Case List 3 (Negotiation and Indorsements To Other Related Topics)

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DEADLINE: 1 FEBRUARY 2021
1. ANGELES 14. MESIONA

2. BASINANG 15. MIRAATO
3. BRAGA 16. SERUELA
4. BUENAFLOR 17. TADIQUE
5. CAPISTRANO 18. UNTAL
6. CASTILLO 19. GERONGA
7. CAYBOT 20. PARACALE
8. CUARTERO 21. GASCON
9. DEROGONGAN 22. MILLAN
10. FRIAS 23. LATOG
11. MADRAZO 24. SUPITER
12. MAMALO 25. GULANES
13. MANACAP
NEGOTIATION AND INDORSEMENTS

[Sections 30 (8, 9), 31, 34, 40, 48, 49]
1. Bank of the Philippine Islands vs. Court of Appeals, Annabelle A. Salazar and Julio R. 22
Templonuevo, G.R. No. 136202, January 25, 2007, First Division, J. Azcuna
Issue: What is the effect of a transfer of an order instrument without indorsement? What is the
effect that the checks were crossed and the one year period before Templonuevo demanded
reimbursement? Does a collecting bank, over the objections of its depositor, have the authority to
withdraw unilaterally from such depositor’s account the amount it had previously paid upon
certain unendorsed order instruments deposited to another account that was later closed?
(Q: If a collecting bank is considered a holder for value [BPI vs. CA, GR 112392, February 29, 2000,
an accommodation party is liable to a collecting bank as it is a holder for value], can a collecting
bank be considered an indorser since usually it “guarantees all prior indorsements or lack of it”? (1)
Legal Answer: Up until this case of Metro Bank vs. BA Finance [GR 179952, December 4, 2009] the
answer is yes. “the collecting bank or last endorser generally suffers the loss because it has the
duty to ascertain the genuineness of all prior endorsements 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 the endorsements” [Associated Bank vs. CA 252 SCRA
260, January 31, 1996]”. (2) Academic Answer: No a collecting bank is a holder with rights (§ 191:
payee or indorsee or bearer) and not an indorser with liabilities (§ 63: intent to be bound). A
collecting bank’s practice of guaranteeing all prior indorsements or lack of it (clearing indorsement,
PCHC rules §17) is different from the warranty of indorsers (§ 65 and 66) although having the same
effect. (3) Suggested Answer. A collecting bank is neither an indorser nor a holder. A collecting
bank is a mere agent of the owner of the item for purposes of collection (Section 4-205 of the U.S.
Uniform Commercial Code and Far East Bank vs. Gold Palace [GR 168274, August 20, 2008]). (Also,
warranty of acceptor, common law principle on mistake in payment of the acceptor, US Uniform
Commercial code 3-417 (a) do not have similar provision in the Philippine jurisdiction, and
restrictive indorsement)
ANSWER:
● Under Section 49 of the Negotiable Instruments Law, where the holder of an instrument payable
to his order transfers it for value without indorsing it, the transfer vests in the transferee such
title as the transferor had therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. This transaction is an equitable assignment.
● In State Investment House v. IAC, the Court enumerated the effects of crossing a check, thus:
(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 such holder must inquire if the check has been received
pursuant to that purpose.
● The one-year delay of Templonuevo in demanding reimbursement for the proceeds of the check
is not of such unreasonable length as to estop Templonuevo from asserting ownership over the
checks especially considering that it was readily apparent on the face of the instruments that
these were crossed checks.
● BPI, as the collecting bank, had the right to debit Salazar’s account for the value of the checks it
previously credited in her favor. As discussed in Associated Bank v. Tan: A bank generally has a
right of set-off over the deposits therein for the payment of any withdrawals on the part of a
depositor. The right of a collecting bank to debit a client's account for the value of a dishonored
check that has previously been credited has fairly been established by jurisprudence.
2. Far East Bank & Trust Company vs. Gold Palace Jewellery Co., as represented by Judy L. Yang, 22
Julie Yang-Go and Kho Soon Huat, G.R. No. 168274, August 20, 2008, Third Division, J. Nachura
Issue: What is the nature of a collecting bank? Is the indorsement of a holder (Gold Palace) to
collecting Bank (Far East) in the nature of a restrictive indorsement? Is this not indorsement under
Section 66? (Also, Section 68 and cross check)
ANSWER:
● 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 transaction in this case had been closed and the principal-agent relationship between the
payee and the collecting bank had already ceased, the latter in returning the amount to the
drawee bank was already acting on its own and should now be responsible for its own actions.
Far East, the collecting bank, cannot invoke the warranty of the payee/depositor who indorsed
the instrument for collection to shift the burden it brought upon itself. This is precisely because
the said indorsement is only for purposes of collection which, under Section 36 of the NIL, is a
restrictive indorsement.
● It did not in any way transfer the title of the instrument to the collecting bank. Far East did not
own the draft, it merely presented it for payment. Considering that the warranties of a general
indorser as provided in Section 66 of the NIL are based upon a transfer of title and are available
only to holders in due course, these warranties did not attach to the indorsement for deposit
and collection made by Gold Palace to Far East.
3. Metropolitan Bank and Trust Company (formerly Asian Bank Corporation) vs. BA Finance 22
Corporation and Malayan Insurance Co., Inc., G.R. No. 179952, December 4, 2009, First
Division, J. Carpio Morales
Issue: What is Section 41 of the NIL? What is the effect of payment based on a forged indorsement?
What is the effect of a collecting bank being the last indorser?
ANSWER:
● Section 41. Indorsement where payable to two or more persons. - Where an instrument is
payable to the order of two or more payees or indorsees who are not partners, all must indorse
unless the one indorsing has authority to indorse for the others.
● The payment of an instrument over a missing indorsement is the equivalent of payment on a
forged indorsement or an unauthorized indorsement in itself in the case of joint payees.
● A collecting bank is an indorser 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,
it assumes the warranty of an indorser. A collecting bank as the 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.
4. Cesar V. Areza and Lolita B. Areza vs. Express Savings Bank, Inc. and Michael Potenciano, G.R. No. 22
176697, September 10, 2014, First Division, J. Perez
Issue: What is a depositary bank? What is a collecting bank? Is a collecting bank an endorser and
liable under Section 66? What is the duty of a collecting bank?
ANSWER:
● A depositary bank is the first bank to take an item even though it is also the payor bank, unless
the item is presented for immediate payment over the counter. It is also the bank to which a
check is transferred for deposit in an account at such bank, evenif the check is physically received
and indorsed first by another bank.
● A collecting bank is defined as any bank handling an item for collection except the bank on which
the check is drawn.
● A depositary/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 "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." If any of the
warranties made by the depositary/collecting bank turns out to be false, then the drawee bank
may recover from it up to the amount of the check.
● 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
5. Metropolitan Bank and Trust Company vs. Wilfred N. Chiok/Bank of the Philippine Islands vs. 22
Wilfred N. Chiok/Global Business Bank, Inc. Vs. Wilfred N. Chiok, G.R. Nos.
172652/175302/175394, November 26, 2014, First Division, J. Leonardo-De Castro
Issue: What is the right of an equitable assignee for value under Section 49 of the Negotiable
Instruments Law?
ANSWER:
● Section 49. Transfer without indorsement; effect of. – Where the holder of an instrument
payable to his order transfers it for value without indorsing it, the transfer vests in the transferee
such title as the transferor had therein, and the transferee acquires in addition, the right to have
the indorsement of the transferor. But for the purpose of determining whether the transferee is
a holder in due course, the negotiation takes effect as of the time when the indorsement is
actually made.
● As an equitable assignee, BPI acquires the instrument, subject to defenses and equities available
among prior parties and, in addition, the right to have the indorsement of Nuguid (the
transferor).
6. Rosalinda S. Khitri and Fernando S. Khitri Vs. People of the Philippines, G.R. No. 210192, July 4, 22
2016, Third Division, J. Reyes
Issue: What does the delivery of check signify?
ANSWER:
The delivery by the private complainant of the check and its acceptance by the accused signified
not merely the transfer to the accused of the money belonging to private complainant, but it also
marked the creation of a fiduciary relation between the parties.
7. People Vs. Randolph S. Ting and Salvacion Garcia, G.R. No. 221505, December 05, 201 8, Third 22
Division, J. Peralta
Issue: May Section 191 of the NIL that defines “issue” as the first delivery of an instrument,
complete in form, to a person who takes it as a holder, be used to acquit the accused for violation of
Section 261 (w)(b) of the Omnibus Election Code, for issuing a treasury warrant during the forty-five
(45)-day election ban period?
ANSWER:
No, the subject provision under the Omnibus Code penalizes a person who "issues, uses or avails" of
treasury warrants or devices and as such, the term "issues" should not be construed in its restricted
sense within the meaning of Negotiable Instruments Law, but rather in its general meaning to give,
to send, or such other words importing delivery to the proper person.
8. Pedro Salazar, Vs. Atty. Armand Duran, A.C. No. 7035, July 13, 2020, First Division, J. Lopez 22
Issue: What is the presumption when a signature is on an instrument without additional words?
ANSWER:
A signature on an instrument payable to order, such as a check, without additional words, constitutes
an indorsement.
NEGOTIATION AND INDORSEMENTS

[Philippine Clearing House Corporation (PCHC), “clearing indorsement”]
1. Allied Banking Corporation vs. Court of Appeals and Bank of the Philippine Islands, G.R. No. 24
123871, August 31, 1998, First Division, J. Panganiban
Issue: What is the mandatory recourse to the PCHC? What is the exhaustion of arbitral authority of
the PCHC in cases involving checks cleared under PCHC before recourse to a 3rd party complaint?
(Note is Section 13 of PCHC rules not an expansion of RTC’s jurisdiction without approval of
Congress since PCHC rules is not a law?)
ANSWER:
Sec. 38 - Arbitration
Any dispute or controversy between two or more clearing participants involving any check/item
cleared thru PCHC shall be submitted to the Arbitration Committee, upon written complaint of
any involved participant by filing the same with the PCHC serving the same upon the other party
or parties, who shall within fifteen (15) days after receipt thereof file with the Arbitration
Committee its written answer to such written complaint and also within the same period serve
the same upon the complaining participant,
Banco de Oro and Associated Bank are clear and unequivocal: a third-party complaint of one
bank against another involving a check cleared through the PCHC is unavailing, unless the
third-party claimant has first exhausted the arbitral authority of the PCHC Arbitration
Committee and obtained a decision from said body adverse to its claim.
Recognizing the role of the PCHC in the arbitration of disputes between participating banks,
the Court in Associated Bank further held: "Pursuant to its function involving the clearing of
checks and other clearing items, the PCHC has adopted rules and regulations designed to
provide member banks with a procedure whereby disputes involving the clearance of checks
and other negotiable instruments undergo a process of arbitration prior to submission to the
courts below. This procedure not only ensures a uniformity of rulings relating to factual
disputes involving checks and other negotiable instruments but also provides a mechanism
for settling minor disputes among participating and member banks which would otherwise go
directly to the trial courts."
RIGHTS OF HOLDERS [Sections 26, 51, 52, 57, 58, 59]
1. Cely Yang vs. Court of Appeals, Philippine Commercial International Bank, Far East Bank & Trust 24
Co., Equitable Banking Corporation, Prem Chandiramani and Fernando David
G.R. No. 138074, August 15, 2003, Second Division, J. Quisumbing
Issue: Is David a holder in due course? Can a payee be considered a holder in due course? Is David
a holder for value? Is David in good faith when he did not inquire as to reason why the cashier’s
check was drawn for him especially that, these were crossed checks?
(Note: The case was silent as to the result of the suit against Equitable Bank. The case was likewise
silent as to Prem, except that the RTC said Yang has recourse against Prem: But is it not that
Prem was already a defendant at the RTC? The case is also silent as to the owner of PCIB FDUC
Account No. 4195-01165-2)
Answer: 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 undisputed that David was the
payee of the checks in question. The weight of authority sustains the view that a payee maybe a
holder in due course. Hence, the presumption that he is a prima facie holder in due course applies
in his favor.
With respect to the consideration, Section 24 of the Negotiable Instruments Law creates a
presumption that every party to the instrument acquired the same for a consideration or for value.
Thus, the law itself creates a presumption in David’s favor that he gave a valuable consideration for
the checks in question. The petitioner has the burden of proof to present convincing evidence to
overthrow the presumption. In this case, the petitioner has failed to show proof that to discharge
the burden.
Yes David is still in good faith. The Negotiable Instruments Law is silent with respect to crossed
checks, although the Code of Commerce makes reference to such instruments. Nonetheless, this
Court has taken judicial cognizance of the practice that a check with two parallel lines in the upper
left hand corner means that it could only be deposited and not converted into cash. The effects of
crossing a check, thus, relates 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. In Bataan Cigar, the
rediscounting of the check by the payee knowingly violated the avowed intention of crossing the
check. Thus, in accepting the cross checks and paying cash for them, despite the warning of the
crossing, the subsequent holder could not be considered in good faith and thus, not a holder in due
course. Our ruling in Bataan Cigar reiterates that in De Ocampo & Co. v. Gatchalian.
The factual circumstances in De Ocampo and in Bataan Cigar are not present in this case. For here,
there is no dispute that the crossed checks were delivered and duly deposited by David, the payee
named therein, in his bank account. In other words, the purpose behind the crossing of the checks
was satisfied by the payee.
2. Equitable PCI Bank (the Banking Entity into which Philippine Commercial International Bank was 23
merged) vs. Rowena Ong, G.R. No. 156207, September 15, 2006, First Division, J. Chico-Nazario
Issue: Was there unjust enrichment for transfer of the value of the manager’s check without
consideration? Is Ong privy to the transaction between Ong and Sarande? What is a holder in due
course and holder for value? What is the presumption of consideration? What is the effect of want
or failure of consideration? What is the effect of a manager’s check and certified check? What is
the liability of an acceptor? What is the degree of ca re required of banks?
(Note: For academic discussion: Here Ong [the holder-payee] can immediately sue PCI Davao
Branch [the drawee] as a manager’s check is considered a promissory note with the bank as maker.
Also, the mere issuance of a manager’s check constitutes an acceptance of the drawee under
Section 62. Either way [maker or acceptor] the drawee becomes primarily liable)
(Also, consideration, meaning of value, effect of cashier’s check, issuance of cashier’s check
considered an acceptance)
ANSWERS:
● NO. On the matter of unjust enrichment, the fundamental doctrine of unjust enrichment is the
transfer of value without just cause or consideration. The elements of this doctrine are:
enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack
of cause. The main objective is to prevent one to enrich himself at the expense of another. It is
based on the equitable postulate that it is unjust for a person to retain benefit without paying
for it. It is well to stress that the check of Sarande had been cleared by the PCI Bank for which
reason the former issued the check to Ong. A check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount
equal to the amount credited to his account. Having cleared the check earlier, PCI Bank,
therefore, became liable to Ong and it cannot allege want or failure of consideration between it
and Sarande.
● NO. Ong is a stranger as regards the transaction between PCI Bank and Sarande.
● A holder in due course is 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 it had 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. Where
value has at any time been given for the instrument, the holder is deemed a holder for value in
respect to all parties who become such prior to that time.
● Every negotiable instrument is deemed prima facie to have been issued for a valuable
consideration; and every person whose signature appears thereon to have become a party
thereto for value.
● Absence or failure of consideration is a matter of defense as against any person not a holder in
due course; and partial failure of consideration is a defense pro tanto, whether the failure is an
ascertained and liquidated amount or otherwise.
● 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. It provides that where a check is certified by
the bank on which it is drawn, the certification is equivalent to an acceptance.
● The acceptor by accepting the instruments engages that he will pay it according to the tenor of
his acceptance; and admits -- (a) The existence of the drawer, the genuineness of his signature,
and his capacity and authority to draw the instrument; and (b) The existence of the payee and
his then capacity to indorse.
● The degree of diligence required of banks is more than that of a good father of a family where
the fiduciary nature of their relationship with their depositors is concerned." Indeed, the
banking business is vested with the trust and confidence of the public; hence the "appropriate
standard of diligence must be very high, if not the highest degree of diligence.
3. Bank of the Philippine Islands vs. Gregorio C. Roxas, G.R. No. 157833, October 15, 2 007, First 23
Division, J. Sandoval-Gutierrez
Issue: Is Roxas a holder in due course? What is the presumption of consideration? What
constitutes value?
ANSWER:
● YES. In Walker Rubber Corp. v. Nederlandsch Indische & Handelsbank, N.V. and South Sea Surety
& Insurance Co., Inc., this Court ruled that 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.” Here, there is no dispute that respondent received
Rodrigo Cawili’s cashier’s check as payment for the former’s vegetable oil. The fact that it was
Rodrigo who purchased the cashier’s check from petitioner will not affect respondent’s status
as a holder for value since the check was delivered to him as payment for the vegetable oil he
sold to spouses Cawili. Verily, the Court of Appeals did not err in concluding that respondent is
a holder in due course of the cashier’s check.
● Every negotiable instrument is deemed prima facie to have been issued for a valuable
consideration; and every person whose signature appears thereon to have become a party
thereto for value.
● 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.
4. Sps. Pedro and Florencia Violago vs. BA Finance Corporation and Avelino Violago, G.R. No. 23
158262, July 21, 2008, Second Division, J. Velasco, Jr.
Issue: Was BA Finance a holder in due course? What is it that prevails, the NIL on Holder in Due
Course or Article 1318 of the Civil Code on vitiated consent? What is the effect of a holder in due
course?
ANSWER:
● The law presumes that a holder of a negotiable instrument is a holder thereof in due course. In
this case, the CA is correct in finding that BA Finance meets all the foregoing requisites.
● The Negotiable Instruments Law. IIn the present petition, petitioners claim that Article 1318 of
the Civil Code should be applied since their consent was vitiated by fraud, and, thus, the
promissory note does not carry any legal effect despite its negotiation. Either way, the
petitioners' arguments deserve no merit. The promissory note is clearly negotiable. The
appellate court was correct in finding all the requisites of a negotiable instrument present.
● A holder in due course, however, holds the instrument free from any defect of title of prior
parties and from defenses available to prior parties among themselves, and may enforce
payment of the instrument for the full amount thereof. Since BA Finance is a holder in due
course, petitioners cannot raise the defense of non-delivery of the object and nullity of the sale
against the corporation. The NIL considers every negotiable instrument prima facie to have been
issued for a valuable consideration. In Salas, we held that a party holding an instrument may
enforce payment of the instrument for the full amount thereof. As such, the maker cannot set
up the defense of nullity of the contract of sale. Thus, petitioners are liable to respondent
corporation for the payment of the amount stated in the instrument.
5. Jonas Michael R. Garza vs. Coca-Cola Bottlers Phils., Inc., et al., G.R. No. 180972, January 23
20, 2014, Second Division, J. Del Castillo
Issue: Can the employee charged of embezzlement encash check payments to CCBPI when
checks that the customers issued were in the name of CCBPI as the payee?
(Also, Section 14 incomplete and delivered instruments)
ANSWER:
● NO. The Court finds convincing petitioner’s arguments that it was impossible for him to
embezzle/not remit the other customers’ cash and check payments, not only because of the
existence of the abovementioned policy, but likewise due to the sworn avowals of these
customers that all their check payments have been issued in CCBPI’s name and have been duly
debited from their accounts. Certainly, petitioner could not have encashed check payments
because they were issued in the name of CCBPI; for the same reason, he could not have engaged
in kiting operations. Quite certainly, he would have easily been found out.
6. Alvin Patrimonio vs. Napoleon Gutierrez and Octavio Marasigan III, G.R. No. 187769, June 23
4, 2014, Second Division, J. Brion
Issue: What is a holder in due course? What does Section 5 (c) and (d) of the NIL provide? What
does acquisition in good faith mean?
ANSWER:
was overdue, and without notice that it had 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.
● Section 52(c) of the NIL states that a holder in due course is one who takes the instrument “in
good faith and for value.” It also provides in Section 52(d) that in order that one may be a holder
in due course, it is necessary 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.
● Acquisition in good faith means taking without knowledge or notice of equities of any sort which
could be set up against a prior holder of the instrument.[18] It means that he does not have any
knowledge of fact which would render it dishonest for him to take a negotiable paper. The
absence of the defense, when the instrument was taken, is the essential element of good faith.
7. Alfredo Pili, Jr., Vs. Mary Ann Resurreccion., G.R. No. 222798, June 19, 2019, Second Division, J. 23
Caguioa
Issue: Is the payee a real party in interest?
ANSWER:
Yes, but only as regards the civil aspect arising from the crime.
8. Quintin Artacho Llorente, V. Star City PTY Limited, G.R. No. 212050, January 15, 2020, First 23
Division, J. Caguioa;
8a. Star City PTY Limited, V. Quintin Artacho Llorente and Equitable PCI Bank (Now BDO 23
Unibank, Inc.), G.R. No. 212216, January 15, 2020, First Division, J. Caguioa
Issue: What is a holder in due course under Section 52? Who has the onus probandi to prove that
one or more of the conditions required to constitute a holder in due course is lacking? What
specific example of good faith or lack of it was shown? What are the rights of a holder in due
course under Section 57? What is the right of a holder under Section 51?
[Also, accommodation party, liability of collecting bank, NI not legal tender]
ANSWERS:
was overdue and without notice that it had 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 or defect in the title of [the] person negotiating it.
● One who claims otherwise has the onus probandi to prove that one or more of the conditions
required to constitute a holder in due course are lacking.
● EPCIB failed to prove that the elements of good faith and value are wanting. SCPL showed that
Llorente's averment about the impossibility of having no face cards coming out after seven
consecutive deals, is not unusual in view of the small percentage of the total number of cards
exposed [as explained in the] judicial affidavit [of] Paul Arbuckle, Head of Gaming of Star City
Casino. IIt bears to emphasize that Arbuckle had thirty (30) years work experience in the
different casinos located in Australia such that his knowledge and expertise about the different
casino games particularly Baccarat, cannot easily be disregarded and overturned by a simple
allegation of cheating which has not been substantiated in view of the absence of a complaint
[by] Llorente to [SCPL's] personnel.
● Under Section 57 of the NIL, "[a] holder in due course holds the instrument free from any defect
in the 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 against all parties liable
thereon."
● Every holder of a negotiable instrument may sue thereon in his own name; and payment to him
in due course discharges the instrument.
LIABILITIES OF PARTIES [Sections 61, 62 (189) 64, 65, 66, 84]
1. Bank of the Philippine Islands vs. Court of Appeals and Benjamin C. Napiza, G.R. No. 112392, 24
February 29, 2000, First Division, J. Ynares-Santiago
Issue: What is the liability of a general indorser? Is this liability applicable to Napiza? Is Napiza
liable as an accommodation party? What is the meaning of depositing a check to a collecting bank?
(Also, degree of care of banks, exception to the degree of diligence required of banks)
Answer: Section 65, provides for the following warranties of a person negotiating an instrument by
delivery or by qualified indorsement: (a) that the instrument is genuine and in all respects what it
purports to be; (b) that he has a good title to it; and (c) that all prior parties had capacity to contract.
No, Napiza is not liable as a general indorser. As correctly held by the Court of Appeals, in depositing
the check in his name, the private respondent did not become the outright owner of the amount
stated therein. Under the above rule, by depositing the check with the petitioner, the private
respondent was, in a way, merely designating petitioner as the collecting bank. This is in consonance
with the rule that a negotiable instrument, such as a check, whether a manager’s check or ordinary
check, is not legal tender. As such, after receiving the deposit, under its own rules, the petitioner
shall credit the amount in the private respondent’s account or infuse value thereon only after the
drawee bank shall have paid the amount of the check or the check has been cleared for deposit.
Again, this is in accordance with ordinary banking practices and with this Court’s pronouncement
that “the collecting bank or last endorser generally suffers the loss because it has the duty to
ascertain the genuineness of all prior endorsements 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 the endorsements.
The banking business is affected with public interest. By the nature of its functions, a bank is under
obligation to treat the accounts of its depositors “with meticulous care, always having in mind the
fiduciary nature of their relationship.” As such, in dealing with its depositors, a bank should exercise
its functions not only with the diligence of a good father of a family but it should do so with the
highest degree of care.
2. Gregorio H. Reyes and Consuelo Puyat-Reyes vs. Court of Appeals, and Far East Bank and Trust 24
Company, G.R. No. 118492, August 15, 2001, Second Division, J. De Leon, Jr.
Issue: Is Section 61 (liability of drawer) of the NIL applicable? What is the degree of care
required of banks?
(Note the suit was for damages not on the payment of the value of the demand draft)
(Also, nature of banking business, legal tender, negligence, Section 89 notice of dishonor)
Answer: No. Section 61 is not applicable in this case.
Based on Philippine Bank of Commerce vs Court of Appeals, the degree of diligence required of
banks is more than that of a good father of a family where the fiduciary nature of their relationship
with their depositors is concerned. In other words banks are duty bound to treat the deposit
account of their depositors with the highest degree of care. But the said ruling applies only to cases
where banks act under their fiduciary capacity, that is, as depositary of the deposits of the
depositors . But the same higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with their depositors.
Hence, the bank is not required to exert extra ordinary diligence in regard to the sale and issuance
of the foreign exchange demand draft.
The respondent bank was not required to exert more than the diligence of a good father of a
family in regard to the sale and issuance of the subject foreign exchange demand draft. The case at
bar does not involve the handling of petitioners' deposit, if any, with the respondent bank. Instead,
the relationship involved was that of a buyer and seller, that is, between the respondent bank as
the seller of the subject foreign exchange demand draft, and PRCI as the buyer of the same, with
the 20th Asian Racing conference Secretariat in Sydney, Australia as the payee thereof. As earlier
mentioned, the said foreign exchange demand draft was intended for the payment of the
registration fees of the petitioners as delegates of the PRCI to the 20th Asian Racing Conference in
Sydney.
3. Associated Bank (Now Westmont Bank) vs. Vicente Henry Tan, G.R. No. 156940, 5
December 14, 2004, First Division, J. Panganiban
Issue: Whether a collecting bank has the right to debit the account of its client for a check that
was dishonored by a drawee?
- Yes, the right of a collecting bank to debit a client’s account for the value of a dishonored
check that has previously been credited has fairly been established by jurisprudence. To
begin with, Article 1980 of the Civil Code provides that "[f]ixed, savings, and current
deposits of money in banks and similar institutions shall be governed by the provisions
concerning simple loan." Hence, the relationship between banks and depositors has been
held to be that of creditor and debtor and thus, legal compensation under Article 1278 of
the Civil Code may take place "when all the requisites mentioned in Article 1279 are
present."
What is the right of set-off and how should the bank exercise this right?
- A bank generally has a right of setoff over the deposits therein for the payment of any
withdrawals on the part of a depositor. It should be exercised with the highest degree of
care. Under ordinary banking practice, after receiving a check deposit, a bank either
immediately credit the amount to a depositor’s account; or infuse value to that account
only after the drawee bank shall have paid such amount Before the check shall have been
cleared for deposit, the collecting bank can only "assume" at its own risk -- as herein
petitioner did -- that the check would be cleared and paid out.
What is the nature of the obligation of a depository bank?

- The long standing doctrine, Philippine Bank of Commerce v. Court of Appeals has held that
"the degree of diligence required of banks is more than that of a good father of a family
where the fiduciary nature of their relationship with their depositors is concerned." The
banking business is vested with the trust and confidence of the public; hence the
"appropriate standard of diligence must be very high, if not the highest, degree of
diligence."
Give the nature of the banking business?

- The fiduciary nature of banking, previously imposed by case law, is now enshrined in
Republic Act No. 8791 or the General Banking Law of 2000. Section 2 of the law specifically
says that the State recognizes the "fiduciary nature of banking that requires high standards
of integrity and performance."
Is a check a legal tender?

- No. A check is not legal tender or money and its value can properly be transferred to a depositor’s
account only after the check has been cleared by the drawee bank.
What is the relation of payee or holder of a commercial paper and the collecting bank?
- Well-settled rule that the relationship between the payee or holder of a commercial paper
and the collecting bank is that of principal and agent.
Whose negligence was the proximate cause of the loss?

- The manager of the bank’s Cabanatuan branch, Consorcia Santiago, categorically admitted
that she and the employees under her control had breached bank policies. They admittedly
breached those policies when, without clearance from the drawee bank in Baguio, they
allowed respondent to withdraw on October 1, 1990, the amount of the check deposited.
Santiago testified that respondent "was not officially informed about the debiting of the
P101,000 from his existing balance of P170,000 on October 2, 1990 x x x."
- It is undeniable that the bank’s premature authorization of the withdrawal by respondent

on October 1, 1990, triggered -- in rapid succession and in a natural sequence -- the
debiting of his account, the fall of his account balance to insufficient levels, and the
subsequent dishonor of his own checks for lack of funds.
Is there a need for the bank to give notice to Tan? What is the basis for such notice requirement? What is
the applicability of Sections 66 and 89 of the NIL to this case?
- Yes, first, notice was proper and ought to be expected. By the bank manager’s account,
respondent was considered a "valued client" whose checks had always been sufficiently
funded from 1987 to 1990, until the October imbroglio. Thus, he deserved nothing less
than an official notice of the precarious condition of his account. Under the provisions of
the Negotiable Instruments Law regarding the liability of a general indorser and the
procedure for a notice of dishonor, it was incumbent on the bank to give proper notice to
respondent.
- In Gullas v. National Bank, the Court emphasized:

"x x x [A] general indorser of a negotiable instrument engages that if the instrument – the
check in this case – is dishonored and the necessary proceedings for its dishonor are duly
taken, he will pay the amount thereof to the holder (Sec. 66) It has been held by a long line
of authorities that notice of dishonor is necessary to charge an indorser and that the right
of action against him does not accrue until the notice is given.
4. Solidbank Corporation vs. Spouses Teodulfo and Carmen Arrieta, G.R. No. 152720, 6
February 17, 2005, Third Division, J. Panganiban
Issue: Is the drawee bank who did not accept (dishonor a check) liable for damages in a suit filed
by the drawer?
- A bank's gross negligence in dishonoring a well-funded check, aggravated by its

unreasonable delay in repairing the error, calls for an award of moral and exemplary
damages. The resulting injury to the check writer's reputation and peace of mind needs to
be recognized and compensated.
5. Maria Tuazon, et.al. vs. Heirs of Bartolome Ramos, G.R. No. 156262, July 14, 2005, Third Division, 7
J. Panganiban
Issue: What is the nature of a contract of agency and does it apply in this case? Is the drawer an
indispensable party in a suit instituted by the holder when checks were dishonored?
● In a contract of agency, one binds oneself to render some service or to do something in

representation or on behalf of another, with the latter’s consent or authority. Absent such
mutual intent, there is generally no agency.
○ No, this does not apply in this case. Petitioners were the rice buyers themselves;
they were not mere agents of respondents in their rice dealership.
● No. As indorser, Maria Tuazon warranted that upon due presentment, the checks were to
be accepted or paid, or both, according to their tenor; and that in case they were
dishonored, she would pay the corresponding amount. After an instrument is dishonored
by nonpayment, indorsers cease to be merely secondarily liable; they become principal
debtors whose liability becomes identical to that of the original obligor. The holder of a
negotiable instrument need not even proceed against the maker before suing the indorser.
Evangeline Santos, as the drawer of the checks, is not an indispensable party in an action
against Maria Tuazon, the indorser of the checks.
[For context: Respondents insisted that the Complaint against them is based on the
bouncing checks that Santos issued; hence, they point to her as the person primarily liable
for the obligation. The instant case was originally one for the collection of the purchase
price of the rice bought by Tuazon from respondents’ predecessor. It is clear that there is
no privity of contract between respondents and Santos. Hence, a final determination of the
rights and interest of the parties may be made without any need to implead her.]
6. Sincere Z. Villanueva vs. Marlyn P. Nite, G.R. No. 148211, July 25, 2006, Second Division, J. 8
Corona
Issue: If the drawee bank dishonors a check can payee-holder sue the bank? Is the drawer an
indispensable party in a suit initiated by the payee-holder against a drawee bank?
Issues and Answers:

If the drawee bank dishonors a check can payee-holder sue the bank?
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.
Is the drawer an indispensable party in a suit initiated by the payee-holder against a drawee
bank?
Yes. The contract of loan was between Villanueva and Nite. No collection suit could prosper
without the drawer, Nite who was an indispensable party, based on Rule 3, Section 7 of the Rules of
Court. If an indispensable party is not impleaded, any judgment is ineffective
7. Melva Theresa Alviar Gonzales vs. Rizal Commercial Banking Corporation, G.R. No. 156294, 9
November 29, 2006, Second Division, J. Garcia
Issue: Does a subsequent party which caused the defect in the instrument have any recourse
against prior endorsers in good faith?
Held: No, it does not.
● Under Section 66 of NIL, the warranties are liable as general endorsers in favor of
subsequent endorsers extend only to the state of the instrument at the time of their
endorsements, specifically, that the instrument is genuine and in all respects what it
purports to be; that they have good title thereto; that all prior parties had capacity to
contract; and that the instrument, at the time of their endorsements, is valid and subsisting.
This provision, however, cannot be used by the party which introduced a defect on the
instrument which qualifiedly endorsed the same, to hold prior endorsers liable on the
instrument because it results in the absurd situation whereby a subsequent party may
render an instrument useless and inutile and let innocent parties bear the loss while he
himself gets away scot-free.
● Section 66 which further states that the general endorser additionally engages that, on due
presentment, the instrument 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
endorser who may be compelled to pay it, must be read in the light of the rule in equity
requiring that those who come to court should come with clean hands. The holder or
subsequent endorser who tries to claim under the instrument which had been dishonored
for "irregular endorsement" must not be the irregular endorser himself who gave cause for
the dishonor. Otherwise, a clear injustice results when any subsequent party to the
instrument may simply make the instrument defective and later claim from prior endorsers
who have no knowledge or participation in causing or introducing said defect to the
instrument, which thereby caused its dishonor.
● Courts in this jurisdiction are not only courts of law but also of equity, and therefore cannot
unqualifiedly apply a provision of law so as to cause clear injustice which the framers of the
law could not have intended to so deliberately cause.
● Moreover, it is a well-established principle in law that as between two parties, he who, by
his acts, caused the loss shall bear the same.
8. Gemma Ilagan vs. People of the Philippines, G.R. No. 166873, April 27, 2007, Second Division, J. 10
Carpio Morales
Issue: Is there a necessity of knowledge on the part of indorser (Tan) that Gemma (drawer) has no
sufficient funds? What is deceit in estafa?
(Note while it is not expressly mentioned this case is instructive on the “necessary proceedings on
dishonor be duly taken” before indorse be made liable under Section 66)
(Also, Section 23 on sequence of recovery in cases of unauthorized payment of checks)
Is there a necessity of knowledge on the part of indorser (Tan) that Gemma (drawer) has no
sufficient funds?
Answer: Given the admitted previous 4-year period of “rediscounting” transactions between Rosita
and petitioner Tan, if he indeed assured her that the checks in question would be sufficiently funded
on maturity, the same was unnecessary to convince her to change them with cash. Any such
assurance was not the efficient cause which induced Rosita to change the checks with cash.
What is deceit in estafa?
Answer: Deceit to constitute estafa under Article 315, 2(d) of the Revised Penal Code must be the
efficient cause of the defraudation. There must be concomitance: the issuance of the check should
be the means to obtain money or property from the payer.
8a. Alberto Cordero Sy vs. People of the Philippines, G.R. No. 168069, April 27, 2007, Second Division, 11
J. Carpio Morales
Issue: Is there a necessity of knowledge on the part of indorser (Tan) that Gemma (drawer) has no
sufficient funds? What is deceit in estafa?
(Note while it is not expressly mentioned this case is instructive on the “necessary proceedings on
dishonor be duly taken” before indorse be made liable under Section 66)
● Is there a necessity of knowledge on the part of indorser (Tan) that Gemma (drawer) has
no sufficient funds? No, it is not necessary. Given the admitted previous 4-year period of
“rediscounting” transactions between Rosita and petitioner Tan, if he indeed assured her
that the checks in question would be sufficiently funded on maturity, the same was
unnecessary to convince her to change them with cash. Any such assurance was not the
efficient cause which induced Rosita to change the checks with cash.
● What is deceit in estafa? Deceit to constitute estafa under above-quoted Article 315, 2(d)
of the Revised Penal Code must be the efficient cause of the defraudation. There must be
concomitance: the issuance of the check should be the means to obtain money or property
from the payer.
8b. Jaime Tan vs. People of the Philippines, G.R. No. 168543, April 27, 2007, Second Division, J. Carpio 12
Morales
8b. Jaime Tan vs. People of the Philippines, G.R. No. 168543, April 27, 2007, Second Division, J. Carpio
Morales
Issue: Is there a necessity of knowledge on the part of indorser (Tan) that Gemma (drawer) has
no sufficient funds?
There was no proof that petitioner Tan had guilty knowledge that [the] petitioner Gemma had no
funds in the bank. Petitioners’ acquittal of the crime charged is thus in order.
What is deceit in estafa?
By postdating a check, or issuing a check in payment of an obligation when the offender had
no funds in the bank, or his funds deposited therein were not sufficient to cover the amount
of the check. The failure of the drawer of the check to deposit the amount necessary to cover
his check within three (3) days from receipt of notice from the bank and/or the payee or
holder that said check has been dishonored for lack or insufficiency of funds shall be prima
facie evidence of deceit constituting false pretense or fraudulent.
Deceit and damage are the essential elements of estafa. Deceit to constitute estafa under
above-quoted Article 315 2(d) of the Revised Penal Code must be the efficient cause of the
defraudation. There must be concomitance: the issuance of the check should be the means to
obtain money or property from the payer.
(Note while it is not expressly mentioned this case is instructive on the “necessary proceedings
on dishonor be duly taken” before indorse be made liable under Section 66)
9. Bank of America, NT and SA Vs. Associated Citizens Bank, et al./Associated Citizens Bank Vs. BA 13
Finance Corporation, et al., G.R. Nos. 141001/141018, May 21, 2009, First Division, J. Carpio
Issue: What is the liability of a general endorser under Section 66 of the Negotiable Instruments
Law? (Also, crossed 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.”
● This Court has repeatedly held that in check transactions, the collecting bank or last
endorser generally suffers the loss because it has the duty to ascertain the genuineness of
all prior endorsements 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 the endorsements.
● As for crossed checks, In Bataan Cigar v. Court of Appeals,the Court enumerated the effects
of crossing a check as follows:
(a) the check may not be encashed but only deposited in the bank;
(b) the check may be negotiated only once – to one who has an account with a
bank; and
(c) 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; otherwise, he is not a holder in due course.
10. Equitable PCI Bank vs. Arcelito B. Tan, G.R. No. 165339, August 23, 2010, Second Division, 14
J. Peralta
Issue: Does the drawee bank that allowed payment of a post-dated check before its due date that
caused the dishonor of the drawer’s other issued checks liable to the drawer for damages? What is
the meaning of a drawee bank? What is the liability of a drawee bank?
● Yes, the drawee bank that allowed payment of a post-dated check before its due date that
caused the dishonor of the drawer’s other issued checks is liable to the drawer for damages
(actual and temperate damages were awarded in this case).
● The drawee bank is the bank on which the check is drawn.
● The drawee bank is under strict liability to pay to the order of the payee in accordance with
the drawer’s instructions as reflected on the face and by the terms of the check. Thus,
payment made before the date specified by the drawer is clearly against the drawee bank's
duty to its client.
11. Citibank, N.A. vs. Atty. Ernesto S. Dinopol, G.R. No. 188412, November 22, 2010, Second Division, 15
J. Mendoza
Issue: What is the liability of a drawee bank that wrongfully dishonors a check? What is the
diligence required of banks only Roman pater familias? What is the degree of diligence required of
banks by the General Banking Law of 2000? (Also, accommodation party)
Answer:
a.) At any rate, the Courts agrees with the courts below in concluding that Citibank was liable to
Atty. Dinopol for moral and exemplary damages and attorney’s fees. In any event, Citibank should
have been more cautious in dealing with its clients since its business is imbued with public interest.
Banks must always act in good faith and must win the confidence of clients and people in general.
It is irrelevant whether the client is a lawyer or not.
b.) NO. The highest degree of diligence is expected. Consequently, the diligence required of banks
is more than that of a Roman pater familias or a good father of a family. The highest degree of
diligence is expected.
c.) GBL requires the highest standards of integrity and performance. In its declaration of policy, the
General Banking Law of 2000 requires of banks the highest standards of integrity and performance.
Needless to say, a bank is “under obligation to treat the accounts of its depositors with meticulous
care.” The fiduciary nature of the relationship between the bank and the depositors must always
be of paramount concern.”
12. Philippine National Bank vs. Spouses Cheah Chee Chong and Ofelia Camacho Cheah/Spouses 16
Cheah Chee Chong and Ofelia Camacho Chea vs. Philippine National Bank, G.R. No. 170865/G.R.
No. 170892, April 25, 2012, First Division, J. Del Castillo
Issue: What are the liabilities of the drawer and drawee of both has contributory negligence?
Answer: Contributory negligence is conduct on the part of the injured party, contributing as a legal
cause to the harm he has suffered, which falls below the standard to which he is required to
conform for his own protection. The spouses Cheah are guilty of contributory negligence and are
bound to share the loss with the bank
13. Sps. Quirino V. Dela Cruz & Gloria Dela Cruz vs. Planters Products, Inc., G.R. No. 158649. February 17
18, 2013, First Division, J. Bersamin.
Issue: What is the meaning of the term “recourse”? What is the effect of an indorsement “with
recourse”? Does the term “with recourse” confirms the obligation of a general indorser?
● The term recourse as thus used means "resort to a person who is secondarily liable after
the default of the person who is primarily liable."
● An indorsement "with recourse" of a note, for instance, makes the indorser a general
indorser, because the indorsement is without qualification. Accordingly, the term with
recourse confirms the obligation of a general indorser, who has the same liability as the
original obligor.
14. Allied Banking Corporation vs. Bank of the Philippine Islands, G.R. No. 188363, February 27, 2013, 18
First Division, J. Villarama, Jr.
Issue: Whether the doctrine of last clear chance applies in this case? Whether the 60-40
apportionment of loss ordered by the Court of Appeals was justified.
● Yes. The doctrine of last clear chance is that the negligence of the plaintiff does not preclude
a recovery for the negligence of the defendant where it appears that the defendant, by
exercising reasonable care and prudence, might have avoided injurious consequences to
the plaintiff notwithstanding the plaintiff’s negligence. In this case, the evidence clearly
shows that the proximate cause of the unwarranted encashment of the subject check was
the negligence of respondent who cleared a post-dated check sent to it thru the PCHC
clearing facility without observing its own verification procedure.
● Yes. Petitioner’s failure to notice the irregularity on the face of the check was a breach of
its duty to the public and a telling sign of its lack of due diligence in handling checks coursed
through it and while the drawee bank has a bigger responsibility in the clearing of checks,
the presenting bank cannot take lightly its obligation to make sure that only valid checks
are introduced into the clearing system. For considerations of public policy and substantial
justice will be served by allocating the damage on a 60-40 ratio.
15. Olongapo City vs. Subic Water and Sewerage Co., Inc., G.R. No. 171626, August 6, 2014, Second 19
Division, J. Brion
Issue: What is the liability of a co-maker in a promissory note? (Also, Section 124)
● The petitioner argued that Subic Water could be held solidarily liable under the writ of
execution since it was identified as OCWD’s co-maker in the compromise agreement.
● The argument is false. Solidary liability must be expressly stated. Art. 1207. Provides that
there is a solidary liability only when the obligation expressly so states, or when the law o
the nature of the obligation requires solidarity.
● Petitioner cannot proceed after Subic Water for OCWD’s unpaid obligations. The law
explicitly states that solidary liability is not presumed and must be expressly provided for.
Not being a surety, Subic Water is not an insurer of OCWD’s obligations under the
compromise agreement.
In other words, the liability of a co-maker must be expressed in writing in the promissory note.
16. Cesar V. Areza and Lolita B. Areza vs. Express Savings Bank, Inc. and Michael Potenciano, 20
G.R. No. 176697, September 10, 2014, First Division, J. Perez
Issue: What is the liability of the acceptor under Section 63? Who is the acceptor? What does the
payment of the amount of check (on the part of the drawee-acceptor) implies? In case the
negotiable instrument is altered before acceptance, is the drawee liable for the original or the
altered tenor of acceptance?
ANSWER:
● Section 63 of Act No. 2031 or the Negotiable Instruments Law provides that the acceptor,
by accepting the instrument, engages that he will pay it according to the tenor of his
acceptance.
● The acceptor is a drawee who accepts the bill. Jurisprudence dictates that the payment of
the amount of a check implies not only acceptance but also compliance with the drawee’s
obligation.
● There are two views: First, the obligation of the acceptor should be enforceable in favor of
a holder in due course against the acceptor according to its tenor at the time of its
acceptance or certification; the second view is that the acceptor/drawee despite the tenor
of his acceptance is liable only to the extent of the bill prior to alteration.
17. Dra. Mercedes Oliver Vs. Philippine Savings Bank and Lilia Castro, G.R. No. 214567, April 4, 2016, 21
Second Division, J. Mendoza
Issue: What are the consequences on to the drawer if the bank blundered when it dishonored a
check without good reason? (Also, nature of manager’s check, Section 52 holder in due course)
A blunder on the part of the bank, such as the dishonor of a check without good reason, can cause
the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal
litigation.
18. RCBC Savings Bank Vs. Noel M. Odrada, G.R. No. 219037. October 19, 2016, Second Division, J. 22
Carpio.
Issue: What is the liability of drawee prior to acceptance? What is it that triggers the operation of
the liabilities of the drawee (acceptor) under Article 62? What are the admissions of the drawee-
acceptor?
ANSWER:
● 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 Section 62 of 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.
19. Philippine National Bank Vs. Pablo V. Raymundo, G.R. No. 208672, December 7, 2016, Third 23
Division, J. Peralta
Issue: What is the liability of a bank’s department manager when it allowed the opening of an
account using a foreign check and allowed drawing of checks therefrom before the lapse of the 21-
day clearing period?
ANSWER:
Accordingly, petitioner Pablo V. Raymundo is ordered to pay the Philippine National Bank actual
damages.
As a bank Branch Manager, Raymundo is expected to be an expert in banking procedures, and he

has the necessary means to ascertain whether a check, local or foreign, is sufficiently funded.
Raymundo's act of approving the deposit to Ms. Juan's newly-opened peso checking account of the
peso conversion [P4,752,689.65] of the foreign check prior to the lapse of the 21-day clearing period
is the proximate cause why the six (6) checks worth P4,000,000.00 were later encashed, thereby
causing the PNB undue injury. Defined as that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces injury and without which the result would
not have occurred, the proximate cause can be determined by asking a simple question: "If the
event did not happen, would the injury have resulted? If the answer is no, then the event is the
proximate cause." If Raymundo did not disregard the bank's foreign check clearing policy when he
approved crediting of the peso conversion of Ms. Juan's foreign check in her newly-opened peso
checking account, the PNB would not have suffered losses due to the irregular encashment of the
six (6) checks.
20. Quintin Artacho Llorente, V. Star City PTY Limited, G.R. No. 212050, January 15, 2020 , First 1
Division, J. Caguioa
Issue: What is the liability of a drawer under Section 61? What is the dual promise of drawer made
upon the issuance of a check? What is the immediate right of recourse against persons secondarily
liable under Section 84? When the instrument is dishonored and the drawer pays the payee-
indorser, is the drawer’s liability to the holder discharged? As the drawer and the payee-indorser
are now primarily liability is there liability solidary under Article 1207 of the Civil Code?
- Sec. 61. Liability of drawer. - The drawer by drawing the instrument admits the existence of the
payee and his then capacity to indorse; and engages that, on due presentment, the instrument will
be accepted or paid, or both, 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. But the drawer may insert in the instrument
an express stipulation negativing or limiting his own liability to the holder.
- A dual promise is implied from the issuance of a check: first, that the bank upon which it is drawn
will pay the amount thereof; and second, if such bank should fail to make the payment, the drawer
will pay the same to the holder.
- Sec. 84. Liability of person secondarily liable, when instrument dishonored. - Subject to the
provisions of this Act, when the instrument is dishonored by non-payment, an immediate right of
recourse to all parties secondarily liable thereon accrues to the holder.
- According to Article 1207 of the Civil Code, there is solidary liability only when the obligation
expressly so states, or when the law or the nature of the obligation requires solidarity. In this case,
there is no contract or agreement wherein the solidary liability of EPCIB is expressly provided.
Under the NIL and the nature of the liability of the drawer, solidary obligation is also not provided
Thus, EPCIB's liability is not solidary but primary due to the SPO that Llorente issued against the
subject demand/bank drafts.
20a. Star City PTY Limited, V. Quintin Artacho Llorente and Equitable PCI Bank (Now BDO Unibank, 2
Inc.), G.R. No. 212216, January 15, 2020, First Division, J. Caguioa
Issue: What is the liability of a drawer under Section 61? What is the dual promise of drawer made
upon the issuance of a check? What is the immediate right of recourse against persons secondarily
liable under Section 84? When the instrument is dishonored and the drawer pays the payee-
indorser, is the drawer’s liability to the holder discharged? As the drawer and the payee-indorser
are now primarily liability is there liability solidary under Article 1207 of the Civil Code?
● The liability of the drawer under Section 61 is not primary but secondary, particularly after
acceptance because it is conditional upon proper presentment and notice of dishonor,
and, in case of a 'foreign bill of exchange, protest, unless such conditions are excused or
dispensed with. Section 61 provides that, “Liability of drawer. - The drawer by drawing the
instrument admits the existence of the payee and his then capacity to indorse; and
engages that, on due presentment, the instrument will be accepted or paid, or both,
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. But the drawer may insert in the instrument an
express stipulation negativing or limiting his own liability to the holder.”
● When the bank, as the drawer of a negotiable check, signs the instrument its engagement
is then as absolute and express as if it were written on the check; and a dual promise is
implied from the issuance of a check: first, that the bank upon which it is drawn will pay
the amount thereof; and second, if such bank should fail to make the payment, the drawer
will pay the same to the holder.
● When the instrument is dishonored by non-payment, an immediate right of recourse to all
parties secondarily liable thereon accrues to the holder, subject to the provisions of the
NIL. Thus, if EPCIB is made liable on the subject demand/bank drafts, it has a recourse
against the indemnity bond.
● Stopping payment does not discharge the liability of the drawer of a check or other bill to
the payee or other holder. However, where payment has been stopped by the drawer the
relation between the drawer and payee becomes the same as if the instrument had been
dishonored and notice thereof given to the drawer. Thus, the drawer's conditional liability
is changed to one free from the condition and his situation is like that of the maker of a
promissory note due on demand; and he is liable on the instrument if he has no sufficient
defense.
● According to Article 1207 of the Civil Code, there is solidary liability only when the
obligation expressly so states, or when the law or the nature of the obligation requires
solidarity. In this case, there is no contract or agreement wherein the solidary liability of
EPCIB is expressly provided. Under the NIL and the nature of the liability of the drawer,
solidary obligation is also not provided Thus, EPCIB's liability is not solidary but primary due
to the SPO that Llorente issued against the subject demand/bank drafts.
21. Philippine Savings Bank, V. Maria Cecilia Sakata, June 17, 2020, G.R. No. 229450, June 17, 2020, 3
Third Division, J. Leonen
Issues:
(1) Is the bank bound to know the signatures of its customers?
(2) Are banking institutions imbued with public interest?
(3) If the drawer is not negligent who is solely liable for making payments on the forged
check?
Held:
(1) Yes, a bank is bound to know the signatures of its customers; and if it pays a forged check,
it bears the loss.
(2) Yes, banking institutions are imbued with public interest. As such, they are expected to
exercise the highest degree of diligence, and high standards of integrity and performance.
(3) If the drawer is not negligent, the bank is solely liable for the payments on the forged check
because of its negligence in failing to detect the forgery.
NOTICE OF DISHONOR [Sections 89, 114]

1. Lina Lim Lao vs. Court of Appeals and People of the Philippines, G.R. No. 119178, June 20, 1997, 4
Third Division, J. Panganiban
Issue: What are the elements of BP 22? What constitutes knowledge of insufficiency of funds? What
is the need for notice of dishonor? To whom must notice be given?
(Note while it appears applicable the SC did not rule that this instrument is incomplete and
undelivered, Section 15 of NIL) (Also, meaning of the term “issue”)
ANSWER:
● Justice Luis B. Reyes, an eminent authority in criminal law, also enumerated the elements of the
offense defined in the first paragraph of Section 1 of B.P. 22, thus:
1. That a person makes or draws and issues any check.
2. That the check is made or drawn and issued to apply on account or for value.
3. That the person who makes or draws and issues the check knows at the time of issue
that he does not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment.
4. That the check is subsequently dishonored by the drawee bank for insufficiency of funds
or credit, or would have been dishonored for the same reason had not the drawer, without
any valid reason, ordered the bank to stop payment.
● Knowledge of insufficiency of funds or credit in the drawee bank for the payment of a check upon
its presentment is an essential element of the offense. There is a prima facie presumption of the
existence of this element from the fact of drawing, issuing or making a check, the payment of which
was subsequently refused for insufficiency of funds. It is important to stress, however, that this is
not a conclusive presumption that forecloses or precludes the presentation of evidence to the
contrary.
● The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a

criminal prosecution. Accordingly, procedural due process clearly enjoins that a notice of dishonor
be actually served on petitioner. Responsibility under B.P. 22 is personal to the accused hence,
personal knowledge of the notice of dishonor is necessary.
● Petitioner has a right to demand — and the basic postulates of fairness require — that the notice
of dishonor be actually sent to and received by her to afford her the opportunity to avert
prosecution under B.P. 22.
2. Betty King vs. People of the Philippines, G.R. No. 131540, December 2, 1999, Third Division, 5
J. Panganiban
Issue: What is the meaning of the term “issue”?

Answer: In the context of the Negotiable Instruments Law, “issue” is defined as the "first delivery
of the instrument complete in form to a person who takes it as a holder."
What is the reason of the need for notice of dishonor in BP 22? (Also, Section 186 delay in the
presentment of checks, Section 196 on cases not provided for in the Act: Delay in presentment
discharges the drawer, but how about delay in giving notice of dishonor, difference between
rediscounting and loan accommodation?)
The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a

criminal prosecution. Accordingly, procedural due process clearly enjoins that a notice of dishonor
be actually served on petitioner. Petitioner has a right to demand — and the basic postulates of
fairness require — that the notice of dishonor be actually sent to and received by her to afford her
the opportunity to avert prosecution under BP 22.
Under Sec. 186 of the Negotiable Instruments Law it is provided that:

Sec. 186. Within what time a check must be presented. - A check must be presented for payment
within a reasonable time after its issue or the drawer will be discharged from liability thereon to the
extent of the loss caused by the delay.
Here, the drawer of the check will be discharged from liability if there was delay in the presentment
of the check within a reasonable time.
But the Negotiable Instruments Law does not provide for the discharge of the liability of the drawer
of a dishonored check. Following Sec. 196 of the Negotiable Instruments Law that for: Cases not
provided for in Act. - Any case not provided for in this Act shall be governed by the provisions of
existing legislation or in default thereof, by the rules of the law merchant.
Applying, Batas Pambansa Blg. 22 (BP 22), a prosecution for violation of the Bouncing Check Law
cannot prosper against the drawer of a dishonored check; it is not enough to establish that a check
issued was subsequently dishonored. It must be shown further that the person who issued the
check knew "at the time of issue that he does not have sufficient funds in or credit with the drawee
bank for the payment of such check in full upon its presentment." Because this element involves a
state of mind which is difficult to establish, Section 2 of the law creates a prima facie presumption
of such knowledge.
Here, Betty King discounted with Ellen Fernandez several checks in the total amount of
P1,070,000.00 in exchange for cash in the amount of P1 million. When the checks were deposited
for payment they were dishonored for being drawn against an account with insufficient funds.
NOTE reference as to “accommodation party” not “loan accommodation”: Even an

“accommodation party” is liable under BP 22. An accommodation party is one who
has signed the check without receiving value in exchange, and who issues the
check for the purpose of lending his name to some other person. He is still liable
even though the holder of the check knew him to be only an accommodation party.
3. Great Asian Sales Center Corporation and Tan Chiong Lin vs. Court of Appeals, and Bancasia 6
Finance and Investment Corporation, G.R. No. 105774, April 25, 2002, Third Division, J. Carpio
Issue: What is the nature of a deed of assignment with recourse? In such case what is the
purpose of an indorsement? What is the effect of absence of notice of dishonor? When notice of
dishonor need not be given (Section 114)? What is the effect of delay in giving notice of
dishonor? What law applies on matters not covered by the NIL (Section 196)? What does delay in
Section 186 of the NIL refer to? What is the difference between rediscounting and loan
accommodation? (Also, payment discharge the instrument)
- A deed of assignment with recourse stipulation is independent of the warranties of an

endorser under the Negotiable Instruments Law.
- In such a case, the endorsement of the negotiable instrument becomes necessary to enable
the assignee to collect from the drawer; The purpose of the endorsement is merely to
facilitate collection of the proceeds of the checks; The purpose of the endorsement is not
to make the assignee finance company a holder in due course because policy considerations
militate against according finance companies the rights of a holder in due course.
- Even if Bancasia failed to give timely notice of dishonor, still there would be no prejudice
whatever to Great Asian. Under the Negotiable Instruments Law, notice of dishonor is not
required if the drawer has no right to expect or require the bank to honor the check, or if
the drawer has countermanded payment.
- Section 114 (d) and (e) of the Negotiable Instruments Law provides as follows: "When notice
need not be given to drawer. — Notice of dishonor is not required to be given to the drawer
in either of the following cases: (d) Where the drawer has no right to expect or require that
the drawee or acceptor will honor the instrument; (e) Where the drawer has
countermanded payment."
- Under common law, delay in notice of dishonor, where such notice is required, discharges
the drawer only to the extent of the loss caused by the delay.
- The common law or Law Merchant supplies gap in accordance with Section 196 of the
Negotiable Instruments Law.
- Section 186 refers only to delay in presentment of checks but is silent on delay in giving
notice of dishonor.
- If the accounts receivable, like postdated checks, are sold for a consideration less than their
face value, the transaction is one of discounting, and is subject to the provisions of the
Financing Company Act. The assignee is immediately subrogated as creditor of the accounts
receivable. However, if the accounts receivable are merely used as collateral for the loan,
the transaction is only a simple loan, and the lender is not subrogated as creditor until there
-
-
is a default and the collateral is foreclosed.
-
4. Willy G. Sia vs. People of the Philippines, G.R. No. 149695, April 28, 2004, Second Division, 7
J. Callejo Sr.
Issue: What is the prima facie presumption of “knowledge” of insufficiency of funds? Must the
notice of dishonor be in writing? What is the need that such notice to be in writing? What is the
effect of payment? (Note: Must the notice of dishonor be in writing under the NIL?)
● Section 2 of B.P. Blg. 22 created a prima facie presumption of knowledge on the part of the
drawer or maker of the check of the insufficiency of his fund in the drawee bank.
● Yes, the notice of dishonor of a check to the maker must be in writing. A mere oral notice
to the drawer or maker of the dishonor of his check is not enough.
● 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.
● If the maker or drawer pays, or makes arrangements with the drawee bank for the payment
of the amount due within the five-day period from notice of the dishonor given to the
drawer, it is a complete defense; the accused may no longer be indicted for violation of
Section 1, B.P. Blg. 22. If he is so indicted, he may set up the payment of the amount due as
a complete defense.
5. Alfredo Rigor vs People, G.R. No. 144887, November 17, 2004, First Division, J. Azcuna 8
Issues and Answers:

Is there presumption of “knowledge” of insufficiency of funds when check is presented ninety
(90) from its due date?
Section 2, of BP Blg. 22 provides that there is a presumption of knowledge of insufficiency of funds
when a check is presented within 90 days from the date of issuance of such check.
What is the effect of admission of Rigor?

While it is true that if a check is presented beyond ninety (90) days from its due date, there is no
more presumption of knowledge by the drawer that at the time of issue his check has no sufficient
funds, the presumption in this case is supplanted by Rigor’s own admission that he did not hide the
fact that he had no sufficient funds for the check.
Is the knowledge of the payee that the funds are insufficient material in BP 22?
Knowledge by the payee is immaterial as deceit is not an essential element of the offense under BP
Blg. 22. The gravamen of the offense is the issuance of a bad check; hence, malice and intent in the
issuance thereof are inconsequential.
How is notice of dishonor made in BP 22?

The notice of dishonor of a check may be sent to the drawer or maker by the drawee bank, the
holder of the check, or the offended party either by personal delivery or by registered mail. The
notice of dishonor to the maker of a check must be in writing.
(Also, Section 2 on stipulated interests and Usury Law and Section 24 on presumption of
consideration)
6. James Svendsenvs. People of the Philippines, G.R. No. 175381, February 26, 2008 , Second 9
Issue: Are notices of dishonor required under BP 22, and how is it made?
● Yes, they are required. These written notices of dishonor or demand letters must actually
be received by the drawer of a dishonored check. There must be proof of receipt thereof
that is property authenticated, and not mere registered receipt and/or return receipt. The
failure of the prosecution to prove the existence and receipt by the petitioner of the
requisite written notice of dishonor and that he was given at least five banking days within
which to settle his account constitutes sufficient ground for his acquittal.
Are unconscionable interest rates still allowed even when the Usury Law was already repealed?
● No, they are not allowed.
● While the Usury Law ceiling on interest rates was lifted by Central Bank Circular No. 905,
nothing therein grants lenders carte blanche to raise interest rates to levels which will either
enslave their borrowers or lead to a hemorrhaging of their assets. Stipulations authorizing
such interest are contra bonos mores, if not against the law. They are, under Article 1409 of
the New Civil Code, inexistent and void from the beginning.
7. Jude Joby Lopez vs. People of the Philippines, G.R. No. 166810, June 26, 2008, First Division, 10
J. Leonardo-De Castro
Issue: What is the effect of failure to receive notice of dishonor? What is the effect of Section 114
(d) of the NIL? (Note instructive as to the elements of ESTAFA under Article 315 2 (d) of the Penal
Code but not part of the coverage this presentation)
What is the effect of failure to receive notice of dishonor?
Answer: Petitioner argued that no presumption or prima facie evidence of guilt would arise if there
is no proof as to the date of receipt by the drawer of the said notice “since there would simply be
no way of reckoning the crucial 3-day period” from receipt of notice of dishonor of the check within
which the amount necessary to cover the check may be done as provided by paragraph 2(d) of
Article 315 of the Revised Penal Code, as amended.
The court ruled that the prima facie presumption of deceit applies in this case. The receipt by the
drawer of the notice of dishonor is not an element of the offense of estafa. The presumption only
dispenses with the presentation of evidence of deceit if such notification is received and the drawer
of the check failed to deposit the amount necessary to cover his check within three (3) days from
receipt of the notice of dishonor of the check. The presumption indulged in by law does not preclude
the presentation of other evidence to prove deceit.
The absence of proof as to receipt of the written notice of dishonor notwithstanding, the evidence
shows that petitioner had actual notice of the dishonor of the check because he was verbally
notified by the respondent and notice whether written or verbal was a surplusage and totally
unnecessary considering that almost two (2) months before the issuance of the check, petitioner’s
current account was already closed. Under these circumstances, the notice of dishonor would have
served no useful purpose as no deposit could be made in a closed bank account.
What is the effect of Section 114 (d) of the NIL?
Answer: Since the petitioner's bank account was already closed even before the issuance of the
subject check, he had no right to expect or require the drawee bank to honor his check. By virtue of
Section 114 (d) of the NIL, petitioner is not entitled to be given a notice of dishonor. The notice of
dishonor would have served no useful purpose as no deposit could be made in a closed bank
account.
8. Edgardo Medalla vs. Resurreccion D. Laxa, G.R. No. 193362, January 18, 2012, Second Division, J. 11
Reyes
Issue: What is the gravamen of the offense of B.P. 22?
The gravamen of the offense punished by B.P. 22 is the act of making and issuing a worthless check
or a check that is dishonored upon its presentation for payment. It is not the non-payment of an
obligation which the law punishes.
9. Hector Trenas vs. People of the Philippines, G.R. No. 195002, January 25, 2012, Second Division, 12
J. Sereno
Issue: Is dishonor an element of the offense of estafa under Article 315, par. 1 (b) of the RPC?
Although the prosecution alleged that the check issued by petitioner was dishonored in a
bank in Makati, such dishonor is not an element of the offense of estafa under Article 315,
par. 1 (b) of the RPC.
10. Amada Resterio vs. People of the Philippines, G.R. No. 177438, September 24, 2012, First Division, 13
J. Bersamin
Issue: How is notice of dishonor made as required in Batas Pambansa Blg. 22?
(The notice of dishonor required by Batas Pambamsa Blg. 22 to be given to the drawer, maker or
issuer of a check should be written. If the service of the written notice of dishonor on the maker,
drawer or issuer of the dishonored check is by registered mail, the proof of service consists not only
in the presentation as evidence of the registry return receipt but also of the registry receipt
together with the authenticating affidavit of the person mailing the notice of dishonor. Without the
authenticating affidavit, the proof of giving the notice of dishonor is insufficient unless the mailer
personally testifies in court on the sending by registered mail.)
● The notice must be in writing. A mere oral notice to pay a dishonored check will not suffice.
The lack of a written notice is fatal for the prosecution.
● It is a general rule that, when service of a notice is sought to be made by mail, it should
appear that the conditions on which the validity of such service depends had existence,
otherwise the evidence is insufficient to establish the fact of service.
● The authentication by affidavit of the mailer or mailers was necessary in order for the giving
of the notices of dishonor by registered mail to be regarded as clear proof of the giving of
the notices of dishonor to predicate the existence of the second element of the offense.
11. Sps. Argovan and Florida Gadeitano vs. San Miguel Corporation, G.R. No. 188767, July 24, 2013, 14
Second Division, J. Perez
Issue: What should the accused do upon receipt of three notices of dishonor? When did the
liability under the bouncing checks law attached? Was there a prejudicial question?
● Upon receipt of three notices of dishonor, petitioners should have immediately funded the check.
● When they did not [immediately fund the check], their liabilities under the bouncing checks law
attached. Such liability cannot be affected by the alleged prejudicial question because their failure
to fund the check upon notice of dishonour is itself the offense.
● No, there is no prejudicial question. There is no prejudicial question if the civil and the criminal
action can, according to law, proceed independently of each other. Here, the issue in the criminal
case is whether the petitioner is guilty of estafa and violation of Batas Pambansa Blg. 22, while in
the civil case, it is whether AsiaTrust Bank had lawfully garnished the ₱378,000.00 from petitioners’
savings account.
12. Robert Chua vs. People of the Philippines, G.R. No. 196853, July 13, 2015, Second Division, 15
J. Del Castillo
Issue: Can a notice of dishonor be issued prior to the issuance and presentment of checks? Can a
demand letter that precedes the issuance of checks constitute as sufficient notice of dishonor?
a.) No. Checks can only be dishonored after they have been issued and presented for payment.
Before that, dishonor cannot take place.
b.) No. Thus, a demand letter that precedes the issuance of checks cannot constitute as sufficient
notice of dishonor within the contemplation of BP 22. It is likewise significant to note that aside
from the absence of a date, the signature of Chua appearing on the questioned November 30, 1993
demand letter is not accompanied by any word or phrase indicating that he affixed his signature
thereon to signify his receipt thereof. Indeed, "conviction must rest upon the strength of the
evidence of the prosecution and not on the weakness of the evidence for the defense." In view of
the foregoing, the Court cannot accord the demand letter dated November 30, 1993 any weight
and credence. Consequently, it cannot be used to support Chua's guilt of the offenses charged.
13. Elizabeth Alburo Vs. People of the Philippines, G.R. No. 196289, August 15, 2016, Third Division, 16
J. Peralta.
Issue: What is the purpose of notice of dishonor in proving violation of BP 22? What if the
demand letter was sent through registered mail?
The knowledge of insufficiency of funds or credit at the time of the issuance of the check is the
second element of the offense under BP 22. Inasmuch as this element involves a state of mind of the
person making, drawing or issuing the check which is difficult to prove, Section 2 of B.P. Blg. 22
creates a prima facie presumption of such knowledge.
For this presumption to arise, the prosecution must prove the following: (a) the check is presented
within ninety (90) days from the date of the check; (b) the drawer or maker of the check receives
notice that such check has not been paid by the drawee; and (c) the drawer or maker of the check
fails to pay the holder of the check the amount due thereon, or make arrangements for payment in
full within five (5) banking days after receiving notice that such check has not been paid by the
drawee. In other words, the presumption is brought into existence only after it is proved that the
issuer had received a notice of dishonor and that within five days from receipt thereof, he failed to
pay the amount of the check or to make arrangements for its payment. The presumption or prima
facie evidence as provided in this section cannot arise, if such notice of nonpayment by the drawee
bank is not sent to the maker or drawer, or if there is no proof as to when such notice was received
by the drawer, since there would simply be no way of reckoning the crucial 5-day period.
Anent the demand letter sent through registered mail, the same was not proven beyond reasonable
doubt that petitioner received the same. Although the Registry Return Card shows that the letter
was received and signed for by a Jennifer Mendoza who identified herself as a househelper of
petitioner, it was not proven that the same person is a duly authorized agent of the addressee or the
petitioner. For notice by mail, it must appear that the same was served on the addressee or a duly
authorized agent of the addressee.[31] To establish beyond reasonable doubt that the issuer of the
check indeed received the demand letter is highly important because it creates the presumption that
the same issuer knew of the insufficiency of the funds. It is [also] essential for the maker or drawer
to be notified of the dishonor of her check, so she could pay the value thereof or make arrangements
for its payment within the period prescribed by law.[32] To assume that because the Registry Receipt
Card appears to have the signature of a person other than the addressee and that same person had
given the letter to the addressee, is utterly erroneous and is not proof beyond reasonable doubt as
required in criminal cases.
14. John Dennis G. Chua Vs. People of the Philippines and Cristina Yao, G.R. No. 195248, November 17
22, 2017, Third Division, J. Martirez
Issue: In BP 22 cases how is notice of dishonor proved? Must actual receipt of said notice be
required? When is the fact of service provided for in the law reckoned? (Note, instructive as to
extinction of civil liability on the dishonored checks even if not all the elements of BP 22 are
proven beyond reasonable doubt, but not part of NIL)
It must be borne in mind that it is not enough for the prosecution to prove that a notice of
dishonor was sent to the accused. The prosecution must also prove actual receipt of said notice,
because the fact of service provided for in the law is reckoned from receipt of such notice of
dishonor by the accused
15. Quintin Artacho Llorente, V. Star City PTY Limited, G.R. No. 212050, January 15, 2020 , First 18
Issue: What is the effect of countermand or stopping payment? What will become of the
relationship between the drawer and payee if payment is countermanded? Does the stopping of
payment discharge the liability of the drawer of a check or other bill to the payee or other
holder? If the drawer countermands payment is notice of dishonor to the drawer still necessary?
(Note, the drawer of a bill, including a draft or check, as a general rule, may by notice to
the drawee prior to acceptance or payment countermand his order and command the drawee
not to pay, in which case the drawee is obliged to refuse to accept or pay)
● The effect of countermand or stopping payment, the drawer of a bill, including a draft or
check, as a general rule, may by notice to the drawee prior to acceptance or payment
countermand his order and command the drawee not to pay, in which case the drawee is
obliged to refuse to accept or pay. The right to stop payment cannot be exercised so as to
prejudice the rights of holders in due course without rendering the drawer liable on the
instrument to such holders.
● The stopping payment does not discharge the liability of the drawer of a check or other bill
to the payee or other holder.
● However, where payment has been stopped by the drawer the relation between the
drawer and payee becomes the same as if the instrument had been dishonored and notice
thereof given to the drawer. Thus, the drawer's conditional liability is changed to one free
from the condition and his situation is like that of the maker of a promissory note due on
demand; and he is liable on the instrument if he has no sufficient defense.
● No. notice is not necessary. Llorente and EPCIB could not seek refuge on the alleged lack of
notice of dishonor to them since they were responsible for the dishonor of the subject
drafts aside from the fact that it would be futile to require such notice since it was EPCIB
who countermanded the payment."
Issue: What is the effect of countermand or stopping payment? What will become of the
relationship between the drawer and payee if payment is countermanded? Does the stopping of
payment discharge the liability of the drawer of a check or other bill to the payee or other
holder? If the drawer countermands payment is notice of dishonor to the drawer still necessary?
(Note, the drawer of a bill, including a draft or check, as a general rule, may by notice to
the drawee prior to acceptance or payment countermand his order and command the drawee
not to pay, in which case the drawee is obliged to refuse to accept or pay)
● Regarding the effect of countermand or stopping payment, the drawer of a bill, including a
draft or check, as a general rule, may by notice to the drawee prior to acceptance or
payment countermand his order and command the drawee not to pay, in which case the
drawee is obliged to refuse to accept or pay.
● Stopping payment does not discharge the liability of the drawer of a check or other bill to
the payee or other holder.
● Where payment has been stopped by the drawer the relation between the drawer and
payee becomes the same as if the instrument had been dishonored and notice thereof
given to the drawer. Thus, the drawer's conditional liability is changed to one free from the
condition and his situation is like that of the maker of a promissory note due on demand;
and he is liable on the instrument if he has no sufficient defense.
DISCHARGE OF NEGOTIABLE INSTRUMENTS [Section 119]
1. Marciano Tan vs. Philippine Commercial International Bank, G.R. No. 152666, April 23, 2008, 20
Second Division, J. Carpio Morales
Issue: What is the element of “knowledge of insufficient fund” in BP 22. How does the BP 22 create
the presumption of knowledge? What is the remedy for the person liable to escape liability?
Was payment made when the buses were surrendered? Does payment obliterate criminal
liability? (Also, crossed check)
ANSWER:
● The element of "knowledge" involves a state of mind that obviously would be difficult to establish,
hence, the statute creates a prima facie presumption of knowledge on the insufficiency of funds or
credit coincidental with the attendance of the two other elements.
● In order to create such presumption, it must be shown that the drawer or maker received a notice
of dishonor and, within five banking days thereafter, failed to satisfy the amount of the check or
arrange for its payment.
● The presumption is not conclusive, however, as it may be rebutted by full payment. It is a complete
defense If the maker or drawer pays, or makes arrangement with the drawee bank for the payment
of the amount due within the five-day period from notice of the dishonor, he or she may no longer
be indicted for such violation.
● Yes, payment of the dishonored checks has obliterated the criminal liability of the petitioner.
2. Anamer Salazar vs. J.Y. Brothers Marketing Corporation, G.R. No. 171998, October 20, 2010, 21
Second Division, J. Peralta
Issue: How are instruments discharged under Section 119 (d) in relation to Article 1231 (6) of the
Civil Code? What are the elements of novation?
SECTION 119. Instrument; how discharged. – A negotiable instrument is discharged:
(d) By any other act which will discharge a simple contract for the payment of money;
And, under Article 1231 of the Civil Code, obligations are extinguished:
(6) By novation.
An extinctive novation presupposes a confluence of four essential requisites: (1) a previous valid
obligation, (2) an agreement of all parties concerned to a new contract, (3) the extinguishment of
the old obligation, and (4) the birth of a valid new obligation. Novation is merely modificatory where
the change brought about by any subsequent agreement is merely incidental to the main obligation
3. Cresencio C. Milla vs. People of the Philippines and Carlos V. Lopez, G.R. No. 188726, January 25, 22
2012, Second Division, J. Sereno
Issue: Is the obligation novated when the checks used as payment of an obligation bounced? What
are the elements of novation? (Note instructive as to the elements of ESTAFA under Article 315 2
(d) of the Penal Code but not part of the coverage this presentation) (Also, Section 60 on liability of
maker, Section 29 on accommodation party)
ANSWER:
● No, the acceptance by MPI of the Equitable PCI checks tendered by Milla could not have
novated the original transaction, as the checks were only intended to secure the return of the
₱2 million the former had already given him. Even then, these checks bounced and were thus
unable to satisfy his liability. Moreover, the estafa involved here was not for simple
misappropriation or conversion, but was committed through Milla’s falsification of public
documents, the liability for which cannot be extinguished by mere novation.
● There are two ways which could indicate the presence of novation and thereby produce the
effect of extinguishing an obligation by another which substitutes the same.
1. The first is when novation has been explicitly stated and declared in unequivocal terms.
2. The second is when the old and the new obligations are incompatible on every point. The
test of incompatibility is whether or not the two obligations can stand together, each
one having its independent existence. If they cannot, they are incompatible, and the
latter obligation novates the first.
Corollarily, changes that breed incompatibility must be essential in nature and not
merely accidental. The incompatibility must take place in any of the essential elements
of the obligation, such as its object, cause or principal conditions thereof; otherwise, the
change would be merely modificatory in nature and insufficient to extinguish the original
obligation
4. Luis Juan L. Virata and UEM-Mara Philippines Corporation Vs. Alejandro Ng Wee Westmont 23
Investment Corp., et al./Westmont Investment, Corporation Vs. Alejandro Ng Wee/Manuel
Estrella Vs. Alejandro Ng Wee/Simeon Cua, et al. Vs. Alejandro Ng Wee/Anthony T. Reyes
Vs. Alejandro Ng Wee, et al. G.R. No. 220926/G.R. No. 221058/G.R. No. 221109/G.R. No.
221135/G.R. No. 221218. July 5, 2017, Third Division, J. Velasco, Jr.
Issue: How was promissory note discharged under Section 119 (c)? (Also, bill of exchange and check,
‘it is a negotiable instrument – written and signed by drawer containing an unconditional order to
pay on demand a sum certain in money’; Also, Section 17 on omission of dates; Also, check as proof
of payment; Also, Section 186 within what time a check must be presented)
ANSWER:The fact that the proceeds were released to Power Merge before the signing of the Credit
Line Agreement and the Amendment thereto lends credence to Virata's claim that Wincorp did not
intend for Power Merge to be strictly bound by the terms of the credit facility; and that there had
already been an understanding between the parties on what their respective obligations will be,
although this agreement had not yet been reduced into writing. The underlying transaction would
later on be revealed in black and white through the Side Agreements, the tenor of which amounted
to Wincorp's intentional cancellation of Power Merge and Virata's obligation under their Promissory
Notes.[100] In exchange, Virata and Power Merge assumed the obligation to transfer equity shares
in UPDI and the tollway project in favor of Wincorp. An arm's length transaction has indeed taken
place, substituting Virata and Power Merge's obligations under the Promissory Notes, in pursuance
of the Memorandum of Agreement and Waiver and Quitclaim executed by Virata and Wincorp.
Thus, as far as Wincorp, Power Merge, and Virata are concerned, the Promissory Notes had already
been discharged.
5. Benjamin Evangelista Vs. Screenex, Inc., represented by Alexander G. Yu, G.R. No. 211564, 1
November 20, 2017, First Division, CJ Sereno
Issue: How are instruments discharged under Section 119 (d)? What is the prescriptive period
under Article 1144 of the Civil Code and for what basis?
- Sec. 119. Instrument; how discharged. - A negotiable instrument is discharged:
(d) By any other act which will discharge a simple contract for the payment of money;
- Article 1144. The following actions must be brought within ten years from the time the right of
action accrues:
1) Upon a written contract;
2) Upon an obligation created by law;
3) Upon a judgment.
MATERIAL ALTERATION [Sections 124 and 125] (Also, Section 125 in relation to Section 1)
1. Philippine National Bank vs. Court of Appeals, Capitol City Development Bank, Philippine 2
Bank of Communications and F. Abante Marketing, G.R. No. 107508, April 25, 1996, First Division,
J. Kapunan
Issue: What is an alteration under Section 125? What is the meaning of Section 125 (f)? What is
the relation of Section 125 to Section 1? What is spoliation? Is the change in the serial number
material alteration? (Also, Section 1: is a check’s serial number material particular?)
● 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.
● Spoliation is an alteration done by a stranger.
● The change in the serial number is not a material alteration since the 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 and the sum of money due to the payee
remained the same.
2. The International Corporate Bank vs. Court of Appeals and Philippine National Bank, G.R. No. 3
129910, September 5, 2006, Third Division, J. Carpio
Issues:
(1) What is material alteration?
(2) Whether or not the checks were materially altered? (Also, Section 1 (b), estoppel:
negligence, banking: affected by public interest)
Held:
(1) Section 125 of Act No. 2031 provides that a material alteration is 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 of 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.
(2) No, the checks were not materially altered. The Court held that an alteration on the serial
number of a check was not a material alteration.
NOTE: The Court also noted that what was altered in the instant case was not an essential requisite for
negotiability under Section 1 of Act No. 2031.
3. Metropolitan Bank and Trust Company vs. Renato D. Cabilzo, G.R. No. 154469, December 6, 2006, 4
First Division, J. Chico-Nazario
Issue: What is material alteration? What is the effect of payment made under a materially
altered instrument? What is the doctrine of equitable estoppel? What is the degree of diligence
required of a bank?
ANSWER:
● 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 Negotiable Instruments
Law.
● Section 124 of the Negotiable Instrument Law provides for the effect of materially altered
instrument. It provides that:
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.
● The doctrine of equitable estoppel states that when one of the two innocent persons, each guiltless
of any intentional or moral wrong, must suffer a loss, it must be borne by the one whose erroneous
conduct, either by omission or commission, was the cause of injury.
● The point is that as a business affected with public interest and because of the nature of its
functions, the bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship. The appropriate degree of diligence
required of a bank must be a high degree of diligence, if not the utmost diligence.
4. Westmont Bank, formerly Associates Bank now United Overseas Bank Philippines Vs. Myrna Dela 5
Rosa-Ramos, Domingo Tan and William Co, G.R. No. 160260, October 24, 2012, Third Division, J.
Mendoza
Issue: Is the alteration of the date from August 1987 to May 8, 1988 considered material
alteration? What is the effect if the alteration was countersigned by the drawer?
- Yes. If countersigned by the drawer it will make it a valid correction of its date as consented by its
drawer as the standard operating procedure of the appellant bank in such situation
- From the case: A careful scrutiny of the evidence shows that indeed the date of Check No. 467322
had been materially altered from August 1987 to May 8, 1988 in accordance with Section 125 of the
Negotiable Instruments Law. It is worthy to take note of the fact that such alteration was not
countersigned by the drawer to make it a valid correction of its date as consented by its drawer as
the standard operating procedure of the appellant bank in such situation as admitted by its Sto.
Cristo Branch manager, Mabini Z. Millan. x x x
- On Check No. 613307, the Bank argues that the CA erred in considering that the said check was
debited against the account of Dela Rosa-Ramos when the fact was that it was dishonored for
having been drawn against insufficient funds. This means that the check was not charged against
her account.
PROTEST [Sections 152]

(Also, negotiation and indorsement. Distinction between contract of an indorser and that of a
guarantor/surety of a commercial paper)
1. Allied Banking Corporation vs. Court of Appeals, G.G. Sportswear Manufacturing Corporation, 6
Nari Gidwani, Spouses Leticia and Leon de Villa and Alcron International LTD. G.R. No. 125851,
July 11, 2006, Third Division, J. Quisumbing
Issue: Can respondents, in their capacity as guarantors and surety, be held jointly and severally liable
under the Letters of Guaranty and Surety, in the absence of protest on the bill in accordance
with Section 152 of the NIL? (Note Case did not rule delve on the fact that a letter of credit is not a
negotiable instrument nor on the negotiability of an export bill)
- Yes, respondent Alcron International Ltd. is subsidiarily liable, while respondents Nari
Gidwani, and Spouses Leon and Leticia de Villa are jointly and severally liable together with
G.G. Sportswear, to pay petitioner Bank the sum of P151,474.52 with interest at the legal rate
from the filing of the complaint, and the costs; Where a foreign bill appearing on its face to
be such is dishonored by non-acceptance, it must be duly protested for non-acceptance, and
where such a bill which has not been previously been dishonored by non-acceptance is
dishonored by non-payment, it must be duly protested for non-payment. If it is not so
protested, the drawer and indorsers are discharged. Where a bill does not appear on its face
to be a foreign bill, protest thereof in case of dishonor is unnecessary.
2. Producers Bank of the Philippines vs. Excelsa Industries, Inc., G.R. No. 152071, May 8, 2009, Second 7
Division, J. Tinga
Issue: What is the effect of failure to comply with Sections 89 and 152 of the NIL on the liability of
respondent when he signed a separate undertaking and promised to pay on demand the full amount
of the draft?
● Respondent may not escape its liability under the separate undertakings. Where the drawer
therein also executed a separate letter of undertaking in consideration for the bank’s
negotiation of its sight drafts, the drawer can still be made liable under the letter of
undertaking even if he is discharged due to the bank’s failure to protest the non-acceptance
of the drafts.
3. Johaida Garina Roa•Buenafe, Vs. Atty. Aaron R. Lirazan, A.C. No. 9361, March 20, 2019, First 8
Division, J. Gesmundo
Issue: What is required to be entered under Section 2 (f), Rule VI of the Rules on Notarial
Practice?
Section 2 (f) Rule VI of the Rules on Notarial Practice provides that -
(f) In case of a protest of any draft, bill of exchange or promissory note, the notary public shall make
a full and true record of all proceedings in relation thereto and shall note therein whether the
demand for the sum of money was made, by whom, when, and where; whether he presented such
draft, bill or note; whether notices were given, to whom and in what manner; where the same was
made, when and to whom and where directed; and of every other fact touching the same.
4. Quintin Artacho Llorente, V. Star City PTY Limited, G.R. No. 212050, January 15, 2020, First 9
Issue: Does the Philippine Courts have jurisdiction when the stopped payment occurred in
Australia per advice of Union Bank of California to the Bank of New York, and the subject matter
of the are subject drafts drawn by a Philippine bank? (Note instructive Isolated Transaction Rule
where unregistered foreign corporations are allowed to sue in the Philippine Courts but not
part of the coverage this presentation)
Answer:
● Yes, the Philippine Courts have jurisdiction. From the point of view of territorial jurisdiction
in criminal cases involving checks, any of the places where the check is drawn, issued,
delivered, or dishonored has jurisdiction. While it is true that the stopped payment occurred
in Australia per advice of Union Bank of California to the Bank of New York, the subject matter
of the instant complaint are the subject drafts drawn by EPCIB, which is a Philippine bank.
● Isolated Transaction Rule. A foreign corporation needs no license to sue before Philippine
courts on an isolated transaction. When the allegations in the complaint have a bearing on
the plaintiff’s capacity to sue and merely state that the plaintiff is a foreign corporation
existing under the laws of a country, such averment conjures two alternative possibilities:
either the corporation is engaged in business in the Philippines, or it is not so engaged. In the
first, the corporation must have been duly licensed in order to maintain the suit; in the
second, and the transaction sued upon is singular and isolated, no such license is required. In
either case, compliance with the requirement of license, or the fact that the sing corporation
is exempt therefore, as the case may be, cannot be inferred from the mere fact that the party
suing is a foreign corporation. The qualifying circumstance being an essential part of the
plaintiff’s capacity to sue must be affirmatively pleaded. Hence, the ultimate fact that a
foreign corporation is not doing business in the Philippines must first be disclosed for it to
be allowed to sue in Philippine courts under the isolated transaction rule. Failing this
requirement, the complaint filed by plaintiff with the trial court, it must be said, fails to show
its legal capacity to sue.
Issue: Does the Philippine Courts have jurisdiction when the stopped payment occurred in Australia
per advice of Union Bank of California to the Bank of New York, and the subject matter of the are
subject drafts drawn by a Philippine bank? (Note instructive Isolated Transaction Rule where
unregistered foreign corporations are allowed to sue in the Philippine Courts but not part of the
coverage this presentation)
Answer: Yes. The issue of whether a foreign corporation, which does not have license to engage in
business in the Philippines, can seek redress in the Philippine courts depends on whether it is doing
business or merely entered into an isolated transaction. A foreign corporation that is not doing
business in the Philippines must disclose such facts if it desires to sue in the Philippine courts under
the isolated transaction rule because without such disclosure, the courts may choose to deny it the
right to sue.
Thus, as to a foreign corporation, the qualifying circumstance that if it is doing business in the
Philippines, if it is duly license or if it is not, it is suing upon a singular and isolated transaction, is
essential part of the element of the plaintiff’s capacity to sue and must be affirmatively pleaded.
Also, from the point of view of territorial jurisdiction in criminal cases involving checks, any of the
places where the check is drawn, issued, delivered, or dishonored has jurisdiction. While it is true that
the stopped payment occurred in Australia per advice of Union Bank of California to the Bank of New
York, xxx the subject matter of the instant complaint are the subject drafts drawn by EPCIB, which is
a Philippine bank.
PROMISSORY NOTES, BILLS OF EXCHANGE AND CHECKS [Sections 184, 126, 185, 186, 189]
(Also, forgery, proximate cause, liabilities of parties: relationship between payee and collecting bank, requirement
of banking business on the first to cash the check, negligence of employees, liability of drawer to drawee, nature
of banking business and functions, comparative negligence)
1. Philippine Commercial International Bank vs. Court of Appeals, and Ford Philippines, Inc. and 11
Citibank, N.A., G.R. No. 121413, January 29, 2001, Second Division, J. Quisumbing
What is the relationship of the payee-holder and collecting bank? What is a crossed check and the
corresponding duty of the collecting bank? What is the requirement of banking business on the one
who first cashes or negotiates a check? (Also, scope of the term insufficient fund, notice of dishonor)
● What is the relationship of the payee-holder and collecting bank? It is a well-settled rule
that the relationship between the payee or holder of commercial paper and the bank to
which it is sent for collection is, in the absence of an agreement to the contrary, that of
principal and agent.
● What is a crossed check and the corresponding duty of the collecting bank? The crossing
of the check with the phrase “Payee’s Account Only,” is a warning that the check should be
deposited only in the account of the payee; It is the collecting bank which is bound to
scrutinize the check and to know its depositors before it could make the clearing
indorsement “all prior indorsements and lor lack of indorsement guaranteed..”
● What is the requirement of banking business on the one who first cashes or negotiates a
check? Banking business requires that the one who first cashes and negotiates the check
must take some precautions to learn whether or not it is genuine. And if the one cashing the
check through indifference or other circumstance assists the forger in committing the fraud,
he should not be permitted to retain the proceeds of the check from the drawee whose sole
fault was that it did not discover the forgery or the defect in the title of the person
negotiating the instrument before paying the check.
1a. Ford Philippines Inc. vs. Court of Appeals and Citibank, N.A. and Philippine Commercial 12
International Bank, G.R. No. 121479, January 29, 2001, Second Division, J. Quisumbing
What is the relationship of the payee-holder and collecting bank?

It is a well-settled rule that the relationship between the payee or holder of commercial paper and
the bank to which it is sent for collection is, in the absence of an argreement to the contrary, that of
principal and agent.22 A bank which receives such paper for collection is the agent of the payee or
holder.
What is a crossed check and the corresponding duty of the collecting bank?
A crossed check is a check which on its face are two parallel lines and written in between said lines
was the phrase "Payee's Account Only", meaning it may only be deposited directly into a bank account.
The bank has the responsibility to make sure that the check in question is deposited in Payee's account
only.
What is the requirement of banking business on the one who first cashes or negotiates a check?
(Also, scope of the term insufficient fund, notice of dishonor)
Banking business requires that the one who first cashes and negotiates the check must take some
precautions to learn whether or not it is genuine. And if the one cashing the check through
indifference or other circumstance assists the forger in committing the fraud, he should not be
permitted to retain the proceeds of the check from the drawee whose sole fault was that it did not
discover the forgery or the defect in the title of the person negotiating the instrument before paying
the check. For this reason, a bank which cashes a check drawn upon another bank, without requiring
proof as to the identity of persons presenting it, or making inquiries with regard to them, cannot
hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to
the hands of a third party.
1b. Ford Philippines Inc. vs. Citibank, N.A., Philippine Commercial, International Bank and the Court of 13
Appeals, G.R. No. 128604, January 29, 2001, Second Division, J. Quisumbing
What is the liability of PCI bank relative to the acts of its employees? Is the doctrine of contributory
negligence applicable? What is the liability of the drawer to the drawee? What is the nature of the
banking functions? What is comparative negligence? What is the nature of the banking business?
(Also, scope of the term insufficient fund, notice of dishonor)
● The general rule is that a bank is liable for the fraudulent acts or representations of an officer
or agent acting within the course and apparent scope of his employment or authority. Thus,
PCI Bank is equally liable for the loss of the proceeds of said checks issued by Ford in favor
of the CIR.
● Yes, the doctrine of contributory negligence is applicable.
● The liability of the drawer to the drawee is to examine its passbook, statements of account,
and cancelled checks and to give notice within a reasonable time (or as required by statute)
of any discrepancy which it may in the exercise of due care and diligence find therein, serving
to mitigate the drawee's liability by reducing the award of interest
● The nature of banking functions is that they handle daily transactions involving millions of
pesos. By the very nature of their work the degree of responsibility, care and trustworthiness
expected of their employees and officials is far greater than those of ordinary clerks and
employees
● Comparative negligence is a partial legal defense that reduces the amount of damages that
a plaintiff can recover in a negligence-based claim, based upon the degree to which the
plaintiff's own negligence contributed to cause the injury.
● Banking business is so impressed with public interest where the trust and confidence of the
public in general is of paramount importance such that the appropriate standard of diligence
must be very high, if not the highest, degree of diligence.
● As for Notice of Dishonor, it is when a negotiable instrument has been dishonored by non-
acceptance or non-payment, notice of dishonor must be given to the drawer and to each
indorser, and any drawer or indorser to whom such notice is not given is discharged. (Section
89, NIL)
● As for insufficient fund, it is the making or drawing and issuing of any check to apply on
account or for value, knowing at the time of issue that there are no sufficient funds in or
credit with the drawee bank for the payment of such check in full upon its presentment (BP
22, Section 1)
2. Elvira Yu Oh vs. Court of Appeals and People of the Philippines, G.R. No. 125297, June 6, 2003, 14
Second Division, J. Austria Martinez
Issue: What is the scope of the term “insufficient fund” as ground for dishonor in BP 22? What is
the meaning of check under BP 22 especially so that here the check is not payable on demand as
defined by Article 185? Is the requirement of notice of dishonor in BP 22 mandatory? (Also, liabilities
of parties, suit of payee directly against drawer, Section 147)
● “Insufficient fund” means insufficiency of funds or credit, and is not limited to "no funds" or "closed
accounts."
● The language of B.P. Blg. 22 is broad enough to cover all kinds of checks, whether present dated or
postdated, or whether issued in payment of pre-existing obligations or given in mutual or
simultaneous exchange for something of value.
● In cases for violation of B.P. Blg. 22, it is necessary that the prosecution prove that the issuer had
received a notice of dishonor. Since service of notice is an issue, the person alleging that the notice
was served must prove the fact of service. Basic also is the doctrine that in criminal cases, the
quantum of proof required is proof beyond reasonable doubt. Hence, for cases of B.P. Blg. 22 there
should be clear proof of notice.
3. Hongkong and Shanghai Banking Corporation Limited vs. Cecilia Diez Catalan, G.R. No. 159590, 15
October 18, 2004, Second Division, J. Austria Martinez
3a. HSBC International Trustee Limited vs. Cecilia Diez Catalan, G.R. No. 159591, October 18, 2004,
Second Division, J. Austria Martinez
3b. HSBC vs. Catalan, G.R. No. 159590, April 25, 2005, Second Division, Resolution
Issue: What is the effect that this suit is under Article 19 of the Civil Code? What about
Sections 189 and 147 of the NIL?
a.) 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. Her allegations in the complaint that the gross inaction of HSBANK
on Thomson’s instructions, as well as its evident failure to inform Catalan of the reason for its
continued inaction and non-payment of the checks, smack of insouciance on its part, are sufficient
statements of clear abuse of right for which it may be held liable to Catalan for any damages she
incurred resulting therefrom. HSBANK’s actions, or lack thereof, prevented Catalan from seeking
further redress with Thomson for the recovery of her claim while the latter was alive.
b.) 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. Catalan may have prayed that she be paid
the value of the checks but it is axiomatic that what determines the nature of an action, as well as
which court has jurisdiction over it, are the allegations of the complaint, irrespective of whether or
not the plaintiff is entitled to recover upon all or some of the claims asserted therein.
Anent HSBC TRUSTEE, it is being sued for the baseless rejection of Catalan’s claim. When Catalan
parted with the checks as a requirement for the processing of her claim, even going to the extent of
traveling to Hongkong to deliver personally the checks, HSBC TRUSTEE summarily disapproved her
claim with nary a reason. HSBC TRUSTEE gave no heed to Catalan’s incessant appeals for an
explanation. Her pleas fell on deaf and uncaring corporate ears. Clearly, HSBC TRUSTEE’s acts are
anathema to the prescription for human conduct enshrined in Article 19 of the Civil Code.
4. Luzon Development Bank vs. Benedicto C. Conquilla, Cornelia C. Conquilla, Dorotea C. Orcine and 16
Feliciano S. Conquilla, G.R. No. 163338, September 21, 2005 , Third Division, J. Panganiban
Issue: What is a promissory note? Is the promissory note proof of identity parties (Columbia and
Coquillas)? (Also, Section 1 effect of check drawn against closed account: non-negotiable! Section
6 issued undated, stale check)
a. A Promissory Note is defined as "an unconditional promise in writing made by
one person to another, signed by the maker, engaging to pay on demand, or
at a fixed or determinable future time, a sum certain in money to order or to
bearer." This definition shows that the makers or signatories of a promissory
note have the duty to pay the amount stated on it.
5. Victoria J. Ilano, etc. vs. Hon. Dolores Español, et. al., G.R. No. 161756, December 16, 2005 Third 17
Issue: What is the effect as to the negotiability of the check drawn against closed account? What
will happen to checks that are not dated? What is a stale check? What is the banking practice on
stale checks? (Note: Remedy is bill of particulars not dismissal if complaint lacks particularity. Note:
this is not covered by the NIL)
● All the checks which were drawn against the same closed account were already rendered
valueless or non-negotiable.
● The validity and negotiable character of an instrument are not affected by the fact that it
is not dated;
● By current banking practice, a check becomes stale after more than six (6) months, or 180
days.
6. Atty. Jose Ricuerdo P. Flores vs. Felix M. Falcotelo, Sheriff IV, RTC Branch 276, Muntinlupa 18
City, A.M. No. P-05-2038, January 25, 2006, First Division, J. Austria Martinez
Issue: What are the safeguards provided by NIL that were violated? (Note this is instructive as to
the procedure for sheriffs in case litigants voluntarily pay. There was no mention however as to
what these NIL safeguards are) (Also, Section 52, 191 and negotiation (Section 30) vs assignment)
● In cases where the judgment obligor voluntarily pays in cash or certified checks the judgment debt
and the judgment obligee is not present, Section 9 of Rule 39 requires the sheriff to receive the
payment. However, the sheriff must turn over the amount within the same day to the clerk of court.
If it is not practicable to deliver the amount to the clerk of court within the same day, the sheriff
shall deposit the amount in a fiduciary account with the nearest government depository bank. The
clerk of court then delivers the amount to the judgment obligee in satisfaction of the judgment.
7. Leticia G. Miranda vs. PDIC, BSP and Prime Savings Bank, G.R. No. 169334, September 8, 2006, First 19
Division, J. Ynares-Santiago
Issue: Do checks operate as an assignment of funds in the hands of Miranda? Was the claim of
Miranda a disputed claim under Section 30 of RA 7653 and thus under the jurisdiction of the
liquidation court? Are the respondents solidarily liable to Miranda? (Also, PCHC clearing
indorsement, liability of indorser, liability of collecting bank, checks as legal tender)
● The two cashier's checks issued by Prime Savings Bank do not constitute an assignment of funds in
the hands of the petitioner as there were no funds to speak of in the first place.
● The claim lodged by the petitioner qualifies as a disputed claim subject to the jurisdiction of the
liquidation court. Regular courts do not have jurisdiction over actions filed by claimants against an
insolvent bank, unless there is a clear showing that the action taken by the BSP, through the
Monetary Board in the closure of financial institutions was in excess of jurisdiction, or with grave
abuse of discretion.
● It is only Prime Savings Bank that is liable to pay for the amount of the two cashier's checks. Solidary
liability cannot attach to the BSP, in its capacity as government regulator of banks, and the PDIC as
statutory receiver under R.A. No. 7653, because they are the principal government agencies
mandated by law to determine the financial viability of banks and quasi-banks, and facilitate
receivership and liquidation of closed financial institutions, upon a factual determination of the
latter's insolvency.
8. Citibank, N.A. (formerly First National City Bank) and Investors’ Finance Corporation, doing 20
business under the name and style of FNCB Finance vs. Modesta R. Sabeniano, G.R. No. 156132,
October 16, 2006, First Division, J. Chico-Nazario
Issue: Are the managers checks (MCs) proof of receipt of loan proceeds? What is the
significance of BPI’s clearing indorsement? What is a crossed check? What is the liability of the
indorser? Is a collecting bank an indorser? Are checks legal tender? (Also, Section 36 restrictive
indorsement)
Answer:
Yes. A crossed MCs give rise to the presumption that the said MCs were already paid out to the intended
payee. Even if the MCs deposited by BPI's client, whether it be by respondent herself or some other person,
lacked the necessary indorsement, BPI, as the collecting bank, is bound by its warranties as an indorser and
cannot set up the defense of lack of indorsement as against petitioner Citibank, the drawee bank.
The crossed check cannot be presented for payment, but it can only be deposited and the drawee bank may
only pay to another bank in the payee's or indorser's account.it is the duty of the collecting bank to
ascertain that the check be deposited in payee's account only
A check, whether an MC or an ordinary check, is not legal tender and, therefore, cannot constitute valid
tender of payment
9. Hi-Cement Corporation vs. Insular Bank of Asia and America (later Philippin Commercial 21
International Bank and now, Equitable PCI Bank), G.R. No. 132403, September 28, 2007, First
Division, J. Corona
Issue: What are crossed checks and how will these checks affect holders in due course? Are crossed
checks similar to restrictive indorsements? Are holders (E-PCI) required to ascertain indorser’s title
on crossed checks? What is solidary liability and relativity of contracts (Section 17, Articles 1207 and
1208 of the Civil Code)? Note instructive as the principle of piercing the veil of corporate personality
but not covered by NIL)
Jurisprudence has pronounced that crossing of a check should have 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 one who has an account with a bank [and]; (c) the act of crossing the checks serves as
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, otherwise, he is not a holder in due course.
Solidary liability is one in which each of the debtors is liable for the entire obligation, and each of
the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the
debtors. Relativity of Contracts means contracts are binding only upon the parties and their
successors-in-interest.
9a. E.T. Henry & Co. and spouses Enrique Tan and Lilia Tan vs. Insular Bank of Asia and America (later 22
Philippine Commercial International Bank and now, Equitable PCI Bank) G.R. No. 132419, September
28, 2007 First Division, J. Corona
Issue: What are crossed checks and how will these checks affect holders in due course? Are crossed
checks similar to restrictive indorsements? Are holders (E-PCI) required to ascertain indorser’s title
on crossed checks? What is solidary liability and relativity of contracts (Section 17, Articles 1207 and
1208 of the Civil Code)? Note instructive as the principle of piercing the veil of corporate personality
but not covered by NIL)
ANSWER:
● The crossing may be “special” wherein between the two parallel lines is written the name
of a bank or business institution, in which case the drawee should pay only with the
intervention of that bank or company. It may also be “general” wherein between two
parallel diagonal lines are written the words “and Co.” or none at all, in which case the
drawee should not encash the same but merely accept the same for deposit.
In order to preserve the credit worthiness of checks, jurisprudence has pronounced that
crossing of a check should have 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 one who has an
account with a bank [and]; (c) the act of crossing the checks serves as 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, otherwise, he is not a holder in due course.
● Yes, as a banking institution, it behooved respondent to act with extraordinary diligence in

every transaction. Its business is impressed with public interest, thus, it was not expected to
be careless and negligent, specially so where the checks it dealt with were crossed. It is then
settled that crossing of checks should put the holder on inquiry and upon him devolves the
duty to ascertain the indorser’s title to the check or the nature of his possession.
● Hi-Cement could not also be made solidarily liable with Riverside and Kanebo for the face
value of their checks. Hi-Cement had nothing to do with the checks of these two
corporations. However, although the language of the trial court decision's dispositive
portion seemed confusing, a reading of the decision in its entirety reveals that the fallo was
for each corporation to be liable solidarily with E.T. Henry and/or the spouses Tan for the
respective values of their checks.
Furthermore, solidary liability cannot be presumed but must be established by law or

contract. Neither is present here.
10. Metropolitan Bank and Trust Company vs. Philippine Bank of Communications, Filipinas Orient 23
Finance Corporation, Pipe Master Corporation and Tan Juan Lian, G.R. No. 141408, October 18,
2007, First Division, J. Sandoval-Gutierrez
Issue: Whether or not Metrobank and Solidbank liable to Filipinas Orient for accepting PBCom
crossed checks payable to Pipe Master? What are crossed checks? What are the liabilities of the
collecting bank? What is a “clearing indorsement”? (Also, checks payable to ‘cash’ (bearer
instrument) and liability of drawer)
ANSWER:
- YES. Here, petitioner banks have the obligation to ensure that the PBCom checks were
deposited in accordance with the instructions stated in the checks.[4] The four PBCom
checks in question had been crossed and issued “for payee’s account only.” This could only
mean that the drawer, Filipinas Orient, intended the same for deposit only by the payee,
Pipe Master. The effect of crossing a check means that the drawer had intended the check
for deposit only by the rightful person, i.e., the payee named therein[5] – Pipe Master.
-
- As what transpired in this case, petitioner banks accommodated Yu Kio, being a valued client
and the president of Pipe Master, and accepted the crossed checks. They stamped at the
back thereof that “all prior indorsements and/or lack of indorsements are guaranteed.” In
so doing, they became general endorsers. 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 a good title to it; that all prior parties had capacity to contract;
and that the instrument is at the time of his indorsement valid and subsisting.” Clearly,
petitioner banks, being endorsers, cannot deny liability.
- A crossed check is a check for which the payment is not made over the counter at the bank.
It is only credited to the bank account of the payee. A check can be made a crossed check by
drawing two transverse parallel lines across the check, with or without the writing 'Account
payee' or 'Not Negotiable'.
- A collecting bank or last endorser generally suffers the loss because it has the duty to
ascertain the genuineness of all prior indorsements and is privy to the depositor who
negotiated the check.
- An act performed by a collecting bank in scrutinizing the check and to know its depositors
before it can make the clearing indorsement, “all prior indorsements and/or lack of
indorsement guaranteed.”
10a. Solid Bank Corporation vs. Filipinas Orient Finance Corporation, Pipe Master Corporation, 1
Tan Juan Lian, and/or Philippine Bank of Communications, G.R. No. 141429, October 18, 2007, First
Division, J. Sandoval-Gutierrez
Issue: Whether or not Metrobank and Solidbank liable to Filipinas Orient for accepting PBCom
crossed checks payable to Pipe Master? What are crossed checks? What are the liabilities of the
collecting bank? What is a “clearing indorsement”? (Also, checks payable to ‘cash’ (bearer
instrument) and liability of drawer)
- No. Petitioner banks have the obligation to ensure that the PBCom checks were deposited in
accordance with the instructions stated in the checks. The four PBCom checks in question had been
crossed and issued "for payee's account only." This could only mean that the drawer, Filipinas Orient,
intended the same for deposit only by the payee, Pipe Master. The effect of crossing a check means
that the drawer had intended the check for deposit only by the rightful person, i.e., the payee named
therein - Pipe Master.
As what transpired in this case, petitioner banks accommodated Yu Kio, being a valued client and
the president of Pipe Master, and accepted the crossed checks. They stamped at the back thereof
that "all prior indorsements and/or lack of indorsements are guaranteed." In so doing, they became
general endorsers. 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 a good title to it;
that all prior parties had capacity to contract; and that the instrument is at the time of his
indorsement valid and subsisting."
Clearly, petitioner banks, being endorsers, cannot deny liability.
- The Negotiable Instruments Law is silent with respect to crossed checks. Nonetheless, this Court
has taken judicial cognizance of the practice that a check with two parallel lines on the upper left
hand corner means that it could only be deposited and not converted into cash.2 The crossing of a
check with the phrase "Payee's Account Only" is a warning that the check should be deposited in the
account of the payee. It is the collecting bank which is bound to scrutinize the check and to know its
depositors before it can make the clearing indorsement, "all prior indorsements and/or lack of
indorsement guaranteed."
- we held that the collecting bank or last endorser generally suffers the loss because it has the duty
to ascertain the genuineness of all prior indorsements and is privy to the depositor who negotiated
the check.
11. Security Bank and Trust Company vs. Rizal Commercial Banking Corporation, G.R. No. 170984, 2
January 30, 2009, Second Division, Acting CJ. Quisumbing
Issue: What is a manager’s check? What is the effect of a check payable to cash? What is the liability
of the drawer? (Also, Section 52 holder in due course)
● A manager's check is one drawn by a bank's manager upon the bank itself. It stands on the
same footing as a certified check,which is deemed to have been accepted by the bank that
certified it.As the bank's own check, a manager's check becomes the primary obligation of
the bank and is accepted in advance by the act of its issuance.
● The effect of a check payable to cash is substantially as good as the money it represents.
● The liability as a drawer remains the same − by drawing the instrument, it admits the
existence of the payee and his then capacity to indorse; and engages that on due
presentment, the instrument will be accepted, or paid, or both, according to its tenor.
11a. Rizal Commercial Banking Corporation vs. Security Bank and Trust Company, G.R. No. 170987, 3
January 30, 2009, Second Division, Acting CJ. Quisumbing
Issues:
(1) What is a manager’s check?
(2) What is the effect of a check payable to cash?
(3) What is the liability of the drawer? (Also, Section 52 holder in due course)
Held:
(1) A manager’s check is one drawn by a bank’s manager upon the bank itself. This stands on the same
footing as a certified check, which is deemed to have been accepted by the bank that certified it. It
becomes the primary obligation of the bank and is accepted in advance by the act of its issuance.
(2) Where a check payable to cash appears regular on its face and the bank finds nothing unusual in the
transaction, the bank shall pay the value of the check.
(3) Section 61 of Act No 2031 provides for the liability of the drawer. The drawer by drawing the
instrument admits the existence of the payee and his then capacity to indorse; and engages that, on
due presentment, the instrument will be accepted or paid, or both, according to its tenor, and if it
be dishonored and the necessary proceedings on dishonor be truly taken, he will pay the amount
thereof to the holder of to any subsequent indorser who may be compelled to pay it. But the drawer
may insert in the instrument an express stipulation negativing or limiting his own liability to the
holder.
12. Robert Dino vs. Maria Luisa Judal-Loot joined by her husband Vicente Loot, G.R. No. 170912, April 4
19, 2010, Second Division, J. Carpio
Issue: What is the effect of a crossed check? What is a holder in due course? (Note unique since the
effect of a cross check ‘hits’ the holder and not the drawee or collecting bank as in previous cases)
ANSWER:
● Under usual practice, crossing a check is done by placing two parallel lines diagonally on the
left top portion of the check. The crossing may be special wherein between the two parallel
lines is written the name of a bank or a business institution, in which case the drawee should
pay only with the intervention of that bank or company, or crossing may be general wherein
between two parallel diagonal lines are written the words "and Co." or none at all as in the
case at bar, in which case the drawee should not encash the same but merely accept the
same for deposit.
The effect therefore of crossing a check relates to the mode of its presentment for payment.
Under Section 72 of the Negotiable Instruments Law, presentment for payment to be
sufficient must be made (a) by the holder, or by some person authorized to receive payment
on his behalf x x x As to who the holder or authorized person will be depends on the
instructions stated on the face of the check.
● Section 52 of the Negotiable Instruments Law defines a holder in due course, thus:
A holder in due course is 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; and
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 of a crossed check, as in this case, the following principles must additionally be
considered: A crossed check (a) may not be encashed but only deposited in the bank; (b)
may be negotiated only once -- to one who has an account with a bank; and (c) warns the
holder that it has been issued for a definite purpose so that the holder thereof must inquire
if he has received the check pursuant to that purpose; otherwise, he is not a holder in due
course.
13. Salvador O. Echano vs. Liberty Toledo, G.R. No. 173930, September 15, 2010, Second Division, J. 5
Abad
Issue: What is the effect of a crossed check? What is a manager’s check?
- It means that the drawer, here the Medical Center Trading Corporation, intended it to be deposited
to the account of the payee.A manager's check is one drawn by the bank's manager upon the bank
itself. It is similar to a cashier's check both as to effect and use.
14. Philippine Commercial Bank Vs. Antonio B. Balmaceda and Rolando N. Ramos, G.R. No. 158143. 6
September 21, 2011 2nd Division, J. Brion
Issue: What is a crossed check? (Also, instructive as to warranty of a maker as to the identity of the
payee)
- A crossed check is one where two parallel lines are drawn across its face or across its corner. Based
on jurisprudence, the crossing of a check has 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 check 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. In other words, the
crossing of a check is a warning that the check should be deposited only in the account of the
payee. When a check is crossed, it is the duty of the collecting bank to ascertain that the check is
only deposited to the payee’s account.
15. Philippine National Bank Vs. Amelio Tria and Atty. Reyes/John Doe, G.R. No. 183308, April 25, 7
2012, Third Division, J. Velasco Jr.
Issue: What is a manager’s check? (Note this is instructive as to exclusive authority of the Executive
Department through the Department of Justice to file information in criminal case. Here the SC
ordered the filing of an information stating that the earlier refusal of the DOJ to do so [sustained by
the CA] was grave abuse of discretion. But this discussion is not covered by NIL)
● A manager’s check is one drawn by a bank’s manager, upon the bank itself. It stands on
the same footing as a certified check, which is deemed to have been accepted by the bank
that certified it, as it 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. In fact, it is obvious from the PNB affidavits that the MWSS C/A
was deducted upon the issuance of the manager’s check and not upon its encashment.
Indeed, as the bank’s own check, a manager’s check becomes the primary obligation of the
bank and is accepted in advance by the act of its issuance.
16. Designer Basktets, Inc. Vs. Air Sea Transport, Inc., et al., G.R. No. 184513, March 9, 2016, Third 8
Division, J. Jardeleza
Issue: In Article 1503 of the Civil Code what is the role of a Bill of Exchange to that of a Bill of Lading
to show the existence of a contract of sale? (Also, instructive as to the computation of stated
interests)
When there is a contract of sale of specific goods, the seller may, by the terms of the contract,
reserve the right of possession or ownership in the goods until certain conditions have been fulfilled.
The right of possession or ownership may be thus reserved notwithstanding the delivery of the goods
to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer.
17. Teresita I. Buenaventura vs. Metropolitan Bank and Trust Company, G.R. No. 167082, August 3, 9
2016, First Division, J. Bersamin
Issue: Are the promissory notes in this case contracts of adhesion and supposed it were what will be
the effect?
● No, they are not contracts of adhesion. If it were, the promissory notes will be interpreted
differently from what the parties intended it to be. When the language of the contract is
explicit leaving no doubt as to the intention of the drafters thereof, the courts may not read
into it any other intention that would contradict its plain import.
Are the promissory notes simulated and fictitious?

● No, the promissory notes were not simulated and fictitious.
● The burden of showing that a contract is simulated rests on the party impugning the
contract. This is because of the presumed validity of the contract that has been duly
executed. The proof required to overcome the presumption of validity must be convincing
and preponderant. Without such proof, therefore, the petitioner’s allegation that she had
been made to believe that the promissory notes would be guaranties for the rediscounted
checks, not evidence of her primary and direct liability under loan agreements, could not
stand.
Are the promissory notes meant only as guaranties to secure payment of checks by the issuer, Rene
Imperial?
● No, the promissory notes were not executed as guaranty for the payment of the subject
checks. A contract of guaranty is one where a person, the guarantor, binds himself or herself
to another, the creditor, to fulfill the obligation of the principal debtor in case of failure of
the latter to do so. It cannot be presumed but must be express and in writing to be
enforceable, especially as it is considered a special promise to answer for the debt, default
or miscarriage of another. It being clear that the promissory notes were entirely silent about
the supposed guaranty in favor of Imperial, the Court must read the promissory notes
literally due to the absence of any ambiguities about their language and meaning. The
petitioner could not validly insist on the guaranty.
18. Citystate Savings Bank Vs. Teresita Tobias and Shellidie Valdez, G.R. No. 227990, March 7, 2018, 10
Second Division, J. Reyes Jr.
Issue: What is the doctrine of comparative negligence? What is the doctrine of apparent
authority or what is sometimes referred to as the “holding out” theory? What is the doctrine of
ostensible agency? (Also, instructive as to money laundering)
Issue: What is the doctrine of comparative negligence?
Answer: While this Court admitted that there was no evidence confirming the conscious
participation of PCIB (collecting bank) in the embezzlement, it nonetheless found the latter liable
pursuant to the doctrine of imputed negligence, as it was established that its employees performed
the acts causing the loss in their official capacity or authority albeit for their personal and private
gain or benefit. Yet, finding that the drawee, Citibank was remiss of its contractual duty to pay the
proceeds of the crossed checks only to its designated payee, this Court ruled that Citibank should
also bear liability for the loss. Then, applying the doctrine of comparative negligence, this Court
adjudged PCIB and Citibank equally liable for the proceeds of the checks.
Issue: What is the doctrine of apparent authority or what is sometimes referred to as the “holding
out” theory? What is the doctrine of ostensible agency?
Answer: The doctrine of apparent authority or what is sometimes referred to as the “holding out”
theory, or the doctrine of ostensible agency, imposes liability, not “as the result of the reality of a
contractual relationship, but rather because of the actions of a principal or an employer in somehow
misleading the public into believing that the relationship or the authority exists.” It is defined as:
The power to affect the legal relations of another person by transactions with third persons
arising from the other’s manifestations to such third person such that the liability of the
principal for the acts and contracts of his agent extends to those which are within the
apparent scope of the authority conferred on him, although no actual authority to do such
acts or to make such contracts has been conferred.
Succinctly stating the foregoing principles, the liability of a bank to third persons for acts done by its
agents or employees is limited to the consequences of the latter’s acts which it has ratified, or those
that resulted in performance of acts within the scope of actual or apparent authority it has vested.
19. Philippine Deposit Insurance Corporation Vs. Manu Gidwani, G.R. No. 234616, June 20, 2018, Third 11
Division, J. Velasco, Jr.
Issue: What is a crossed check?
A crossed check is one where two (2) 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 check 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.
20. Quintin Artacho Llorente, V. Star City PTY Limited, G.R. No. 212050, January 15, 2020 , First
Issue: What is the meaning of a draft is it a negotiable instrument? If it is, what type of a
negotiable instrument is a draft? What is a bank draft? (Note! “drawn on a bank” [check], “drawn
by a bank” [draft])
● What is the meaning of a draft? Is it a negotiable instrument? A draft is a form of a

bill of exchange used mainly in transactions between persons physically remote from each
other. A draft is a negotiable instrument.
● If it is, what type of a negotiable instrument is a draft? It is an order made by one

person, say the buyer of goods, addressed to a person having in his possession funds of
such buyer, ordering the addressee to pay the purchase price to the seller of the goods.
● What is a bank draft? Where the order is made by one bank to another bank, it is referred
to as a bank draft.
Issue: What is the meaning of a draft and is it a negotiable instrument?

A draft is a form of a bill of exchange used mainly in transactions between persons physically remote
from each other. It is an order made by one person, say the buyer of goods, addressed to a person
having in his possession funds of such buyer, ordering the addressee to pay the purchase price to the
seller of the goods.
If it is, what type of a negotiable instrument is a draft?

The bank drafts, subject of this case are negotiable instruments and are therefore governed by the
provisions of the Negotiable Instruments Law. Where the order is made by one bank to another bank,
as in this case, it is referred to as a bank draft.
What is a bank draft?

Where the order is made by one bank to another bank, as in this case, it is referred to as a bank
draft. It is in the customary form of a check and is generally drawn by one bank upon another bank
in which it has deposits much the same as the ordinary depositor draws his check upon his bank. The
general rule is that such instrument is a check and subject to the rules applicable to checks. Since
the term check is limited to a demand instrument and "draft" is not [as it may be payable on demand
or at a fixed or determinable future time72], there is a distinction between the two in this respect.
21. Nenita Ko, Vs. Atty. Ladimir Ian G. Maduramente and Atty. Mercy Grace L. Maduramente, 13
A.C. No. 11118 (Formerly CBD Case No. 08-2140), July 14, 2020, En Banc, Per Curiam
Issue: What is effect of a crossed check?
● The effect of a crossed check would be to indicate that the said crossed check would only be
for deposit in a specific bank account.
OTHER RELATED TOPICS
1. Jovencio Lim and Teresita Lim vs. People of the Philippines, Regional Trial Court of Quezon City, 14
Branch 217, City Prosecutor of Quezon City, and Wilson Cham, G.R. No. 149276, September
27, 2002, En banc, J. Corona
Issue: Whether or not PD 818 is constitutional?
● PD 818 is not unconstitutional. The fact that the penalty is severe provides insufficient basis to
declare a law unconstitutional and does not, by that circumstance alone, make it cruel and inhuman.
Also, the law was properly published and thus it did not violate the due process clause in the
Constitution.
2. Republic of the Philippines, represented by The Anti-Money Laundering Council (AMLC) vs. Hon. 15
Antonio M. Eugenio, JR., as presiding judge of RTC, Manila, Branch 34, Pantaleon Alvarez and Lilia
Cheng, G.R. No. 174629, February 14, 2008, Second Division, J. Tinga
Issue: Are checks confidential communications (especially in the light of U.S. vs. Miller, 425 US 435,
[1976])? Are bank deposits covered by the right to privacy? If so, what is the basis of such privacy in
the Philippine setting?
Answer: Yes. One might assume that the constitutional dimension of the right to privacy, as applied
to bank deposits, warrants our present inquiry. We decline to do so. Admittedly, that question has
proved controversial in American jurisprudence. Notably, the United States Supreme Court in U.S. v.
Miller held that there was no legitimate expectation of privacy as to the bank records of a
depositor.86 Moreover, the text of our Constitution has not bothered with the triviality of allocating
specific rights peculiar to bank deposits.
However, sufficient for our purposes, we can assert there is a right to privacy governing bank
accounts in the Philippines, and that such right finds application to the case at bar. The source of such
right is statutory, expressed as it is in R.A. No. 1405 otherwise known as the Bank Secrecy Act of 1955.
The right to privacy is enshrined in Section 2 of that law, to wit: SECTION 2. All deposits of whatever
nature with banks or banking institutions in the Philippines including investments in bonds issued by
the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby
considered as of an absolutely confidential nature and may not be examined, inquired or looked into
by any person, government official, bureau or office, except upon written permission of the
depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or
dereliction of duty of public officials, or in cases where the money deposited or invested is the subject
matter of the litigation.
Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a basic state policy in
the Philippines. Subsequent laws, including the AMLA, may have added exceptions to the Bank
Secrecy Act, yet the secrecy of bank deposits still lies as the general rule. It falls within the zones of
privacy recognized by our laws. The framers of the 1987 Constitution likewise recognized that bank
accounts are not covered by either the right to information under Section 7, Article III or under the
requirement of full public disclosure under Section 28, Article II.1 Unless the Bank Secrecy Act is
repealed or amended, the legal order is obliged to conserve the absolutely confidential nature of
Philippine bank deposits.
3. Spouses PNP Director Eliseo D. Dela Paz (Ret.) and Maria Fe C. Dela Paz vs. Senate Committee 16
on Foreign Relations and the Senate Sergeant-at-arms Jose Balajadia, Jr., G.R. No. 184849, February
13, 2009, En banc, J. Nachura
Issue: Effect of Article 14 (2) of the United Nations Convention Against Corruption as well as Article
17 (1) and (2) of the United Nations Convention Against Transnational Organized Crime on
“movement of cash and appropriate negotiable instruments”?
Philippines is a state-party to the United Nations Convention Against Corruption and the United
Nations Convention Against Transnational Organized Crime. The two conventions contain provisions
dealing with the movement of considerable foreign currency across borders. The Moscow incident
would reflect on our country’s compliance with the obligations required of state-parties under these
conventions. Thus, the respondent Committee can properly inquire into this matter, particularly as to
the source and purpose of the funds discovered in Moscow as this would involve the Philippines’
commitments under these conventions.
4. Spouses Simon Yap and Milagros Guevarra vs. First e-Bank Corporation (previous known as PDCP 17
Development Bank, Inc.), G.R. No. 169889, September 29, 2009, First Division, J. Corona
Issue: What is the effect of Circular 57-97 now Rule 111 Section 1 (b) on criminal actions
involving violation of BP 22 and its civil action?
Circular 57-97 and Section 1(b), Rule 111 of the Rules of Court both provide that the criminal action
for violation of BP 22 shall be deemed to necessarily include the corresponding civil action, i.e., a
collection suit. No reservation to file such civil action separately shall be allowed or recognized.
5. Office of the Court Administrator (OCA) vs. Clerk of Court Hermenegildo I. Marasigan, RTC Kabacan, 18
North Cotabato, A.M. No. P-05-2082, December 12, 2011, En Banc, Per Curiam.
Issue: What are guidelines on check payments for court fees provided in OCA Circular No. 88- 2007,
issued on August 28, 2007 or the Supreme Court adopted guidelines for the payment of fees, and its
modes and effect, thus, amending Section 1, Rule 141 of the Rules of Court?
● Pursuant to the Resolution dated April 17, 2007 in A.M. No. 04-2-04-SC amending Section 1
of Rule 141 of the Rules of Court, the following guidelines for the payment of fees, its modes
and effects are hereby adopted:
Xxxxx
Check payments may be in the form of personal, company or manager's check, provided
that, if the amount exceeds Fifty Thousand Pesos (P50,000.00), it shall be paid in manager's
check.
SEC. 3. When payment is made in check. - All checks shall be crossed. No post dated, altered,
or third-party check shall be accepted. Only checks in the account name of the lawyer (or
law firm) or the party (individual or corporate) filing an action shall be accepted.
SEC. 4. When check is dishonored. - Upon receipt of the notice of dishonor of the check from
the depository bank by the Supreme Court, the Fiscal Management and Budget Office
(FMBO) shall inform in writing the Clerk of Court concerned within five (5) days from receipt
of the notice of dishonor. In multiple-sala courts, the Clerk of Court shall inform in writing
the Branch Clerk of Court where the case was raffled of the dishonor of the check within
twenty-four (24) hours from receipt of the notice.
6. Magdiwang Realty Corporation, Renato P. Dragon and Esperanza Tolentino vs. The Manila 19
Banking Corporation, substituted by First Sovereign Asset Management (SPV-AMC), Inc., G.R. No.
195592, September 5, 2012, First Division, J. Reyes
Issue: Explain the (10)-year prescriptive period to file an action based on the subject promissory
note? What are the circumstances that interrupt this period in accordance with Article 1155 of the
New Civil Code?
● Art. 1142. A mortgage action prescribes after ten years
● Article 1155 of the New Civil Code (NCC) provides that the prescription of actions is interrupted
when: (1) they are filed before the court; (2) there is a written extrajudicial demand by the creditors;
and (3) there is any written acknowledgment of the debt by the debtor.
7. Office of the Court Administrator (OCA) vs. Susan R. Fontanilla, Clerk of Court, Municipal 20
Circuit Trial Court, San Narciso-Buenavista, San Narciso, Quezon, A.M. No. P-12- 3086, September
18, 2012, En Banc, Per Curiam
Issue: What is the check payment system? How does it eliminate the irregularities in the
collection of court funds?
Answer:
A check payment system is immediate depositing of Court’s fund with the LBP or with the authorized
government depositories. It is designed to promote full accountability for government funds.
8. Land Bank of the Philppines vs. Artemio S. San Juan, Jr., G.R. No. 168279. April 2, 2013, En Banc, J. 21
Brion
Issue: Whether the acts imputed on the respondent constitute gross neglect of duty so as to justify
the respondent’s dismissal from the government service?
Respondent’s actuations constitute gross, and not simple, neglect of duty. A bank manager has the
duty to ensure that bank rules are strictly complied with, not only to ensure efficient bank operation,
but also to serve the bank’s best interest. His responsibility over the functions of the employees of
the branch cannot simply be overlooked as their acts normally pass through his supervision and
approval. He should serve as the last safeguard against any pretense employed to carry out an illicit
claim over the bank’s money. In the present case, the respondent miserably failed to discharge his
functions as Acting LBP Manager.
9. Fely Y. Yalong vs. People of the Philippines and Lucila C. Ylagan, G.R. No. 187174, August 28, 2013, 22
Second Division, J. Perlas-Bernabe
Issue: In what places may the violation of BP 22 be filed? Where any of its elements occurred? Which
place, the place where the check is drawn, issued, delivered or dishonored?
ANSWER:
● It is well-settled that violation of BP 22 cases is categorized as transitory or continuing crimes,
which means that the acts material and essential thereto occur in one municipality or territory,
while some occur in another.
● A criminal case for violation of BP 22 may be filed in any of the places where any of its elements
occurred — in particular, the place where the check is drawn, issued, delivered, or dishonored.
10. Unicapital Inc., et al. vs. Rafael Jose Consing, Jr., et al./Rafael Consing, Jr. Vs. Hon. Marissa 23
Macaraig-Guillen, etc., et al., G.R. No. 175277, G.R. No. 175285/G.R. No. 192073, September 11,
2013, Second Division, J. Perlas-Bernabe
Issue: What is the effect of the creditors demanding a postdated check when the creditor knows
fully well that the drawer does not have the necessary funds to cover the same? Can this be enough
to sue pursuant to Article 19 of the Civil Code?
ANSWER: YES. Consing, Jr. alleged that Unicapital and PBI, et al.’s act of “demand[ing] a postdated
check knowing fully well [that he] does not have the necessary funds to cover the same, nor is he
expecting to have them [is equivalent to] asking him to commit a crime under unlawful coercive
force.” Accordingly, these specific allegations, if hypothetically admitted, may result into the recovery
of damages pursuant to Article 19 of the Civil Code which states that “[e]very person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.”
11. Richard Chua vs. The Executive Judge, Mertopolitan Trial Court, Manila, G.R. No. 202920, October 1
2, 2013, Second Division, J. Perez
Issue: If there are forty (40) counts of BP 22 filed must there be also forty (40) filing fees to be paid?
● Under the rules of criminal procedure, the filing of the forty(40) counts is equivalent to the
filing of forty (40) different informations, as each count represents an independent violation
of BP Blg. 22. Filing fees are, therefore, due for each count and may be paid for each count
separately. Consolidation unifies criminal cases involving related offenses only for purposes
of trial. Consolidation does not transform the tiling fees due for each case consolidated into
one indivisible fee. Allowing petitioner to pay for the tiling fees of some of the forty ( 40)
counts of violation of BP Big. 22 tiled before the MeTC, will concededly result into the
absolute non-payment of the filing fees of the rest. The fate of the cases which filing fees
were not paid, however, is already the concern of the MeTC.
12. Re: Allegations made under oath at the Senate Blue Ribbon Committee hearing held on September 2
26, 2013 Against Associate Justice Gregory S. Ong, Sandiganbayan, A.M. No. SB- 14-21-J, September
23, 2014, En Banc, Per Curiam
Issue: What was the consideration for the issuance of the checks relative to the Kevlar case?
● The eleven checks of ₱282,000.00 as supposed advance interest were given to respondent as
consideration for the favorable ruling in the Kevlar case.
13. Ariel T. Lim vs. People of the Philippines, G.R. No. 190834, November 26, 2014, Third Division, J. 3
Peralta
Issue: Will the payment of the amount of the dishonored checks six (6) months before the filing of
Informations with the court exonerate the accused from the imposition of penalties for violation
of BP 22?
Held: Yes, the payment of the dishonored checks six months before the filing of informations with
the court will exonerate the accused from the imposition of penalties for violation of BP Blg. 22.
14. Office of the Court Administrator vs. Fredelito R. Baltazar, A.M. No. P-14-3209, October 20, 2015, 4
En Banc, Per Curiam
Issue: What does Administrative Circular No. 3-2000 provide relative to the encashment of personal
check with the use of JDF fund?
ANSWER: The Administrative Circular No.3-2000 prohibits the use of the JDF fund for the
encashment of personal checks. In the JDF, collections shall not be used for encashment of personal
checks, salary checks, etc. Only Cash, Cashier's Check and Manager's Check are acceptable as
payments.Indeed, the use of court funds for purposes other than for what it is expected may
constitute malversation.
15. Paulina T. Yu Vs. Atty. Berlin R. Dela Cruz, A.C. No. 10912. January 19, 2016, En Banc, Per Curiam 5
Issue: Is the issuance of a worthless check to client basis for administrative complaint against
counsel?
- Yes. act of issuing worthless checks patently violated Rule 1.01 of Canon 1 of the CPR which requires
that "[a] lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct." This
indicates a lawyer's unfitness for the trust and confidence reposed on him, shows such lack of
personal honesty and good moral character as to render him unworthy of public confidence, and
constitutes a ground for disciplinary action, and thus seriously and irreparably tarnishes the image of
the profession.Such conduct, while already off-putting when attributed to an ordinary person, is
much more abhorrent when exhibited by a member of the Bar. In this case, respondent lawyer
turned his back from the promise that he once made upon admission to the Bar. As "vanguards of
the law and the legal system, lawyers must at all times conduct themselves, especially in their
dealings with their clients and the public at large, with honesty and integrity in a manner beyond
reproach."
16. Mary Elizabeth Ty-Delgado Vs. House of Representatives Electoral Tribunal and Philip Arreza 6
Pichay, G.R. No. 219603, January 26, 2016, En Banc, J. Carpio
Issue: Is violation of BP 22 a crime against moral turpitude?
- Yes, violation of Batas Pambansa Blg. 22 is a crime involving moral turpitude because a
drawer who issues an unfunded check deliberately reneges on the private duties he owes his
fellow men or society in a manner contrary to accepted and customary rule of right and duty,
justice, honesty or good morals
17. Engel Paul Aca Vs. Atty. Ronaldo P. Salvado, A.C. No. 10952, January 26, 2016, En Banc Per Curiam 7
counsel?
● Yes. The issuance of worthless checks constituted gross misconduct, and put the erring
lawyer's moral character in serious doubt, though it was not related to his professional duties
as a member of the Bar.
[In this case, it constituted a violation of Rule 1.01 and Rule 7.03 of the CPR.]
18. Simplecio A. Marsada Vs. Romeo M. Monteroso, etc., A.M. No. P-10-2793, March 8, 2016, En Banc, 8
J. Bersamin
Issues and Answers:

What is the sheriff’s duty to exhaust all efforts to recover the balance of an unsatisfied execution
of judgment under Section 9, Rule 39 of the Rules of Court?
The sheriff’s duty is outlined below:
(a) Immediate payment on demand - The officer shall enforce an execution of a judgment for money
by demanding from the judgment obligor the immediate payment of the full amount stated in the
writ of execution and all lawful fees. The judgment obligor shall pay in cash, certified bank check
payable to the judgment obligee, or any other form of payment acceptable to the latter, the amount
of the judgment debt under proper receipt directly to the judgment obligee or his authorized
representative if present at the time of payment. The lawful fees shall be handed under proper
receipt to the executing sheriff who shall turn over the said amount within the same day to the clerk
of court of the court that issued
the writ.
(b) Satisfaction by levy - If the judgment obligor cannot pay all or part of the obligation in cash,
certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall
levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be
disposed of for value and not otherwise exempt from execution giving the latter the option to
immediately choose which property or part thereof may be levied upon, sufficient to satisfy the
judgment.
(c) Garnishment of debts and credits - The officer may levy on debts due the judgment obligor and
other credits, including bank deposits, financial interests, royalties, commissions and other personal
property not capable of manual delivery in the possession or control of third parties. Levy shall be
made by serving notice upon the person owing such debts or having in his possession or control such
credits to which the judgment obligor is entitled. The garnishment shall cover only such amount as
will satisfy the judgment and all lawful fees.
Can payment be done through a certified bank check?

Yes. Payment can be done in cash or through a certified bank check, issued in the name of the
judgment obligee, which shall be delivered directly to the judgment obligee within ten (10) working
days from service of notice on said garnishing requiring such delivery, except the lawful fees which
shall be paid directly to the court.
Can an executing sheriff demand that payment by check be made payable to him?
No. The check should be made payable in the name of the judgment obligee.
19. Republic of the Philippines represented by Privatization and Management Office Vs. National 9
Labor Relations Commission, et al., G.R. No. 174747, March 9, 2016, Second Division, J. Leonen
Issue: Can the checks be released to the complainants without filing a separate claim before the
Commission on Audit?
● Yes, it can.
● Under Proclamation No. 50, Series of 1986, no employer-employee relationship is created by
the acquisition of Asset Privatization Trust (now Privatization and Management Office) of
government assets for privatization. It is not obliged to pay for any money claims arising from
employer-employee relations except when it voluntarily holds itself liable to pay. These
money claims, however, must be filed within the three-year period under Article 291 of the
Labor Code. Once liability is determined, a separate money claim must be brought before the
Commission on Audit, unless the funds to be used have already been previously appropriated
and disbursed.
● Here, the petitioner’s Board of Trustees already have issued the Resolution on September
23, 1992 for the release of funds to pay separation benefits to terminated employees of
Bicolandia Sugar Development Corporation. Private respondents’ checks were released by
petitioner to the Arbitration Branch in Labor Arbiter in 1992. Under these circumstances, it
is presumed that the funds to be used for private respondents’ benefits have already been
appropriated and disbursed. This would account why private respondents’ co-complainants
were able to claim their checks without need of filing a separate claim before the COA.
20. PHILCOMSAT Holdings Corporation Vs. Atty. Luis K. Lokin, Jr. and Atty. Sikin C. Labastilla, A.C. 10
No. 11139, April 19, 2016, En Banc, Perlas-Bernabe
Issue: What will be the consequence if counsel made it appear in the checkbook that two million
pesos (P2,000,000.00) was issued for the Sandiganbayan to secure a TRO?
Answer: A counsel can be held guilty of indirect contempt and be held administratively liable of
violating the Code of Professional Responsibility as the subject checkbook entry contained a
contumacious imputation against the Sandiganbayan which tends to undermine and/or denigrate
the integrity of such court.
21. Atty. Joselita C. Malibago-Santos, etc. Vs. Juanito B. Francisco, Jr., etc., A.M. No. P-16-3459, June 25
21, 2016, En Banc, J. Leonen
Issue: Is it legal for a Sheriff to accept a check in the amount of P8,000.00 in an honest belief that his
official duties as regards the extrajudicial foreclosure proceedings have already ceased?
ANSWER:
● No. Sheriffs cannot receive any voluntary monetary considerations from any party in relation
to the performance of their duties as officers of the court. Canon I, Section 4 and Canon III,
Section 2(b) of the Code of Conduct for Court Personnel prohibit public employees such as
sheriffs from accepting any form of remuneration in relation to the performance of their
official duties. Furthermore, PD 4639 and Section 7(d) of RA 6713 similarly and expressly
prohibit public officials and employees from receiving such gratuities.
22. Aurora Aguilar-Dyquianco Vs. Atty. Diana Lynn M. Arellano, A.C. No. 10541, July 12, 2016, En Banc, 25/
J. Caguioa 12
counsel?
ANSWER:
● Yes. Canon 1 of the Code of Professional Responsibility mandates all members of the Bar to
obey the laws of the land and promote respect for law, and Rule 1.01 of the Code specifically
provides that "a lawyer shall not engage in unlawful, dishonest, immoral or deceitful
conduct." The act of a lawyer in issuing a check without sufficient funds to cover the same
constitutes such willful dishonesty and immoral conduct which undermines the public
confidence in the legal profession. He or she cannot justify the act of issuing worthless checks
by reason of dire financial condition.
counsel?
His act of issuing a worthless check constitute grave violations of the CPR and the lawyer's oath. These
shortcomings on his part have seriously breached the highly fiduciary relationship between lawyers
and clients. Specifically, his act of issuing worthless checks patently violated Rule 1.01 of Canon 1 of
the CPR which requires that "[a] lawyer shall not engage in unlawful, dishonest, immoral or deceitful
conduct." This indicates a lawyer's unfitness for the trust and confidence reposed on him, shows such
lack of personal honesty and good moral character as to render him unworthy of public confidence,
and constitutes a ground for disciplinary action, and thus seriously and irreparably tarnishes the
image of the profession. Such conduct, while already off-putting when attributed to an ordinary
person, is much more abhorrent when exhibited by a member of the Bar.
23. Sps. Nunilo and Nemia Anaya Vs. Atty. Jose B. Alvarez, Jr., A.C. No. 9436, August 1, 2016, Second 25
Division, J. Mendoza
counsel?
ANSWER:
● Yes. The act of a lawyer in issuing a check without sufficient funds to cover them or, worst,
drawn against a closed account, constitutes willful dishonesty, unethical conduct, and
manifestation of moral turpitude that undermines the public confidence in the law and the
members of the bar. It shows a lawyer's low regard to his commitment to the Oath, which
he swore to uphold and respect when he joined the legal profession.
24. Jen Sherry Wee-Cruz Vs. Atty. Chichina Faye Lim, A.C. No. 11380, August 16, 2016, En Banc, C.J. 25
Sereno
Issue: Is the issuance of a worthless check to client basis for administrative complaint against counsel?
ANSWER:
● Yes. On several occasions, the Supreme Court has had to discipline members of the legal
profession for their issuance of worthless checks. The issuance of unfunded checks involves
a violation of BP 22, and exhibits indifference towards the pernicious effect of the illegal act
to public interest and public order.
25. Bienvenida Flor Suarez Vs. Atty. Eleonor A. Maravilla-Ona, A.C. No. 11064, September 27, 2016, En 25
Banc, Per Curiam
counsel?
ANSWER:
● Yes. The act of issuing a worthless check constitutes dishonesty, abuse of trust and
confidence, and betrayal of a lawyer’s client's interests in violation of the Code of
Professional Responsibility. Section 27, Rule 138 of the Revised Rules of Court mandates that
a lawyer may be disbarred or suspended by this Court for any of the following acts: (1) deceit;
(2) malpractice; (3) gross misconduct in office; xxx (5) conviction of a crime involving moral
turpitude; and (6) violation of the lawyer's oath;
● These acts undoubtedly speak of deceit which involves moral turpitude and includes anything
done contrary to justice, modesty or good morals. Such malfeasance is not only
unacceptable, disgraceful, and dishonorable to the legal profession; it also reveals a basic
moral flaw that makes a lawyer unfit to practice law.
26. Woodrow B. Camaso Vs. TSM Shipping (Phils), Inc., UTKILEN, and/or Jones Tulod, G.R. No. 223290, 25
November 7, 2016, First Division, J. Perlas-Bernabe
Issue: Is the use of a Metrobank check attached to a petition for review as payment of docket fees
among the modes of payment under Section 6, Rule VIII of the 2009 IRCA? Must the rules be relaxed
in the interest of substantial justice?
ANSWER:
● No, it is not one of the modes prescribed under the Rules. However, the rules may be relaxed
in the interest of substantial justice. While the court acquires jurisdiction over any case only
upon the payment of the prescribed docket fees, its non-payment at the time of filing of the
initiatory pleading does not automatically cause its dismissal provided that: (a) the fees are
paid within a reasonable period; and (b) there was no intention on the part of the claimant
to defraud the government.
27. Spouses Rodel and Eleanor Caños Vs. Atty. Louise Marie Therese B. Escobido, A.M. No. P-15-3315, 25
February 6, 2017, Third Division, J. Jardeleza
Issue: Is the issuance of a worthless check to client basis for administrative complaint against a clerk
of court?
ANSWER:
● Yes. The Administrative Code of 1987 provides that a public employee's failure to pay just
debts is a ground for disciplinary action. The repeated acts of contracting loans and paying
with worthless checks reflect bad faith. A clerk of court is not a mere public employee; the
clerk is both an employee of the Court and a member of the Bar, and thus, is expected to
meet a high standard of uprightness and propriety. They also hold a position of trust and
confidence with concomitant duties and responsibilities that require from its holder
competence, honesty, and integrity so essential for the proper and effective administration
of justice.
28. Atty. Raul Q. Buensalida Vs. Marinel Gabinete, A.M. No. P-16-3593, February 21, 2017, En Banc, 25
Per Curiam
Issue: Is the issuance of a worthless check to client basis for administrative complaint against a utility
worker?
ANSWER:
● Yes, the unauthorized taking of registered mail matter and the subsequent diversion of the
proceeds of the checks contained therein by a utility worker of the court constitutes
misconduct. Misconduct is grave where the elements of corruption, a clear intent to violate
the law, or a flagrant disregard of established rules are present. Under Section 46(A)(3), Rule
10 on the Schedule of Penalties of the Revised Rules on Administrative Cases in the Civil
Service (RRACCS), grave misconduct is punishable by dismissal from service in the first
instance.
29. Atty. Prosencio D. Jaso Vs. Gloria L. Londres, A.M. No. P-16-3616, June 21, 2017, Second Division, 25
J. Mendoza
Issue: When Londres did not pay her loan and asked that the post-dated check will not be
deposited because her funds is not sufficient, are these grounds for administrative sanctions?
ANSWER:
● Yes. Willful failure to pay just debts is administratively punishable and a ground for
disciplinary action. Section 46, Rule 10 of the Revised Rules of Administrative Cases in the
Civil Service prohibits an employee from contracting loans of money or other property from
persons with whom the office of the employee has business relations and Section 1, Canon
1 of the Code of Conduct for Court Personnel which prohibits court personnel from using
his/her official position to secure unwarranted benefits, privileges or exemptions for
themselves or others. In this case, it was proved that Lourdes have not settled her debts to
Atty. Jaso. Having incurred a just debt, it was Londres' moral and legal responsibility to settle
it when it became due.
30. Emma G. Alfelor Vs. Hon. Augustus C. Diaz, A.M. No. MTJ-16-1883, July 11, 2017, En Banc, J. Caguioa 25
Issue: Can there be administrative liability when a judge convicted an accused for BP 22 based on
nine (9) checks when only one check was raffled at his sala?
ANSWER:
● Yes. Such act of carelessness is considered as gross ignorance of the law. There is gross
ignorance of the law when an error committed by the judge was "gross or patent, deliberate
or malicious" or when a judge ignores, contradicts, or fails to apply settled law and
jurisprudence because of bad faith, fraud, dishonesty or corruption. It cannot be excused by
a claim of good faith. Moreover, gross ignorance of the law is a serious charge under Section
8, Rule 140 of the Rules of Court punishable by: (1) dismissal from the service, forfeiture of
benefits except accrued leave credits, and disqualification from reinstatement or
appointment to any public office; (2) suspension from office without salary or other benefits
for more than three (3) months but not exceeding six months; or (3) a fine of more than
₱20,000.00 but not exceeding ₱40,000.00.
31. Sps. Geraldy and Lilibeth Victory Vs. Atty. Marian Jo S. Mercado, A.C. No. 10580, July 12, 2017, 25
Third Division, J. Tijam
counsel?
ANSWER:
● Yes. Canon 1, Rule 1.01, and Canon 7 provides that: “(Canon 1) A lawyer shall uphold the
constitution, obey the laws of the land and promote respect for law and for legal processes”;
● “(Rule 1.01) A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct”;
and
● “(Canon 7) A lawyer shall at all times uphold the integrity and dignity of the legal profession
and support the activities of the integrated bar.”
● The deliberate failure to pay just debts and the issuance of worthless checks constitute gross
misconduct, for which a lawyer may be sanctioned with suspension from the practice of law.
Lawyers are instruments for the administration of justice and vanguards of our legal system.
32. Allan S. Cu Vs. Small Business Guarantee and Finance Corporation through Mr. Hector M. 25
Olmedillo, G.R. No. 211222, August 7, 2017, First Division, J. Caguioa
Issue: What will be the remedy if the bank upon which the checks were drawn was declared to be
under liquidation?
(Also, instructive as to effects of liquidation but not covered by the NIL)
ANSWER:
● The right to pursue civil or monetary claim against a bank under liquidation exists and is
undiminished before the liquidation court.
● If a bank is under liquidation, its liability to pay interest on deposits and all other obligations
as of closure shall cease upon its closure by the Monetary Board without prejudice to the
Section 85 (1) of the New Central Bank Act; and on final decisions against the closed bank:
"The execution and enforcement of a final decision of a court other than the liquidation court
against the assets of a closed bank shall be stayed. The prevailing party shall file the final
decision as a claim with the liquidation court and settled in accordance with the Rules on
Concurrence and Preference of Credits under the Civil Code or other laws."
33. Laurence D. Punla and Marilyn Santos Vs. Atty. Eleonor Maravilla-Ona, A.C. No. 11149, August 15, 25
2017, En Banc, Per Curiam
Issue: Is the issuance of a promissory note and even so counsel failed to make good his
obligation ground for disbarment? (Also, instructive as to whether there can be double disbarment
but not covered by the NIL)
ANSWER:
● Yes. Under Rule 138, Sec. 27 of the Rules of Court, a member of the bar may be disbarred
from his office as attorney by the Supreme Court for any deceit, malpractice, or other gross
misconduct in such office, or by reason of his conviction of a crime involving moral
turpitude, or for any violation of the lawyer’s oath.
34. Priscilla Z. Obre Vs. Leonora O. Miaral, G.R. No. 217777, August 16, 2017, Second Division,
J. Carpio
Issue: When does the prescriptive period under Article 25 of the Revised Penal Code
commence?
Answer:
Under Article 25 of the Revised Penal Code, the penalties of prision mayor and reclusion temporal
are included in the enumeration of afflictive penalties. Furthermore, Article 90 of the Revised Penal
Code states that crimes punishable by afflictive penalties, such as the crime of estafa, prescribe in
fifteen (15) years.
The said prescriptive period is computed under Article 91 of the Revised Penal Code, as follows:
ART. 91. Computation of prescription of offenses. - The period of prescription shall commence to run
from the day on which the crime is discovered by the offended party, the authorities, or their agents,
and shall be interrupted by the filing of the complaint or information, and shall commence to run
again when such proceedings terminate without the accused being convicted or acquitted, or are
unjustifiably stopped for any reason not imputable to him.
35. Jun Miranda vs. Sps. Engr. Ernesto and Aida Mallari, G.R. No. 218343, November 28, 2018, Second 24
Division, J. Caguiao
Issue: Based on Section 9 (b) what is the purpose of levy on execution on real and personal
properties of the judgment debtor’s incontrovertible and unquestionable real and personal
property? Must levy be done prior to the judgment debtor be required to pay cash or certified check?
Answer: Section 9(b), Rule 39 of the Rules, which authorizes a "levy upon the
properties of the judgment obligor of every kind and nature whatsoever which may
be disposed of for value and not otherwise exempt from execution" presupposes that
the property to be levied belongs to and is owned by the judgment debtor. Also,
according to Section 12, Rule 39, the effect of levy on execution as to third persons
is to create a lien in favor of the judgment obligee over the right, title and interest of
the judgment obligor in such property at the time of the levy, subject to liens and
encumbrances then existing. If the judgment obligor no longer has any right, title or
interest in the property levied upon, then there can be no lien that may be created
in favor of the judgment obligee by reason of the levy.
Based on Section 9(b), Rule 39 of the Rules, the purpose of a levy on execution is to
subject real and personal properties of the judgment debtor and make them
answerable to the obligation in favor of the judgment obligee in case the former is
not able to pay the judgment debt in cash, certified check, or similar means; and
only property incontrovertibly or unquestionably belonging to the judgment
obligor may be subject of a levy on execution.
36. Re: Complaint Against Mr. Ramdel Rey M. De Leon, Executive Assistant Iii, Office Of Associate 24
Justice Jose P. Perez, On The Alleged Dishonesty And Deceit In Soliciting Money For Investments
A.M. No. 2014-16-SC, January 15, 2019, En Banc, J. Gesmundo
Issue: May court employees engage in re-discounting of checks to augment meager income as court
employee?
37. Solomon Son, Vs. Rolando C. Leyva, A.M. No. P-11-2968 [Formerly OCA I.P.I. No. 10-3535-P], 24
November 28, 2019, First Division, J. Lazaro-Javier
Issue: Did the respondent follow the procedures laid down under Section 9, Rule 39 of the Rules of
Court for the proper implementation of the writ of execution?
Answer: · Respondent failed to follow the procedures laid down under Section 9, Rule 39 of the Rules
of Court for the proper implementation of the writ of execution.
38. Engr. Felipe A. Virtudazo and Spouse Estelita M. Virtudazo, V. Alipio Labuguen nd His Spouse 24
Damiana Mabuti and Genara Labuguen, G.R. No. 229693, December 10, 2019 , First Division, J.
Reyes, J. Jr.
Issue: How is judgments for money enforced in accordance with Section 9, Rule 39 of the Rules of
Court?
Answer: · The officer shall levy upon the properties of the judgment obligor of every kind and
nature whatsoever which may be disposed of for value and not otherwise exempt from execution
giving the latter the option to immediately choose which property or part thereof may be levied
upon, sufficient to satisfy the judgment; and if the judgment obligor does not exercise the option,
the officer shall first levy on the personal properties, if any, and then on the real properties if the
personal properties are insufficient to answer for the judgment.
39. Jerry F. Villa, Vs Atty. Paula Dimpa Beatriz Defensor-Velez, A.C. No. 12202 (formerly CBD Case No. 24
15-4535), December 05, 2019, First Division, J. Lazaro-Javier
Issue: What Rule and Canon was violated when a lawyer issues a worthless check and evaded
payment of a just debt?
Answer: · Rule 1.01 Canon 1 of the Code of Professional Responsibility: “a lawyer shall not engage
in unlawful, dishonest, immoral or deceitful conduct.”
40. Ruben A. Andaya, V. Atty. Emmanuel Aladin A. Tumanda, A.C. No. 12209, February 18, 2020, En 24
Banc, J. Hernando
Issue: Is the act of a lawyer in issuing a worthless check being a violation of BP 22 a ground for which
he may be disciplined under Rule 138, Section 27 of the Rules of Court?
Answer:Yes, it is a ground for disbarment or suspension from office as attorney by the Supreme
Court.
41. Michael M. Lapitan, Vs. Atty. Elpidio S. Salgado, A.C. No. 12452, February 18, 2020, En Banc, Per 24
Curiam
Issue: Is it a ground for disbarment when a lawyer through deceit and bad faith, claimed that he had
left his cash. refused to pay and instead promised to pay through a post•dated check. But when the
post-dated check was presented for payment, it was dishonored for the reason "ACCOUNT
CLOSED?
Answer: Yes, it is a ground for disbarment under Section 27 Rule 138 of the Rules of Court.
140 cases
-END-

Case List 3 (Negotiation and Indorsements To Other Related Topics)

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DEADLINE: 1 FEBRUARY 2021

1. ANGELES 14. MESIONA

NEGOTIATION AND INDORSEMENTS

Issue: What does the delivery of check signify?

NEGOTIATION AND INDORSEMENTS

RIGHTS OF HOLDERS [Sections 26, 51, 52, 57, 58, 59]

LIABILITIES OF PARTIES [Sections 61, 62 (189) 64, 65, 66, 84]

Answer: No. Section 61 is not applicable in this case.

What is the nature of the obligation of a depository bank?

Give the nature of the banking business?

Is a check a legal tender?

Whose negligence was the proximate cause of the loss?

- It is undeniable that the bank’s premature authorization of the withdrawal by respondent

- In Gullas v. National Bank, the Court emphasized:

- A bank's gross negligence in dishonoring a well-funded check, aggravated by its

● In a contract of agency, one binds oneself to render some service or to do something in

Issues and Answers:

Held: No, it does not.

(Also, Section 23 on sequence of recovery in cases of unauthorized payment of checks)

What is deceit in estafa?

(Also, Section 23 on sequence of recovery in cases of unauthorized payment of checks)

What is deceit in estafa?

As a bank Branch Manager, Raymundo is expected to be an expert in banking procedures, and he

NOTICE OF DISHONOR [Sections 89, 114]

1. That a person makes or draws and issues any check.

● The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a

Issue: What is the meaning of the term “issue”?

The absence of a notice of dishonor necessarily deprives an accused an opportunity to preclude a

Under Sec. 186 of the Negotiable Instruments Law it is provided that:

NOTE reference as to “accommodation party” not “loan accommodation”: Even an

- A deed of assignment with recourse stipulation is independent of the warranties of an

Issues and Answers:

What is the effect of admission of Rigor?

How is notice of dishonor made in BP 22?

What is the effect of failure to receive notice of dishonor?

What is the effect of Section 114 (d) of the NIL?

DISCHARGE OF NEGOTIABLE INSTRUMENTS [Section 119]

1) Upon a written contract;

2) Upon an obligation created by law;

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

PROTEST [Sections 152]

What is the relationship of the payee-holder and collecting bank?

● Yes, as a banking institution, it behooved respondent to act with extraordinary diligence in

Furthermore, solidary liability cannot be presumed but must be established by law or

Are the promissory notes simulated and fictitious?

Issue: What is the doctrine of comparative negligence?

● What is the meaning of a draft? Is it a negotiable instrument? A draft is a form of a

● If it is, what type of a negotiable instrument is a draft? It is an order made by one

Issue: What is the meaning of a draft and is it a negotiable instrument?

If it is, what type of a negotiable instrument is a draft?

What is a bank draft?

● Art. 1142. A mortgage action prescribes after ten years

Issues and Answers:

Can payment be done through a certified bank check?

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