GSIS VS CA -

FACTS:
Two deeds of mortgages were issued by spouses Racho in favor of GSIS as security for two loans
obtained by them. They also executed a promissory note. Due to the failure to comply with the
terms of the mortgage, the mortgages were extrajudicially foreclosed. The foreclosure was
being assailed by the spouses as they alleged that the mortgage contracts were signed not as
guarantees or sureties but merely gave their common property for the sole benefit of the other
spouses. Both sides of the case
used the provisions on accommodation parties in the Negotiable Instruments Law.

The trial court dismissed the action, but this was reversed by the appellate court.

ISSUE:
WHETHER OR NOT THE DEEDS OF MORTGAGE AND THE PROMISSORY NOTE WERE NEGOTIABLE
INSTRUMENTS

HELD:
THE SUPREME COURT HELD IN THE NEGATIVE. The promissory note hereinbefore quoted, as
well as the mortgage deeds subject of this case, are clearly not negotiable instruments. These
documents do not comply with the fourth requisite to be considered as such under Section 1 of
Act No. 2031 because they are neither payable to order nor to bearer. The note is payable to a
specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031 would
not apply; governance shall be afforded, instead, by the provisions of the Civil Code and special
laws on mortgages.
Federal Express corp
V
Antonino

Facts:
Eliza was an owner of a condominium unit located at New York, United States. On December 15,
2003, Luwalhati and Eliza were in the Philippines. Having unpaid monthly condominium charges
while still in the Philippines, they decided to send several Citibank checks to Veronica Sison, who
would pay on their behalf and was also based in New York. The checks served as payment for
the unpaid monthly charges and real estate tax, the checks were sent through FedEx or Federal
Express Corporation. Sison allegedly did not receive the package resulting in the non-payment
and the eventual foreclosure of the condominium unit. Upon inquiry, Sison found out that Fedex
delivered the package to her deliver with no signed receipt. Luwalhati and Eliza with the help of
their counsel sent a demand letter to Fedex which the latter did not heed prompting them to file
a claim for damages. Fedex, on the other hand, claimed that they are absolved from liability
since Luwalhati and Eliza shipped prohibited items, mis declaring them as documents. The
transportation of money (including but not limited to coins or negotiable instruments equivalent
to cash such as endorsed stocks and bonds) is prohibited under the Air Waybill.

The RTC held in favor of Luwalhati and Eliza. The RTC ruled that a check is not legal tender or a
"negotiable instrument equivalent to cash," as prohibited by the Air Waybill. The Court of
Appeals likewise sustained the Regional Trial Court's conclusion that checks are not legal tender,
and thus, not covered by the Air Waybill's prohibition.

Issue: Whether or not the checks in question are negotiable instruments equivalent to cash

Ruling:
The Supreme Court held in the negative. It is settled in jurisprudence that checks, being only
negotiable instruments, are only substitutes for money and are not legal tender; more so when
the check has a named payee and is not payable to bearer. The checks involved here are payable
to specific payees, Maxwell¬-Kates, Inc. and the New York County Department of Finance. Thus,
they are order instruments. An order instrument, which must be endorsed by the payee before
it may be negotiated, cannot be a negotiable instrument equivalent to cash.
Ubas Sr.
v.
Chan

Facts:
The respondent doing business under the name and style of UNIMASTER was indebted to
petitioner in the amount of P1,500,000.00, representing the price of boulders, sand, gravel, and
other construction materials purchased by respondent from him for the construction of
Macagtas Dam in Catarman, Northern Samar. Further, he averred that respondent had issued
three 3 bank checks, payable to "CASH" in the amount of P500,000.00 each, payable on 3
separate months. However, when petitioner presented the subject checks for encashment, the
same were dishonored due to a stop payment order. Petitioner sent a demand letter to the
respondent stating the serial numbers of the checks, including the dates and amounts thereof
which were not disputed by respondent. However, despite the respondent not disputing the
contents of the demand letter, he previously claimed that were not issued to petitioner, but to
Engr. Merelos, the project engineer and that the subject checks were lost and only came into
the possession of petitioner.

The RTC held in favor of the petitioner finding that respondent failed to overcome the
disputable presumption that every party to an instrument acquired the same for a valuable
consideration under Section 24 of Act No. 2031, or the Negotiable Instruments Law. The CA
however, reversed the RTC’s ruling. considering that the drawer of the subject checks was
Unimasters, which, as a corporate entity, has a separate and distinct personality from
respondent. It observed that the subject checks cannot be validly used as proof of the alleged
transactions between petitioner and respondent, since from the face of these checks alone, it is
readily apparent that they are not personal checks of the former.

Issue: Whether or not the petitioner has a cause of action against the respondent based on the
checks issued

Held:
The Supreme Court held in favor of the petitioner. the defendant is, in appropriate instances,
required to overcome the said presumption and present evidence to prove the fact of payment
so that no judgment will be entered against him." This presumption stems from Section 24 of
the NIL, which provides that:

Section 24. Presumption of Consideration. - 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.

Hence, as the RTC correctly ruled, it is presumed that the subject checks were issued for a valid
consideration, which therefore, dispensed with the necessity of any documentary evidence to
support petitioner's monetary claim. Unless otherwise rebutted, the legal presumption of
consideration under Section 24 of the NIL stands. The Supreme Court further stated that in,
Pacheco v. CA, the Court has expressly recognized that a check "constitutes an evidence of
indebtedness" and is a veritable "proof of an obligation." Hence, petitioner may rely on the
same as proof of respondent's personal obligation to him.
Metrobank v. Chiok

FACTS: Respondent Wilfred N. Chiok (Chiok) had been buying dollars from Gonzalo B. Nuguid
(Nuguid) at the exchange rate prevailing on the date of the sale. Chiok pays Nuguid either in
cash or manager's check, to be picked up by the latter or deposited in the latter's bank account.
Nuguid delivers the dollars either on the same day or on a later date as may be agreed upon
between them, up to a week later. Chiok and Nuguid had been dealing in this manner for about
six to eight years, with their transactions running into millions of pesos. For this purpose, Chiok
maintained accounts with petitioners Metropolitan Bank and Trust Company (Metrobank) and
Global Business Bank, Inc. (Global Bank), the latter being then referred to as the Asian Banking
Corporation (Asian Bank). Chiok likewise entered into a Bills Purchase Line Agreement (BPLA)
with Asian Bank. Under the BPLA, checks drawn in favor of, or negotiated to, Chiok may be
purchased by Asian Bank. Upon such purchase, Chiok receives a discounted cash equivalent of
the amount of the check earlier than the normal clearing period. However, a problem occurred
when Nuguid failed to fulfill his obligations, when he failed to deliver the dollar amount
equivalent to that of the three checks deposited to his account. Prompting Chiok to request that
payment on the three checks be stopped.

On July 25, 1995, the RTC issued an Order directing the issuance of a writ of preliminary
prohibitory injunction. The RTC went on to rule that manager's checks and cashier's checks may
be the subject of a Stop Payment Order from the purchaser based on the payee's contractual
breach. The Court of Appeals likewise affirmed the RTCs decision.

Issue:
Whether or not payment of manager's and cashier's checks are subject to the condition that the
payee thereof should comply with his obligations to the purchaser of the checks

Held:
The Supreme Court held in the negative. A manager’s check, like a cashier’s check, is an order of
the bank to pay, drawn upon itself, committing in effect its total resources, integrity, and honor
behind its issuance. By its peculiar character and general use in commerce, a manager’s check or
a cashier’s check is regarded substantially to be as good as the money it represents. While
manager’s and cashier’s checks are still subject to clearing, they cannot be countermanded for
being drawn against a closed account, for being drawn against insufficient funds, or for similar
reasons such as a condition not appearing on the face of the check. Long standing and accepted
banking practices do not countenance the countermanding of manager’s and cashier’s checks
based on a mere allegation of failure of the payee to comply with its obligations towards the
purchaser. Therefore, when Nuguid failed to deliver the agreed amount to Chiok, the latter had
a cause of action against Nuguid to ask for the rescission of their contract; but, Chiok did not
have a cause of action against Metrobank and Global Bank that would allow him to rescind the
contracts of sale of the manager’s or cashier’s checks, which would have resulted in the
crediting of the amounts thereof back to his accounts.
National Marketing Corp. vs. Federation

FACTS: NAMARCO, a government-owned and controlled corporation entered into a Contract of

Sale with FEDERATION, a non-stock organization. Under the Contract, NAMARCO would supply
goods to FEDERATION. FEDERATION will then pay a partial amount and the balance to be paid
on cash upon delivery of the duly indorsed negotiable shipping document of the imported items.
To insure the payment of the goods by the defendant, petitioner accepted three domestic
letters of credit. Upon arrival of the goods, NAMARCO submitted to FEDERATION Statement of
Account for all the goods covered by the Contract of Sale. FEDERATION received from
NAMARCO the goods under the condition that the cost would be paid in cash through the 3
Letters of credit previously secured by defendant. FEDERATION and some of its members filed a
complaint against NAMARCO for specific performance and damages, alleging that after
NAMARCO had delivered a great portion of the goods listed in the Contract of Sale, it refused to
deliver the other goods mentioned in the said contract. In their answer, petitioner alleged that
the Contract of Sale was not validly entered into and, therefore, it is not bound by the provisions
thereof. On the other hand, NAMARCO presented to PNB, Manila, for payment the sight drafts
earlier secured by petitioner to cover the full payment of the goods, accompanied with all the
supporting papers. However, the PNB informed petitioner that it could not negotiate and effect
payment on the sight drafts as the condition of the covering letters of credit had not been
complied with. The common condition of the three letters of credit is that the sight drafts drawn
on them must be duly accepted by FEDERATION before they will be honored by the PNB. But the
said drafts were not presented to defendant for acceptance.

NAMARCO demanded from the FEDERATION the payment of the total amount, but FEDERATION
failed and refused to pay the said amount, or any portion thereof, to NAMARCO. Because of
FEDERATION’s failure to pay NAMARCO of the total amount of goods delivered, NAMARCO
instituted the civil case against FEDERATION to compel it to pay the demanded amount with
interest. In their answer, FEDERATION moved to dismiss the complaint on the ground that the
cause of action alleged is barred forever. According to FEDERATION, the present petition is
tantamount to counter-claim which was not availed by NAMARCO in the earlier complaint for
specific performance of FEDERATION against NAMARCO which was decided already by the trial
court and Supreme Court. The lower court ruled in favor of NAMARCO and ordered FEDERATION
to pay petitioner the amount of goods. In their appeal before the Supreme Court. FEDERATION
contends that it has incurred no liability, as NAMARCO has neither alleged nor proved that it has
complied with the conditions contained in the three domestic letters of credit, that the sight
drafts drawn upon them be presented to FEDERATION for acceptance before they can be
honored by the Bank.

ISSUE: Whether or not the delivery of letters of credit by the FEDERATION amounted as
payment to NAMARCO, discharging them of liability

HELD: The Supreme Court held in the negative. The mere delivery of the letters of credit by
FEDERATION to NAMARCO did not operate to discharge the debt of the FEDERATION.
NAMARCO accepted the letters of credit to as security for the payment of those goods delivered
to FEDERATION. Therefore, it was given as a mere guarantee for the payment of the
merchandise.
Article 1249 of the Civil Code provides that the delivery of promissory notes payable to order, or
bills of exchange or drafts or other mercantile document shall produce the effect of
payment only when realized, or when by the fault of the creditor, the privileges inherent in their
negotiable character have been impaired. The impairment of the negotiable character of the
commercial paper by the fault of the creditor, is applicable only to instruments executed by
third persons and delivered by the debtor to the creditor and does not apply to instruments
executed by the debtor himself and delivered to the creditor. In this case, it is not even
pretended that the negotiable character of the sight drafts was impaired because of the fault of
NAMARCO. The fact that NAMARCO attempted to collect from the PNB on the sight drafts is of
no material significance because they were never taken as payment neither as agreement that
they should be accepted as payment. The mere fact that NAMARCO proceeded in good faith to
try to collect payments, did not amount to an appropriation by it of the amounts mentioned in
the sight drafts to release its claims against the FEDERATION. A mere attempt to collect or
enforce a bill or note from which no payment results is not such an appropriation of it as to
discharge the debt.
FORTUNADO V CA

FACTS:
Fortunado won a Civil case against Bautista which resulted in the levying of two parcels of land
owned by Bautista. However, one of the levied parcels of land was already bought by NSC but
had not yet been registered in its name. The subject lands were then sold at a public auction,
the petitioner being only the sole bidder. NSC then informed the sheriff of its intention to
redeem the lot they bought, but the sheriff suggested that they redeem both lots. NSC then filed
with the RTC a motion to redeem both lots which were then opposed by the petitioner, on the
ground that NSC has no personality to intervene. Pending motion, NSC issued checks to the
sheriff as payment for the redemption. Bautista sent a letter to the sheriff communicating his
availment of NSC’s check to fully redeem the property. Emphasizing that the redemption is
solely for the purpose of executing and delivery of the Certificate of Redemption to him and not
as an acknowledgement to the validity of the sale which he continues to contest. The sheriff
acknowledged the checks and issued the Certificate in favor of NSC and Bautista. Bautista then
informed the sheriff that he would no longer effect the redemption because the sail was void.
Bautista then filed a motion praying for the safekeeping of the check with the Clerk of Court
until all issues are resolved. The sheriff then informed petitioner’s counsel of the deposit of the
check. But the counsel rejected the same contending that the check was not a legal tender and
was not intended for payment but only for deposit.
Petitioner then requested the sheriff to issue a final deed of sale since there was no valid
redemption of the property. But the same was not granted so the petitioner filed a petition for
mandamus with CA.
Petitioner argued that respondents failed to comply with the rules in exercising the right of
redemption as Article 1249 of the Civil Code, which provides that payment of debts in money
shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in
the currency which is legal tender in the Philippines, is applicable to such.
CA rejected petitioner’s argument but held that the validity of redemption was dependent on
the validity of the certificate of sale, which had to be resolved by the trial court.
MR was denied hence this petition for certiorari.

ISSUE:

Whether or not the checks issued by NSC are legal tender and be considered as payment for the
redemption price

HELD:

The Supreme Court held in the affirmative. If the redemptioners choose to exercise their right of
redemption, it is the policy of the law to aid rather than to defeat the right of redemption. It
stands to reason therefore, that redemptions should be looked upon with favor and where no
injury is to follow, a liberal construction will be given to our redemption laws as well as to the
exercise of the right of redemption. In the United States, it has also been held and recognized
that a payment by check or draft or bank bills or currency which is not legal tender is effective if
the officer accepts such payment. If in good faith the redemptioner pays, and the officer
receives before the expiration of the time of redemption, an ordinary banker’s check, the
payment is regarded as sufficient.
Aguilar v Lightbringers

Facts:
The case stems from a collection of sum of money case filed by the respondent against the
petitioners. The money which was borrowed were in the form of three separate checks. The
petitioners claim that they never borrowed such amount. In the MCTC proceeding, petitioners
were held in default and the trial was heard ex-parte. The MCTC ruled in favor of the
respondent. Stating, that the checks issued proved the existence of the loan transactions
between petitioner and respondent. The RTC likewise made a similar ruling with the MCTC. The
CA likewise affirmed the ruling of the RTC. Hence, this petition.

Issue:
Whether or not there was a contract of loan based on the checks issued

Held:
The Supreme Court held in the affirmative. The Court agrees with the findings of fact of the
MCTC and the RTC that a check was sufficient evidence of a loan transaction. The findings of fact
of the trial court, its calibration of the testimonies of the witnesses and its assessment of the
probative weight thereof, as well as its conclusions anchored on the findings are accorded high
respect, if not conclusive effect.
In Pacheco v. Court of Appeals, this Court has expressly recognized that a check constitutes
evidence of indebtedness and is a veritable proof of an obligation. Hence, it can be used in lieu
of and for the same purpose as a promissory note. In fact, in the seminal case of Lozano v.
Martinez, the Supreme Court pointed out that a check functions more than a promissory note
since it not only contains an undertaking to pay an amount of money but is an "order addressed
to a bank and partakes of a representation that the drawer has funds on deposit against which
the check is drawn, sufficient to ensure payment upon its presentation to the bank." This Court
reiterated this rule in the relatively recent Lim v. Mindanao Wines and Liquor Galleria stating
that a check, the entries of which are in writing, could prove a loan transaction.