Juanita Salas vs. Hon.

Court of Appeals and Filinvest Finance & Leasing

Corporation
G.R. No. 76788. January 22, 1990

FACTS:

Petitioner bought a motor vehicle from the Violago Motor Sales Corporation
evidenced by a promissory note. The note was subsequently endorsed to
Filinvest Finance & Leasing Corporation which financed the purchase.
Petitioner defaulted in her installments because VMS delivered a different
vehicle to her. Due to her failure to pay Filinvest filed a collection suit.
The trial court ordered petitioner to pay the defendant. They both appealed the
decision to the Court of Appeals. In her appeal, she did not implead VMS as a
party to the case because she already sued VMS for “breach of contract with
damages” in another case.

The Court of Appeals modified the decision and ordered the petitioner to pay
the defendant sum of P54,908.30 at 14% per annum. Her motion for
reconsideration was denied.

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. Her defense is that Filinvest should proceed against VMS because
the alleged fraud, bad faith and misrepresentation by VMS supposedly released
her from any liability to Filinvest.

RULING:

The questioned promissory note is a negotiable instrument because it complied

with all the requisites provided for by law:
[a] that it is in writing and signed by the maker Juanita Salas;
[b] that it contains an unconditional promise to pay the amount of P58,138.20;
[c] that 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] that it is payable to Violago Motor Sales Corporation, or order and as such,
[e] that the drawee is named or indicated with certainty.
The note was negotiated by indorsement in writing on the instrument itself
payable to the Order of Filinvest Finance and Leasing Corporation. It is an
indorsement of the entire instrument.

Filinvest is a holder in due course because it has 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.

As a holder in due course, Filinvest 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. This being so, petitioner cannot set up against respondent the defense
of nullity of the contract of sale between her and VMS.

NOTES: 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”.
Under Section 8 of the Negotiable Instruments Law, there are only two ways by
which an instrument may be made payable to order. There must always be a
specified person named in the instrument and the bill or note is to be paid to
the person designated in the instrument or to any person to whom he has
indorsed and delivered the same. Without the words “or order or “to the order
of”, the instrument is payable only to the person designated therein and is
therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the
advantages of being a holder of a negotiable instrument, but will merely “step
into the shoes” of the person designated in the instrument and will thus be
open to all defenses available against the latter.
The instrument is payable to order where it is drawn payable to the order of a
specified person or to him or his order. (Consolidated Plywood Industries Inc.
vs. IFC Leasing and Acceptance Corporation, 149 SCRA 448)
RAUL SESBREÑO vs HON. COURT OF APPEALS, DELTA MOTORS
CORPORATION AND PILIPINAS BANK
G.R. No.  89252 May 24, 1993

FACTS: 

Raul Sesbreno made a money market placement in the amount of P300,000

with PhilFinance, with a term of 32 days. PhilFinance issued to Sesbreno the
Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory
Note (DMC PN No. 2731), the Certificate of Securities Delivery Receipt
indicating the sale of the Note with notation that said security was in the
custody of Pilipinas Bank, and postdated checks drawn against the Insular
Bank of Asia and America for P304,533.33 payable on 13 March 1981. The
checks were dishonored for having been drawn against insufficient funds. 
Philfinance delivered to petitioner Denominated Custodian Receipt (DCR).

Petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas,

and handed her a demand letter informing the bank that his placement with
Philfinance in the amount reflected in the DCR had remained unpaid and
outstanding, and that he in effect was asking for the physical delivery of the
underlying promissory note. Petitioner then examined the original of the DMC
PN No. 2731 and found: that the security had been issued on 10 April 1980;
that it would mature on 6 April 1981; that it had a face value of P2,300,833.33,
with the Philfinance as “payee” and private respondent Delta Motors
Corporation (“Delta”) as “maker;” and that on face of the promissory note was
stamped “NON NEGOTIABLE.”  Pilipinas did not deliver the Note, nor any
certificate of participation in respect thereof, to petitioner.

Petitioner later made similar demand letters again asking private respondent
Pilipinas for physical delivery of the original of DMC PN No. 2731.

Petitioner also made a written demand upon private respondent Delta for the
partial satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee
thereof, had assigned to him said Note to the extent of P307,933.33. Delta,
however, denied any liability to petitioner on the promissory note.
As petitioner had failed to collect his investment and interest thereon, he filed
an action for damages against private respondents Delta and Pilipinas.

ISSUE:

Whether or not DMC PN No. 2731 marked as non-negotiable may be assigned?

RULING:

YES. Only an instrument qualifying as a negotiable instrument under the

relevant statute may be negotiated either by indorsement thereof coupled with
delivery, or by delivery alone where the negotiable instrument is in bearer form.
A negotiable instrument may, however, instead of being negotiated, also
be assigned or transferred. The legal consequences of negotiation as
distinguished from assignment of a negotiable instrument are, of course,
different. A non-negotiable instrument may, obviously, not be negotiated; but it
may be assigned or transferred, absent an express prohibition against
assignment or transfer written in the face of the instrument:
The words “not negotiable,” stamped on the face of the bill of lading, did not
destroy its assignability, but the sole effect was to exempt the bill from the
statutory provisions relative thereto, and a bill, though not negotiable, may be
transferred by assignment; the assignee taking subject to the equities between
the original parties. 

DMC PN No. 2731, 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.
Cely Yang vs. Court of Appeals, et, al.
GR No. 138074

FACTS:

Petitioner Cely Yang agreed with private respondent Prem Chandiramani to

procure from Equitable Banking Corp. and Far east Bank and Trust Company
(FEBTC) two cashier’s checks in the amount of P2.087 million each, payable to
Fernando david and FEBTC dollar draft in the amount of US$200,000.00
payable to PCIB FCDU account No. 4195-01165-2. Yang gave the checks and
the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet
Chandiramani to turn over the checks and the dollar draft, and the latter
would in turn deliver to the former Phil.
Commercial International Bank (PCIB) manager’s check in the sum of P4.2
million and the dollar draft in the same amount to be issued by Hang Seng
Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous
and Ranigo allegedly lost the two cashier’s checks and the dollar draft.
The loss was then reported to the police. It transpired, however that the checks
and the dollar draft were never lost, for Chandiramani was able to get hold of
them without delivering the exchange consideration consisting of PCIB
Manager’s checks. Two hours after Chandiramani was able to meet Ranigo, the
former delivered to David the two cashier’s checks of Yang and, in exchange,
got US $360,000 from David, who in turn deposited them. Chandiramani also
deposited the dollar draft in PCIG FCDU No. 4194-0165-2.
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the
instruments she believed to be lost. Both Banks complied with her request, but
upon the representation of PCIB, FEBTC subsequently lifted the stop payment
order on FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU
Account No. 4194-0165-2 to received the amount of US $ 200, 000.
ISSUE/S:

(1) Whether or not David may be considered a holder in due course.

(2) Whether or not the presumption that every party to an instrument acquired
the same for a consideration is applicable in this case.
RULING:

(1) Every holder of a negotiable instrument is deemed prima facie a holder in

due course. However, this presumption arises only in favor of a person who is a
holder as defined in Section 191 of the Negotiable Instruments Law, meaning a
“payee or indorsee of a bill or note, who is in possession of it, or the bearer
thereof.”

In the present case, it is not disputed that David was the payee of the checks in
question. The weight of authority sustains the view that a payee may be a
holder in due course. Hence, the presumption that he is a prima facie holder in
due course applies in his favor.
(2) The presumption is that every party to an instrument acquired the same for
a consideration. However, said presumption may be rebutted. Hence, what is
vital to the resolution of this issue is whether David took possession of the
checks under the conditions provided for in Section 52 of the Negotiable
Instruments Law. All the requisites provided for in Section 52 must concur in
David’s case, otherwise he cannot be deemed a holder in due course.

Section 24 of the Negotiable Instruments Law creates a presumption that every

party to an instrument acquired the same for a consideration or for value.
Thus, the law itself creates a presumption in David’s favor that he gave
valuable consideration for the checks in question. In alleging otherwise, the
petitioner has the onus to prove that David got hold of the checks absent said
consideration. However, petitioner failed to discharge her burden of proof. The
petitioner’s averment that David did not give valuable consideration when he
took possession of the checks is unsupported, devoid of any concrete proof to
sustain it. Note that both the trial court and the appellate court found that
David did not receive the checks gratis, but instead gave Chandiramani US$
360,000 as consideration for the said instruments.
RCBC SAVINGS BANK v. NOEL M. ODRADA,
GR No. 219037, 2016-10-19

FACTS:
Respondent Noel M. Odrada (Odrada) sold a secondhand Mitsubishi Montero
(Montero) to Teodoro L. Lim (Lim) for P1,510,000 of the total consideration
P610,000 was initially paid by Lim and the balance of P900,000 was financed
by petitioner RCBC Savings Bank (RCBC) through a car loan obtained by Lim.
Unable to produce the Montero's OR and CR, Lim requested RCBC to execute a
letter addressed to Odrada informing the latter that his application for a car
loan had been approved.
RCBC issued a letter that the balance of the loan would be delivered to Odrada
upon submission of the OR and CR. Following the letter and initial down
payment, Odrada executed a Deed of Absolute Sale on 9 April 2002 in favor of
Lim and the latter took possession of the Montero.
When RCBC received the documents, RCBC issued two manager's checks
payable to Odrada.
Odrada did not go to the slated meeting and instead deposited the manager's
checks with International Exchange Bank (Ibank) and redeposited but the
checks were dishonored both times apparently upon Lim's instruction to
RCBC.
Consequently, Odrada filed a collection suit against Lim and RCBC
Lim alleged that the cancellation of the loan was at his instance, upon
discovery of the misrepresentations by Odrada about the Montero's
roadworthiness.
He further alleged that the letter was delivered to Odrada prior to the
presentation of the manager's checks to RCBC.
RCBC contended that the manager's checks were dishonored because Lim had
cancelled the loan. RCBC claimed that the cancellation of the loan was prior to
the presentation of the manager's checks. Moreover, RCBC alleged that despite
notice of the defective condition of the Montero, which constituted a failure of
consideration, Odrada still proceeded with presenting the manager's checks.
It was later disclosed during trial that RCBC also sent a formal notice of
cancellation of the loan to both Odrada and Lim.
ISSUE/S:
[1] Whether or not the drawee bank of a manager's check has the option of
refusing payment by interposing a personal defense of the purchaser of the
manager's check who delivered the check to a third party.
[2] Whether or not the holder of a manager's check is not a holder in due
course, can the drawee bank interpose a personal defense of the purchaser.
RULING:
A manager's check as a check drawn by the bank's manager upon the bank
itself and accepted in advance by the bank by the act of its issuance.
It is really the bank's own check and may be treated as a promissory note with
the bank as its maker.
Consequently, upon its purchase, the check becomes the primary obligation of
the bank and constitutes its written promise to pay the holder upon demand.
As a general rule, the drawee bank is not liable until it accepts.
Prior to a bill's acceptance, no contractual relation exists between the holder...
and the drawee. Acceptance, therefore, creates a privity of contract between the
holder and the drawee so much so that the latter, once it accepts, becomes the
party primarily liable on the instrument.
Accordingly, acceptance is the act which triggers the operation of the liabilities
of the drawee (acceptor) under Section 62of the Negotiable Instruments Law.
Thus, once he accepts, the drawee admits the following: (a) existence of the
drawer; (b) genuineness of the drawer's signature; (c) capacity and authority of
the drawer to draw the instrument; and (d) existence of the payee and his then
capacity to endorse.
A manager's check is accepted by the bank upon its issuance. As compared to
an ordinary bill of exchange where acceptance occurs after the bill is presented
to the drawee, the distinct feature of a manager's check is that it is accepted in
advance. Notably, the mere issuance of a manager's check creates a privity of
contract between the holder and the drawee bank, the latter primarily binding
itself to pay according to the tenor of its acceptance.
The drawee bank, as a result, has the unconditional obligation to pay a
manager's check to a holder in due course irrespective of any available
personal defenses. However, while this 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 defenses.
This Court ruled that the issuing bank could validly refuse payment because
Mesina was not a holder in due course. Unequivocally, the Court declared: "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." the drawee
bank of a manager's check may interpose personal defenses of the purchaser of
the manager's check if the holder is not a holder in due course. In short, the
purchaser of a manager's check may validly countermand payment to a holder
who is not a holder in due course. Accordingly, the drawee bank may refuse to
pay the manager's check by interposing a personal defense of the purchaser.
Hence, the resolution of the present case requires a determination of the status
of Odrada as holder of the manager's checks.
In this case, the Court of Appeals gravely erred when it considered Odrada as a
holder in due course. Section 52 of the Negotiable Instruments Law defines a
holder in due course as one 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.
To be a holder in due course, the law requires that a party must have acquired
the instrument in good faith
In the present case, Odrada attempted to deposit the manager's checks on 16
April 2002, a day after Lim had informed him that there was a serious problem
with the Montero. Instead of addressing the issue, Odrada decided to deposit
the manager's checks. Odrada's actions do not amount to good faith. Clearly,
Odrada failed to make an inquiry even when the circumstances strongly
indicated that there arose, at the very least, a partial failure of consideration
due to the hidden defects of the Montero. Odrada's action in depositing the
manager's checks despite knowledge of the Montero's defects amounted to bad
faith. Moreover, when Odrada redeposited the manager's checks on 19 April
2002, he was already formally notified by RCBC the previous day of the
cancellation of Lim's auto loan transaction. Following UCPB,... RCBC may
refuse payment by interposing a personal defense of Lim - that the title of
Odrada had become defective when there arose a partial failure or lack of
consideration.
RCBC acted in good faith in following the instructions of Lim. The records show
that Lim notified RCBC of the defective condition of the Montero before Odrada
presented the manager's checks
RCBC also received a formal notice of cancellation of the auto loan from Lim
and this prompted RCBC to cancel the manager's checks since the auto loan
was the consideration for issuing the manager's checks. RCBC acted in good
faith in stopping the payment of the manager's checks.Section 58 of the
Negotiable Instruments Law provides: "In the hands of any holder other than a
holder in due course, a negotiable instrument is subject to the same defenses
as if it were non-negotiable, x x x." Since Odrada was not a holder in due
course, the instrument becomes subject to personal defenses under the
Negotiable Instruments Law. Hence, RCBC may legally act on a countermand
by Lim, the purchaser of the manager's checks.
RCBC cannot be made liable because it acted in good faith in carrying out the
stop payment order of Lim who presented to RCBC the complaint letter to
Odrada when Lim issued the stop payment order.
Ang vs Associated Bank, etal

G.R. No. 146511 September 5, 2007

FACTS: 

On August 28, 1990, respondent Associated Bank (formerly Associated

Banking Corporation and now known as United Overseas Bank Philippines)
filed a collection suit against Antonio Ang Eng Liong and petitioner Tomas Ang
for the two (2) promissory notes that they executed as principal debtor and co-
maker, respectively.

In the Complaint, respondent Bank alleged that on October 3 and 9, 1978, the
defendants obtained a loan of P evidenced by a promissory note bearing PN-No.
DVO-78-382, and P 50,000, 30,000, evidenced by a promissory note bearing
PNNo. DVO-78-390. As agreed, the loan would be payable, jointly and
severally, on January 31, 1979 and December 8, 1978, respectively. In
addition, subsequent amendments to the promissory notes as well as the
disclosure statements6 stipulated that the loan would earn 14% interest rate
per annum, 2% service charge per annum, 1% penalty charge per month from
due date until fully paid, and attorney’s fees equivalent to 20% of the
outstanding obligation. Despite repeated demands for payment, the latest of
which were on September 13, 1988 and September 9, 1986, on Antonio Ang
Eng Liong and Tomas Ang, respectively, respondent Bank claimed that the
defendants failed and refused to settle their obligation, resulting in a total
indebtedness of P 539,638.96 as of July 31, 1990. In his Answer, Antonio Ang
Eng Liong only admitted to have secured a loan amounting to P 80,000.

He pleaded though that the bank “be ordered to submit a more reasonable
computation” considering that there had been “no correct and reasonable
statement of account” sent to him by the bank, which was allegedly collecting
excessive interest, penalty charges, and attorney’s fees despite knowledge that
his business was destroyed by fire, hence, he had no source of income for
several years. For his part, petitioner Tomas Ang filed an Answer with
Counterclaim and Cross-claim. He interposed the affirmative defenses that: the
bank is not the real party in interest as it is not the holder of the promissory
notes, much less a holder for value or a holder in due course; the bank knew
that he did not receive any valuable consideration for affixing his signatures on
the notes but merely lent his name as an accommodation party; he accepted
the promissory notes in blank, with only the printed provisions and the
signature of Antonio Ang Eng Liong appearing therein.
ISSUE: 

Whether or not Petitioner is liable to the obligation despite being a mere co-
maker and accommodation party.

RULING: 

Yes. Notably, Section 29 of the NIL defines an accommodation party as a

person “who has signed the instrument as maker, drawer, acceptor, or
indorser, without receiving value therefor, and for the purpose of lending his
name to some other person.” As gleaned from the text, an accommodation
party is one who meets all the three requisites, viz: (1) he must be a party to
the instrument, signing as maker, drawer, acceptor, or indorser; (2) he must
not receive value therefor; and (3) he must sign for the purpose of lending his
name or credit to some other person. An accommodation party lends his name
to enable the accommodated party to obtain credit or to raise money; he
receives no part of the consideration for the instrument but assumes liability to
the other party/ies thereto. The accommodation party is liable on the
instrument to a holder for value even though the holder, at the time of taking
the instrument, knew him or her to be merely an accommodation party, as if
the contract was not for accommodation.

As petitioner acknowledged it to be, the relation between an accommodation

party and the accommodated party is one of principal and surety – the
accommodation party being the surety. from the beginning; As such, he is
deemed an original promisor and debtor he is considered in law as the same
party as the debtor in relation to whatever is adjudged touching the obligation
of the latter since their liabilities are interwoven as to be inseparable. Although
a contract of suretyship is in essence accessory or collateral to a valid principal
obligation, the surety’s liability to the creditor is immediate, primary and
absolute; he is directly and equally bound with the principal. As an equivalent
of a regular party to the undertaking, a surety becomes liable to the debt and
duty of the principal obligor even without possessing a direct or personal
interest in the obligations nor does he receive any benefit therefrom.

In the instant case, petitioner agreed to be “jointly and severally” liable under
the two promissory notes that he co-signed with Antonio Ang Eng Liong as the
principal debtor. This being so, it is completely immaterial if the bank would
opt to proceed only against petitioner or Antonio Ang Eng Liong or both of them
since the law confers upon the creditor the prerogative to choose whether to
enforce the entire obligation against any one, some or all of the debtors.
Nonetheless, petitioner, as an accommodation party, may seek reimbursement
from Antonio Ang Eng Liong, being the party accommodated.

Consequently, in issuing the two promissory notes, petitioner as

accommodating party warranted to the holder in due course that he would pay
the same according to its tenor. value therefore It is no defense to state on his
part that he did not receive any because the phrase “without receiving value
therefor” used in Sec. 29 of the NIL means “without receiving value by virtue of
the instrument” and not as it is apparently supposed to mean, “without
receiving payment for lending his name.” Stated differently, when a third
person advances the face value of the note to the accommodated party at the
time of its creation, the consideration for the note as regards its maker is the
money advanced to the accommodated party. It is enough that value was given
for the note at the time of its creation. As in the instant case, a sum of money
was received by virtue of the notes, hence, it is immaterial so far as the bank is
concerned whether one of the signers, particularly petitioner, has or has not
received anything in payment of the use of his name.

Furthermore, since the liability of an accommodation party remains not only

primary but also unconditional to a holder for value, even if the accommodated
party receives an extension of the period for payment without the consent of
the accommodation party, the latter is still liable for the whole obligation and
such extension does not release him because as far as a holder for value is
concerned, he is a solidary co-debtor.
FAR EAST BANK v. GOLD PALACE JEWELLERY CO.,
GR No. 168274, 2008-08-20
Facts:
Samuel Tagoe, purchased from the respondent Gold Palace Jewellery Co.'s
(Gold Palace's) store at SM-North EDSA several pieces of jewelry. In payment of
the same, he offered Foreign Draft No. M-069670 issued by the United
Overseas Bank (Malaysia) BHD Medan Pasar, Kuala Lumpur Branch (UOB),
addressed to the Land Bank of the Philippines, Manila (LBP), and payable to
the respondent company. Before receiving the draft, respondent Judy Yang, the
assistant general manager of Gold Palace, inquired from petitioner Far East
Bank & Trust Company's (Far East's) SM North EDSA Branch, its neighbor
mall tenant, the nature of the draft. The teller informed her that the same was
similar to a manager's check, but advised her not to release the pieces of
jewelry until the draft had been cleared.
Yang issued Cash Invoice No. 1609[6] to the foreigner, asked him to come
back, and informed him that the pieces of jewelry would be released when the
draft had already been cleared. Respondent Julie Yang-Go, the manager of
Gold Palace, consequently deposited the draft in the company's account with
the aforementioned Far East... branch on June 2, 1998.
When Far East presented the draft for clearing to LBP, the drawee bank, the
latter cleared the same UOB's account with LBP was debited, and Gold Palace's
account with Far East was credited with the amount stated in the draft.
The foreigner claims the purchased goods.
because the amount in the draft was more than the value of the goods
purchased, she issued, as his change, Far East Check No. 1730881 for
P122,000.00. This check was later presented for encashment and was, in fact,
paid by the said bank.
After around three weeks, LBP informed Far East that the amount in Foreign
Draft No. M-069670 had been materially altered from P300.00 to P380,000.00
and that it was returning the same.
the material alteration was discovered by UOB after LBP had informed it that
its funds were being depleted following the encashment of the subject draft.
Intending to debit the amount from respondent's account, Far East
subsequently refunded the P380,000.00 earlier paid by LBP the outstanding
balance of its account was already inadequate, Far East was able to debit only
P168,053.36, but this was done without a prior written notice to the account
holder. Far East only notified by phone the representatives of the respondent
company.
Petitioner demanded from respondents the payment of P211,946.64 or the
difference between the amount in the materially altered draft and the amount
debited from the respondent company's account. Because Gold Palace did not
heed the demand, Far East consequently instituted Civil Case No. 99-296 for
sum of money and damages before the Regional Trial Court (RTC) the RTC
rendered
Decision in favor of Far East
The CA reversed the ruling of the trial court and awarded respondents'
counterclaim.

ISSUE:
Whether or not LBP was liable on its payment of the check according to the
tenor of the check at the time of payment, which was the raised amount.
RULING:
Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that
the acceptor, by accepting the instrument, engages that he will pay it according
to the tenor of his acceptance. This provision applies with equal force in case
the drawee pays a bill without having previously accepted it. His actual
payment of the amount in the check implies not only his assent to the order of
the drawer and a recognition of his corresponding obligation to pay the
aforementioned sum, but also, his clear compliance with that obligation. Actual
payment by the drawee is greater than his acceptance, which is merely a
promise in writing to pay. The payment of a check includes its acceptance.
The tenor of the acceptance is determined by the terms of the bill as it is when
the drawee accepts. Stated simply, LBP was liable on its payment of the check
according to the tenor of the check at the time of payment, which was the
raised amount.
METROBANK V. JMC
G.R. NO. 235511

FACTS:
Respondent Junnel's Marketing Corporation (JMC) is a domestic corporation
engaged in the business of selling wines and liquors. It has a current account
with Metrobank from which it draws checks to pay its different suppliers.
Among JMC's suppliers are Jardine Wines and Spirits (Jardine) and Premiere
Wines (Premiere).
In 2000 JMC discovered an Anomaly involving 11 crossed checks it has issued
to the orders of Jardine and Premiere on various dates between October 1998
to May 1999. As it was, the subject checks had already been charged against
JMC's current account but were, for some reason, not covered by any official
receipt from Jardine or Premiere. 7 crossed check is payable to the order of
Jardine and the other 4 is for Premiere which all amounted P1,481,292.00.
Examination of the dorsal portion of the subject checks revealed that all had
been deposited with Bankcom, Dau branch, under Account No. 0015-32987-7.
Upon inquiring with Jardine and Premiere, however, JMC was able to confirm
that neither of the said suppliers owns Bankcom Account No. 0015-32987-7.
On 30 April 2000, respondent PurificacionDelizo former accountant of JMC
meanwhile execute a letter addressed to one NelviaYusi, President of JMC. That
she stole several check drawn 29 against JMC current account and forwarded
by her to one LitaBituin. Delizo further admitted that she, Bituin and an
unknown bank manager colluded to cause the deposit and encashing of the
stolen checks and shared in the proceeds thereof.

ISSUE:
Whether or not JMC has cause of action to be reimbursed by Metrobank for the
crossed check that were encashed by a person different from the payee.

RULING:
The RTC's decision was in favor of JMC. The involvement of Bankcom and
Metrobank on the wrongful encashment of the subject checks, however, were
clearly established: Bankcom accepted the subject checks for deposit under
Account No. 0015-32987-7, endorsed them and sent them for clearance with
the Philippine Clearing House Corporation (PCHC). Bankcom did all these
despite the fact that the subject checks were ll crossed checks and that
Account No. 0015-32987-7 neither belongs to Jardine nor Premiere-the payees
named in the subject checks. In this regard, Bankcom was clearly negligent.
Metrobank, on the other hand, is also negligent for its failure to scrutinize the
subject checks before clearing and honoring them. Since all the checks were
crossed metrobank should not accept the check if it would be encashed by a
person other than the payee. Bankom should reimbursed metrobank for the
amount paid.
A collecting or presenting bank that receives a check for deposit and that
presents the same to the drawee bank for payment-is an 30 indorser of such
check. When a collecting bank presents a check to the drawee bank for
payment, the former thereby assumes the same warranties assumed by an
indorser of a negotiable instrument pursuant to Section 66 of the Negotiable
Instruments Law.
These warranties are: (1) that the instrument is genuine and in all respects
what it purports to be (2) that the indorser has good title to it (3) that all prior
parties had capacity to contract and (4) that the instrument is, at the time of
the indorsement, valid and subsisting. If any of the foregoing warranties turns
out to be false, a collecting hank becomes liable to the drawee bank for
payments made under such false warranty.
METROPOLITAN BANK v. JUNNEL'S MARKETING CORPORATION,
GR No. 232044, 2020-08-27

FACTS:
Junnel’s Marketing Corporation (JMC) is a depositor of Metropolitan Bank &
Trust Co. (Metrobank) F.B. Harrison branch, under Current Account no.
00730-150091-9, against which it draws company checks. In 1998 to 1999,
JMC wrote the following checks payable to the following payees, as follows
In an audit conducted by JMC, the above checks were found to be stolen and
encashed. These checks found their way to the Pasay City branch of Asiatrust
Bank, now Asia United Bank Corporation (AUB), where they were deposited to
account no. 1-506-22208-0, in the name of Zenaida Casquero (Casquero).
AUB, contain the indorsement at the back by the payees. AUB then required
Casquero to sign a Deed of Undertaking, where she allegedly received the
checks from a certain Virginia Rosales as payment for the use of her credit line.
The checks, according to AUB, contain the indorsement at the back by the
payees. AUB then required Casquero to sign a Deed of Undertaking, where she
assumed full responsibility for the correctness, genuineness and validity of all
the checks and of the indorsement appearing thereon. Thereafter, the checks
were presented to Metrobank, which cleared and authorized the payment
thereof.
On April 30, 2000, Purificacion Delizo (Delizo) confessed that while she was
employed as an Accountant, at JMC, she stole several company checks drawn
against JMC's Metrobank current account. The stolen checks were not
delivered to the named payee therein, but were instead given to a certain Lita
Bituin and an unidentified bank manager with whom Delizo colluded and
connived in encashing said checks, and shared in the proceeds thereof.
ISSUE/S:
[1] Whether or not the CA gravely erred in its decision.
[2] Whether or not Junnel is entitled to rely on the indorsement of AUB on the
check.
[3] Whether or not negotiability os destroyed even if the subject instrument is a
crossed check.
[4] Whether or not AUB is the right party to be held liable for the irregularities
and losses.
[5] Whether or not Junnel's, being the proximate cause of the loss, is solely
responsible and should suffer the losses it incurred.
RULING:
We deny the consolidated Petitions. The CA correctly ruled that Metrobank and
AUB are sequentially liable for the entire amount of the seven checks.
Sequence of Recovery in Unauthorized Payment of Checks
We agree with the appellate court that in cases of unauthorized payment of
checks to persons other than the named payee therein or his order, the drawee
bank is liable to the drawer for the amount of the checks. In turn, the drawee
bank may seek reimbursement from the collecting bank. This rule is already
embedded in our jurisprudence. He is bound by its contractual obligation to its
client, the drawer, to pay the check only to the payee or to the payee's order.
The drawee bank is duty-bound to follow strictly the instructions of its client,
which is reflected on the face of, and by the terms of, the check. When the
drawee bank pays a person other than the named payee on the check, the
drawee bank violates its contractual obligation to its client. Thus, it shall be
held liable for the amount charged to the drawer's account. When an
unauthorized payment on the checks is made, the liability of Metrobank to
JMC attaches even if it merely acted upon the guarantee of the collecting bank.
Metrobank, in this case, allowed the payment of eight checks to Casquero. Two
of these checks were crossed and were payable to Ramon Victor Ranee and Nila
Valdes. Five checks were payable to the orders of specified persons, while one
check was payable to bearer. With regard to the check payable to bearer, the
CA correctly ruled that Casquero acquired title to the said instrument and was
authorized to encash the same.
Metrobank, however, denies liability over the payment of the seven other
checks. It argues that it has no way of knowing whether or not these checks
were deposited to the named payee therein as these checks were not presented
to it for deposit.
A crossed check is one where two parallel lines are drawn across its face or
across its corner, and carries with it the following effects: (a) the check may not
be encashed but only deposited in the bank; (b) the check may be negotiated
only once to the one who has an account with the bank; and (c) the act of
crossing the check serves as a warning to the holder that the cheek has been
issued for a definite purpose and he must inquire if he received the check
pursuant to this purpose; otherwise, he is not a holder in due course. The
crossing of a check, thus, means that the check should be deposited only in
the account of the payee.
It is undisputed that the checks with numbers 3010048880 and 3010049229
are crossed checks. As such, the drawer's instruction is that they should be
deposited only to the account of the payees named therein. By paying the
checks to the person who is not the named payee thereof, Metrobank violated
the instructions of JMC, and is, therefore liable for the amount charged to
JMC's account.
As regards the checks payable to the order of specific persons, Metrobank is
also under strict liability to pay the checks to the named payee therein. JMC's
instruction to pay these checks to the named payee is clearly written on the
checks. Metrobank violated this instruction when it paid the amount of the
checks deposited to Casquero's account. Hence, Metrobank should suffer the
consequence of this wrongful encashment.
AUB is liable to Metrobank. The liability, however, does not fall entirely upon
Metrobank. Metrobank which merely relied upon the guaranty of the collecting
bank, AUB, may seek reimbursement from the latter.
A collecting bank where a check is deposited, and which endorses the check
upon presentment with the drawee bank, is an endorser. Under Section 66 of
the Negotiable Instruments Law, an endorser warrants: (1) that the instrument
is genuine and in all respects what it purports to be; (2) that the endorser has
good title to it; (3) that all prior parties had capacity to contract; and (4) that
the instrument is, at the time of the indorsement, valid and subsisting
When a collecting bank presents a check to the drawee bank for payment, the
former thereby assumes the same warranties assumed by an endorser of a
negotiable instrument and if any of these warranties turn out to be false, the
collecting bank becomes liable to the drawee bank for the payments made
under these false warranties.
When AUB presented the subject checks to Metrobank for payment, it
guaranteed that the checks were genuine and in all respect what it purports to
be and deposited to an account that has a good title to these checks. These
guaranties, however, turned out to be false as Delizo admitted that she stole
the subject checks and that they were not delivered to the named payee
therein. These checks were instead deposited to Casquero's account, who was
not the named payee thereof. Since these checks were paid under these false
guaranties, AUB is liable to reimburse Metrobank with the value of the checks.
UB cannot absolve itself from liability by arguing that it credited the amount of
the checks to Casquero's account only after Metrobank cleared them for
payment. Since the subject checks were deposited in Casquero's account in
AUB, AUB also has the opportunity to determine whether the checks will be
paid to the rightful payee. The fact that two of the checks were crossed should
have alerted AUB that these checks are meant to be deposited only to the
payee's account.
As regards the checks payable to order, AUB, as the last indorser, is liable for
the payment of the checks even if the previous indorsements were forged. This
Court has ruled in a long 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."
Thus, AUB should be liable to reimburse Metrobank for the amount of the
seven checks.
This said, Metrobank cannot pass the blame upon its depositor, JMC. Owing to
the fiduciary nature of their relationship, Metrobank is under obligation to
treat the account of JMC with utmost fidelity and meticulous care. It is
Metrobank's failure to uphold this obligation which caused the unauthorized
payment of the checks, to the prejudice of JMC.
Neither can AUB impute liability upon JMC by invoking the doctrine of
contributory negligence, as pronounced in the case of Associated Bank v. Court
of Appeals. Associated Bank is not on all fours with this case. In Associated
Bank, the alleged contributory negligence was sufficiently established. The
drawer, Province of Tarlac, allowed a retired cashier of the payee to collect the
check, and had been releasing the checks to him for nearly three years, despite
the fact that the new cashier of the payee was also collecting the check. This
Court ruled that the fact that there are two people collecting the check should
have alerted the employees in the Treasurer's Office of the fraud being
committed. Evidence in Associated Bank, however, suggests that the provincial
employees were aware of the retirement of the cashier and his consequent
dissociation from the payee hospital, but nevertheless allowed him to collect
the checks.
The law imposes a duty of diligence on the collecting bank to scrutinize checks
deposited with it for the purpose of determining their genuineness and
regularity. The collecting bank being primarily engaged in banking holds itself
out to the public as the expert and the law holds it to a high standard of
conduct. AUB's negligence and false guaranty, however, violate this duty.
hus, Metrobank is liable to JMC for the unauthorized encashment of the seven
checks. AUB, in turn, is liable to Metrobank for the amount it paid to JMC.
t is settled that the collecting bank which reimbursed the drawee bank may in
turn seek reimbursement from the persons who caused the checks to be
deposited and received the unauthorized payments. The CA affirmed the RTC's
findings that Delizo's participation was established by her own written
confession and that Casquero received the proceeds of the checks as they were
deposited in her account. Thus, the CA correctly ruled that Casquero and
Delizo should reimburse AUB of the amount it paid to Metrobank.

BDO UNIBANK, Petitioner, v. ENGR. SELWYN LAO

FACTS:
On March 9, 1999, respondent Engineer Selwyn S. Lao filed before the RTC a
complaint for collection of sum of money against Equitable Banking
Corporation, now petitioner Banco de Oro Unibank (BDO), Everlink Pacific
Ventures, Inc. and Wu Hsieh (George Wu). In his complaint, Lao alleged that he
was doing business under the name and style of "Selwyn Lao Construction",
that he was a majority stockholder of Wing An Construction and Development
Corporation (Wing An); that he entered into a transaction with Everlink,
through its authorized representative Wu, under which, Everlink would supply
him with "HCG sanitary wares" and that for the down payment, he issued two
Equitable crossed checks payable to Everlink: Check No. 0127-242249 and
Check No. 0127-242250, in the amounts of P273,300.00 and P336,500.00,
respectively.
On August 24, 2001, 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. In its answer, Union
Bank argued that Check No. 0127-242249 was deposited in the account of
Everlink; that Check No. 0127-242250 was validly negotiated by Everlink to
New Wave, that Check No. 0127-242250 waspresented for payment to BDO,
and the proceeds thereof were credited to New Wave's account, that it was
under no obligation to deposit the checks only in the account of Everlink
because there was nothing on the checks which would indicate such
restriction, and that a crossed check continues to be negotiable, the only
limitation being that it should be presented for payment by a bank.
ISSUE:
Whether or not the Union Bank pay Lao the value of check NO. 0127-242250,
moral damages; exemplary damages; and attorney's fees.
RULING:
Yes, the Union Bank should pay Lao the amount of ₱336,500.00, representing
the value of Check No. 0127-242250; ₱50,000.00 as moral damages;
₱l00,000.00 as exemplary damages; and ₱50,000.00 as attorney's fees. The
RTC observed that there was nothing irregular with the transaction of Check
No. 0127-242249 because the same was deposited in Everlink's account with
Union Bank. It, however, found that Check No. 0127-242250 was irregularly
deposited and encashed because it was not issued for the account of Everlink,
the payee, but for the account of New Wave. The trial court noted further that
Check No. 0127-242250 was not even endorsed by Everlink to New Wave.
Thus, it opined that Union Bank was negligent in allowing the deposit and
encashment of the said check without proper endorsement.
Samsung Construction Corporation, Inc. v. Far East Bank and Trust
Company
G.R. No. 129015; August 13, 2004
FACTS:
Samsung Construction held an account with Far East Bank. One day, a check
worth P999,500 payable to case was presented by a certain Roberto Gonzaga to
the Makati Branch of Far East Bank. The check was certified to be true by Jose
Sempio, the assistant accountant of Samsung, who also happened to be
present in the bank during the time that the check was presented. Three bank
personnel (teller, Assistant Cashier, and another bank officer) examined the
check and compared the signature appearing on the check with the specimen
signatures of Samsung’s President Jong. After ascertaining that the signature
was genuine, and that the account had sufficient funds, Gonzaga was asked to
submit 3 proof of his identity. Eventually, Gonzaga was able to encash the
check. When Samsung discovered the unauthorized withdrawal, it filed a
complaint against FEBTC for violation of Sec 23 of the Negotiable Instruments
Law.
During the trial, both parties presented their respective expert witnesses:
Samsung presented NBI Document Examiner Roda Flores, FEBTC presented
PNP Crime Laboratory document Examiner Rosario Perez.
RTC rendered judgment in favor of Samsung, holding FEBTC liable. It gave
more credence to the testimony of NBI Examiner Flores.
CA reversed the RTC and absolved FEBTC from any liability. The contradictory
findings of NBI and PNP created doubt as to the whether there was forgery.
Assuming there was forgery, it was due to the negligence of Samsung. As held
in PNB v. National City Bank of NY, as between 2 innocent persons, loss would
be borne by the negligent party.
ISSUE/S:
[1] WON the check was forged.
[2] WON Samsung could set up the defense of forgery in Sec. 23.
RULING:
[1] YES. The details of the forgery are not really important to the lesson. The
testimony of the NBI Examiner was more credible because even the testimony
of the PNP Examiner reveals that there are a lot of differences in the questioned
signature as compared to the standard signature specimen. The PNP Examiner
tried to excuse the “differences” by asserting that there were mere “variations”,
but such conclusion was not supported by sufficient cogent reasons.

The most telling difference between the question and genuine signatures
examined by the PNP is in the final upward stroke in the signature, or “the
point to the short stroke of the terminal in the capital letter “L”. The difference
was glaring, yet the PNP Examiners brushed this off as a mere variation. The
NBI Examiner testified that there is a free rapid continuous execution or stroke
as shown by the tampering terminal stroke of the signatures whereas the
questioned signature is a hesitating slow drawn execution stroke. The Court
also compared the qualifications of the NBI Examiner to that the PNP
Examiner. The NBI Examiner was more experienced (15 years) and had
examined more than 50,000-55,000 questioned documents, as opposed to the
PNP Examiner who admitted to having examined only around 500 documents.

[2] YES. The general rule is to the effect that a forged signature is wholly
inoperative, and payment made through or under such signature is ineffectual
or does not discharge the instrument. If payment is made, the drawee cannot
charge it to the drawer’s account. The traditional justification for the result is
that the drawee is in a superior position to detect a forgery because he has the
maker’s signature and is expected to know and compare it. Under Sec 23 of the
Negotiable Instruments Law, forgery is a real or absolute defense by the party
whose signature is forged. Such liability attaches even if the bank exerts due
diligence and care in preventing such faulty discharge.
Although the Court recognized that Sec 23 bars a party from setting up the
defense of forgery if it is guilty of negligence, it was unable to conclude that
Samsung was guilty of negligence. The bare fact that the forgery was
committed by an employee of the party whose signature was forged cannot
necessarily imply that such party’s negligence was the cause for the forgery.
Admittedly, the record does not establish what measures Samsung employed to
safeguard its blank checks. Jong’s testimony regarding the use of a safety box
by Kyu was considered hearsay. But when CA ruled that Samsung was
negligent, it did not really explain how and why. o In the absence of evidence to
the contrary, the court concluded that there was no negligence, the
presumption being that every person takes ordinary care of his concerns.The
CA Decision extensively discussed the FEBTC’s efforts in establishing that
there no negligence on its part in the acceptance and payment of the forged
check. However, the degree of diligence exercised by the bank would be
irrelevant if the drawer is not precluded from setting up the defense of forgery
under Sec 23 by his own negligence.

Not only did the amount nearly total 1M, it was payable to cash. This should
have aroused suspicion of the banks, as it is not ordinary business practice for
a check for such large amount to be made payable to case or to bearer, instead
of to the order of a specified person. Gonzaga did not carry any written proof
that he was authorized by Samsung to encash the check. FEBTC Senior
Assistant Cashier admitted that the bank tried, but failed, to contact Jong over
the phone to verify. The bank just heavily relied on the say-so of Sempio.
FEBTC Accountant Velez even admitted that she did not personally know
Sempio, and had met Sempio for the 1 st time only on the day the check was
enchased.
Metropolitan Bank And Trust Co. V. Cablizo
FACTS:

November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank

Check payable to "CASH" and postdated on November 24, 1994 in the amount
of  P1,000 drawn against his Metrobank account to Mr. Marquez, as his sales
commission. Check was presented to Westmont Bank for payment who
indorsed it to Metrobank for appropriate clearing. After the entries thereon
were examined, including the availability of funds and the authenticity of the
signature of the drawer, Metrobank cleared the check for encashment in
accordance with the Philippine Clearing House Corporation (PCHC) Rules.

On November 16, 1994: Cabilzo’s representative was at Metrobank when he

was asked by a bank personnel if Cabilzo had issued a check in the amount
of P91K to which he replied in negative. That afternoon: Cabilzo called
Metrobank to reiterate that he did not issue the check. He later discovered that
the check of P1K was altered to P91K and date was changed from Nov 24 to
Nov 14. Cabilzo demanded that Metrobank re-credit the amount of P91,000.00
to his account

On June 30, 1995: Through counsel sent a letter-demand for the amount of

P90K.

CA affirmed RTC ruling in favor of Cablizo.

ISSUE:

Whether or not Cablizo can recover from Metrobank.

RULING:
YES.  CA Affirmed that the material alteration changes the items which are
required to be stated under Section 1 of the Negotiable Instruments Law
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 that changes the effect of
the instrument.

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 of payment 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 P1,000.00 to P91,000.00 and the date was changed from 24 November
1994 to 14 November 1994.

Section 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,
and 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. 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. The bank must perform a high degree of diligence, if not the utmost
diligence. Surprisingly, however, Metrobank failed to detect the above
alterations which could not escape the attention of even an ordinary person
"NINETY" is also typed differently and with a lighter ink. Only 2 asterisks were
placed before the amount in figures, while 3 asterisks were placed after such
amount "NINETY" are likewise a little bigger when compared with the letters of
the words "ONE THOUSAND PESOS ONLY”. 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.

The corollary liability of Westmont Ban's indorsement, if any, is separate and

independent from the liability of Metrobank to Cabilzo. 

Samson Ching vs. Clarita Nicdao and Court of Appeals

G.R. No. 141181, April 27, 2007

 
FACTS:

Clarita Nicdao, owner of Vignette Superstore, contracted a loan from  Emma

Nuguid and Samson Ching in 1995. Payments were issued in the form of
checks which was later denied because of insufficiency of funds, thus in 1997
11 information for violation of BP 22, The Bouncing Checks Law, was filed
against Nicdao. The MCTC convicted Nicdao stating that the following elements
are present in the case of respondent Nicdao’s issuance of the checks: (1) the
making, drawing, and issuance of any check to apply to account or for value;
(2) the issuer, maker or drawer has knowledge that said checking account has
insufficient funds; and (3) subsequent dishonor of the check by the drawee
bank for insufficiency of funds.  And as such elements are explained in the
violation of BP 22, the RTC also affirmed the said decision.            

On the other hand the Court of Appeals acquitted Nicdao after the factual
findings showed that Nicdao had already paid her debt in the total of
Php5,780,000 to Nuguid. Also, Ching failed to adduce evidence to prove the
existence of a previous transaction between him and the respondent. In
addition to that with regards to the 20 million pesos check, the CA characterize
the claim of Ching as incredible and contrary to human experience since no
one would deliver the said amount to respondent Nicdao without any
documentary proof thereof.              

Petitioner, Ching, contends that notwithstanding the acquittal of respondent,

the SC has jurisdiction and authority to resolve and rule on her civil liability
and that said liability is in the amount of Php 20,950,000. On the other hand,
respondent Nicdao asserts that under Section 2(b), Rule 111 of the Revised
Rules of Court, which provides that “except in the cases provided for in Section
3 hereof, after the criminal action has been commenced, the civil action which
has been reserved cannot be instituted until final judgment in the criminal
action.

ISSUE/S:

Whether or not a civil case may be instituted against Clarita Nicdao after her
acquittal.

RULING:

The general rule as provided in Rule 111 of the Revised Rules of Court is that
an acquittal does not necessarily carry with it the extinguishment of the civil
liability of the accused. Judgments of acquittal are required to state whether
the evidence of the prosecution failed to prove the guilt of the accused or
merely failed to prove his guilt beyond reasonable doubt. In either case, the
judgment shall determine if the act or omission from which the civil liability
might arise did not exist. From the foregoing, petitioner Ching correctly argued
that he, as the offended party, may appeal the civil aspect of the criminal case
notwithstanding the respondent Nicdao’s acquittal. However, a painstaking
review of the case leads to the conclusion that respondent Nicdao’s acquittal
likewise carried with it the extinction of the action to enforce her civil liability.
There is simply no basis to hold respondent Nicdao civilly liable to petitioner
Ching. First, the acquittal of respondent Nicdao is based on the finding that
she did not commit the act penalized under BP 22. Second, the CA did not
adjudge her to be civilly liable to petitioner Ching. And third, while petitioner
Ching attempts to show that respondent Nicdao’s liability did not arise from or
was not based upon the criminal act of which she was acquitted but from her
loan obligations to him, however, petitioner Ching miserably failed to prove by
preponderant evidence the existence of these unpaid loans.

The petition is denied for lack of merit.

Bank of America vs. Philippine Racing Club
G.R. 150228   July 30, 2009

FACTS:

Plaintiff PRCI is a domestic corporation which maintains a current account

with petitioner Bank of America. Its authorized signatories are the company
President and Vice-President. By virtue of a travel abroad for these officers,
they pre-signed checks to accommodate any expenses that may come up while
they were abroad for a business trip. The said pre-signed checks were left for
safekeeping by PRCs accounting officer. Unfortunately, the two (2) of said
checks came into the hands of one of its employees who managed to encash it
with petitioner bank. The said check was filled in with the use of a check-
writer, wherein in the blank for the 'Payee', the amount in words was written,
with the word 'Cash' written above it.

Clearly there was an irregularity with the filling up of the blank checks as both
showed similar infirmities and irregularities and yet, the petitioner bank did
not try to verify with the corporation and proceeded to encash the checks.

PRC filed an action for damages against the bank. The lower court awarded
actual and exemplary damages. On appeal, the CA affirmed the lower court's
decision and held that the bank was negligent. Hence this appeal. Petitioner
contends that it was merely doing its obligation under the law and contract in
encashing the checks, since the signatures in the checks are genuine.

ISSUE:
Whether or not the petitioner can be held liable for negligence and thus should
pay damages to PRC.

RULING:

Both parties are held to be at fault but the bank has the last clear chance to
prevent the fraudulent encashment hence it is the one foremost liable.

There was no dispute that the signatures in the checks are genuine but the
presence of irregularities on the face of the check should have alerted the bank
to exercise caution before encashing them. It is well-settled that banks are in
the business impressed with public interest that they are duty bound to protect
their clients and their deposits at all times.  They must treat the accounts of
these clients with meticulousness and a highest degree of care considering the
fiduciary nature of their relationship. The diligence required of banks are more
than that of a good father of a family.

The PRC officers' practice of pre-signing checks is a seriously negligent and

highly risky behavior which makes them also contributor to the loss. It's own
negligence must therefore mitigate the petitioner's liability. Moreover, the
person who stole the checks is also an employee of the plaintiff, a cleck in its
accounting department at that. As the employer, PRC supposedly should have
control and supervision over its own employees.

The court held that the petitioner is liable for 60% of the total amount of
damages while PRC should shoulder 40% of the said amount.
ASIA BREWERY INC., v. EQUITABLE PCI BANK

FACTS:

Charlie S. Go was the assistant vice president for finance at Asia Brewery, Inc.
(petitioner). ABI is a corporation organized and existing under the laws of the
Philippines. Within the period of September 1996 to July 1998, Equitable PCI
Bank (respondent) issued10 checks and 16 demand drafts with a total value of
₱3,785,257.38in the name of Charlie Go. However, none of the said checks and
demand drafts reached payee, Charlie S. Go. Instead, all of the above checks
and demand drafts fell into the hands of a certain Raymond, a Sales
Accounting Manager of Asia Brewery, Inc., who 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.
Subsequently, Raymond Kehwas 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.

As a result, Asia Breqery, Inc. filed a complaint for payment, reimbursement, or

restitution against respondent before the RTC of Makati City. The RTC
dismissed petitioners' Complaint for lack of cause of action and denied their
motion for reconsideration. It agreed with respondent that the case
Development Bank v. Sima Wei was applicable and said that ABI did not
acquire any right or interest in the instruments since the firm never received
them.

ISSUE:

Whether or not there was delivery as contemplated in Section 16 of the NIL.

RULING:

Yes. In order to resolve whether the Complaint lacked a cause of action,

respondent must have presented evidence to dispute the presumption that the
signatories validly and intentionally delivered the instrument. Therefore, the
Court ruled thatit was erroneous for the RTC to have concluded that there was
no delivery, just because the checks did not reach the payee. It failed to
consider Section 16 of the Negotiable Instruments Law, which envisions
instances when instruments may have been delivered to a person other than
the payee. Pursuant to the last sentence of Section 16 of the NIL, 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.

The SC, however, stressed that a complaint cannot be dismissed on the ground
of lack of cause of action because the issue may only be raised after questions
of fact have been resolved in a full-blown trial.