issue: Whether or not petitioner Bank has a cause of action against
any or all of the defendants for the undelivered checks.

Case #20
Held: No. The court ruled that a negotiable instrument of which a
G.R. No. 85419
check is, is not only a written evidence of a contract right but is also a
Development Bank of Rizal vs Sima Wei and/or Lee Kian Huat, et. Al
species of property. Just as a deed to a piece of land must be
March 9, 1993
delivered in order to convey title to the grantee, so must a negotiable
instrument be delivered to the payee in order to evidence its
Facts: In consideration for a loan extended by petitioner Bank to
existence as a binding contract. Section 16 of the Negotiable
respondent Sima Wei, the latter executed a promissory note in the
Instruments Law, which governs checks, provides in part that every
amount of P1,829,000.00 on or before June 24, 1983 with interest at
contract is incomplete and revocable until delivery of the instrument
32% per annum. Sima Wei made partial payments, leaving a balance
for the purpose of giving effect thereto. Thus, the payee of a
of P1,032,450.02. Subsequently, Sima Wei issued two crossed
negotiable instrument acquires no interest with respect thereto until
checks payable to petitioner Bank. However, these two checks were
its delivery to him. Delivery of an instrument means transfer of
not delivered to petitioner bank but instead came into the possession
possession, actual or constructive, from one person to another.
of respondent Lee Kian Huat, who deposited the same without the
Without the initial delivery of the instrument from the drawer to the
petitioner-payee’s indorsement to the account of respondent Plastic
payee, there can be no liability of the instrument. Moreover, such
Corporation with Producers Bank. Inspite of the fact that the checks
delivery must be intended to give effect to the instrument.
were crossed and payable to petitioner Bank and bore no instrument
of the latter, Cheng Uy, the Branch Manager of Producers Bank,
Since petitioner Bank never received the checks on which it based its
action against said respondents, it never owned the checks nor did it
acquire any interest therein. Thus, anything which the respondents
may have done with respect to the said checks could not have
prejudiced petitioner Bank. It had to right or interest in the checks
which could have been violated by said respondents. Petitioner Bank
has therefore no cause of action against said respondents, in the
alternative or otherwise. If at all, it is Sima Wei, the drawer, who
would have a cause of action against her co-respondents, if the
allegations is the complaint are found to be true.

Doctrine: Checks must be delivered to the payee to give effect

thereto. A negotiable instrument, of which a check is, is not only a
written evidence of a contract right but is also a species of property.
Just as a deed to a piece of land must be delivered in order to
convey title to the grantee, so must a negotiable instrument be
delivered to the payee in order to evidence its existence as a binding
contract. The payee of a negotiable instrument acquires no interest
with respect thereto until its delivery to him. Delivery of an instrument
means transfer of possession, actual or constructive, from one
person to another. Without the initial delivery of the instrument from
the drawer to the payee, there can be no liability on the instrument.
Moreover, such delivery must be intended to give effect to the
instrument.