Hongkong and Shanghai Bank vs Catalan (18 October 2004)

HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED v. CECILIA DIEZ CATALAN. G.R. No.
159590. October 18, 2004.

AUSTRIA-MARTINEZ, J.:

FACTS:

Frederick Arthur Thomson drew 5 checks payable to defendant Cecilia. Catalan presented these checks
to Hongkong and Shanghai Banking Corporation Limited (HSBANK). The checks were dishonored for
having insufficient funds. Thomson demanded that the checks be made good because he, in fact, had
sufficient funds. Still, HSBANK did not accept the checks.

Subsequently, Thomson died but Catalan was not paid yet. The account was transferred to HSBC
International Trustee Limited (TRUSTEE). Catalan then requested TRUSTEE to pay her but still refused
and even asked her to submit back to them the original checks for verification.

Catalan and her lawyer went to Hong Kong on their own expense to personally submit the checks. They
still were not honored, leading Catalan to file a suit against HSBC to collect the money.

ISSUE: Whether the check can be encashed.

RULING:

Court of Appeals is AFFIRMED

RATIO DECIDENDI

HSBANK is being sued for unwarranted failure to pay the checks notwithstanding the repeated
assurance of the drawer Thomson as to the authenticity of the checks and frequent directives to pay the
value thereof to Catalan. HSBANK claims that Catalan has no cause of action because under Section 189
of the Negotiable Instruments Law, "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 it." However, HSBANK is not being sued on the value of the check itself but for
how it acted in relation to Catalan’s claim for payment despite the repeated directives of the drawer
Thomson to recognize the check the latter issued.

Mesina vs IAC
Mesina v. Intermediate Appellate Court [G.R. No. 70145. November 13, 1986]
PARAS, J.:
Petitioner became the holder of the cashier’s check as endorsed by Alexander Lim who stole the check.
He refused to say how and why it was passed to him.
ISSUE
Whether petitioner is a holder in due course.
RULING
The assailed orders of the respondent court are AFFIRMED in toto.
RATIO DECIDENDI
Theories and examples advanced by petitioner on causes and effects of a cashier's check such as 1) it
cannot be countermanded in the hands of a holder in due course and 2) a cashier's check is a bill of
exchange drawn by the bank against itself-are general principles which cannot be aptly applied to the
case at bar, without considering other things. Petitioner failed to substantiate his claim that he is a
holder in due course and for consideration or value as shown by the established facts of the case.
Admittedly, petitioner became the holder of the cashier's check as endorsed by Alexander Lim who stole
the check. He refused to say how and why it was passed to him. He had therefore notice of the defect of
his title over the check from the start. The holder of a cashier's check who is not a holder in due course
cannot enforce such check against the issuing bank which dishonors the same. If a payee of a cashier's
check obtained it from the issuing bank by fraud, or if there is some other reason why the payee is not
entitled to collect the check, the respondent bank would, of course, have the right to refuse payment of
the check when presented by the payee, since respondent bank was aware of the facts surrounding the
loss of the check in question.

Domagsang vs CA (347 SCRA 75, 2000)

JOSEPHINE DOMAGSANG vs. COURT OF APPEALS. G.R. NO. 139292. December 5, 2000.

VITUG, J.:
FACTS:

Ignacio Garcia gave petitioner a loan. Petitioner issued and delivered 18 postdated checks. When the
checks were drawn, all were dishonored due the account being closed. Garcia supposedly wrote a letter
to demand.

Petitioner contends that he did not receive a demand letter and the checks were not issued as payment
but as evidence of indebtedness. The lower court convicted petitioner.

ISSUE: Whether verbal notice is enough as written notice of dishonor.

RULING:
The SC acquitted petitioner but ordered her to pay the amount plus interest.

RATIO DECIDENDI:

the lack of a written notice of dishonor is fatal. While, indeed, Section 2 of B.P. Blg. 22 does not state
that the notice of dishonor be in writing, taken in conjunction, however, with Section 3 of the law, i.e.,
"that where there are no sufficient funds in or credit with such drawee bank, such fact shall always be
explicitly stated in the notice of dishonor or refusal," a mere oral notice or demand to pay would appear
to be insufficient for conviction under the law. The Court is convinced that both the spirit and letter of
the Bouncing Checks Law would require for the act to be punished thereunder not only that the accused
issued a check that is dishonored, but that likewise the accused has actually been notified in writing of
the fact of dishonor.

Ramos vs CA (203 SCRA 657)

Ramos v. Court of Appeals [G.R. No. L-64129-31. November 18, 1991]

MEDIALDEA, J.:
FACTS
Petitioner, as acting bank manager, allowed withdrawals on uncleared checks deposited into the accounts
of her co-accused. Petitioner repeatedly granted accommodations in at least fourteen (14) instances and
despite her knowledge that prior checks deposited by her co-accused turned out to be unfunded.

ISSUE
Whether petitioner is engaged in “check kiting” which amounts to estafa with unfaithfulness or abuse of
confidence.

RULING
Court of Appeals is AFFIRMED

RATIO DECIDENDI
YES. The act of utilizing the float status of uncleared checks constitutes “check kiting”. The crime
committed by the accused was estafa with unfaithfulness or abuse of confidence under Article 315
subparagraph 1 (b) of the Revised Penal Code. In this case, petitioner acted maliciously or in bad faith by
assuming to dispose the money of the bank as if it were her own, thereby committing conversion and a
clear breach of trust. She performed an indispensable act necessary to enable her and her co-accused to
accomplish the criminal purpose they had in mind.