CHAN WAN, 

plaintiff-appellant,
vs.
TAN KIM and CHEN SO, defendants-appellees.

Facts:

Facts:

Chan Wan collected its bearer instruments in the form of eleven checks from Equitable Banking Corporation, but
were dishonoured due to insuficient funds. As such, she filed this collection suit. in court, Tan Kim declared that the
checks had been issued to Pinong and Muy for some shoes, however, was only 'intended as mere receipts(. The
court declined to order payment as Chan Wan was not a holder in due course, and the cross checks was deposited
in the bank not mentioned in the crossing. The bank mentioned in the crossing is China Banking Corporation.

Issue:

Whether Chan Wan is a holder in due course. NO

Whether Chan Wan has the right to collect over eleven checks. Yes. However, the case was dismissed due to the
incompleteness of details on the circumstances and the transaction.

Ruling:

The Negotiable Instruments Law regulating the issuance of negotiable checks, the rights and the liabilities arising
therefrom, does not mention "crossed checks". Art. 541 of the Code of Commerce refers to such instruments. 1 The
bills of Exchange Act of England of 1882, contains several provisions about them, some of which are quoted in the
margin. 2 In the Philippine National Bank vs. Zulueta, 101 Phil., 1071; 55 Off. Gaz., 222, we applied some provisions
of said Bills of Exchange Act because the Negotiable Law, originating from England and codified in the United
States, permits resort thereto in matters not covered by it and local legislation.3

Eight of the checks here in question bear across their face two parallel transverse lines between which these words
are written: non-negotiable — China Banking Corporation. These checks have, therefore, been crossed specially to
the China Banking Corporation, and should have been presented for payment by China Banking, and not by Chan
Wan.4 Inasmuch as Chan Wan did present them for payment himself — the Manila court said — there was no
proper presentment, and the liability did not attach to the drawer.

The court agree to the legal premises and conclusion. It must be remembered, at this point, that the drawer in
drawing the check engaged that "on due presentment, the check would be paid, and that if it be dishonored . . . he
will pay the amount thereof to the holder".5 Wherefore, in the absence of due presentment, the drawer did not
become liable.

1. on the backs of the checks, endorsements which apparently show they had been deposited with the China
Banking Corporation and were, by the latter, presented to the drawee bank for collection. All the crossed checks
have the "clearance" endorsement of China Banking Corporation.
These circumstances would seem to show deposit of the checks with China Banking Corporation and subsequent
presentation by the latter through the clearing office; but as drawee had no funds, they were unpaid and returned,
some of them stamped "account closed". How they reached his hands, plaintiff did not indicate. Most probably, as
the trial court surmised, — this is not a finding of fact — he got them after they had been thus returned, because he
presented them in court with such "account closed" stamps, without bothering to explain. Naturally and rightly, the
lower court held him not to be a holder in due course under the circumstances, since he knew, upon taking them up,
that the checks had already been dishonored. Section 52(b) of the NIL That he became the holder of it before it was
overdue, and without notice that it had been previously dishonored, if such was the fact;
2. Simply because he was not a holder in due course Chan Wan could not recover on the checks. The Negotiable
Instruments Law does not provide that a holder who is not a holder in due course, may not in any case, recover
on the instrument.

If B purchases an overdue negotiable promissory note signed by A, he is not a holder in due course; but he may
recover from A,8 if the latter has no valid excuse for refusing payment. The only disadvantage of holder who is
not a holder in due course is that the negotiable instrument is subject to defense as if it were non- negotiable.

Tan Kim admitted on cross-examination either that the checks had been issued as evidence of debts to Pinong
and Muy, and/or that they had been issued in payment of shoes which Pinong had promised to make for her.

Seeming to imply that Pinong had to make the shoes, she asserted Pinong had "promised to pay the checks for
me".

However, the facts was not completely aired out. Needless to say, if it were true that the checks had been
issued in payment for shoes that were never made and delivered, Tan Kim would have a good defense as
against a holder who is not a holder in due course.
 Metropolitan bank vs. CA

Facts:

Gomez opened an account with Golden Savings bank and deposited 38 treasury warrants. All these
warrants were indorsed by the cashier of Golden Savings, and deposited it to the savings account in a
Metrobank branch. They were sent later on for clearing by the branch office to the principal office of
Metrobank, which forwarded them to the Bureau of Treasury for special clearing. On persistent
inquiries on whether the warrants have been cleared, the branch manager allowed withdrawal of the
warrants, only to find out later on that the treasury warrants have been
dishonored.

Issue:
Whether the treasury warrants in question are negotiable instruments.

Ruling:

Clearly stamped on the treasury warrants' face is the word "non-negotiable." Moreover, and this is of equal
significance, it is indicated that they are payable from a particular fund, to wit, Fund 501. Section 1 of the
Negotiable Instruments Law, provides that "An instrument to be negotiable must conform to the following
requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional
promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable
future time; (d) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee,
he must be named or otherwise indicated therein with reasonable certainty." Section 3 (When promise is
unconditional) thereof provides that "An unqualified order or promise to pay is unconditional within the
meaning of this Act though coupled with
—
(a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be
debited with the amount; or (b) A statement of the transaction which gives rise to the instrument. But an order
or promise to pay out of a particular fund is not unconditional." The indication of Fund 501 as the source of the
payment to be made on the treasury warrants makes the order or promise to pay "not unconditional" and the
warrants themselves non-negotiable. There should be no question that the exception on Section 3 of the
Negotiable Instruments Law is applicable in the present case. Metrobank cannot contend that by indorsing the
warrants in general, Golden Savings assumed that they were "genuine and in all respects what they purport to
be," in accordance with Section 66 of the Negotiable Instruments Law. The simple reason is that this law is not
applicable to the non-negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the
purpose of guaranteeing the genuineness of the warrants but merely to deposit them with Metrobank for
clearing. It was in fact Metrobank that made the guarantee when it stamped on the back of the warrants: "All
prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch.
 Kauffman vs PNB

Facts:

Plaintiff was entitled to the sum of P98,000 from the surplus earnings of Philippine Fiber & Produce Company (PFPC)
which was placed to his credit on the Company’s books. The PFPC treasurer requested from PNB Manila that a
telegraphic transfer of S45,000 should be made to the plaintiff in NY upon account of PFPC. The treasurer drew and
delivered a check for the amount of P90,355 on the PNB which is the total costs o said transfer. As evidence, a document
was made out and delivered to the PFPC treasurer which is referred to by the bank’s assistant cashier as it’s official
receipt.

ION the same day the Philippine National Bank dispatched to its New York Agency a cablegram to the following effect:
Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000.(Sgd.) PHILIPPINE NATIONAL BANK,
Manila.

Upon receipt of the telegraphic message, the bank’s representative advised the withholding of the money from
Kauffman, in view of his reluctance to accept certain bills of the PFPC. The PNB agreed and sent to its NY agency another
message to withhold the payment as suggested. Upon advice of the PFPC treasurer that S45,000 had been placed to his
credit, he presented himself at the PNB NY and demanded the money but was refused due to the direction of the
withholding of payment

Issue:

Whether plaintiff has a right over the money withhold.

Ruling:

No.

Provisions of the NIL can come into operation there must be a document in existence of the character described in
section 1 of the Law; and no rights properly speaking arise in respect to said instrument until it is delivered. The order
transmitted by PNB to its NY branch, for the payment of a specified sum of money to the plaintiff was not made payable
“to order” or “to bearer”, as

required in subsection (d) of that Act; and inasmuch as it never left he possession of the bank, or its representative in
NY, there was no delivery in the sense intended in section 16 of the same Law. In connection, it is unnecessary to point
out that the official receipt delivered by the bank to the purchaser of the telegraphic order cannot itself be viewed in the
light of a negotiable instrument, although it affords complete proof of the obligation actually assumed by the bank.

Kauffman, however, has remedy based on the Civil Code, particularly on stipulations pour atrui.
 Borromeo Vs. Sun

Facts:

Private respondent Amancio Sun brought before CFI of Rizal an action against LourdesO. Borromeo (in her capacit" as
corporate secretary) and Federico O. Borromeo to compel the transfer to his name in the books of Federico O Borromeo
Inc the 23,223 shares of stocks registered in the name of Federico O. Borromeo' as evidenced by a Deed of Assignment.
On the other hand' petitioner Federico O. Borromeo disclaimed an" participation on the said (Deed of Assignment and
that his signature has forged.

At first the trial court decided that the signature has not forged due to the two expert) witnesses and affirmed that it )as
the signature of Federico O. Borromeo even if he changed the signature in the latter years. On the appeal of the
petitioner' CA reversed the decision of the trial court. Upon the motion of reconsideration' Amarnio Sun contended that
the expert witness named Segundo , Tabayoyong is not an expert ) witness because he did not finished the degree of
criminology' his civil service eligibility is only a second grade, that he has never an author of " books, and he is not a
member of any professional organization. Both parties agreed to submit the specimen signature to the Philippine
Constabulary Crime Laboratory. It has found out that the specimen is written by one and the same person.

Issue;

Whether or not the blank deed of assignment which was signed by the petitioner is negotiable.

Ruling:

Yes. The blank deed of assignment signed by petitioner was negotiable.

That the Deed of Assignment is dated January 16, 1974 while the questioned signature was found to
be circa 1954-1957, and not that of 1974, is of no moment. It does not necessarily mean, that the
deed is a forgery. Pertinent records reveal that the subject Deed of Assignment is embodied in blank
form for the assignment of shares with authority to transfer such shares in the books of the
corporation. It was clearly intended to be signed in blank to facilitate the assignment of shares from
one person to another at any future time. This is similar to Section 14 of the Negotiable Instruments
Law where the blanks may be filled up by the holder, the signing in blank being with the assumed
authority to do so. Indeed, as the shares were registered in the name of Federico O. Borromeo just
to give him personality and standing in the business community, private respondent had to have a
counter evidence of ownership of the shares involve. Thus the execution of the deed of assignment in
blank, to be filled up whenever needed. The same explains the discrepancy between the date of the
deed of assignment and the date when the signature was affixed thereto.
 GSIS vs CA (170 SCRA) 23 February 1989

Facts:

Mr. and Mrs. Isabelo R. Racho, together with the spouses Mr. and Mrs. Flaviano Lagasca, executed a deed of mortgage
in favor of petitioner Government Service Insurance System and subsequently, another deed of mortgage in connection
with two loans granted by the latter in the sums of P 11,500.00 and P 3,000.00, respectively. A parcel of land covered co-
owned by said mortgagor spouses, was given as security under the aforesaid two deeds. They also executed a
'promissory note to be jointly, severally and solidarily liable.

The Lagasca spouses executed an instrument denominated "Assumption of Mortgage" under which they obligated
themselves to assume the aforesaid obligation to the GSIS and to secure the release of the mortgage covering that
portion of the land belonging to herein private respondents and which was mortgaged to the GSIS. 4 This undertaking
was not fulfilled.

Upon failure of the mortgagors to comply with the conditions of the mortgage, particularly the payment of the
amortizations due, GSIS extrajudicially foreclosed the mortgage and caused the mortgaged property to be sold at public
auction.

Private respondents filed a complaint against the petitioner and the Lagasca spouses in the former Court of First
Instance of Quezon City, praying that the extrajudicial foreclosure "made on, their property and all other documents
executed in relation thereto in favor of the Government Service Insurance System" be declared null and void.

Private respondents alleged that they signed the mortgage contracts not as sureties or guarantors for the Lagasca
spouses but they merely gave their common property to the said co-owners who were solely benefited by the loans
from the GSIS.

The trial court dismiss the complaint for lack of cause of action but the Court of Appeals reversed the decision of the trial
court.

Issue:

Whether or not the promissory note and the mortgage deeds are negotiable instruments.

Held:

No, the executed documents are not negotiable.

In submitting their case to this Court, both parties relied on the provisions of Section 29 of Act No. 2031, otherwise
known as the Negotiable Instruments Law, which provide that an accommodation party is one who has signed an
instrument as maker, drawer, acceptor of indorser without receiving value therefor, but is held liable on the instrument
to a holder for value although the latter knew him to be only an accommodation party.

This approach of both parties appears to be misdirected and their reliance misplaced. 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.
Therefore, due to the lack of the essential requisites the promissory note and the deed of mortgage is not negotiable
document of title.