Corbett v. Clark, 45 Wis. 403 (1878) (23 Files Merged)

AUGUST TERM, 1878.
403
Corbett vs. Clark and another.
no sncli demand, no right of action therefor had been perfected

before such action was commenced; and consequently, if the
same had been claimed in that action, no recovery could have
been had therefor.
We think the case was fairly submitted to the jury by the
learned circuit judge, and that there was no error in refusing
to give the instructions asked by the appellant.
By the Oov/ri.— The judgment of the circuit court is
affirmed.
Bill of Exchange: (1) What constitutes. (2, 3) When acceptance abso-

lute, and liability not limited to particular fund.
A. and B., cultivating on shares the farm of M. and N., partners, gaveX. (to
whom A. and B. were indebted) an instrument in writing addressed to
M. and if., requesting them to pay a certain sum of money to X., “ and
take the same oat of our share of the grain,” meaning the grain then
harvested or growing on said farm; and M. andiT. wrote the words
“ Order accepted ”
on the back of the instrument, with their firm name
signed thereto. In an action by X. against M. and N.: Held,
1. That the instrument, though without words of negotiability, is a valid bill
of exchange.
2. That the order and acceptance are 'absolute; the words above quoted from
the order not limiting its payment to a particular fund, or making it con-
ditional, but merely indicating' the means by which the drawees might
reimburse themselves.
3. That the drawees cannot defend against the legal effect of the bill and ac-
ceptance, on the ground that, before such acceptance, they had already
made advances to the drawers, solely on the faith of the share of grain
belonging to the latter, more than sufficient to cover its full value, and
that the facts were known to X. at the time of such acceptance.
APPEAL from tbe Circuit Court for Fond d%tLao County.

The defendants appealed from a judgment rendered against
them. The instrument upon which the action was brought,
and the facts relied on as a defense, will sufficiently appear
from the opinion.
Eor the appellants, there was a brief by Shepard & Shepard,
404 SUPREME COUNT OF WISCONSIN,
and oral argument by Ghas. E. Shepard. They contended,

among other things, 1. That the instrument in question was
not negotiable: (1) Because it did not run to the order of any
one, or to bearer. Gerard v. La Goste, 1 Dal., 194; 1 Am. L.
C. (3d ed.), 321-2; Oa/rruth v. Walker, 8 Wis., 252. (2) Be-
cause it was a request to pay, not absolutely and in any event,
but out of a particular fund designated. Hunger v. Shannon,
61 N. Y., 251; Cook v. Satlerlee, 6 Cow., 108; 1 Am. L. 0.,
317-18. 2. That nonnegotiable instruments are subject to
the defense that there was nothing due the payee at the time
when notice of the transfer came to the maker. 1 Parsons on
N. &. B., 14, 15; 2 id., 44-47. 3. That the acceptance was in
law conditional, the order itself being so. 1 Parsons on N. &
B., 304; Atkinson v. Hanks, 1 Cow., 691.
Geo. P. Knowles, for respondent, argued that the instru-
ment in question was a negotiable bill of exchange, being for
the payment of money only, giving the drawer a personal and
certain credit, not confined to any particular fund, and being
payable absolutely and at all events. Eyd on Bills, 50-55;
Chi tty on Bills, 132-4; Corbitt v. Stonemetz, 15 Wis., 170;
24 id., 607. The words “and take the same out of our share
of the grain ” are mere direction or advice as to how the ac-
ceptor may reimburse himself. Edwards on Bills, 162-3; Ohitty
on Bills, 126; Story on Bills, § 65; 1 Phillips on Neg. Ins.,
1-40; 1 Hill, 11; Kelley v. Play or, 4 id., 265, 442; 23 N. Y.,
570; Bank of Ky. v. Sanders, 3 Marsh., 184; Redman v.
Adams, 51 Me., 433; Hacleed v. Snee, 2 Strange, 762; 3 Mod.,
400; 10 id., 294; Kaussoullier v. Kartsinek,7 Term, 733.
ORTON,J. This action is brought by the payee, the re-

spondent, against the drawees, the appellants, upon the follow-
ing instrument:
“ G-reenbush, Wis., Sept. 20,
1875.
“ Mr. I. B. Clark & Co. — Please pay G.A. Gorbett one
hundred and eighty-three dollars and 90-100, and take the same
out of our share of the grain.”
On the same day, the drawees wrote upon the back of this
AUGUST TEEM, 18T8. 405
order the words, “ Order accepted,’’ and signed tbe same, by

tbeir firm name of “ Gla/rh<&Thorp.”
This acceptance in itself is unqualified and absolute, but of
course it must be held to be subject to any qualifications or
conditions, if any, which appear upon the face of the order;
and it is contended by the learned counsel of the appellants,
that the words, “ and take the same out of our share of the
grain,” qualify the acceptance and make the order payable out
of a distinct and specified fund, and conditional upon the suffi-
ciency of such fund. These words, without explanation, are
meaningless; but, to give.the appellants the full benefit of
their explanation by the facts set up in their answer and found
by the circuit court, it may be said that the appellants had
rented to the drawers of said order two farms, and, by the terms
of the lease, each party was to have one-half of the produce
raised upon said farms for the years 1875 and 1876, and the
appellants were to have alien upondhe share of the lessees for
any advances made or credits allowed by the appellants to them,
or debts incurred to the appellants by them, in and by the work-
ing of the farms, and for seed and certain fall plowing. The
drawers of the order had gone into possession of the farms;
and when the order was drawn, the produce of the same was
either harvested or growing, and they had no other means to
pay their debts except their share of the same, besides which
they were insolvent. The appellants, at the date of the order,
had claims against the drawers’ share of the produce, accord-
ing to the terms of the lease, of an uncertain amount, but
probably considerably less than said share, and had also be-
come the holders of a certain chattel mortgage upon the
half share of the half share of the said drawers, belonging to
one of said drawers to secure his individual note for $323, be-
sides interest, to become due December 28,1875; which mort-
gage also covered some other property.
• It is claimed by the appellants that their advances under
'
said lease, together with the said note and mortgage, more than
covered the entire amount of said half share of the produce
406 SUPREME COUNT OF WISCONSIN,
Corbett vs. Claris and another.
raised, upon said farms for the year 1875, and that the respond-
ent, the payee of said order, had knowledge of these facts, and
that the words in the order, “ take the same out of our share of
the grain,” mean said share already anticipated and absorbed by
these other claims.
This bill is not drawn with words of negotiability, but “ it
is not essential to the validity of a bill of exchange that it
should be made payable to order, or bearer, or have the words,
“valué received.’” Mehlberg v. Tisher, 24 Wis., 607. This
order, then, has all the essential elements of a bill of ex-
change, unless the above words make it payable out of a par-
ticular fund and conditionally, and qualify the acceptance.
We do not think they can have this effect, even with the
explanation given in the answer and finding. This question
must be determined by the rule, that if these or similar words
are used “ merely to designate the fund out of which the ac-
ceptor may reimburse himself,” or “ as mere reference in the
draft to the fund, to call the attention of the drawee to his
means of reimbursement,” then the order and acceptance are
absolute and unconditional; but if they are used to limit the
payment, or make the order payable only out of a particular
fund, or conditionally, or upon a contingency, then the order
is not a bill of exchange, and the acceptance alone is not a
sufficient cause of action, even between the original parties.
Story’s Bills of Ex., § 40.
Perhaps a better test as to whether an order with such or
similar words is a bill of exchange, is found under the above
reference. “ The general rule is, that a bill of exchange al-
ways implies a personal general credit, not limited or appli-
cable to particular circumstances and events which can not be
known to the holder of the bill in the general course of its
negotiation.” The vague and by themselves meaningless
words here used, as we shall see, cannot affect the original
payee after an unqualified acceptance; much less would they
affect subsequent holders of ’the bill chargeable only with notice
of the words themselves.
AUGUST TEEM, 18T8. 407
Corbett ys. Clark and another.
By tbe above test there would seem to be no question that

this order is to be treated as an unconditional and absolute bill
of exchange.
Where the words in the body of the order are obscure, am-
biguous or uncertain, and it may be doubtful whether they
should be construed to make the payment conditional, con-
tingent or limited by a particular fund, or as a mere direction
as to the fund out of which the drawee may be reimbursed,
there it would seem to be the duty of the drawee, in his accep-
tance, to clearly express such a condition or qualification.
Sproat v. Matthews, 1 Term R., 182; Story’s Bills of Ex., §
240. But by the authorities, which are from cases nearly
parallel, there can be no doubt that this instrument should
be classed as a bill of exchange. In Redman v. Adams, 51
Maine, 433, the words of the clause were, “ and charge the
same against whatever amount may be due me for my share of
fish caught on board schoone- r Morning Star,’ for the follow-
ing year, 1860.” The acceptance was general; and the court
held that “ this was a mere reference to the fund in the draft,
to call the attention of the drawee to his means of reimburse-
ment,” and that the “ payment of the order was not made to
depend upon his having any share of the fish, nor was the call
limited to the proceeds thereof.” In Macleed v. Snee, 2
Strange, 762, the order was, “ Pay7£9 19s as my quarterly7 half
pay to be due from 24th of June to 27th of September next by
advance; ” and the court say7s: “ The mention of the half pay
is only by way of direction how he shall reimburse himself, but
the money is still to be advanced on the credit of the person;”
and the court distinguishes such a case from Josselyn v. Lacier,
10 Mod., 294, and Jenney v. Herle, 1 Strange, 591, where the
orders were drawn upon particular and uncertain funds, and
no personal credit is given to the drawer. In Haussoullier
v. Hartsinck, 7 Term R., 733, the words in the note were,
“ being a portion of value as. under, deposited in security
for the payment hereof,” and the collateral was appended to
the note; and it was held the note was payable at all events,
408 SUPREME COURT OF WISCONSIN,
and that the payment, when made, was to be carried to a par-

ticular account.
Where the clause merely indicates the account to which
the transaction is to be carried, or the fund from which the
drawee is to reimburse himself, and the acceptance is general,
it does not affect the validity of the order as a bill of ex-
change. Kelley v. Mayor, etc., of Brooklyn, 4 Hill, 263;
Early v. McCart, 2 Dana, 414. In Spurgin v. McPheeters,
42 Ind., 527, the order was: “Pay to Jesse McPheeters or
order the sum of one hundred and nineteen dollars, on said
MU of 13-4. in. lumber, and oblige,” etc. The answer set up
that the order was given for past indebtedness; that the draw-
ers -wereinsolvent; that the drawee had a contract with the
drawers for the delivery of inch lumber on the cars, and
to be paid for when 30,000 feet of such lumber was so deliv-
ered, and not till then; that said lumber had not been so de-
livered; that the order was drawn and accepted with reference
to said contract; and that all the facts were within the knowl-
edge of the payee at the time of the acceptance, and it was
understood at the time that the order was not to be paid until
the performance of said contract. The acceptance was simply,
“ I accept.” The action was by the payee against the acceptor.
On demurrer to the answer, it was held that, the acceptance
being general, it could not be contradicted or explained by a
contemporaneous verbal agreement; that the consideration of
the bill could not be inquired into as between the acceptor and
the payee; and that showing that it was given for an antece-
dent debt, or as an accommodation, was no defense. In Syl-
vester v. Staples, 44 Maine, 496, the order was, “ Pay Ansel
T. Sylvester fifty-five dollars for work done on logs,” etc.
The acceptance was, “ I accept the written order, to pay when
due.” On the trial of the action, by the payee against the ac-
ceptor, the defendant offered to show by parol evidence that
the words “ to pay when due” were understood by the parties
and agreed to mean, when the acceptor should have funds in
his hands belonging to the drawer, “ for work done on logs,”
and that at the time of the acceptance there was nothing s«
AUGUST TEEM, 1878. 409
due, and bad not since been due; and the offer was refused,
and tbe evidence rejected, on the ground that the acceptance
was general, and the words could have no other construction
than to mean to pay when the order was due, or at the matu-
rity of the order, and that parol evidence was not admissible
to contradict or explain either the order or acceptance. The
objection was made that the order had no words of negotia-
bility, as in this case, and was therefore no bill of exchange,
and that it was open to explanation and defenses of this char-
acter. It was held that the order was a bill of exchange, and
that the exclusion of the evidence offered to show any con-
temporaneous agreement between the parties contradicting or
varying the terms of the order or the acceptance was correct,
and that the words of the acceptance must be taken most
strongly against the acceptor.
In addition to the elementary principles and first impres-
sions based upon the reason supporting such principles in ap-
plication to this peculiar form of order, I have referred to the
foregoing cases, which appear to be very much in point, and
given to them considerable space, because these peculiar
clauses in orders and acceptances,-though various in language,
are often closely similar in significance, and mate very close
cases, and present great.difficulty in determining, in any given
ease, whether the order is a bill of exchange and its accept-
ance absolute or conditional.
The learned counsel of the appellants have cited several
cases which they most ingeniously claim to be applicable to
this case, and to show by authority that this acceptance is
payable out of a particular fund, and conditional, and there-
fore no bill of exchange.
In Gerard v. La Coste, 1 Dall., 194, it is held that the
order in that case, not having words of negotiability, was not
assignable so as to allow the holder to sue upon it; but it is
also held that it was a bill of exchange, and, when accepted,
bound all parties to it absolutely. In Cook,v. Saterlee, 6 Cow.,
108, the order was upon the drawee to pay and take up the
note of the drawer in the possession of the payee; and it was
410 SUPREME COUET OF WISCONSIN,
held that it was not a bill of exchange, but a mere engage-

ment, and in declaring upon it the payee must show perform-
ance. In Atkinson v. Manks, 1 Cow., 691, the order was
drawn for the delivery of goods in the hands of the drawee,
and of course was no bill of exchange.
The order in Jackman v. Bowker, 4 Met., 235, was upon
the drawee to pay an uncertain amount, to be ascertained
upon a final settlement with the payee, and out of an uncer-
tain fund in the hands of the drawee, and therefore no bill of
exchange.
The case of Munger v. Shannon, 61 N. Y., 251, claimed to
be especially in point, is essentially different from this case.
The fund was in the hands and under the joint control of the
drawer and drawee as copartners, and the order was drawn
upon the drawer’s share of the-profits of the partnership busi-
ness, which could not be ascertained without accounting and
settlement.
But whether this order was strictly a bill of exchange or
not, this defense is not available against an absolute and gen-
eral acceptance.
In Maber v. Massias, 2 Wm. Blackstone, 1072, the order
was for money, the product of the drawers’” goods in the
hands of the drawee, after discharging present acceptances,
and the acceptance was general; and it was held that the ac-
ceptor could not defend on the ground of balances due him
from the drawers, when his acceptance was general and uncon-
ditional; and the court said: “But, having accepted it gen-
erally in the terms of the draft, that is, subject to prior
acceptances, he shall not shelter himself by this concealed bal-
ance due to himself in the course of a running account.” The
same equitable principle is recognized and enforced in the
case of Weston v. Barker, 12 Johns., 276, where the defend-
ant was assignee of certain funds in trust for the payment of
specified indebtedness of the assignor, ared to hold the balance
subject to his order, which order was given to the plaintiff.
It was held that the acceptor of such a trust, and by.it the
acceptor of the order, could hot set off against such order de-
AUGUST TEEM, 1878. 411
mands against the assignor arising from other transactions in

which the plaintiff had no concern. In Kemble v. Lull, 3
McLean, 272, where the order was. for a certain sum of money,
“ if in funds,” and there was a general acceptance, it was held
that, after such a general acceptance, the acceptor could not
allege a want of consideration, and that the acceptance was
an undertaking to pay the amount of the order to the plaint-
iff. To the same effect is the Case of McMenomy v. Ferrers,
3 Johns., 71.
The defense in effect is, that the appellants, when the order
was given, had already anticipated and absorbed the entire
share of the grain belonging to the drawers, by claims and
demands against them, and that therefore there was no con-
sideration to the order; and it places the appellants, the
drawees and acceptors of the bill, in the attitude of knowing,
when they accepted it, that they had no fund out of which it
could be paid. This attitude most clearly shows that they
accepted the bill upon the personal credit of the drawers alone,
and not upon the credit of any fund, and as an accommoda-
tion to the drawers.
“ It was no defense or bar, that the bill vTasknown to the
holder to be an accommodation bill as between the other par-
ties, if he took it for value before due.” Story’s Bills of Ex.,
§ 191.
By a proper construction of these words in the bill, and by
the authorities, we are clearly of the opinion that this order is
a valid bill of exchange, and is not payable out of a particular
fund or conditionally, but absolutely, and that the words are
used merely in reference to the means by which the appellants,
the acceptors, might reimburse themselves for its payment,
and that the defenses set up were unavailable.
By the Court. — The judgment of the circuit court is af-
firmed, with costs.
DECEMBER TERM, 1860. 29
Myers et al. ». Standart et al.
rules of statutory construction, hold that the law of May 1,.

1852, had any such effect.
Demurrer to answer overruled.
Brinkerhoff, C.J., and Scott, Sutliff, and Gholson, JJ.;

concurred.
George Myers, John C. Fall and John A. Collins v. Need-

ham M. Standart, Samuel A. Wheeler, Philo Chamber-
lin, and Silas S. Stone.
1. Under the averment, in a declaration, of due demand and notice of the dis-
honor of a bill of exchange, the declarations of the defendant showing an
acknowledgment of liability upon, and a promise to pay the amount of the
bill, are admissible in evidence.
2. A bill of exchange addressed, generally, to the drawee, in a city, may be
accepted payable at a particular bank in the same city, and a presentment
for payment may be made at the counter of such bank, without a previous
notice to, or the assent of the drawer.
3. The drawers of a bill, being partners, dissolved their partnership after the
maturity and protest of the bill, but gave no notice thereof to the payees
of the bill. Some time after the dissolution the agent of the payees called
on one of the partners for settlement of the bill, who referred him to another,..
and by him declarations were made that, although there had been a defect
in the mode of giving notice, which discharged the drawers, they would not
take advantage of it, but would settle when .they were satisfied nothing could
be made from the acceptors. The acceptors were wholly insolvent, and the
action was not brought on the bill until after a considerable lapse of time.
On the trial the other partners objected to the admission in evidence of the
declarations. Held, that they were properly admitted in evidence, as show-
ing that there had been due notice of dishonor of the bill, and charging all
the partners with liability thereon.
Motion for a new trial, reserved in tbe district court of'

Cuyaboga county.
This was an action of assumpsit on a bill of exchange.
Two of the defendants, Philo Chamberlin and Silas S. Stone,.
severally pleaded the general issue. Needham M. Standart
was discharged upon his plea of bankruptcy, and Samuel A.
Wheeler died after the institution of the suit. The case was
tried before a jury upon the pleas of Chamberlin and Stone,..
30 SUPREME COURT OP OHIO.
and a verdict rendered for the plaintiffs. After the verdict, a

motion was made for a new trial, by Chamberlin and Stone,
on the grounds of the improper admission of evidence, of the
misdirection of the court to the jury, that the verdict was
contrary to law, and against the evidence. This motion was
reserved, for decision, to this court.
The testimony in the case, and the exceptions to testimony
and to the charges of the court, are set forth in a statement
agreed to by the parties. Prom this statement, it substan-
tially appears that the defendants were partners under tho
style of Standart, Chamberlin & Co., which partnership waa
formed in the year 1838, and expired by limitation on tho
1st of January, 1841. That the following bill of exchange
was drawn by the firm :
“ $1000. Akron, 0., April 10, 1839.
Pour months after date, pay to the order of Messrs. Myers,
Pall & Collins, One Thousand Dollars, and charge to acct. of
“ Your obt. servants,
“ Standart, Chamberlin & Co.”
(Addressed to) Messrs. Griffith, Rolfe & Co., New York.
The bill was indorsed by Myers, Pall & Collins to R. Bu-
chanan or order,, who was the holder when it matured, but
who indorsed it to C. McAlister, in Philadelphia, for collec-
tion, and by him it was sent to parties in New York. The
bill was presented for acceptance, and on the face of the bill
was.written, “ At Union Bank, Griffith, Rolfe & Co.”
When the bill matured it was presented by a notary to the
paying teller of the Union Bank in the city of New York,
who refused payment for want of funds. The bill was then
protested, and notices sent to C. McAlister, by him to R. Bu-
chanan, by him to the plaintiffs, and by them to the drawers.
These parties, in proving the forwarding of the notices, do
not recollect the particular day, but say that, from their course
of business and knowledge of the mode of doing such busi-
ness, they were forwarded the day after their reception, by
the usual course of mail.
The plaintiffs offered in evidence a conversation between
Myers et al. v. Standart et al.
.their clerk and S. A. Wheeler, one of the partners of Stand-

art, Chamberlin & Co. The statement shows that, at a time
■“not remembered definitely, but believed to be in the month
of August, 1840, he (the clerk) made a trip to Akron to en-
deavor to make an amicable settlement of this draft with the
drawers; that he called upon Mr. Chamberlin, who referred
him to Mr. S. A. Wheeler; that he had an interview with Mr.
S. A. Wheeler, from whom it is believed that the said Myers,
Fall & Collins had originally received the draft, who stated to
deponent that they, Standart, Chamberlin & Co., were re-
leased from all legal responsibility of payment of said draft,
in consequence of some defect in the protest, or notices of
protest, or something of the kind, but that they did not in-
tend to take any advantage of the same, as they were justly
bound to see them, the said Myers, Fall & Collins, paid,
and would do so when they, Standart, Chamberlin & Co., were
fully satisfied that nothing could be made out of the said
Griffith, Rolfe & Co., the acceptors in the city of New York,
and asked that the settlement of the same might be delayed
until that was finally ascertained, and urged renewed efforts
to make the money in New York.” On a further examina-
tion, the witness stated that the defect in giving notice, as well
as he recollected, which was claimed as discharging Standart,
Chamberlin & Co., was that the notices did not come to them
by the nearest post route, but went to Cincinnati, thence to
Lancaster, and from there to Akron. He was cross-examined
as to the date of the conversation, and said, “ I now can not
recall the time, other than it was prior to 1841, but most
probably in 1840.” He further said, that he thought it was
in the fall of 1840, after the draft had been protested and
suit brought against the acceptors, and before the separation
between Myers, Fall & Collins, which was in 1842. He did
not pretend to fix the date. The statement shows that at the
time the draft matured, the drawers had funds to meet it, in
the hands of the acceptors, who failed, and became wholly
insolvent, the efforts to recover anything by suit proving en-
tirely fruitless.
The evidence to which objection was taken, was that be-
SUPREME COURT OE OHIO.
Myers et al. u. Standart et al.
fore stated, of the declaration of one of the partners, as to-

the notice of the dishonor of the draft, to the effect that they
would pay the draft, notwithstanding they had been dis-
charged by notice not having been given; and the ground
of the objection stated is, that strict notice only was averred
in the declaration, and required strict proof.
It was claimed that the court misdirected the jury, by in-
structing them that a draft drawn payable generally, may bu
accepted by the drawee, payable at a particular bank in the»
city of his residence, and that without notice to the drawer,
or first obtaining their consent, said draft at maturity may bi
presented by the holder at the counter of said bank for pay-
ment, and protested for nonpayment, so as to bind the drawer,
without any presentation or demand of payment at the usual-
residence or place of business of said drawee, and without a,
demand of the drawee in person.
It was also claimed that the court misdirected the jury by
instructing them that, although the declaration of a partner
made after the dissolution of a partnership can not be re-
ceived in evidence to charge his former copartner-upon a
liability that had become extinct by reason of laches in a
third person; yet, that such declaration may be received for
that purpose, unless it is made to appear that notice was
given of the dissolution of the partnership, or unless from
lapse of time, or some other circumstances, the jury find
that the dissolution was known to the party who is to be bene-
fited by such declarations.
It. P. Spalding, for defendant Chamberlin, in support of

the motion for a new trial, submitted the following points and
authorities :
1. Strict notice being averred in the declaration, it was im-
proper to allow the plaintiffs to introduce evidence to show a
waiver of notice by one of the defendants, after protest for
nonpayment. Corey v. Scott, 3 Barn. & Ald. 624; Curtis v.
The State Bank, 6 Blackf. 312; Blackly v. Grant, 6 Mass.
386; Law. Pl. in Ass. 363; Baily on Bills, ch. 9, p. 406, 5th
DECEMBER TERM, 1860.
ed., 1830; Byles on Bills, marg. p. 238; Hill v. Varrett, 3

Greenlf. Rep. 233.
2. The court misdirected the jury by telling them that a
draft made payable generally could be accepted by the drawee
payable at a particular place in the city of New York, with-
out notice to the drawer, and that a presentation at the place
of payment, would be sufficient to bind the drawer without a
demand at the hands of the acceptor at his residence or place
of business. Story on Bills of Exchange, p. 281, sec. 239
and note 3, sec. 240; Chitty on Bills, p. 300, 303; Cowie et
al. v. Halsall, 4 Barn. & Ald. 197. See remarks of Bailey,
J., in Sebag v. Abitvol, 4 Maule & Selw. 466, and of Abbot,
C.J., in Rowe v. Young, 2 Brod. & Bing. 276; 6 Eng. Com.
Law, 109. See Lewis v. Planter’s Bank, 3 How. (Miss.)
Rep. 267; 3 Kent Com., 9th ed., pp. 110, 133; 16 M. & W.
751; Townsend’s adm’r v. Lorain Bank of Elyria, 2 Ohio
St. Rep. 360; Miser v. Trovinger’s exr’s, 7 Ohio St. Rep.
285-; Pierce v. Struthers, 27 Penn. St. Rep. 254-; Waterman
v. Vose et al., 43 Maine Rep. 511; Walker v. The Bank of
the State of New York, 13 Barb. 638; 1 Strange’s Rep. 214.
3. The court erred in its instructions to the jury, that after
the dissolution of a partnership, one of the former partners
could bind his copartner, and attach to him a liability that
had become extinct for want of regular notice, by his own
declarations, unless the dissolution of the copartnership was
known to the person to be benefited by such declarations.
Story on Bills of Exchange, sec. 320; 3 Kent Com., 9th ed.,
p. 72; Hackley v. Patrick et al., 3. Johns. 536; Palmer v.
Bodge, 4 Ohio St. Rep. 21; Bell v. Morrison et ál., 1 Peters,
351.
The fact that notice of the dissolution of the partnership
of Standart, Chamberlin & Co. had not reached Myers, Eall
& Collins, at the time of the alleged waiver by Wheeler, will
have no weight in the consideration of the question whether
Wheeler had power to bind his former copartners by such
waiver. Myers, Eall & Collins parted with no property, nor
yet were they subjected to any prejudice by reason of the
supposition that the firm of Standart, Chamberlin & Co-,con-
¿4 SUPREME COURT OE OHIO.
timied to exist. And in such cases only is a notice of disso-

lution material to the defense of the partner who claims ex-
emption from liability. Story on Part., 4th ed., p. 277, sec,
162.
The drawers of the bill had, by the acceptance, become, in
effect, sureties for the payment, and nothing more. Payment
was not cluly demanded, and if it was, notice of nonpayment
was not regularly given to the drawers. They had becom-
eexhonerated from all legal liability during the life of the co--
partnership. Could that liability be restored, after dissolu-
tion, by the declarations of an individual, so as to bind the
whole as effectually as if the firm had continued to exist?
See Le Roy, Bayard & Co. v. Johnson, 2 Peters, 186; Yandes
et al. v. Lefavour et al., 2 Blackf. 371.
It is insisted, on the part of defendants, that Wheeler, in
waiving a defect in the notice of nonpayment, was in the exe-
cution of a power, so far as it concerned his copartners, that
appertained to him only so long as the partnership existed.
After dissolution'his waiver could bind no one but himself.
The fact that no notice of the dissolution had been given can
not affect this question of power.
4. A general acceptance of a draft imposes on the holder
the duty of presenting it for payment to the acceptor in per-
son, or at his house or place of business. An acceptance to
pay at a particular place, imposed no other duty on the holder
than to have the draft at that place for payment. The drawer
had a right to expect that demand of payment would be made
of the acceptor in person, or at his domicile or place of busi-
ness. The requisitions of the law have been changed without
his consent.
That inserting “ place of payment,” is deemed a material
alteration of the contract —See Sturges & Hale v. Williams,
9 Ohio St. Rep. 443; Southwark Bank v. Gross et al., 35
Penn. St. Rep. 80.
H. Griswold, for plaintiffs.

1. As to the first point made by defendant, I cite the fol-
lowing .authorities.: Byles on Bills, 308. 347, 350, 347, 409,
470; 7 East, 231; 5 Pick. 444; Chitty on Bills, 163; 16

Johns. 152; 12 East, 38; 1 Taunt. 12, 712; 4 id. 93; 5
Johns. 375; 3 Penn. Rep. 419, 425; 13 East, 417; 7 Conn.
526-; 12 Wheat. 183; 12 Mass. 52; 6 East, 16; 2 Camp. 188,
232; 3 Barn. &Ald. 622; 16 M. & W. 749; 2 Stark. Ev. 274.
We offered the evidence as evidence of notice satisfactory
to the defendants. This distinction is clearly recognized in
the authorites cited. That a demand was made is not disputed;
and the objection under this point, has reference only to the
notice.
2. As to the second point, I cite these authorities: Troy
City Bank v. Lanman, 19 N. Y. Rep. 477, recognized as
good law in 31 Barb. 403. This bill was payable in New York,
and is governed by the law of New York. This decision is
evidence of what the law of that State was.
3. As to the third point, I cite the following authorities:
Darling v. March, 22 Maine Rep. 184; 7 Wend. 441; 11
Pick. 408; 8 Shepl. 433; 6 Johns. 267; 1 Taunt. 103; Coll-
yer on Part. 497; Story on Part. 107.
There is no new liability created. Wheeler did nothing
more than what fell within the legitimate scope of his duties
as a member of a dissolved firm, in settling up its business,
.liquidating accounts and agreeing upon balances. Demand
had been made ; notice of some sort had been given; and it
was right that he should say whether he was satisfied with it.
Suppose, under these circumstances, Wheeler had paid the
bill when demand was made of him; is there any doubt but
that he could have charged the amount over to the firm ?
We are not seeking to charge the defendants upon a prom-
ise made by one of the partners. Wheeler and Chamberlin
were the Akron partners, and chargeable with the adjustment
of this business, and Chamberlin referred the plaintiff’s clerk
to Wheeler. This binds the whole to whatever Wheeler did.
4. The fourth point, made by the defendants, is the same,
in substance, as their second.
5. However the court may hold on the third point, I ir.sist
that all the defendants are bound by the acknowledgment and
promise of Wheeler, in the absence of evidence that they had
36 SUPREME COURT OE OHIO.
given notice of dissolution, or that the plaintiffs had actual

notice of it in some other way. On this point, I cite Story
on Part. 334^5-6; Collyer on Part., p. 484.
The rule is general and universal. It is immaterial what
he engagement may be which th.e partner makes. It is not
essential that any actual consideration should pass at that
time. If the transaction is such as would bind the firm, were
the partnership then in existence, it will bind all the mem-
bers, though it be dissolved
Gholson, J. The first reason assigned for a new trial is

the admission of evidence tending to show what is said to be
a waiver, by one of the defendants, of laches in giving notice,
tñe averment in the declaration, undei which the proof was
offered, being of demand and notice in the usual form.
Whether under such an averment, a dispensation or excuse
for not giving notice, or, in a case where there has been no
attempt to give notice, a subsequent waiver of any notice
might be properly shown, we need not decide. The evidence
offered and received, we think, tended to show that notice had
actually been received, in the language of one of the author-
ities, that the preliminaries essential to the maintenance of
the action had been satisfied. Byles on Bills, 337. In this
view, the authorities clearly show that it was admissible.
It was held in the case of Campbell v. Webster, 2 M. G. &
S. 258, “ that any acknowledgment by the drawer of a bill,
of his liability to pay, or any promise to pay the amount,
though conditional as to the mode of payment, is evidence to
be left to the jury, of due notice of dishonor, and in ease of
a foreign bill, of its having been duly protested.”
The evidence in this case not only showed that notice had
been received, but the informality alleged to have operated as
a discharge, when stated, it does not appear would have had
that effect, though such was the opinion of the party. He
claimed that notice should have been sent directly from New
York, and not by way of Cincinnati and Lancaster, through
the successive-holders of the bill. But the law clearly author-
ized the course which was taken. Lawson v. Farmer’s Bank
of Salem, 1 Ohio St. Rep. 206. And the whole statement

taken together, showed that there was in fact no laches in giv-
ing notice, but that the course properly adopted for the pur-
'
pose had been effectual.
It is also urged as a reason for a new trial, that there was
a misdirection to the jury, in saying that a draft drawn pay
able generally, may be accepted by the drawee, payable at a
particular bank in the city of his residence, and that, without a
previous notice to, or the assent of, the drawer, a presentment
for payment may be properly made at the counter of such bank
The precise question here presented has been recently con-
sidered in the court of appeals in New York; and it was
held that such an acceptance did not discharge the drawer.
“No possible injury,” says the judge who delivered the opin-
ion, “ can result to the drawer or indorser by making a bill
of exchange, directed to the drawee in a city generally, pay-
able at some particular place in the same city. It becomes
pro Jiaevice the place of business of such drawee. The cases
differ as to whether the holder may not, nevertheless, present
the bill for payment at the ordinary place of business, or if
he has none, the residence of the drawee; but I have seen
none which decides that he is bound to do so. I am confident
that the practice pursued in this instance corresponds with
commercial usage, and think it should be sustained.” Troy
City Bank v. Lanman, 19 N. Y. Rep. 477-480. We feel the
propriety of a uniformity of decisions upon commercial ques-
tions between the courts of this State and those of New York;
and even if we had grave doubts of the correctness of a de-
cision of the highest court of New York, we should be in-
clined to follow it, in the absence of any settled rule in this
State. But upon principle, we see no good reason to doubt
the correctness of that decision.
The distinction, between the contract of the drawer and
payee and that of the payee and acceptor, should not be con-
founded. The mere drawing a bill is no contract with the
acceptor. His contract has yet to be made, and, it may be
admitted, should not be made so as to affect the contract be-
tween the drawer and payee evidenced by the bill. The
acceptance must be obtained and acted on substantially as that

contract requires, or the drawer can not be charged. That
contract in the present case contemplated that the acceptor
should become bound generally, and not conditionally, for the
amount of the bill to the payee.
It is well known that the effect on the contract of the maker
of a note or acceptor of a bill, of the note or bill being made
payable at a particular place, was the subject of much discus-
sion among the judges in England, and that a difference of
opinion existed. Some contended that, as against the maker
or acceptor, a demand at the place was necessary, others that
it was not. The controversy was settled by the house of lords
in favor of the former opinion. Rowe v. Young, 2 Bro. &
Bing. 164. This led to an act of parliament providing that
such effect should not be given to the bill or note, unless the
words “ not otherwise or elsewhere ” were added to the desig-
nation of the place of payment. The decisions of the courts
in this country have been contrary to that of the house of
lords, and in accordance with the opinion of the minority of
the judges in the case of Rowe v. Young; and the only effect
given to such designation of the place of payment in behalf
of a maker or an acceptor, has been to relieve him from a
' claim for interest, if he was present at the place designated
and ready to pay, but unable to do so for the want of a de-
mand. In this view, as between payee and maker or acceptor,
the designation of a place of payment has been held material.
Such being the only view in which the liability of the
acceptor is qualified by designating a place of payment, it is
clear that the contingency in which he might avail himself of
such qualification could not affect the drawer, for it presup-
poses that to have occurred which in itself discharged the
drawer, the failure to make a demand for the payment of the
bill.
It will be observed that the rule applies to cases where the
bill is addressed to a drawee in a city generally, and accepted
payable at some particular place in the same city. It would
not apply when the bill was accepted payable at some other
city or place. This might injuriously affect the.drawer in the
DECEMBER TERM, 1860.
time and mode of forwarding funds to meet the bill, and of

receiving notice of dishonor. But where in the same city, a
particular location or agency is designated for the coming to-
gether of the parties, to pay and receive, it is difficult to per-
ceive how any injury therefrom can result to the drawer. In
a large city, in many cases, such an arrangement would be
very convenient, and we see no reason why it should not be
allowed.
After what has been stated, it is scarcely necessary to say
that the eases, as to the alteration of a promissory note or an
accepted bill, by inserting or striking out words designating
a place of payment, do not apply to this case. We have here
no change of contract, but a question whether the contract
of the acceptor was so made as to affect the rights of the
drawer under his contract with the payee. The very distinc-
tion we have taken appears to have been suggested in one of
the cases cited. Sturges & Hale v. Williams, 9 Ohio St. Rep.
443-451.
In another particular a misdirection to the jury is alleged
to have occurred. The charge to the jury proceeds on the
assumption that they might have found from the evidence that
at the time the declarations of the partner as to receiving no-
tiee of the dishonor of the bill were made, the partnership
had ceased to exist. We think it quite doubtful whether any
view of the evidence would warrant such a finding, and if not,
the charge was an abstract proposition which could not pre-
judice the defendants. But the counsel on both sides have
argued the case, as if such an assumption might properly be
made, and we therefore proceed to examine the correctness
of the charge, as bearing on such a view of the evidence.
The charge, as shown by the statement presented, is some-
what loosely drawn, in referring to the liability of the defend-
ants as having become extinct by the laches of a third per-
son. But we think the effect of the charge must be consid-
ered in connection with the issue and evidence in the case,
and incorrect language, unless it may have misled the jury,
ought not to be regarded. We have before stated that the
declarations of the partner were properly admitted as show-
ing that notice of the dishonor of the bill had been received.
If they were properly admissible in evidence, and their effect,
if believed by the jury, was to charge the defendants with lia-
bility, the language used in instructing the jury to find upon
such evidence, can not be material.
The question to be really met, and it is one of some diffi-
culty, is, whether, assuming the partnership to have been dis-
solved, though the fact was unknown to the plaintiffs, such
declarations of one partner were properly admissible against
the others ? There has been much discussion and conflict of
opinion as to the authority of one partner after a dissolution
of the partnership, to bind other partners by a promise or ad-
mission of liability, and particularly in reference to a debt
barred by the statute of limitations. It would be difficult to
deduce from the authorities any clear and definite rule which
would show whether a particular declaration might be re-
ceived. Partners in reference to their contracts occupy the
position of other joint contractors, and are also regarded each
as the agent of the others. But this agency, either before or
after dissolution, must be limited to the ordinary scope of the
business of the partnership. After the dissolution, the agency
is limited to the winding up and adjusting the business. But
persons who have had previous dealings with the partnership,
and have no notice of its dissolution, may deal with the part-
ners as if the partnership still continued. Such dealing, how-
ever, must be limited to matters within the scope of the au-
thority of the partners to bind each other, and in the usual and
ordinary course of the partnership business. If credit be given
in the usual course of business on the faith of the existence of
the partnership, there could be no doubt of the liability of the
firm for the debt contracted. Whether the making a prom-
ise or admission to revive a debt barred by the statute of lim-
itations, or a promise or admission of a like character, con-
sidered either as a continuance of a liability, or as a new con
tract, may be regarded as a matter in the usual and ordinary
course of business, is doubtful. But we are not prepared to
limit the dealings of persons having no notice of dissolution
of a partnership, strictly, to new contracts upon an entirely
Myers et al. ®. Standart et al.
new consideration. We think that partners who, after disso

lution, by a failure to give notice to those with whom thej
have had previous dealings, or have entered into previous en
gagements, hold out each other as competent to make nego-
tiations and arrangements in the same manner as if the part-
nership existed, may well be bound by declarations and ad-
missions made by one partner, in the course of the negotia-
tion or arrangement of a subject matter originating during
the existence of the partnership. They may thus, though
passively, give a right to evidence of a title to a claim or to
property, which it would be unjust to permit them afterward
to dispute. Nor do we think that it can be generally neces-
sary in such cases, that the party should have parted with
something, or have changed his position; it would suffice if
it appeared from the circumstances that, on the faith of the
declarations made, he forbore to act in the prosecution of his
claim.
In this case the holders of a protested bill call on the
drawers, who were partners when the bill was drawn, and
after it matured, for settlement. One partner refers them to
another as having charge of such business. Neither says
anything of a change of authority to act or speak. The
partner referred to enters into the negotiation for the settle-
ment of the bill. He alleges that there had been a defect in
giving notice of dishonor, which had discharged the drawers,
but the matter relied upon, when stated, proves to be no de-
fect, and then gives distinct and positive assurances that not-
withstanding the supposed defect the matter will be settled,
urging, however, continued efforts to recover the amount from
the acceptors. A considerable time elapses, the acceptors are
•whollyinsolvent, a demand by action is made on the drawers,
and the right to use such declarations as evidence of demand
and notice is contested by the other partners. We do not
think we are required by any rule of law, and certainly by no
principle of justice, to exclude such evidence.
The ground that the verdict was against the weight of evi-
dence, has not been pressed in the argument, and requires no
42 SUPREME COURT OF OHIO.
Fisher’s executor s. J. Mossman et al.
consideration. The motion for a new trial will be overruled;

and judgment entered on the verdict.
Brinkerhoff, C.J., and Scott, Sutliff and Peck, JJ.,

concurred.
Hiram Fisher’s executor v. James Mossman et al.
1. Where a creditor takes from his debtor a note, and also a mortgage on real
estate to secure the same, and the debtor afterward dies ; and an action against
his personal representative on the note becomes barred by the lapse of time,
under section 103 of the administration act, held, that the creditor may nev-
ertheless have his remedy in equity on the mortgage.
2. Where a mortgage on real estate is duly executed and recorded, and the
mortgaged premises are subsequently sold at sheriff’s sale, under a,judgment
in favor of a third party, against the mortgagors, obtained subsequent to the
recording of the mortgage; and the mortgagee is present at the sheriff’s sale,
and keeps silent in respect to his mortgage, held, that the mortgage being
duly recorded, and there being no other evidence of actual fraud, the mort-
gagee is not estopped, by his mere silence, from afterward claiming the ben-
efit of his mortgage lien.
In Chancery. Reserved in the district court of Gallia

county.
The case is sufficiently stated in the opinion of the court.
John W. Andrews, for plaintiff.
A. G. Thurman and A. T. Fullerton, for defendants.
Brinkerhoff, C.J. This is a bill in chancery for foreclo-

sure, and sale of mortgaged premises, filed in the common
pleas of Gallia county, and from thence appealed to the dis-
trict court of that county, and by it reserved for decision here.
The facts in the case, so far as it is necessary to state them
in order to an understanding of the questions they present,
are these:
During and subsequent to the year 1837, John Mcssman
376 SUFFOLK AND NANTUCKET.
Newhall & another v. Clark.
renders him liable in an action for the price of the goods.

But that case does not support the claim made by the plain-
tiffs in the present case. In that case, the defendant, after
he came of age, retained and used another’s property, for
which he had paid nothing; and it was held, that he must
pay for it. It would have been otherwise, if he had sold or
wasted the property, during his minority. In such case, his
infancy would have been a good defence. In the present
case, the defendant Barnard, while under age, sold to his
partner such of the goods, for which the notes in suit were
given, as were not. previously sold by the firm, and also all
the other goods of the firm, and received, partly in money,
and partly in a note, the amount which he at first put in,
with such a profit thereon as his partner was willing to allow
him. By retaining the note after he came of age, he seems
to have ratified, if any thing, the dissolution of the partner-
ship, rather than the partnership itself.
Judgment for the defendants.
Moreton Newhall & another vs. Joseph W. Clark.
The acceptance of an order, for the payment of money out of the amount to be
advanced to the drawer, when the houses he was then erecting on the drawee’s
land should be so far completed, as to have the plastering done according to the
contract between the parties, is not absolute, but conditional; ana tne acceptor’s
liability thereon is dependent on the contingency of the work being completed to
a certain stage, according to the contract; nor will such acceptance become ab-
solute, and the acceptor liable thereon, as such, by a subsequent cancellation of
the contract by the drawee and the assignee of the drawer.
If the acceptor of a conditional order, dependent on the contingency of certain
work being completed for the acceptor by the drawer, according to a contract
between them, prohibit the drawer from proceeding to complete the work, or col-
lude with the drawer to put an end to the contract, so as to prevent the acceptor
from being liable on his acceptance, the remedy of the holder of the order,
if entitled to any, which the court did not decide, is by a special action on the
case for damages against the acceptor: In such case, the burden of proof
would be on the plaintiff to show, that the prevention of the completion of the
contract had been caused by the defendant $ and any evidence on the part of the
acceptor, that the drawer had failed or been unable to perform his contract, by
reason of death, sickness, insolvency, or other inability, would be competent to
rebut the charge.
MARCH TERM 1849. 377
The plaintiffs, as the payees, brought this action against

the defendant, as the acceptor, of two orders drawn on him
by Henry M. Reed, for different sums, and of different dates,
but in other respects of the same tenor. The declaration also
contained the general counts for work and labor, money paid,
&c., in common form. The following is a copy of one of
these orders:—
“ Boston, June 22, 1844. J. W. Clark — Please pay to Newhall & Maguire,
or their order, one hundred and eighty-four dollars and sixty-six cents, out
of the amount to be advanced to me when the houses I am now erecting on
your land in Erie street are so far completed as to have the plastering done,
according to our contract, dated April 12, 1844, now on record, and charge it
to my account. Yours, &c., respectfully, Henry M. Heed.”
Indorsed: “ Jos. W. Clark.”
The trial was before Colby, J., in the court of common

pleas.
The plaintiff contended, that the orders and acceptance
were absolute; and the defendant that they were conditional.
The presiding judge ruled this point in favor of the plaintiffs ;
but considering the question doubtful, allowed them to pro-
ceed and introduce evidence to show, and the fact was admit-
ted, that, on the 14th of February, 1845, Reed, the contractor
and drawer of the order, made an assignment to Rice and
Jenkins of all his right in the contract, and that on the same
day the contract was cancelled by Rice and Jenkins and the.
defendant.
The plaintiffs contended, upon this evidence, that if the
orders were conditional, the defendant and the drawer having
cancelled the contract, the defendant had thereby rendered
himself liable absolutely, from the time of the cancellation;
and the presiding judge so ruled. The defendant thereupon
offered to show the following facts, by way of explaining
and avoiding the effect of the cancellation : —
That the contract had expired by its own limitation, at the
time of the cancellation; that Reed had wholly failed to
comply with the terms of the contract, and had released the
premises to Clark; that the work done by Reed was not
•lone pursuant to the contract; that he was utterly unable to
complete the work, and that in February, 1845, the work

was wholly suspended; that this was well known to the
plaintiffs; and that the assignment was made in consequence
of the utter inability of Reed to go on with and complete
the contract.
This evidence, being objected to by the plaintiffs, was
considered inadmissible by the court, and rejected.
It was agreed that the plaintiffs worked upon the houses
mentioned in the contract to the full value of the sums for
which the orders were drawn, and on the faith of these orders.
Upon the facts in evidence, the presiding judge ruled, that
the plaintiffs could recover, and a verdict being returned ac-
cordingly in their favor, the defendant alleged exceptions.
E. Blake, for the defendant.
Amos B. Merrill, for the plaintiff.
Shaw, C. J.* The court are of opinion, that this verdict,
under the instructions given, and the evidence offered, as ap-
pears by the bill of exceptions, cannot be sustained.
The plaintiffs declare in a general count for work and
labor, money paid, &c., in common form, and also upon two
orders, copies of which accompany the bill of exceptions.
These orders are alike, and the same remarks will apply to
both: “Please pay, &c., out of the amount to be advanced
to me, when the houses I am now erecting on your land, in
Erie street, are so far completed as to have the plastering
done, according to our contract, dated,” &c. The orders
refer to the contract subsisting between the parties, and ne-
cessarily call for evidence, beyond that of the orders them-
selves, to ascertain their meaning and legal effect, and to de-
termine when and from what fund the sums mentioned in
them are to be paid. They look to the future, to a certain
quantity of work to be done, and materials supplied, by the
drawer, for the use and benefit of the acceptor, according to
contract. All future events are contingent; all unaccom-
plished enterprises, intended labors and performances, fall
* Fletcher, J., did not sit in this case.

within this category. The acceptance was an agreement to

the request expressed in the older, and as that was contin-
gent, the acceptance was an undertaking dependent on the
same contingency. That contingency was, when, or if, the
work I have undertaken to do, shall have been completed to
a certain stage, agreeably to our contract. If, then, the work
was never done by the contractor, the drawer of the order,
under and in pursuance of this contract, the event never oc-
curred, upon which the defendant by his acceptance bound
himself to pay. It follows, as a necessary consequence, that
by force of the defendant’s express promise, he was not bound
to pay any thing. Payment was only to be made, at a time
which never arrived ; and out of a fund of the drawer, to
accrue by the performance of the contract, on the part of the
drawer, which never being performed, the fund of course
never existed.
The court are therefore of opinion, that the direction of
the court was incorrect, in ruling that this acceptance was an
absolute and unconditional promise for the payment of money.
But, for the purpose of presenting another question, the
plaintiffs offered evidence to prove, that, on the 14th of Feb-
ruary, 1845, Reed, the drawer of the order, and the contract-
or with the defendant, made an assignment to Rice and Jen-
kins of all his right in the contract; and that on the same
day the contract was cancelled by Rice and Jenkins and
Clark; and of these facts there is no dispute.
Upon these facts, the court ruled, at the instance of the
plaintiffs, that if the order was conditional, the defendant,
and the drawer, that is, as the evidence was, the assignee of
the drawer, having cancelled the contract, the defendant had
thereby rendered himself absolutely liable from the time of
such cancellation.
This direction was, in our judgment, incorrect. By such
cancellation, the condition on which the money was to be
paid did not occur; the work on the house was not done by
Reed, conformably to his contract, so as to bring the defend-
ant’s engagement within the terms of the order and accept-
Newhall & another y. Clark.
ance ; and the defendant, therefore, did not become liable by

force of his acceptance.
We do not mean to say, that when a party has obtained
such an order and acceptance, nothing short of an absolute
performance of the contract, on the part of the contractor
and drawer, will give the payee any remedy against the ac-
ceptor. The holder of such an order is a holder for value,
and has an interest in the contract, and in its execution, as a
means of raising the fund to which he has a right to look for
his pay. If, therefore, after the acceptance of such an order,
the acceptor, without justifiable cause, should prohibit the
drawer and contractor from proceeding to such a completion
of the contract, as will make the acceptance payable, or if he
should collude with the drawer of the order, to put an end
to the contract, when, but for such fraudulent interference,
the drawer would be able and ready to go' on and complete
it, we are not prepared to say that the holder of the order
would not have a remedy by a special action, setting out such
wrongful act of the acceptor, and the loss sustained by the
holder by means thereof. The sum thus to be recovered
would not be the debt due by force of the contract, that is,
the acceptance, but damages for the wrongful act of the ac-
ceptor, in preventing the completion of the contract, by
means of which the holder has sustained the loss of the debt.
In such action, the burden of proof would be on the plaintiffs
to show, that the prevention of the completion of the con-
tract had been caused by the defendant, to avoid the order;
and any evidence, on the part of the acceptor, to show that
the drawer had failed or been unable to perform his contract,
by reason of death, sickness, insolvency or other inability,
would be competent to rebut the charge, upon which such
action must be grounded.
. But, even if the plaintiffs, under á count in indebitatus
assumpsit, could be permitted to prove facts tending to show
that the performance of Reed’s contract, and the earning of
the money from which the acceptance was payable, had been
prevented by the defendant, of which we have great doubt, it
Foster v. Plummer & others.
must be done not merely by showing a cancellation of the

contract, before its completion; but also that it was done
without excuse or justification, on the part of the defendant,
and that the drawer was competent and willing, and, but for
such interference of the defendant, would have been able, to
complete his contract; and thus to place in the defendant’s
hands the fund from which the acceptance was payable. In
the present case, this must have been done by proof of facts
aliunde ; and the evidence of facts, offered by the defendant,
to explain and avoid the effect of these acts of the defendant
in annulling the contract, to wit, that Reed had wholly failed
to comply with the terms of his contract, &c., as stated in
the bill of exceptions, would have been competent and mate-
rial, and the rejection of such evidence by the court was
therefore incorrect.
Exceptions sustained, verdict set aside, and new trial
granted.
Thomas Foster vs. George H. Plummer & others.

The original defendant, in a writ of review, cannot, in his defence thereto, avail
himself of a discharge in insolvency, obtained in pursuance of proceedings com-
menced since the rendition of the original judgment against him.
This was a review of a judgment recovered in the court

of common pleas by the defendants against the plaintiff. It
appeared by an agreed statement of facts, that the defendants
commenced an action for goods sold and delivered, against
the plaintiff, and caused his real estate to be attached therein;
that the action was entered in the court of common pleas, and
judgment recovered thereon at the October term, 1846, upon
default; that an execution issued on the judgment, and was
delivered to a deputy sheriff, who proceeded in due form to
seize thereon the equity of redemption of the real estate pre-
viously attached, and advertised the same for sale; that before
a sale of the equity, and before the execution was otherwise
EN BANC
[G.R. No. 43596. October 31, 1936.]
PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. THE

NATIONAL CITY BANK OF NEW YORK, and MOTOR SERVICE
COMPANY, INC., defendants. MOTOR SERVICE COMPANY,
INC., appellant.
L.D. Lockwood for appellant.

Camus & Delgado for appellee.
SYLLABUS
1. BANKS AND BANKING; ACCEPTANCE OR CERTIFICATION OF

CHECKS; ESTOPPEL. — Where a check is accepted or certified by the bank on
which it is drawn, the bank is estopped to deny the genuineness of the
drawer's signature and his capacity to issue the instrument.
2. ID; PAYMENT OF FORGED CHECK. — If a drawee bank pays a
forged check which was previously accepted or certified by the said bank it
cannot recover from a holder who did not participate in the forgery and did
not have actual notice thereof.
3. ID; ID. — The payment of a check does not include or imply its
acceptance in the sense that this word is used in section 62 of the
Negotiable Instruments Act.
4. ID.; ID. — In the case of the payment of a forged check, even
without former acceptance, the drawee can not recover from a holder in due
course not chargeable with any act of negligence or disregard of duty.
5. ID.; ID. — To entitle the holder of a forged check to retain the
money obtained thereon, there must be a showing that the duty to ascertain
the genuineness of the signature rested entirely upon the drawee, and that
the constructive negligence of such drawee in failing to detect the forgery
was not affected by any disregard of duty on the part of the holder, or by
failure of any precaution which, from his implied assertion in presenting the
check as a sufficient voucher, the drawee had the right to believe he had
taken.
6. ID.; ID. — In the absence of actual fault on the part of the
drawee, his constructive fault in not knowing the signature of the drawer and
detecting the forgery will not preclude his recovery from one who took the
check under circumstances of suspicion and without proper precaution, or
whose conduct has been such as to mislead the drawee or induce him to pay
the check without the usual scrutiny or other precautions against mistake or
fraud.
7. ID.; ID. — One who purchases a check or draft is bound to satisfy
CD Technologies Asia, Inc. © 2023 cdasiaonline.com
himself that the paper is genuine, and that by indorsing it or presenting it for
payment or putting it into circulation before presentation he impliedly
asserts that he performed his duty.
8. ID.; ID. — While the foregoing rule, chosen from a welter of
decisions on the issue as the correct one, will not hinder the circulation of
two recognized mediums of exchange by which the great bulk of business is
carried on, namely, drafts and checks, on the other hand, it will encourage
and demand prudent business methods on the part of those receiving such
mediums of exchange.
9. ID.; ID. — It being a matter of record in the present case, that the
appellee bank is no more chargeable with the knowledge of the drawer's
signature than the appellant is, as the drawer was as much the customer of
the appellant as of the appellee, the presumption that a drawee bank is
bound to know more than any indorser the signature of its depositor does
not hold.
10. ID.; ID. — According to the undisputed facts of the case the
appellant in purchasing the papers in question from unknown persons
without making any inquiry as to the identity and authority of the said
persons negotiating and indorsing them, acted negligently and contributed
to the appellee's constructive negligence in failing to detect the forgery.
11. ID.; ID. — Under the circumstances of the case, if the appellee
bank is allowed to recover, there will be no change of position as to the
injury or prejudice of the appellant.
DECISION
RECTO, J : p
This case was submitted for decision to the court below on the
following stipulation of facts:
"1. That plaintiff is a banking corporation organized and
existing under and by virtue of a special act of the Philippine
Legislature, with office as principal place of business at the Masonic
Temple Bldg., Escolta, Manila, P.I.; that the defendant National City
Bank of New York is a foreign banking corporation with a branch office
duly authorized and licensed to carry and engage in banking business
in the Philippine Islands, with branch office and place of business in the
National City Bank Bldg., City of Manila, P.I., and that the defendant
Motor Service Company, Inc., is a corporation organized and existing
under and by virtue of the general corporation law of the Philippine
Islands, with office and principal place of business at 408 Rizal Avenue,
City of Manila, P.I., engaged in the purchase and sale of automobile
spare parts and accessories.
"2. That on April 7 and 9, 1933, an unknown person or
persons negotiated with defendant Motor Service Company, Inc., the
checks marked as Exhibits A and A-1, respectively, which are made
parts of the stipulation, in payment for automobile tires purchased
from said defendant's stores, purporting to have been issued by the
'Pangasinan Transportation Co., Inc. by J.L. Klar, Manager and
Treasurer', against the Philippine National Bank and in favor of the
International Auto Repair Shop, for P144.50 and P215.75; and said
checks were indorsed by said unknown persons in the manner
indicated at the back thereof, the Motor Service Co., Inc., believing at
the time that the signatures of J.L. Klar, Manager and Treasurer of the
Pangasinan Transportation Co., Inc., on both checks were genuine.
"3. The checks Exhibits A and A-1 were then indorsed for
deposit by the defendant Motor Service Company, Inc. at the National
City Bank of New York and the former was accordingly credited with the
amounts thereof, or P144.50 and P215.75.
"4. On April 8 and 10, 1933, the said checks were cleared at
the clearing house and the Philippine National Bank credited the
National City Bank of New York for the amounts thereof, believing at
the time that the signatures of the drawer were genuine, that the
payee is an existing entity and the endorsements at the bank thereof
regular and genuine.
"5. The Philippine National Bank then found out that the
purported signatures of J.L. Klar, as Manager and Treasurer of the
Pangasinan Transportation Company, Inc., in said Exhibits A and A-1
were forged when so informed by the said Company, and it accordingly
demanded from the defendants the reimbursement of the amounts for
which it credited the National City Bank of New York at the clearing
house and for which the latter credited the Motor Service Co., but the
defendants refused, and continue to refuse, to make such
reimbursements.
"6. The Pangasinan Transportation Co., Inc., objected to have
the proceeds of said check deducted from their deposit.
"7. Exhibits B, C, D, E, F, and G, which were introduced at the
trial in the municipal court of Manila and forming part of the record of
the present case, are admitted by the parties as genuine and are made
part of this stipulation as well as Exhibit H hereto attached and made a
part hereof."
Upon plaintiff's motion, the case was dismissed before trial as to the
defendant National City Bank of New York. A decision was thereafter
rendered giving plaintiff judgment for the total amount of P360.25, with
interest and costs. From this decision the instant appeal was taken.
Before us is the preliminary question of whether the original appeal
taken by the plaintiff from the decision of the municipal court of Manila
where this case originated, became perfected because of plaintiff's failure to
attach to the record within 15 days from receipt of notice of said decision,
the certificate of appeal bond required by section 76 of the Code of Civil
Procedure. It is not disputed that both the appeal docket fee and the appeal
cash bond were paid and deposited within the prescribed time. The issue is
whether the mere failure to file the official receipt showing that such deposit
was made within the said period is a sufficient ground to dismiss plaintiff's
appeal. This question was settled by our decision in the case of Blanco vs.
Bernabe and Lawyers Cooperative Publishing Co. (page 124, ante), and
needs no further consideration. No error was committed in allowing said
appeal.
We now pass on to consider and determine the main question
presented by this appeal, namely, whether the appellee has the right to
recover from the appellant, under the circumstances of this case, the value
of the checks on which the signatures of the drawer were forged. The
appellant maintains that the question should be answered in the negative
and in support of its contention appellant advanced various reasons
presently to be examined carefully.
I. It is contended, first of all, that the payment of the checks in
question made by the drawee bank constitutes an "acceptance", and,
consequently, the case should be governed by the provisions of section 62 of
the Negotiable Instruments Law, which says:
"SEC. 62. Liability of acceptor. — The acceptor by accepting
the instrument 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."
This contention is without merit. A check is a bill of exchange payable
on demand and only the rules governing bills of exchange payable on
demand are applicable to it, according to section 185 of the Negotiable
Instruments Law. In view of the fact that acceptance is a step unnecessary in
so far as bills of exchange payable on demand are concerned (sec. 143), it
follows that the provisions relative to "acceptance" are without application to
checks. Acceptance implies, in effect, subsequent negotiation of the
instrument, which is not true in case of the payment of a check because
from the moment a check is paid it is withdrawn from circulation. The
warranty established by section 62, is in favor of holders of the instrument
after its acceptance. When the drawee bank cashes or pays a check, the
cycle of negotiation is terminated, and it is illogical thereafter to speak of
subsequent holders who can invoke the warranty provided in section 62
against the drawee. Moreover, according to section 191, "acceptance"
means "an acceptance completed by delivery or notification" and this
concept is entirely incompatible with payment, because when payment is
made the check is retained by the bank, and there is no such thing as
delivery or notification to the party receiving the payment. (1 Bouvier's Law
Dictionary, 476.) There can be no such thing as "acceptance" in the ordinary
sense of the term. A check being payable immediately and on demand, the
bank can fulfill its duty to the depositor only by paying the amount
demanded. The holder has no right to demand from the bank anything but
payment of the check, and the bank has no right, as against the drawer, to
do anything but pay it. (5 R.C.L., p. 516, par. 38.) A check is not an
instrument which in the ordinary course of business calls for acceptance. The
holder can never claim acceptance as his legal right. He can present for
payment, and only for payment. (1 Morse on Banks and Banking, 6th ed., pp.
898, 899.)
There is, however, nothing in the law or in business practice against
the presentation of checks for acceptance, before they are paid, in which
case we have a "certification" equivalent to "acceptance" according to
section 187, which provides that "where a check is certified by the bank on
which it is drawn, the certification is equivalent to an acceptance", and it is
then that the warranty under section 62 exists. This certification or
acceptance consists in the signification by the drawee of his assent to the
order of the drawer, which must not express that the drawee will perform his
promise by any other means than the payment of money. (Sec. 132.) When
the holder of a check procures it to be accepted or certified, the drawer will
perform his promise by any other means than the payment of money. (Sec.
132.) When the holder of a check procedures it to be accepted or certified,
the drawer and all indorsers are discharged from liability thereon (sec. 188),
and then the check operates as an assignment of a part of the funds to the
credit of the drawer with the bank. (Sec. 189.) There is nothing in the nature
of the check which intrinsically precludes its acceptance, in like manner and
with like effect as a bill of exchange or draft may be accepted. The bank may
accept if it chooses; and it is frequently induced by convenience, by the
exigencies of business, or by the desire to oblige customers, voluntarily to
incur the obligation. The act by which the bank places itself under obligation
to pay to the holder the sum called for by a check must be the expressed
promise or undertaking of the bank signifying its intent to assume the
obligation, or some act from which the law will imperatively imply such valid
promise or undertaking. The most ordinary form which such an act assumes
is the acceptance by the bank of the check, or, as it is perhaps more often
called, the certifying of the check. (1 Morse on Banks and Banking, pp. 898,
899; 5 R.C.L., p. 520.).
No doubt a bank may by an unequivocal promise in writing make itself
liable in any event to pay the check upon demand, but this is not an
"acceptance" of the check in the true sense of that term. Although a check
does not call for acceptance, and the holder can present it only for payment,
the certification of checks is a means in constant and extensive use in the
business of banking, and its effects and consequences are regulated by the
law merchant. Checks drawn upon banks or bankers, thus marked and
certified, enter largely into the commercial and financial transactions of the
country; they pass from hand to hand, in the payment of debts, the purchase
of property, and in the transfer of balances from one house and one bank to
another. In the great commercial centers, they make up no inconsiderable
portion of the circulation, and thus perform a useful, valuable, and an almost
indispensable office. The purpose of procuring a check to be certified is to
impart strength and credit to the paper by obtaining an acknowledgment
from the certifying bank that the drawer has funds therein sufficient to cover
the check, and securing the engagement of the bank that the check will be
paid upon presentation. A certified check has a distinctive character as a
species of commercial paper, and performs important functions in banking
and commercial business. When a check is certified, it ceases to possess the
character, or to perform the functions, of a check, and represents so much
money on deposit, payable to the holder on demand. The check becomes a
basis of credit — an easy mode of passing money from hand to hand, and
answers the purposes of money. (5 R.C.L., pp. 516, 517.)
All the authorities, both English and American, hold that a check may
be accepted, though acceptance is not usual. By the law merchant, the
certificate of the bank that a check is good is equivalent to acceptance. It
implies that the check is drawn upon sufficient funds in the hands of the
drawee, that they have been set apart for its satisfaction, and that they shall
be so applied whenever the check is presented for payment. It is an
undertaking that the check is good then, and shall continue good, and this
agreement is as binding on the bank as its notes of circulation, a certificate
of deposit payable to the order of the depositor, or any other obligation it
can assume. The object of certifying a check, as regards both parties is to
enable the holder to use it as money. The transferee takes it with the same
readiness and sense of security that he would take the notes of the bank. It
is available also to him for all the purposes of money. Thus it continues to
perform its important functions until the course of business it goes back to
the bank for redemption, and is extinguished by payment. It cannot be
doubted that the certifying bank intended these consequences, and it is
liable accordingly. To hold otherwise would render these important securities
only a snare and a delusion. A bank incurs no greater risk in certifying a
check than in giving a certificate of deposit. In well-regulated banks the
practice is at once to charge the check to the account of the drawer, to credit
it in a certified check account, and, when the check is paid, to debit that
account with the amount. Nothing can be simpler or safer than this process.
(Merchants' Bank vs. States Bank, 10 Wall., 604, at p. 647; 19 Law. ed.,
1008, 1019.)
Ordinarily the acceptance or certification of a check is performed and
evidenced by some word or mark, usually the words "good", "certified" or
"accepted" written upon the check by the banker or bank officer. (1 Morse,
Banks and Banking, 915; 1 Bouvier's Law Dictionary, 476.) The bank virtually
says, that check is good; we have the money of the drawer here ready to
pay it. We will pay it now if you will receive it. The holder says, No, I will not
take the money; you may certify the check and retain the money for me until
this check is presented. The law will not permit a check, when due, to be
thus presented, and the money to be left with the bank for the
accommodation of the holder without discharging the drawer. The money
being due and the check presented, it is his own fault if the holder declines
to receive the pay, and for his own convenience has the money appropriated
to that check subject to its future presentment at any time within the statute
of limitations. (1 Morse on Banks and Banking, p. 920.)
The theory of the appellant and of the decisions on which it relies to
support its view is vitiated by the fact that they take the word "acceptance"
in its ordinary meaning and not in the technical sense in which it is used in
the Negotiable Instruments Law. Appellant says that when payment is made,
such payment amounts to an acceptance, because he who pays accepts.
This is true in common parlance, but it is not "acceptance" in legal
contemplation. The word "acceptance" has a peculiar meaning in the
Negotiable Instruments Law, and, as has been above stated, in the instant
case there was payment but no acceptance, or what is equivalent to
acceptance, certification.
With few exceptions, the weight of authority is to the effect that
"payment" neither includes nor implies "acceptance".
In National Bank vs. First National Bank ([1910], 141 Mo. App., 719;
125 S. W., 513), the court asks, if a mere promise to pay a check is binding
on a bank, why should not the absolute payment of the check have the same
effect? In response, it is submitted that the two things, — that is acceptance
and payment, — are entirely different. If the drawee accepts the paper after
seeing it, and then permits it to go into circulation as genuine, on all the
principles of estoppel, he ought to be prevented from setting up forgery to
defeat liability to one who has taken the paper on the faith of the
acceptance, or certification. On the other hand, mere payment of the paper
at the termination of its course does not act as an estoppel. The attempt to
state a general rule covering both acceptance and payment is responsible
for a large part of the conflicting arguments which have been advanced by
the courts with respect to the rule. (Annotation at 12 A.L.R., 1090 [1921].)
In First National Bank vs. Brule National Bank ([1917], 12 A.L.R., 1079,
1085), the court said:
"We are of the opinion that 'payment is not acceptance'.
Acceptance, as defined by section 131, cannot be confounded with
payment. . . .
"Acceptance, certification, or payment of a check, by the express
language of the statute, discharges the liability only of the persons
named in the statute, to wit, the drawer and all indorsers, and the
contract of indorsement by the negotiator of the check is discharged by
acceptance, certification, or payment. But clearly the statute does not
says that the contract of warranty of the negotiator, created by section
65, is discharged by these acts."
The rule supported by the majority of the cases (14 A.L.R., 764), that
payment of a check on a forged or unauthorized indorsement of the payee's
name, and charging the same to the drawer's account, do not amount to an
acceptance so as to make the bank liable to the payee, is supported by all of
the recent cases in which the question is considered. (Cases cited,
Annotation at 69 A.L.R., 1076, 1077, [1930].)
Merely stamping a check "Paid" upon its payment on a forged or
unauthorized indorsement is not an acceptance thereof so as to render the
drawee bank liable to the true payee. (Anderson vs. Tacoma National Bank
[1928], 146 Wash., 520; 264 Pac., 8; Annotation at 69 A.L.R., 1077 [1930].)
In State Bank of Chicago vs. Mid-City Trust & Savings Bank (12 A.L.R.,
989, 991, 992), the court said:
"The defendant in error contends that the payment of the check
shows acceptance by the bank, urging that there can be no more
definite act by the bank upon which a check has been drawn, showing
acceptance, than the payment of the check. Section 184 of the
Negotiable Instruments Act (sec. 202) provides that the provisions of
the act applicable to bills of exchange apply to a check, and section
131 (sec. 149), that the acceptance of a bill must be in writing signed
by the drawee. Payment is the final act which extinguishes a bill.
Acceptance is a promise to pay in the future and continues the life of
the bill. It was held in First National Bank vs. Whitman (94 U.S., 343; 24
L. ed., 229), that payment of a check upon a forged indorsement did
not operate as an acceptance in favor of the true owner. The contrary
was held in Pickle vs. Muse (Fickle vs. People's Nat. Bank, 88 Tenn.,
380; 7 L.R.A., 93; 17 Am. St. Rep., 900; 12 S.W., 919), and Seventh
National Bank vs. Cook (73 Pa., 483; 13 Am. Rep., 751) at a time when
the Negotiable Instruments Act was not in force in those states. The
opinion of the Supreme Court of the United States seems more logical,
and the provisions of the Negotiable Instruments Act now require an
acceptance to be in writing. Under this statute the payment of a check
on a forged indorsement, stamping it 'paid,' and charging it to the
account of the drawer, do not constitute an acceptance of the check or
create a liability of the bank to the true holder or the payee. (Elyria
Sav. & Bkg. Co. vs. Walker Bin Co., 92 Ohio St., 406; L.R.A., 1916D,
433; 111 N.E., 147; Ann. Cas. 1917D, 1055; Baltimore & O.R. Co. vs.
First National Bank, 102 Va., 753; 47 S.E., 837; State Bank of Chicago
vs. Mid-City Trust & Savings Bank, 12 A.L.R., pp. 989, 991, 992.)"
Before drawee's acceptance of check there is no privity of contract
between drawee and payee. Drawee's payment of check on unauthorized
indorsement does not constitute "acceptance" of check. (Sinclair Refining
Co. vs. Moultrie Banking Co., 165 S.E., 860 [1932].)
The great weight of authority is to the effect that the payment of a
check upon a forged or unauthorized indorsement and the stamping of it
"paid" does not constitute an acceptance. (Dakota Radio Apparatus Co. vs.
First Nat. Bank of Rapid City, 244 N.W., 351, 352 [1932].)
Payment of the check, cashing it on presentment is not acceptance.
(South Boston Trust Co. vs. Levin, 249 Mass., 45, 48, 49; 143 N.E., 816;
Blocker, Shepard Co. vs. Granite Trust Company, 187 Me., 53,54 [1933].)
In Rauch vs. Bankers National Bank of Chicago (143 Ill. App., 625, 636,
637 [1908]), the language of the decision was as follows:
" . . . The plaintiffs say that this acceptance was made by the
very unauthorized payments of which they complain. This suggestion
does not seem forceful to us. It is the contention which was made
before the Supreme Court of the United States in First National Bank
vs. Whitman (94 U.S., 343), and repudiated by that court. The
language of the opinion in that case is so apt in the present case that
we quote it:
"'It is further contended that such an acceptance of a check as
creates a privity between the payee and the bank is established by the
payment of the amount of this check in the manner described. This
argument is based upon the erroneous assumption that the bank has
paid this check. If this were true, it would have discharged all of its
duty, and there would be an end to the claim against it. The bank
supposed that it had paid was upon a pretended and not a real
indorsement of the name of the payee. . . . We cannot recognize the
argument that payment of the amount of the check or sight draft under
such circumstances amounts to an acceptance creating a privity of
contract with the real owner.
"'It is difficult to construe a payment as an acceptance under any
circumstances. . . . A banker or individual may be ready to make actual
payment of a check or draft when presented, while unwilling to make a
promise to pay at a future time. Many, on the other hand, are more
ready to promise to pay than to meet the promise when required. The
difference between the transactions is essential and inherent.'"
And in Wharf vs. Seattle National Bank (24 Pac. [2d]), 120, 123 [1993]):
"It is the rule that payment of a check on unauthorized or forged
indorsement does not operate as an acceptance of the check so as to
authorize an action by the real owner to recover its amount from the
drawee bank. (Michie on Banks and Banking, vol. 5, sec. 278, p. 521.) A
full list of the authorities supporting the rule will be found in a footnote
to the foregoing citation." (See also, Federal Land Bank vs. Collins, 156
Miss., 893; 127 So., 570; 69 A.L.R., 1068.)
In a very recent case, Federal Land Bank vs. Collins (69 A.L.R., 1068,
1072-1074), this question was discussed at considerable length. The court
said:
"In the light of the first of these statutes, counsel for appellant is
forced to stand upon the narrow ledge that the payment of the check
by the two banks will constitute an acceptance. The drawee bank
simply marked it 'paid' and did not write anything else except the date.
The bank first paying the check, the Commercial National Bank and
Trust Company, simply wrote its name as indorser and passed the
check on to the drawee bank; does this constitute an acceptance? The
precise question has not been presented to this court for decision.
Without reference to authorities in other jurisdictions it would appear
that the drawee bank had never written its name across the paper and
therefore, under the strict terms of the statute, could not be bound as
an acceptor; in the second place, it does not appear to us to be illogical
and unsound to say that the payment of a check by the drawee, and
the stamping of it 'paid', is equivalent to the same thing as the
acceptance of a check; however, there is a variety of opinions in the
various jurisdictions on this question. Counsel correctly states that the
theory upon which the numerous courts hold that the payment of a
check creates privity between the holder of the check and the drawee
bank is tantamount to a pro tanto assignment of that part of the funds.
It is most easily understood how the payment of the check, when not
authorized to be done by the drawee bank, might under such
circumstances create liability on the part of the drawee to the drawer.
Counsel cites the case of Pickle vs. Muse (88 Tenn., 380; 12 S.W., 919;
7 L.R.A., 93; 17 Am. St. Rep., 900), wherein Judge Lurton held that the
acceptance of a check was necessary in order to give the holder
thereof a right of action thereon against the bank, and further held in a
case similar to this, so far as this question is concerned, that the
acceptance of a check so as to give a right of action to the payee is
inferred from the retention of the check by the bank and its subsequent
charge of the amount of the drawer, although it was presented by, and
payment made to, an unauthorized person. Judge Lurton cited the case
of National Bank of the Republic vs. Millard (10 Wall., 152; 19 L. ed.,
897), wherein the Supreme Court of the United States, not having such
a case before it, threw out the suggestion that, if it was shown that a
bank had charged the check on its books against the drawer and made
settlement with the drawee that the holder could recover on account of
money had and received, invoking the rule of justice and fairness, it
might be said there was an implied promise to the holder to pay it on
demand. (See National Bank of the Republic vs. Millard, 10 Wall. [77
U.S.], 152; 19 L. ed., 899.) The Tennessee court then argued that it
would be inequitable and unconscionable for the owner and payee of
the check to be limited to an action against an insolvent drawer and
might thereby lose the debt. They recognized the legal principle that
there is no privity between the drawer bank and the holder, or payee,
of the check, and proceeded to hold that no particular kind of writing
was necessary to constitute an acceptance and that it became a
question of fact, and the bank became liable when it stamped it 'paid'
and charged it to the account of the drawer, and cites, in support of its
opinion, Seventh National Bank vs. Cook (73 Pa., 483; 13 Am. Rep.,
353); and Dodge vs. Bank (20 Ohio St., 234; 5 Am. Rep., 648).
"This decision was in 1890, prior to the enactment of the
Negotiable Instruments Law by the State of Tennessee. However, in
this case Judge Snodgrass points out that the Millard case, supra, was
dicta. The Dodge case, from the Ohio court, held exactly as the
Tennessee court, but subsequently in the case of Elyria Bank vs.
Walker Bin Co. (92 Ohio St., 406; 111 N.E., 147; L.R.A. 1916D, 433;
Ann. Cas. 1917D, 1055), the court held to the contrary, called attention
to the fact that the Dodge case was no longer the law, and proceeded
to announce that, whatever might have been the law before the
passage of the Negotiable Instruments Act in that state, it was no
longer the law; that the rule announced in the Dodge case had been
'discarded.' The court, in the latter case, expressed its doubts that the
courts of Tennessee and Pennysylvania would adhere to the rule
announced in the Pickle case, quoted supra, in the face of the
Negotiable Instruments Law. Subsequent to the Millard case, the
Supreme Court of the United States, in the case of First National Bank
of Washington vs. Whitman (94 U.S., 343; 347; 24 L. ed., 229), where
the bank, without any knowledge that the indorsement of the payee
was unauthorized, paid the check, and it was contended that by the
payment the privity of contract existing between the drawer and
drawee was imparted to the payee, said:
"'It is further contended that such an acceptance of the check as
creates a privity between the payee and the bank is established by the
payment of the amount of this check in the manner described. This
argument is based upon the erroneous assumption that the bank has
paid this check. If this were true, it would have discharged all of its
duty, and there would be an end of the claim against it. The bank
supposed that it had paid the check; but this was an error. The money
it paid was upon a pretended and not a real indorsement of the name
of the payee. The real indorsement of the payee was as necessary to a
valid payment as the real signature of the drawer; and in law the check
remains unpaid. Its pretended payment did not diminish the funds of
the drawer in the bank, or put money in the pocket of the person
entitled to the payment. The state of the account was the same after
the pretended payment as it was before.
"'We cannot recognize the argument that a payment of the
amount of a check or sight draft under such circumstances amounts to
an acceptance, creating a privity of contract with the real owner. It is
difficult to construe a payment as an acceptance under any
circumstances. The two things are essentially different. One is a
promise to perform an act, the other an actual performance. A banker
or an individual may be ready to make actual payment of a check or
draft when presented, while unwilling to make a promise to pay at a
future time. Many, on the other hand, are more ready to promise to
pay than to meet the promise when required. The difference between
the transactions is essential and inherent.'
"Counsel for appellant cite other cases holding that the stamping
of the check 'paid' and the charging of the amount thereof to the
drawer constituted an acceptance, but we are of opinion that none of
these cases cited hold that it is in compliance with the Negotiable
Instruments Act; paying the check and stamping same is not the
equivalent of accepting the check in writing signed by the drawee. The
cases holding that payment as indicated above constituted acceptance
were rendered prior to the adoption of the Negotiable Instruments Act
in the particular state, and these decisions are divided into two classes;
the one holding that the check delivered by the drawer to the holder
and presented to the bank or drawee constitutes an assignment pro
tanto; the other holding that the payment of the check and the
charging of same to the drawee although paid to an unauthorized
person creates privity of contract between the holder and the drawee
bank.
"We have already seen that our own court has repudiated the
assignment pro tanto theory, and since the adoption of the Negotiable
Instruments Act by this state we are compelled to say that payment of
a check is not equivalent to accepting a check in writing and signing
the name of the acceptor thereon. Payment of the check and the
charging of same to the drawer does not constitute an acceptance.
Payment of the check is the end of the voyage; acceptance of the
check is to fuel the vessel and strengthen it for continued operation on
the commercial sea. What we have said applies to the holder and not
to the drawer of the check. On this question we conclude that the
general rule is that an action cannot be maintained by a payee of the
check against the bank on which it is drawn, unless the check has been
certified or accepted by the bank in compliance with the statute, even
though at the time the check is that an action cannot be maintained by
a payee of the drawer of the check out of which the check is legally
payable; and that the payment of the check by the bank on which it is
drawn, even though paid on the unauthorized indorsement of the name
of the holder (without notice of the defect by the bank), does not
constitute a certification thereof, neither is it an acceptance thereof;
and without acceptance or certification, as provided by statute, there is
no privity of contract between the drawee bank and the payee, or
holder of the check. Neither is there an assignment pro tanto of the
funds where the check is not drawn or a particular fund, or does not
show on its face that it is an assignment of a particular fund. The above
rule as stated seems to have been the rule in the majority of the states
even before the passage of the uniform Negotiable Instruments Act in
the several states."
The decision in the case of First National Bank vs. Bank of Cottage
Grove (59 Or., 388), which appellant cites in its brief (pp. 12, 13) has been
expressly overruled by the Supreme Court of Massachusetts in South Boston
Trust Co. vs. Levin (143 N.E., 816, 817), in the following language:
"In First National Bank vs. Bank of Cottage Grove (59 Or., 388;
117 Pac., 293, 296, at page 396), it was said: 'The payment of a bill or
check by the drawee amounts to more than an acceptance. The rule,
holding that such a payment has all the efficacy of an acceptance, is
founded upon the principle that the greater includes the less.' We are
unable to agree with this statement as there is no similarity between
acceptance and payment; payment discharges the instrument, and no
one else is expected to advance anything on the faith of it; acceptance
contemplates further circulation, induced by the fact of acceptance.
The rule that the acceptor makes certain admissions which will inure to
the benefit of subsequent holders, has no applicability to payment of
the instrument where subsequent holders can never exist."
II. The old doctrine that a bank was bound to know its
correspondent's signature and that a drawee could not recover money paid
upon a forgery of the drawer's name, because, it was said, the drawee was
negligent not to know for forgery and it must bear the consequence of its
negligence, is fact fading into the misty past, where it belongs. It was
founded in misconception of the fundamental principles of law and common
sense. (2 Morse, Banks and Banking, p. 1031.)
Some of the cases carried the rule to its furthest limit and held that
under no circumstances (except, of course, where the purchaser of the bill
has participated in the fraud upon the drawee) would the drawee be allowed
to recover bank money paid under a mistake of fact upon a bill of exchange
to which the name of the drawer had been forged. This doctrine has been
freely criticized by eminent authorities, as a rule too favorable to the holder,
not the most fair, nor best calculated to effectuate justice between the
drawee and the drawer. (5 R.C.L., p. 556.)
The old rule which was originally announced by Lord Mansfield in the
leading case of Price vs. Neal (3 Burr., 1354), elicited the following comment
from Justice Holmes, then Chief Justice of the Supreme Court of
Massachusetts, in the case of Dedham National Bank vs. Everett National
Bank (177 Mass., 392). "Probably the rule was adopted from an impression
of convenience rather than for any more academic reason; or perhaps we
may say that Lord Mansfield took the case out of the doctrine as to
payments under a mistake of fact by the assumption that a holder who
simply presents negotiable paper for payment makes no representation as
to the signature, and that the drawee pays at his peril."
Such was the reaction that followed Lord Mansfield's rule which Justice
Story of the United States Supreme Court adopted in the case of Bank of
United States vs. Georgia (10 Wheat., 333), that in B.B. Ford & Co. vs.
People's Bank of Orangeburg (74 S.C., 180), it was held that "an unrestricted
indorsement of a draft and presentation to the drawee is a representation
that the signature of the drawer is genuine", and in Lisbon First National
Bank vs. Wyndmere Bank (15 N.D., 299), it was also held that "the drawee of
a forged check who has paid the same without detecting the forgery, may
upon discovery of the forgery, recover the money paid from the party who
received the money, even though the latter was a good faith holder,
provided the latter has not been misled or prejudiced by the drawee's failure
to detect the forgery."
Daniel, in his treatise on Negotiable Instruments, has the following to
say:
"In all the cases which hold the drawee absolutely estopped by
acceptance or payment from denying genuineness of the drawer's
name, the loss in thrown upon him on the ground of negligence on his
part in accepting or paying, until he has ascertained the bill to be
genuine. But the holder has preceded him in negligence, by himself not
ascertaining the true character of the paper before he receive it, or
presented it for acceptance or payment. And although, as a general
rule, the drawee is more likely to know the drawer's handwriting than a
stranger is, if he is in fact deceived as to its genuineness, we do not
perceive that he should suffer more deeply by a mistake than a
stranger, who, without knowing the handwriting, has taken the paper
without previously ascertaining its genuineness. And the mistake of the
drawee should always be allowed to be corrected, unless the holder,
acting upon faith and confidence induced by his honoring the draft,
would be placed in a worse position by according such privilege to him.
This view has been applied in a well considered case, and is intimated
in another; and is forcibly presented by Mr. Chitty, who says it is going
a great way to charge the acceptor with knowledge of his
correspondent's handwriting, 'unless some bona fide holder has
purchased the paper on the faith of such an act.' Negligence in making
payment under a mistake of fact is not now deemed a bar to recovery
of it, and we do not see why any exception should be made to the
principle, which would apply as well to release an obligation not
consummated by payment." (Vol. 2, 6th edition, pp. 1537-1539.)
III. But now the rule is perfectly well settled that in determining the
relative rights of a drawee who, under a mistake of fact, has paid, and a
holder who has received such payment, upon a check to which the name of
the drawer has been forged, it is only fair to consider the question of
diligence or negligence of the parties in respect thereto. (Woods and Malone
vs. Colony Bank [1902], 56 L.R.A., 929, 932.) The responsibility of the
drawer's signature, is absolute only in favor of one who has not, by his own
fault or negligence, contributed to the success of the fraud or to mislead the
drawee. (National Bank of America vs. Bangs, 106 Mass., 441; 8 Am. Rep.,
349; Woods and Malone vs. Colony Bank, supra; De Feriet vs. Bank of
America, 23 La. Ann., 310; B.B. Ford & Co. vs. People's Bank of Orangeburg,
74 S.C., 180; 10 L.R.A. [N.S.], 63.) If it appears that the one to whom
payment was made was not an innocent sufferer, but was guilty of
negligence in not an innocent sufferer, but was guilty of negligence in not
doing something, which plain duty demanded, and which, if it had been
done, would have avoided entailing loss of any one, he is not entitled to
retain the moneys paid through a mistake on the part of the drawee bank.
(First Nat. Bank of Danvers vs. First Nat. Bank of Salem, 151 Mass., 280; 24
N.E., 44; 21 A.S.R., 450; First Nat. Bank of Orleans vs. State Bank of Alma, 22
Neb., 769; 36 N.W., 289; 3 A.S.R., 294; American Exp. Co. vs. State Nat.
Bank, 27 Okla., 824; 113 Pac., 711; 33 L.R.A. [N.S.], 188; B.B. Ford & Co. vs.
People's Bank of Orangeburg, 74 S.C., 180; 54 S.E., 204; 114 A.S.R., 986; 7
Ann. Cas., 744; 10 L.R.A. [N.S.], 63; People's Bank vs. Franklin Bank, 88
Tenn., 299; 12 S.W., 716; 17 A.S.R., 884; 6 L.R.A., 724; Canadian Bank of
Commerce vs. Bingham, 30 Wash., 484; 71 Pac., 43; 60 L.R.A., 955.) In other
words, to entitle the holder of a forged check to retain the money obtained
thereon, he must be able to show that the whole responsibility of
determining the validity of the signature was upon the drawee, and that the
negligence of such drawee was not lessened by any failure of any precaution
which, from his implied assertion in presenting the check as a sufficient
voucher, the drawee had the right to believe he had taken. (Ellis vs. Ohio Life
Insurance & Trust Co., 4 Ohio St., 628; Rouvant vs. Bank, 63 Tex., 610; Bank
vs. Ricker, 71 Ill., 429; First National Bank of Danvers vs. First Nat. Bank of
Salem, 24 N.E., 44, 45; B.B. Ford & Co. vs. People's Bank of Orangeburg,
supra.) The recovery is permitted in such case, because, although the
drawee was constructively negligent in failing to detect the forgery, yet if the
purchaser had performed his duty, the forgery would in all probability have
been detected and the fraud defeated. (First National Bank of Lisbon vs.
Bank of Wyndmere, 15 N.D., 209; 10 L.R.A. [N.S.], 49.) In the absence of
actual fault on the part of the drawee, his constructive fault in not knowing
the signature of the drawer and detecting the forgery will not preclude his
recovery from one who took the check under circumstances of suspicion
without proper precaution, or whose conduct has been such as to mislead
the drawee or induce him to pay the check without the usual scrutiny or
other precautions against mistake or fraud. (National Bank of America vs.
Bangs, supra; First National Bank vs. Indiana National Bank, 30 N.E., 808-
810; Woods and Malone vs. Colony Bank, supra; First National Bank of
Danvers vs. First Nat. Bank of Salem, 151 Mass., 280.) Where a loss, which
must be borne by one of two parties alike innocent of forgery, can be traced
to the neglect or fault of either, it is reasonable that it would be borne by
him, even if innocent of any intentional fraud, through whose means it has
succeeded. (Gloucester Bank vs. Salem Bank, 17 Mass., 33; First Nat. Bank
of Danvers vs. First National Bank of Salem, supra; B.B. Ford & Co. vs.
People's Bank of Orangeburg, supra.) Again if the indorser is guilty of
negligence in receiving and paying the check or draft, or has reason to
believe that the instrument is not genuine, but fails to inform the drawee of
his suspicions the indorser according to the reasoning of some courts will be
held liable to the drawee upon his implied warranty that the instrument is
genuine. (B.B. Ford & Co. vs. People's Bank of Orangeburg, supra; Newberry
Sav. Bank vs. Bank of Columbia, 93 S.C., 294; 38 L.R.A. [N.S.], 1200.) Most of
the courts now agree that one who purchases a check or draft is bound to
satisfy himself that the paper is genuine; and that by indorsing it or
presenting it for payment or putting it into circulation before presentation he
impliedly asserts that he has performed his duty, the drawee, who has,
without actual negligence on his part, paid the forged demand, may recover
the money paid from such negligent purchaser. (Lisbon First National Bank
vs. Wyndmere Bank, supra.) Of course, the drawee must, in order to recover
back the holder, show that he himself was free from fault. (See also R.C.L.,
pp. 556-558.)
So, if a collecting bank is alone culpable, and, on account of its
negligence only, the loss has occurred, the drawee may recover the amount
it paid on the forged draft or check. (Security Commercial & Sav. Bank vs.
Southern Trust & C. Bank [1925], 74 Cal. App., 734;241 Pac., 945.)
But we are aware of no case in which the principle that the drawee is
bound to know the signature of the drawer of a bill or check which he
undertakes to pay has been held to be decisive in favor of a payee of a
forged bill or check to which he has himself given credit by his indorsement.
(Secalso, Mckleroy vs. Bank, 14 La. Ann., 458; Canal Bank vs. Bank of
Albany, 1 Hill., 287; Rouvant vs. Bank, supra; First Nat. Bank vs. Indiana
National Bank, 30 N.E., 808-810.)
In First Nat. Bank vs. United States National Bank ([1921], 100 Or.,
264; 14 A.L.R., 479; 197 Pac., 547), the court declared: "A holder cannot
profit by a mistake which his negligent disregard of duty has contributed to
induce the drawee to commit. . . . The holder must refund, if by his
negligence he has contributed to the consummation of the mistake on the
part of the drawee by misleading him. . . . If the only fault attributable to the
drawee is the constructive fault which the law raises from the bald fact that
he has failed to detect the forgery, and if he is not chargeable with actual
fault in addition to such constructive fault, then he is not precluded from
recovery from a holder whose conduct has been such as to mislead the
drawee or induce him to pay the check or bill of exchange without the usual
security against fraud. The holder must refund to a drawee who is not guilty
of actual fault if the holder was negligent in not making due inquiry
concerning the validity of the check before he took it, and if the drawee can
be said to have been excused from making inquiry before taking the check
because of having had a right to presume that the holder had made such
inquiry."
The rule that one who first negotiates forged paper without taking
some precaution to learn whether or not it is genuine should not be allowed
to retain the proceeds of the draft or check from the drawee, whose sole
fault was that he did not discover the forgery before he paid the draft or
check, has been followed by the later cases. (Security Commercial & Savings
Bank vs. Southern Trust & C. Bank [1925], 74 Cal. App., 734; 241 Pac., 945;
Hutcheson Hardware Co. vs. Planters State Bank [1921], 26 Ga. App., 321;
105 S.E., 854; [Annotation at 71 A.L.R., 337].).
Where a bank, without inquiry or identification of the person presenting
a forged check, purchases it, indorses it generally, and presents it to the
drawee bank, which pays it, the latter may recover if its only negligence was
it mistake in having failed to detect the forgery, since its mistake did not
mislead the purchaser or bring about a change in position. (Security
Commercial & Savings Bank vs. Southern Trust & C. Bank [1925], 74 Cal.
App., 734; 241 Pac., 945.) Also, a drawee bank could recover from another
bank the portion of the proceeds of a forged check cashed by the latter and
deposited by the forger in the second bank and never withdrawn, upon the
discovery of the forgery three months later, after the drawee had paid the
check and returned the voucher to the purported drawer, where the
purchasing bank was negligent in taking the check, and was not injured by
the drawee's negligence in discovering and reporting the forgery as to the
amount left on deposit, since it was not a purchaser for value. (First State
Bank & T. Co. vs. First Nat. Bank [1924], 314 Ill., 269; 145 N. E., 382.)
Similarly, it has been held that the drawee of a check could recover the
amount paid on the check, after discovery of the forgery, from another bank,
which put the check into circulation by cashing it for the one who had forged
the signature of both drawer and payee, without making any inquiry as to
who he was, although he was a stranger, after which the check reached, and
was paid by, the drawee, after going through the hands of several
intermediate indorsees. (71 A.L.R., p. 340.).
In First National Bank vs. Brule National Bank ([1917], 12 A.L.R., 1079,
1085), the following statement was made:
"We are clearly of opinion, therefore, that the warranty of
gunuineness, arising upon the act of the Brule National Bank in putting
the check in circulation, was not discharged by payment of the check
by the drawee (First National Bank), nor was the Brule National Bank
deceived or misled to its prejudice by such payment. The Brule
National Bank by its indorsement and delivery warranted its own
identification of Kost and the genuineness of his signature. The
indorsement of the check by the Brule National Bank was such as to
assign the title to the check to its assignee, the Whitbeck National
Bank, and the amount was credited to the indorser. The check bore no
indication that it was deposited for collection, and was not in any
manner restricted so as to constitute the indorsee the agent of the
indorser, nor did it prohibit further negotiation of the instrument, nor
did it appear to be in trust for, or to the use of, any other person, nor
was it conditional. Certainly the Pukwana Bank was justified in relying
upon the warrant of genuineness, which implied the full identification
of Kost, and his signature by the defendant bank. This view of the
statute is in accord with the decisions of many courts. (First National
Bank vs. State Bank, 22 Neb., 769; 3 Am. St. Rep., 294; 36 N.W., 289;
First National Bank vs. First National Bank, 151 Mass., 280; 21 Am. St.
Rep. 450; 24 N.E., 44; People's Bank vs. Franklin Bank, 88 Tenn., 299;6
L.R.A., 727; 17 Am. St. Rep., 884;12 S.W., 716.)"
The appellant leans heavily on the case of Fidelity & Co. vs.
Planenscheck (71 A.L.R., 331), decided in 1929. We have carefully examined
this decision and we do not feel justified in accepting its conclusions. It is but
a restatement of the long abandoned rule of Neal vs. Price, and it is
predicated on the wrong premise that payment includes acceptance, and
that a bank drawee paying a check drawn on it becomes ipso facto an
acceptor within the meaning of section 62 of the Negotiable Instruments Act.
Moreover in a more recent decision, that of Louisa National Bank vs.
Kentucky National Bank (39 S.W. [2nd], 497, 501) decided in 1931, the Court
of Appeals of Kentucky held the following:
"The appellee, on presentation for payment of the $600 check,
failed to discover it was a forgery. It was bound to know the signature
of its customer, Armstrong, and it was derelict in failing to give his
signature to the check sufficient attention and examination to enable it
to discover instantly the forgery. The appellant, when the check was
presented to it by Banfield, failed to make any inquiry of or about him
and did not cause or have him to be identified. Its act in so paying to
him the check is a degree of negligence on its part equivalent to
positive negligence. It indorsed the check, and, while such indorsement
may not be regarded within the meaning of the Negotiable Instrument
Law as amounting to a warranty to appellant of that which it indorsed,
it at least substantially served as a representation to it that it had
exercised ordinary care and had complied with the rules and customs
of prudent banking. Its indorsement was calculated, if it did not in fact
do so, to lull the drawee bank into indifference as to the drawer's
signature to it when paying the check and charging it to its customer's
account and remitting its proceeds to appellant's correspondent.
"If in such a transaction between the drawee and the holder of a
check both are without fault, no recovery may be had of the money so
paid. (Deposit Bank of George town vs. Fayette National Bank, supra,
and cases cited.) Or the rule may be more accurately state that, where
the drawee pays the money, he cannot stated that, where the drawee
pays the money, he cannot recover it back from a holder in good faith,
for value and without fault.
"If, on the other hand, the holder acts in bad faith, or is guilty of
culpable negligence, a recovery may be had by the drawee of such
holder. The negligence of the Bank of Louisa in failing to inquire of and
about Banfield, and to cause or to have him identified before it parted
with its money on the forged check, may be regarded as the primary
and proximate cause of the loss. Its negligence in this respect reached
in its effect the appellee, and induced incaution on its part. In
comparison of the degrees of the negligence of the two, it is apparent
that of the appellant excels in culpability. Both appellant and appellee
inadvertently made a mistake, doubtless due to a hurry incident to
business. The first and most grievous one was made by the appellant,
amounting to its disregard of the duty, it owed itself as well as the duty
it owed to the appellee, and it cannot on account thereof retain as
against the appellee the money which it so received. It cannot shift the
loss to the appellee, for such disregard of its duty inevitably
contributed to induce the appellee to omit its duty critically to examine
the signature of Armstrong, even if it did not know it instantly at the
time it paid the check. (Farmers' Bank of Augusta vs. Farmers' Bank of
Maysville, supra, and cases cited.)"
IV. The question now is to determine whether the appellant's
negligence in purchasing the checks in question is such as to give the
appellee the right to recover upon said checks, and on the other hand,
whether the drawee bank was not itself negligent, except for its constructive
fault in now knowing the signature of the drawer and detecting the forgery.
We quote with approval the following conclusions of the court a quo:
"Check Exhibit A bears number 637023-D and is dated April 6,
1933, whereas check Exhibit A-1 bears number 637020-D and is dated
April 7, 1933. Therefore, the later check, which is prior in number to
the former check, is however, issued on a later date. This circumstance
must have aroused at least the curiosity of the Motor Service Co., Inc.
"The Motor Service Co., Inc., accepted the two checks from
unknown persons. And not only this; check Exhibit A is indorsed by a
subagent of the agent of the payee, International Auto Repair Shop.
The Motor Service Co., Inc., made no inquiry whatsoever as to the
extent of the authority of these unknown persons. Our Supreme Court
said once that 'any person taking checks made payable to a
corporation, which can act only by agents, does so at his peril, and
must abide by the consequences if the agent who indorses the same is
without authority' (Insular Drug Co. vs. National Bank, 58 Phil., 684).
xxx xxx xxx
"Check Exhibit A-1, aside from having been indorsed by a
supposed agent of the International Auto Repair Shop is crossed
generally. The existence of two parallel lines transversally drawn on
the face of this check was a warning that the check could only be
collected through a banking institution (Jacobs, Law of Bills of
Exchange, etc., pp., 179, 180; Bills of Exchange Act of England, secs.
76 and 79). Yet the Motor Service Co., Inc., accepted the check in
payment for merchandise.
". . . In Exhibit H attached to the stipulation of facts as an integral
part thereof, the Motor Service Co., Inc., stated the following:
"'The Pangasinan Transportation Co. is a good customer of this
firm and we received checks from them every month in payment of
their account. The two checks in question seem to be exactly similar to
the checks which we received from the Pangasinan Transportation Co.
every month.'
"If the failure of the Motor Service Co., Inc., to detect the forgery
of the drawer's signature in the two checks, may be considered as an
omission in good faith because of the similarity stated in the letter,
then the same consideration applies to the Philippine National Bank, for
the drawer is a customer of both the Motor Service Co., Inc., and the
Philippine National Bank." (B. of E., pp. 25, 28, 35.)
We are of opinion that the facts of the present case do not make it one
between two equally innocent persons, the drawee bank and the holder, and
that they are governed by the authorities already cited and also the
following:
"The point in issue has sometimes been said to be that of
negligence. The drawee who has paid upon the forged signature is held
to bear the loss, because he has been negligent in failing to recognize
that the handwriting is not that of his customer. But it follows obviously
that if the payee, holder, or presenter of the forged paper has himself
been in default, if he has himself been guilty of a negligence prior to
that of the banker, or if by any act of his own he has at all contributed
to induce the banker's negligence, then he may loss his right to cast
the loss upon banker. The courts have shown a steadily increasing
disposition to extend the application of this rule over the new
conditions of fact which from time to time arise, until it can now rarely
happen that the holder, payee, or presenter can escape the imputation
of having been in some degree contributory towards the mistake.
Without any actual change in the abstract doctrines of the law, which
are clear, just, and simple enough, the gradual but sure tendency and
effect of the decisions have been to put as heavy a burden of
responsibility upon the payee as upon the drawee, contrary to the
original custom. . . ." (2 Morse on Banks and Banking, 5th ed., secs.
464 and 466, pp. 82-85 and 86,87.).
In First National Bank, vs. Brule National Bank (12 A.L.R., 1079, 1088,
1089), the following statement appears in the concurring opinion:
"What, then, should be the rule? The drawee asks to recover for
money had and received. If his claim did not rest upon a transaction
relating to a negotiable instrument plaintiff could recover as for money
paid under mistake, unless defendant could show some equitable
reason, such as changed condition since, and relying upon, payment by
plaintiff. In the Wyndmere Case, the North Dakota court holds that this
rule giving right to recover money paid under mistake should extend to
negotiable paper, and it rejects in its entirely the theory of estoppel
and puts a case of this kind on exactly the same basis as the ordinary
case of payment under mistake. But the great weight of authority, and
that based on the better reasoning, holds that the exigencies of
business demand a different rule in relation to negotiable paper. What
is that rule? Is it an absolute estoppel against the drawee in favor of a
holder, no matter how negligent such holder has been? It surely is not.
The correct rule recognizes the fact that, in case of payment without a
prior acceptance or certification, the holder takes the paper upon the
credit of the prior indorsers and the credit of the drawer, and not upon
the credit of the drawee; that the drawee, in making payment, has a
right to rely upon the assumption that the payee used due diligence,
especially where such payee negotiated the bill or check to a holder,
thus representing that it had so fully satisfied itself as to the identity
and signature of the maker than it was willing to warrant as relates
thereto to all subsequent holders. (Uniform Act, secs. 65 and 66.) Such
correct rule denies the drawee the right to recover when the holder
was without fault or when there has been some change of position
calling for equitable relief. When a holder of a bill of exchange uses all
due care in the taking of bill or check and the drawee thereafter pays
same, the transaction is absolutely closed — modern business could
not be done on any other basis. While the correct rule promotes the
fluidity of two recognized mediums of exchange, those mediums by
which the great bulk of business is carried on, checks and drafts, upon
the other hand it encourages and demands prudent business methods
upon the part of those receiving such mediums of exchange.
(Pennington County Bank vs. First State Bank, 110 Minn., 263;26 L.R.A.
[N.S.], 849;136 Am. St. Rep., 496;125 N.W., 119; First National Bank
vs. State Bank, 22 Neb., 769; 3 Am. St. Rep., 294;36 N.W., 289; Bank of
Williamson, vs. McDowell County Bank, 66 W. Va., 545;36 L.R.A. [N.S.],
605;66 S.E., 761; Germania Bank vs. Boutell, 60 Minn., 189;27 L.R.A.,
635;51 Am. St. Rep., 519;62 N.W., 327; American Express Co. vs. State
National Bank, 27 Okla., 834;33 L.R.A. [N.S.], 188;113 Pac., 711;
Farmers' National Bank vs. Farmers' & Traders Bank, L.R.A., 1915A, 77,
and note [159 Ky., 141;166 S.W., 986].)
"That the defendant bank did not use reasonable business
prudence is clear. It took this check from a stranger without other
identification than that given by another stranger; its cashier
witnessed the mark of such stranger thus vouching for the identity and
signature of the marker; and it indorsed the check as 'Paid,' thus
further throwing plaintiff off guard. Defendant could not but have
known, when negotiating such check and putting it into the channel
through which it would finally be presented to plaintiff for payment,
that plaintiff, if it paid such check, as defendant was asking it to do,
would have to rely solely upon the apparent faith and credit that
defendant had placed in the drawer. From the very circumstances of
this case plaintiff had to act on the facts as presented to it by
defendant, and upon such facts only.
"But appellant argues that it so changed its position, after
payment by plaintiff, that in 'equity and good conscience' plaintiff
should not recover — it says it did not pay over any money to the
forger until after plaintiff had paid the check. There would be merit in
such contention if defendant had indorsed the check for 'collection,'
thus advising plaintiff that it was relying on plaintiff and not on the
drawer. It stands in court where it would have been if it had done as it
represented."
In Woods and Malone vs. Colony Bank (56 L.R.A., 929, 932), the court
said:
". . . If the holder has been negligent in paying the forged paper,
or has by his conduct, however innocent, misled or deceived the
drawee to his damage, it would be unjust for him to be allowed to
shield himself from the results of his own carelessness by asserting
that the drawee was bound in law to know his drawer's signature."
V. Section 23 of the Negotiable Instruments Act provides that "when
a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof
against any party thereto, can be acquired through or under such signature,
unless the party against whom it is sought to enforce such right is precluded
from setting up the forgery or want of authority."
It not appearing that the appellee bank did not warrant to the appellant
the genuineness of the checks in question, by its acceptance thereof, nor did
it perform any act which would have induced the appellant to believe in the
genuineness of said instruments before appellant purchased them for value,
it can not be said that the appellee is precluded from setting up the forgery
and, therefore, the appellant is not entitled to retain the amount of the
forged check paid to it by the appellee.
VI. It has been held by many courts that a drawee of a check, who
is deceived by a forgery of the drawer's signature may recover the payment
back, unless his mistake has placed an innocent holder of the paper in a
worse position than he would have been in if the discover of the forgery had
been made on presentation. (5 R.C.L., p. 559;2 Daniel on Negotiable
Instruments, 1538.) Forgeries often deceived the eye of the most cautions
experts; and when a bank has been so deceived, it is a harsh rule which
compels it to suffer although no one has suffered by its being deceived. (17
A.L.R., 891;5 R.C.L., 559.)
In the instant case should the drawee bank be allowed recovery, the
appellant's position would not become worse than if the drawee had refused
the payment of these checks upon their presentation. The appellant has lost
nothing by anything which the drawee has done. It had in its hands some
forged worthless papers. It did not purchase or acquire these papers
because of any representation made to it by the drawee. It purchased them
from unknown persons and under suspicious circumstances. It had no valid
title to them, because the persons from whom it received them did not have
such title. The appellant could not have compelled the drawee to pay them,
and the drawee could have refused payment had it been able to detect the
forgery. By making a refund, the appellant would only be returning what it
had received without any title or right. And when appellant pays back the
money it has received it will be entitled to have restored to it the forged
papers it parted with. There is no good reason why the accidental payment
made by the appellee should inure to the benefit of the appellant. If there
were injury to the appellant said injury was caused not by the failure of the
appellee to detect the forgery but by the very negligence of the appellant in
purchasing commercial papers from unknown persons without making
inquiry as to their genuineness.
In the light of the foregoing discussion, we conclude:
1. That where a check is accepted or certified by the bank on which
it is drawn, the bank is estopped to deny the genuineness of the drawer's
signature and his capacity to issue the instrument;
2. That if a drawee bank pays a forged check which was previously
accepted or certified by the said bank it cannot recover from a holder who
did not participate in the forgery and did not have actual notice thereof;
3. That the payment of a check does not include or imply its
acceptance in the sense that this word is used in section 62 of the
Negotiable Instruments Law;
4. That in the case of the payment of a forged check, even without
former acceptance, the drawee can not recover from a holder in due course
not chargeable with any act of negligence or disregard of duty;
5. That to entitle the holder of a forged check to retain the money
obtained thereon, there must be a showing that the duty to ascertain the
genuineness of the signature rested entirely upon the drawee, and that the
constructive negligence of such drawee in failing to detect the forgery was
not affected by any disregard of duty on the part of the holder, or by failure
of any precaution which, from his implied assertion in presenting the check
as a sufficient voucher, the drawee had the right to believe he had taken;
6. That in the absence of actual fault on the part of the drawee, his
constructive fault in not knowing the signature of the drawer and detecting
the forgery will not preclude his recovery from one who took the check under
circumstances of suspicion and without proper precaution, or whose conduct
has been such as to mislead the drawee or induce him to pay the check
without the usual scrutiny or other precautions against mistake or fraud;
7. That one who purchases a check or draft is bound to satisfy
himself that the paper is genuine, and that by indorsing it or presenting it for
payment or putting it into circulation before presentation he impliedly
asserts that he performed his duty;
8. That while the foregoing rule, chosen from a welter of decisions
on the issue as the correct one, will not hinder the circulation of two
recognized mediums of exchange by which the great bulk of business is
carried on, namely, drafts and checks, on the other hand, it will encourage
and demand prudent business methods on the part of those receiving such
mediums of exchange;
9. That it being a matter of record in the present case, that the
appellee bank is no more chargeable with the knowledge of the drawer's
signature than the appellant is, as the drawer was as much the customer of
the appellant as of the appellee, the presumption that a drawee bank is
bound to know more than any indorser the signature nature of its depositor
does not hold;
10. That according to the undisputed facts of the case the appellant
in purchasing the papers in question from unknown persons without making
any inquiry as to the identity and authority of the said persons negotiating
and indorsing them, acted negligently and contributed to the appellee's
constructive negligence in failing to detect the forgery;
11. That under the circumstances of the case, if the appellee bank
is allowed to recover, there will be no change of position as to the injury or
prejudice of the appellant. Wherefore, the assignments of error are
overruled, and the judgment appealed from must be, as it is hereby,
affirmed, with costs against the appellant. So ordered.
Avanceña, C.J., Villa-Real, Abad Santos, Imperial, Diaz and Laurel, JJ.,
concur.

SECOND DIVISION
[G.R. No. 72110. November 16, 1990.]
ROMAN CATHOLIC BISHOP OF MALOLOS, INC. , petitioner, vs.

INTERMEDIATE APPELLATE COURT, and ROBES-FRANCISCO
REALTY AND DEVELOPMENT CORPORATION, respondents.
Rodrigo Law Office for petitioner.

Antonio P. Barredo and Napoleon M. Malinas for private respondent.
SYLLABUS
1. CIVIL LAW; CONTRACTS; TENDER OF PAYMENT; CANNOT BE

PRESUMED BY MERE INFERENCE FROM SURROUNDING CIRCUMSTANCES. —
We agree with the petitioner that a finding that the private respondent had
sufficient available funds on or before the grace period for the payment of its
obligation does not constitute proof of tender of payment by the latter for its
obligation within the said period. Tender of payment involves a positive and
unconditional act by the obligor of offering legal tender currency as payment
to the obligee for the former's obligation and demanding that the latter
accept the same. Thus, tender of payment cannot be presumed by a mere
inference from surrounding circumstances. At most, sufficiency of available
funds is only affirmative of the capacity or ability of the obligor to fulfill his
part of the bargain. But whether or not the obligor avails himself of such
funds to settle his outstanding account remains to be proven by independent
and credible evidence. Tender of payment presupposes not only that the
obligor is able, ready, and willing, but more so, in the act of performing his
obligation. Ab posse ad actu non vale illatio. "A proof that an act could have
been done is no proof that it was actually done." The respondent court was
therefore in error to have concluded from the sheer proof of sufficient
available funds on the part of the private respondent to meet more than the
total obligation within the grace period, the alleged truth of tender of
payment. The same is a classic case of non-sequitur.
2. ID.; ID.; ID.; NOT VALIDLY CONSTITUTED BY PAYMENT OF A
CERTIFIED PERSONAL CHECK. — With regard to the third issue, granting
arguendo that we would rule affirmatively on the two preceding issues, the
case of the private respondent still can not succeed in view of the fact that
the latter used a certified personal check which is not legal tender nor the
currency stipulated, and therefore, can not constitute valid tender of
payment. The first paragraph of Art. 1249 of the Civil Code provides that
"the 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. The Court en banc in the recent case of
Philippine Airlines v. Court of Appeals, (Promulgated on January 30, 1990)
G.R. No. L-49188, stated thus: Since a negotiable instrument is only a
substitute for money and not money, the delivery of such an instrument
does not, by itself, operate as payment (citing Sec. 189, Act 2031 on Negs.
Insts.; Art. 1249, Civil Code; Bryan London Co. v. American Bank, 7 Phil. 255;
Tan Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a
manager's check or ordinary check, is not legal tender, and an offer of a
check in payment of a debt is not a valid tender of payment and may be
refused receipt by the obligee or creditor. Hence, where the tender of
payment by the private respondent was not valid for failure to comply with
the requisite payment in legal tender or currency stipulated within the grace
period and as such, was validly refused receipt by the petitioner, the
subsequent consignation did not operate to discharge the former from its
obligation to the latter.
3. ID.; ID.; OBLIGATIONS ARISING THEREFROM HAVE THE FORCE OF
LAW BETWEEN THE CONTRACTING PARTIES. — Art. 1159 of the Civil Code of
the Philippines provides that "obligations arising from contracts have the
force of law between the contracting parties and should be complied with in
good faith." And unless the stipulations in said contract are contrary to law,
morals, good customs, public order, or public policy, the same are binding as
between the parties. (Article 1409, Civil Code, par. 1). What the private
respondent should have done if it was indeed desirous of complying with its
obligations would have been to pay the petitioner within the grace period
and obtain a receipt of such payment duly issued by the latter. Thereafter,
or, allowing a reasonable time, the private respondent could have demanded
from the petitioner the execution of the necessary documents. In case the
petitioner refused, the private respondent could have had always resorted to
judicial action for the legitimate enforcement of its right. For the failure of
the private respondent to undertake this more judicious course of action, it
alone shall suffer the consequences.
4. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF TRIAL COURT AS
A RULE, SHOULD BE ACCORDED FULL CONSIDERATION AND RESPECT. — On
the contrary, the respondent court finds itself remiss in overlooking or taking
lightly the more important findings of fact made by the trial court which we
have earlier mentioned and which as a rule, are entitled to great weight on
appeal and should be accorded full consideration and respect and should not
be disturbed unless for strong and cogent reasons. (Natividad del Rosario
Vda. de Alberto v. Court of Appeals, G.R. 29759, May 18, 1989; Matabuena v.
Court of Appeals, G.R. 76542, May 5, 1989).
5. ID.; SUPREME COURT; INSTANCES WHEN THE COURT HAS TO
REVIEW THE EVIDENCE. — While the Court is not a trier of facts, yet, when
the findings of fact of the Court of Appeals are at variance with those of the
trial court, (Robleza v. Court of Appeals, G.R. 80364, June 28, 1989) or when
the inference of the Court of Appeals from its findings of fact is manifestly
mistaken, (Reynolds Philippine Corporation v. Court of Appeals, G.R. 38187,
January 17, 1987) the Court has to review the evidence in order to arrive at
the correct findings based on the record.

DECISION
SARMIENTO, J : p
This is a petition for review on certiorari which seeks the reversal and
setting aside of the decision 1 of the Court of Appeals, 2 the dispositive
portion of which reads: LLpr
WHEREFORE, the decision appealed from is hereby reversed

and set aside and another one entered for the plaintiff ordering the
defendant-appellee Roman Catholic Bishop of Malolos, Inc. to accept
the balance of P124,000.00 being paid by plaintiff-appellant and
thereafter to execute in favor of Robes-Francisco Realty Corporation a
registerable Deed of Absolute Sale over 20,655 square meters portion
of that parcel of land situated in San Jose del Monte, Bulacan
described in OCT No. 575 (now Transfer Certificates of Title Nos. T-
169493, 169494,169495 and 169496) of the Register of Deeds of
Bulacan. In case of refusal of the defendant to execute the Deed of
Final Sale, the clerk of court is directed to execute the said document.
Without pronouncement as to damages and attorney's fees. Costs
against the defendant-appellee. 3
The case at bar arose from a complaint filed by the private respondent,
then plaintiff, against the petitioner, then defendant, in the Court of First
Instance (now Regional Trial Court) of Bulacan, at Sta. Maria, Bulacan, 4 for
specific performance with damages, based on a contract 5 executed on July
7, 1971.
The property subject matter of the contract consists of a 20,655 sq.m.-
portion, out of the 30,655 sq.m. total area, of a parcel of land covered by
Original Certificate of Title No. 575 of the Province of Bulacan, issued and
registered in the name of the petitioner which it sold to the private
respondent for and in consideration of P123,930.00. cdphil
The crux of the instant controversy lies in the compliance or non-

compliance by the private respondent with the provision for payment to the
petitioner of the principal balance of P100,000.00 and the accrued interest of
P24,000.00 within the grace period.
A chronological narration of the antecedent facts is as follows:
On July 7, 1971, the subject contract over the land in question was
executed between the petitioner as vendor and the private respondent
through its then president, Mr. Carlos F. Robes, as vendee, stipulating for a
downpayment of P23,930.00 and the balance of P100,000.00 plus 12%
interest per annum to be paid within four (4) years from execution of the
contract, that is, on or before July 7, 1975. The contract likewise provides for
cancellation, forfeiture of previous payments, and reconveyance of the land
in question in case the private respondent would fail to complete payment
within the said period.
On March 12, 1973, the private respondent, through its new president,
Atty. Adalia Francisco, addressed a letter 6 to Father Vasquez, parish priest
of San Jose Del Monte, Bulacan, requesting to be furnished with a copy of the
subject contract and the supporting documents.
On July 17, 1975, admittedly after the expiration of the stipulated
period for payment, the same Atty. Francisco wrote the petitioner a formal
request 7 that her company be allowed to pay the principal amount of
P100,000.00 in three (3) equal installments of six (6) months each with the
first installment and the accrued interest of P24,000.00 to be paid
immediately upon approval of the said request.
On July 29, 1975, the petitioner, through its counsel, Atty. Carmelo
Fernandez, formally denied the said request of the private respondent, but
granted the latter a grace period of five (5) days from the receipt of the
denial 8 to pay the total balance of P124,000.00, otherwise, the provisions of
the contract regarding cancellation, forfeiture, and reconveyance would be
implemented.
On August 4, 1975, the private respondent, through its president, Atty.
Francisco, wrote 9 the counsel of the petitioner requesting an extension of
30 days from said date to fully settle its account. The counsel for the
petitioner, Atty. Fernandez, received the said letter on the same day. Upon
consultation with the petitioner in Malolos, Bulacan, Atty. Fernandez, as
instructed, wrote the private respondent a letter 10 dated August 7, 1975
informing the latter of the denial of the request for an extension of the grace
period.
Consequently, Atty. Francisco, the private respondent's president,
wrote a letter 11 dated August 22, 1975, directly addressed to the petitioner,
protesting the alleged refusal of the latter to accept tender of payment
purportedly made by the former on August 5, 1975, the last day of the grace
period. In the same letter of August 22, 1975, received on the following day
by the petitioner, the private respondent demanded the execution of a deed
of absolute sale over the land in question and after which it would pay its
account in full, otherwise, judicial action would be resorted to. prLL
On August 27, 1975, the petitioner's counsel, Atty. Fernandez, wrote a

reply 12 to the private respondent stating the refusal of his client to execute
the deed of absolute sale due to its (private respondent's) failure to pay its
full obligation. Moreover, the petitioner denied that the private respondent
had made any tender of payment whatsoever within the grace period. In
view of this alleged breach of contract, the petitioner cancelled the contract
and considered all previous payments forfeited and the land as ipso facto
reconveyed.
From a perusal of the foregoing facts, we find that both the contending
parties have conflicting versions on the main question of tender of payment.
The trial court, in its ratiocination, preferred not to give credence to the
evidence presented by the private respondent. According to the trial court:
. . . What made Atty. Francisco suddenly decide to pay
plaintiff's obligation on August 5, 1975, go to defendant's office at
Malolos, and there tender her payment, when her request of August
4, 1975 had not yet been acted upon until August 7, 1975? If Atty.
Francisco had decided to pay the obligation and had available funds
for the purpose on August 5, 1975, then there would have been no
need for her to write defendant on August 4, 1975 to request an
extension of time. Indeed, Atty. Francisco's claim that she made a
tender of payment on August 5, 1975 — such alleged act, considered
in relation to the circumstances both antecedent and subsequent
thereto, being not in accord with the normal pattern of human
conduct — is not worthy of credence. 13
The trial court likewise noted the inconsistency in the testimony of
Atty. Francisco, president of the private respondent, who earlier testified that
a certain Mila Policarpio accompanied her on August 5, 1975 to the office of
the petitioner. Another person, however, named Aurora Oracion, was
presented to testify as the secretary-companion of Atty. Francisco on that
same occasion.
Furthermore, the trial court considered as fatal the failure of Atty.
Francisco to present in court the certified personal check allegedly tendered
as payment or, at least, its xerox copy, or even bank records thereof. Finally,
the trial court found that the private respondent had insufficient funds
available to fulfill the entire obligation considering that the latter, through its
president, Atty. Francisco, only had a savings account deposit of P64,840.00,
and although the latter had a money-market placement of P300,000.00, the
same was to mature only after the expiration of the 5-day grace period.
Based on the above considerations, the trial court rendered a decision
in favor of the petitioner, the dispositive portion of which reads: cdphil
WHEREFORE, finding plaintiff to have failed to make out its

case, the court hereby declares the subject contract cancelled and
plaintiff's downpayment of P23,930.00 forfeited in favor of defendant,
and hereby dismisses the complaint; and on the counterclaim, the
Court orders plaintiff to pay defendant.
(1) Attorney's fees of P10,000.00;
(2) Litigation expenses of P2,000.00; and
(3) Judicial costs.
SO ORDERED. 14
Not satisfied with the said decision, the private respondent appealed to
the respondent Intermediate Appellate Court (now Court of Appeals)
assigning as reversible errors, among others, the findings of the trial court
that the available funds of the private respondent were insufficient and that
the latter did not effect a valid tender of payment and consignation.
The respondent court, in reversing the decision of the trial court,
essentially relies on the following findings:
. . . We are convinced from the testimony of Atty. Adalia
Francisco and her witnesses that in behalf of the plaintiff-appellant
they have a total available sum of P364,840.00 at her and at the
plaintiff's disposal on or before August 4, 1975 to answer for the
obligation of the plaintiff-appellant. It was not correct for the trial
court to conclude that the plaintiff-appellant had only about
P64,840.00 in savings deposit on or before August 5, 1975, a sum not
enough to pay the outstanding account of P124,000.00. The plaintiff-
appellant, through Atty. Francisco proved and the trial court even
acknowledged that Atty. Adalia Francisco had about P300,000.00 in
money market placement. The error of the trial court has in
concluding that the money market placement of P300,000.00 was out
of reach of Atty. Francisco. But as testified to by Mr. Catalino Estrella,
a representative of the Insular Bank of Asia and America, Atty.
Francisco could withdraw anytime her money market placement and
place it at her disposal, thus proving her financial capability of
meeting more than the whole of P124,000.00 then due per contract.
This situation, We believe, proves the truth that Atty. Francisco
apprehensive that her request for a 30-day grace period would be
denied, she tendered payment on August 4, 1975 which offer
defendant through its representative and counsel refused to receive. .
. 15 (Emphasis supplied)
In other words, the respondent court, finding that the private
respondent had sufficient available funds, ipso facto concluded that the
latter had tendered payment. Is such conclusion warranted by the facts
proven? The petitioner submits that it is not. LexLib
Hence, this petition. 16

The petitioner presents the following issues for resolution:
xxx xxx xxx
A. Is a finding that private respondent had sufficient
available funds on or before the grace period for the payment of its
obligation proof that it (private respondent) did tender of (sic)
payment for its said obligation within said period?
xxx xxx xxx
B. Is it the legal obligation of the petitioner (as vendor) to
execute a deed of absolute sale in favor of the private respondent (as
vendee) before the latter has actually paid the complete
consideration of the sale — where the contract between and executed
by the parties stipulates —
"That upon complete payment of the agreed
consideration by the herein VENDEE, the VENDOR shall
cause the execution of a Deed of Absolute Sale in favor of
the VENDEE."
xxx xxx xxx.
C. Is an offer of a check a valid tender of payment of an
obligation under a contract which stipulates that the consideration of
the sale is in Philippine Currency? 17
We find the petition impressed with merit.
With respect to the first issue, we agree with the petitioner that a
finding that the private respondent had sufficient available funds on or
before the grace period for the payment of its obligation does not constitute
proof of tender of payment by the latter for its obligation within the said
period. Tender of payment involves a positive and unconditional act by the
obligor of offering legal tender currency as payment to the obligee for the
former's obligation and demanding that the latter accept the same. Thus,
tender of payment cannot be presumed by a mere inference from
surrounding circumstances. At most, sufficiency of available funds is only
affirmative of the capacity or ability of the obligor to fulfill his part of the
bargain. But whether or not the obligor avails himself of such funds to settle
his outstanding account remains to be proven by independent and credible
evidence. Tender of payment presupposes not only that the obligor is able,
ready, and willing, but more so, in the act of performing his obligation. Ab
posse ad actu non vale illatio. "A proof that an act could have been done is
no proof that it was actually done."
The respondent court was therefore in error to have concluded from
the sheer proof of sufficient available funds on the part of the private
respondent to meet more than the total obligation within the grace period,
the alleged truth of tender of payment. The same is a classic case of non-
sequitur. cdphil
On the contrary, the respondent court finds itself remiss in overlooking

or taking lightly the more important findings of fact made by the trial court
which we have earlier mentioned and which as a rule, are entitled to great
weight on appeal and should be accorded full consideration and respect and
should not be disturbed unless for strong and cogent reasons. 18
While the Court is not a trier of facts, yet, when the findings of fact of
the Court of Appeals are at variance with those of the trial court, 19 or when
the inference of the Court of Appeals from its findings of fact is manifestly
mistaken, 20 the Court has to review the evidence in order to arrive at the
correct findings based on the record.
Apropos the second issue raised, although admittedly the documents
for the deed of absolute sale had not been prepared, the subject contract
clearly provides that the full payment by the private respondent is an a priori
condition for the execution of the said documents by the petitioner.
That upon complete payment of the agreed consideration by
the herein VENDEE, the VENDOR shall cause the execution of a Deed
of Absolute Sale in favor of the VENDEE. 21
The private respondent is therefore in estoppel to claim
otherwise as the latter did in the testimony in cross-examination of its
president, Atty. Francisco, which reads:
Q Now, you mentioned, Atty. Francisco, that you wanted the
defendant to execute the final deed of sale before you would
given (sic) the personal certified check in payment of your
balance, is that correct?
A Yes, sir. 22
xxx xxx xxx
Art. 1159 of the Civil Code of the Philippines provides that "obligations
arising from contracts have the force of law between the contracting parties
and should be complied with in good faith." And unless the stipulations in
said contract are contrary to law, morals, good customs, public order, or
public policy, the same are binding as between the parties. 23
What the private respondent should have done if it was indeed

desirous of complying with its obligations would have been to pay the
petitioner within the grace period and obtain a receipt of such payment duly
issued by the latter. Thereafter, or, allowing a reasonable time, the private
respondent could have demanded from the petitioner the execution of the
necessary documents. In case the petitioner refused, the private respondent
could have had always resorted to judicial action for the legitimate
enforcement of its right. For the failure of the private respondent to
undertake this more judicious course of action, it alone shall suffer the
consequences. LibLex
With regard to the third issue, granting arguendo that we would rule
affirmatively on the two preceding issues, the case of the private respondent
still can not succeed in view of the fact that the latter used a certified
personal check which is not legal tender nor the currency stipulated, and
therefore, can not constitute valid tender of payment. The first paragraph of
Art. 1249 of the Civil Code provides that "the 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.
The Court en banc in the recent case of Philippine Airlines v. Court of
Appeals, 24 G.R. No. L-49188, stated thus:
Since a negotiable instrument is only a substitute for money
and not money, the delivery of such an instrument does not, by itself,
operate as payment (citing Sec. 189, Act 2031 on Negs. Insts.; Art.
1249, Civil Code; Bryan London Co. v. American Bank, 7 Phil. 255; Tan
Sunco v. Santos, 9 Phil. 44; 21 R.C.L. 60, 61). A check, whether a
manager's check or ordinary check, is not legal tender, and an offer
of a check in payment of a debt is not a valid tender of payment and
may be refused receipt by the obligee or creditor.
Hence, where the tender of payment by the private respondent was not
valid for failure to comply with the requisite payment in legal tender or
currency stipulated within the grace period and as such, was validly refused
receipt by the petitioner, the subsequent consignation did not operate to
discharge the former from its obligation to the latter.
In view of the foregoing, the petitioner in the legitimate exercise of its
rights pursuant to the subject contract, did validly order therefore the
cancellation of the said contract, the forfeiture of the previous payment, and
the reconveyance ipso facto of the land in question. llcd
WHEREFORE, the petition for review on certiorari is GRANTED and the

DECISION of the respondent court promulgated on April 25, 1985 is hereby
SET ASIDE and ANNULLED and the DECISION of the trial court dated May 25,
1981 is hereby REINSTATED. Costs against the private respondent.
SO ORDERED.
Melencio-Herrera, Paras and Regalado, JJ., concur.
Padilla, J., took no part.
Footnotes
1. Promulgated on April 25, 1985; Zosa, M.A., J., ponente; Bartolome, F.C. and
Ejercito, B.C., JJ., concurring.
2. AC-G.R. CV No. 69626, Robes-Francisco Realty & Development Corporation

vs. Roman Catholic Bishop of Malolos, Inc.
3. Rollo, 37.
4. Hon. Jesus M. Elbinias, Presiding Judge, Branch V.
5. Rollo, 9-11.
6. Annex "T", 2, Record on Appeal, Court of First Instance, Bulacan, Branch V,
Rollo, 49.
7. Annex "C-3", Id.
8. Annex "A-4", Id.
9. Annex "A-5, Id.

10. Annex "T", 5, Id.
11. Annex "C-6", Id.

12. Annex "C-7", 1-2, Id.
13. Annex "T", 14, Id.
14. Annex "T", 22 Id.

15. Rollo, 35.
16. Filed on October 25, 1985.

17. Rollo, 8-9.
18. Natividad del Rosario Vda. de Alberto v. Court of Appeals, G.R. 29759, May
18, 1989; Matabuena v. Court of Appeals, G.R. 76542, May 5, 1989.
19. Robleza v. Court of Appeals, G.R. 80364, June 28, 1989.

20. Reynolds Philippine Corporation v. Court of Appeals, G.R. 38187, January
17, 1987.
21. Rollo, 11.
22. T.s.n., June 9, 1977, 24.

23. Article 1409, Civil Code, par. 1.
24. Promulgated on January 30, 1990.

1867.] The Irving Bank v. Wetherald. 335
Statement of case.
The Irving Bank, in the city of New York, v. James

Wetherald and others.
The customary certificate “good ” by a bank at whose place of business a note
is made payable, is information merely, that the maker has funds to meet
the note.
This information may be furnished verbally, by letter or by a memorandum
upon the nolo. The effect in each case is the same.
The bank making the certificate, has the means of accurate knowledge, and is
bound to state the fact correctly. It is estopped from denying the truth of
its statement where the presenting bank relies upon its accurracy and fails to
protest the note for non-payment.
Where, however, a certificate of the goodness of a note is erroneously made,
and the error is discovered and notice given to the presenting bank, in time
for it to make a re-presentment and charge the indorsers, the certifying bank
is discharged from further liability.
And where in such case, the certifying bank, to relieve itself from supposed
liability on such a certificate, paid to the other bank the amount of the note,
received it back with the mark “paid” stamped upon it, presented it for
payment and gave notice of non-payment to the indorsers bn the day of
its maturity. Held, that the bank took the note as purchaser and acquired
the rights of a holder of the same, and could maintain their action against
the indorsers of the note.
The questions in this case arise upon the following facts,

which were found by the judge who tried the cause without
a jury:
On the 7th day of December, 1858, one Morris Wilson
made his note for $301.30 at eight months, payable at the
Irving Bank to his own order; he indorsed the same, and it
was also indorsed by Wetherald & Young, the defendants.
Said note, before maturity, was duly discounted by the
Seventh Ward Bank for the defendants.
On the day the aforesaid note matured, the Seventh Ward
Bank, as the owner thereof, presented it to the paying teller
of the Irving Bank,' who certified it in the usual manner as
good, and charged the same to Morris Wilson in the books
of the Irving Bank. At this time Morris Wilson had no
'
funds in the bank.
Immediately upon said note being returned to the Seventh
Ward Bank certified, that bank caused the same to be
stamped “ paid.”
336 The Irving Bank v. Wethebald. [March,
Opinion of the Court, per Httnt, J.
Upon the discovery by the officersof the Irving Bank of

the mistake of their paying teller in certifying said note,
and before three o’clock of the same day, the said Irving
Bank notified the said Seventh Ward Bank of the mistake,
and requested the said certificate to be canceled, which the
said Seventh Ward Bank refused.
Upon the refusal of the said Seventh Ward Bank to cancel
said certificate, the said Irving Bank paid to the said Seventh
Ward Bank the full amount of said note and received the
same into their possession stamped “paid,” as aforesaid;
and thereupon, on the same day of its maturity, and before
three o’clock p. m., the same was again presented at the
counter of the Irving Bank for payment, payment demanded,
and the same duly protested for' non-payment, and notice
thereof given to the defendants.
The court directed judgment in favor of the' defendants.
The General Term of the first district reversed this judg-
ment and ordered a new trial. The defendants appeal to
this court, stipulating that 'if the order granting a new trial
be affirmed, judgment absolute may be entered against them.
Mr. Tyler, for the appellants.
Mr. E. Fitch, for the respondents.
Hunt, J. Both the judge at the circuit, and the General

Term, were of the opinion, that the notice by the plaintiffs
to the Seventh Ward Bank, of the mistake in certifying
Wilson’s check to be good, before any steps had been taken,
or any measures omitted by the Seventh Ward Bank, and
while there was still time to fix all the parties upon the note,
relieved the plaintiffs from their liability on the certificate.
In this opinion I concur. Such a certificate possesses no
extraordinary or hidden power. It should impose no greater
liability than its terms fairly require. Divested of all tech-
nical terms, the transaction in question was simply this:
The Seventh Ward Bank present for payment at the Irving
Bank, where it is made payable, the note of Morris Wilson.
The making the note payable there, was a warrant from the
1867.] The Ievxktg Bank v. Wbtheeaed. 337
Opinionof the Court,per Hunt, J;
maker to the latter bank, to pay it from his -funds and

charge it to him. When the note is presented, the teller of
the paying bank informs the presenter that the note is good,
in other words, that the maker has the funds in the bank to
meet it. This information may be communicated verbally,
by letter or by a memorandum on the note, ordinarily called
a certificate. If the note were presented by an individual,
the money would ordinarily be paid to him in satisfaction,
and the note left with the paying bank. In the case of a
bank, the note is taken back by the party owning it, to be
returned the next day in the settlement of exchanges, as an
item of credit in its favor, and against the certifying bank.
This is the usual course of business in the city of New York.
The correctness of this. certificate is a matter which the
certifying bank has the means .of knowing, and is bound
to state correctly.* If the presenting bank relies upon its
accuracy, and fails to charge the indorsers as upon non-pay-
ment on presentation, the certifying bank is estopped from
denying the truth of its statement. Having asserted, of its
own knowledge, that the maker had funds in its bank to
meet the, note, and the presenting bank, having omitted,
to charge its indorsers in reliance upon such statement, the
certifying bank will not be permitted to go behind its own
statements: The teller of the bank is the proper officer to
make this statement, and his statement binds the bank,-
whether accurate or erroneous. These principles are estab-
lished in Mead v. The Merchants' Bank of Albany (25 N.
Y., 143), and in Farmers' and Mechanics' Bank of Kent
County v. Butchers' and Drovers' Bank (16 id., 125).
In the present case the Irving Bank discovered its error,
in stating that it had funds for the payment of Wilson’s
note, in sufficient time to prevent any loss in consequence
of the error. It immediately notified the Seventh Ward
Bank of the error, and in time to enable it to make a re-pre-
sentment, if necessary, and to charge the indorsers. Ho
damage,.therefore, could accrue to the latter bank from the
erroneous information. They were bound to accept and to
act upon the corrected information, if there were time and
Tiffany — Yol. IX. 43
338 The Irving Bank v. Wethebald. [March,
Opinion of the Court, per Hunt, J.
opportunity so to do. I agree with the courts below that the

plaintiffs might have stopped at that point, and there'
would have been no liability on their part to the Seventh
Ward Bank.
That bank went farther, however, and, upon the refusal of
the Seventh Ward Bank to cancel their certificate, paid to
that bank the amount of the note, re-presented it at their own
counter, and gave notice of non-payment to the defendants
as indorsers thereof. This the judge, at Special Term, held
to amount, in law, to a payment of the note. The General
Term held otherwise, and reversed his judgment. It was
agreed, by the judge at Special Term, that the certificate of
the paying teller was not a payment of thp note. In this he
was no doubt correct. It has also been held, and correctly, that
the stamping a note as “ paid,” or marking it with a cancel-
ing hammer, does not constitute a payment. (Scott v. Betts,
Lalor Sup., 363 and note; Watervliet Bank v. White, 1
Denio, 608.)
That the advance of the amount of the note, by the
plaintiff, to the' Seventh Ward Bank, was made to relieve
them from an apprehended liability on their certificate,, and
was not intended by them to be in discharge of the note, is
obvious from the immediate re-presentment of the note for
payment, and notice to the indorsers that the same had not
been paid. There could have been no other purpose in this
than to charge the parties to' an existing note. So, if they
had intended a payment and discharge of the note, they
would have allowed its return in the exchanges of the day
following, in the usual course of business, instead of making
a special payment of the same. The judge has not found, as
a fact, that the note was intended to be paid by the Irving
Bank, or that it was paid by them. Ho could not have so
found upon the testimony, with propriety. He simply finds
that the plaintiff paid “the amount of the note” to the
Seventh Ward Bank, and he holds, as a legal result, that the
advance of the money, under the circumstances stated, oper-
ated to discharge and cancel the note. In this conclusion I
think he erred. The plaintiffs took the note as a purchaser,
186t.] The Ieving Bank v. Wetheeald; 389
Opinion of the Court, per Hunt, J.
and acquired the rights of a holder. (See Watervliet Bank v.

White, 1 Denio, 608.) In that case the Watervliet Bank,
at whose counter the note was made payable, received it from
the holder for collection, and, having an account with the
maker, which, however, was not good for' the amount,
charged it to him and paid it to the holder, at the same
time placing up to it a canceling mark. *By the practice of
the bank this mark only denoted that the note was charged.
In a suit on the note by the bank, as indorsee against the
maker, it was held that the bank held it with the rights of a
purchaser, and could maintain the action.
In the present ease the plaintiffs feared a liability-to the
Seventh Ward Bank, by reason of their mistaken certificate
of the goodness of the note. They advanced to that bank its
amount, for the purpose of re-presenting it for payment, noti-
fying the indorsers, and holding it as an existing security.
The defendants are indorsers duly charged. They received,
themselves, the amount of the note upon its discount. It
has never been paid, and is now an available security in the
hands of the plaintiffs.
The order of the General Term should be affirmed, and
judgment absolute ordered in favor of the plaintiffs for the
amount of the note and interest.
All concur.
Judgment absolute.
NOVEMBER, TERM, 1891. 3
Brickley et al. v. Edwards et al.
trial court in making out the transcript. We think it clear

that an appellate court has the inherent power to relieve
against accident and excusable mistake in the proper case.
Smythe v. Boswell, 117 Ind. 365. If it were not for the mis-
take, the motion to dismiss the appeal should be sustained,
inasmuch as all parties must be brought in within the time
limited for appealing, unless accident, fraud or excusable mis-
take is affirmatively shown. Holloran v. Midland R. W.
Co., 129 Ind. 274.
Ordered that the motion to dismiss be overruled, that the
costs of the motion be taxed against the appellants, and that
they be allowed thirty days in which to correct their errors
respecting parties.
Filed March 19, 1892.
No. 14,988.
Practice. —Non,Est Factum.—Reply.—PleaofEstoppel.—A plea of non ese

factum closes the issues, and does not require a reply ; but a reply of es-
toppel may be pleaded to such an answer.
Same.—MotiontoStrike OutPleading.—Overruling.—Overrulinga motion to
strike out a pleading is not such an error as will reverse the case.
Promissory Note.—Payable in Bank.—Note Executedby Illegal Corporation.
—The maker of a note, payable in bank, to an illegal corporation,
which is afterwards annulled by a decree of court is, as against an in-
nocent endorsee of the note for value, estopped to deny its existence or
its capacity to contract.
Estoppel. —Third Person RelyingUponCorrespondence not Addressedto Him.
—A. wrote to B., who had executed a note payable in bank, asking him
“if the note was all right,” and if it would “be paid at maturity?”
B. replied on the back of the letter that “ the note referred to is all
right, and will be paid when due.” The letter came into the possession
of C., who purchased the note before it was due, relying upon the cor-
respondence, and became assignee thereof.
Held, that B. was not estopped to set up any defence against said note that
existed at the time of the correspondence as against C., the purchaser.
Same.—Special and GeneralAdmissionsor Declarations.—Admissionsor dec-
4 SUPREME COURT OF INDIANA,
Brickley el al. v. Edwards et at.
larations which have been acted upon by others are conclusive against
the party making them in all cases between him and the person whose,
conduct he has thus influenced, whether the admissions or declarations
are made in express language to the person himself, or are made in
general terms, or may be implied from the open and general conduct of
the party. Open and general statements of a party may be considered
as addressed to everyone who may have occasion to act upon them.
From the Huntington Circuit Court.
L. P. Milligan and O. W. Whitelock,for appellants.
H. J. Shirk, I. Walker, W. B. McClintic and J. Mitchell,
for appellees.
McBride, J-. The appellee was plaintiff below. His

complaint charges the execution of a note by the appellant
Andrew J. Brickley on January 25th, 1882, payable January
25th, 1887, to the Fort Wayne, Warren and Brazil Railroad
Company, or order, at the First National Bank of Fort
Wayne, Indiana, and, also, the execution by both appellants
of a mortgage on certain land in Huntington county to se-
cure the note.
It also alleges the assignment of the note and mortgage
before maturity to the appellee. Prayer for judgment for the
amount due on the note and for foreclosure of the mortgage.
The appellants filed an answer in eight paragraphs:
1st. A joint answer of general denial.
2d. A separate answer by Andrew J. Brickley of non est
factum, verified.
3d. That the note and mortgage were procured by fraud,
of which the appellee had full knowledge.
4th. That the note and' mortgage were procured by fraud,
and were without consideration, and, after they were signed,
they were taken and carried away without his authority or
consent,•'andthat there was in fact no such corporation as that
named as the payee.
5th. That the note and mortgage were obtained by fraud,
and were without consideration, of which facts the assignee
had full knowledge when he took the assignment.
NOVEMBER TERM, 1891. 5
Briekley et al. t>.Edwards et al.
6th. That the note and mortgage were without any con-
sideration whatever, of which fact the appellee had full
knowledge, etc.
7th. That the note was procured by fraud, that when it
was given a suit was pending challenging the existence of
the payee as a corporation, which suit was afterward prose-
cuted to effect, and a judgment rendered adjudging it no cor-
poration, which judgment was, on appeal, affirmed by the
Supreme Court, and that the appellee had knowledge of all
of said facts when he took the assignment. This answer was
verified.
8th. A verified denial of the assignment.
The appellee replied in six paragraphs.
The first is addressed to the second paragraph of answer,
that of non estfactum. It alleges that on the day the note
was assigned to him one William J. Holman, claiming to be
the President of the Fort Wayne, Warren and Brazil Rail-
road Company, presented to him a memorandum in writing
directed to the appellant A. J. Briekley, making inquiry as
to the validity of the note and mortgage, said inquiry being
signed by E. H. Shirk; that on the opposite page thereof
was a memorandum signed by said Briekley, stating that the
note and mortgage referred to were “ all right,” and would
be paid at maturity. The latter memorandum was addressed
to “ Hon. E. H. Shirk,” writer of the letter of inquiry. It
was further alleged that said writing had been intrusted to
said Holman by said Briekley to enable Holman to negotiate
the note ; that the appellee relied on the representations in
said writing, without other knowledge of the facts, and pur-
chased the note for a valuable consideration and before ma-
turity, whereby he claimed the appellant was estopped to
deny the execution of the note.
The second paragraph of reply was addressed to the third
and fourth paragraphs of answer, and alleged that the appel-
lee purchased the note before maturity, in good faith, for a
Brickley el al. v. Edwards et al.
valuable consideration, and without knowledge of any fraud

in its procurement.
The third paragraph was addressed to the fifth and sixth
paragraphs of answer, and denies knowledge of any want of
consideration, and alleges that he purchased the note before
maturity, in good faith and for a valuable consideration.
The fourth paragraph is addressed to the seventh paragraph
of answer, and also alleges that the note was assigned to him
before maturity, for value, etc., and that he had no knowl-
edge of the action to annul the corporation, or of the fraud,
or that the payee was not legally incorporated.
The fifth paragraph was addressed to all of the answers
except the first and and second. The facts pleaded were sub-
stantially the same as in the first paragraph, setting out the
letter to Shirk and the reply by Brickley.
The sixth was a general denial, addressed to all except the
first, second and eighth paragraphs of answer.
The errors assigned, so far as they relate to the pleadings,
are, that the court erred in overruling appellants’ motion to
strike out the first and fourth paragraphs of the reply, and
in overruling appellants’ demurrer to the second and fifth
paragraphs of reply.
The ground upon which the appellants insist that the court
erred in refusing to strike out the two paragraphs of reply,
is that they were both addressed to pleas of non est factum,
and that a plea of non est factum closes the issues, and does
not admit of a reply. It is true that a plea of non estfactum
closes the issues, and does not require a reply. It does not
follow, however, that a reply may not be proper. A reply
of estoppel may be pleaded to an answer of non estfactum.
Pattison v. Norris, 29 Ind. 165; Pudd v. Matthews, 79 Ky.
479. Webbv. Corbin, 78 Ind. 403, is not in conflict with
this. The court did not err in refusing to strike out the re-
plies. But, if it had, the cause could not be reversed upon
that ground. A cause will not be reversed because of the
refusal of the court to strike out a pleading. City of Craw-
NOVEMBER TERM, 1891.. 7
fordsville v. Boots, 76 Ind. 32; Smith v. Martin, 80 Ind.

260; Lake Erie, etc., R. W. Co. v. Kinsey, 87 Ind. 514;
Hoke v. Applegate, 92 Ind. 570.
It is unnecessary for us to consider in this connection the
sufficiency of the seventh paragraph of answer as a plea of
non est factum. Nor did the motion to strike out raise any
question as to the sufficiency of the reply of estoppel. A
motion to strike out does not perform the office of a de-
murrer.
The court did not err in overruling the demurrer to the
second paragraph of reply to the third and fourth para-
graphs of answer.- The averments of the fraud, by which'it
is alleged the execution of the note and mortgage were pro-
cured, are not sufficient to bring either of the paragraphs of
answer within the rule of Cline v. Guthrie, 42 Ind. 227,
upon which the appellant relies.. It is not alleged that the
appellant was deceived as to the character of the papers he
executed. He kne.w he. was making a note and a mortgage.
Nor are the averments that they were taken away without
his authority or consent sufficient to bring the facts pleaded
within the rule of that case. Neither of the answers is ver-
ified. They do not call in question the execution of the
note and mortgage, but seek to avoid them because of the
alleged fraud of the parties who procured their execution,
.and the alleged knowledge of the appellee of the fraud.
As against the payee or one chargeable with notice they
plead a good defence. The note being payable at a bank in
this State, none of the facts thus pleaded can avail against a
bona fide endorsee for value who acquired it before due. So,
also, of the averments of the non-existence of the corpora-
tion. Having contracted with it as a corporation he is, as
against an innocent endorsee of the note, estopped to deny
its existence, or its capacity to contract- . Smelser v. Wayne,
etc., T. P. Co., 82 Ind. 417; Jones v. Kokomo Building Ass’n,
77 Ind. 340-; Beatty v. Bartholomew, etc., Society, 76 Ind. 91;
Baker v. Neff, 73 Ind. 68; Snyder v. Studebaker, 19 Ind.
Brickleyet al. v. Edwardset al.
462; Meikel v. German, etc., Society, 16 Ind. 181; Heaston

v. Cincinnati, etc., R. R. Co., 16 Ind. 275.
The fifth paragraph of reply was, as we have heretofore
said, a reply of estoppel, and was pleaded to all of the sev-
eral paragraphs of answer except the first and second. It
was based upon the following writings:
“ Peru, Ind., April 1st, 1882.
“Mr. Andrew J. Brichley, Marckle,Ind. :
“ Dear Sir : William J. Holman, of Fort Wayne, wishes
to negotiate with us for a loan, or rather the sale of a note
of yours for ($2,000) two thousand dollars, dated June 25th,
1882, payable to the Fort Wayne, Warren» and Brazil Rail-
road Company, maturing January 25th, 1887, and secured
by mortgage of the same date of note, on one hundred acres
of land, being a part of your home farm opposite the town
'of Markle, in Huntington, county, Indiana, and recorded
February 4th, 1882, in book S, page 297 of mortgage records
of Huntington county. We wish to know if the notéis all
right, and will be paid at maturity, and interest as it be-
comes due. Please answer on opposite page and oblige.
“ E. H. Shirk.”
Indorsed upon the back of the foregoing was the fol-
lowing :
“Markle, Ind., April, 1882.
“Hon. K H. Shirh:
“ Dear Sir : Tours on opposite page received. The
note and mortgage referred to are all right, and will be paid
when due. There are no other liens against the land mort-
gaged. ' A. J. Brickley.
“ Witness : W. J. HOLMAN.
“ William Allen.
“ L. P. Holman.”
It is alleged in the reply that the holder of the note, Hol-
man, offered it for sale to E. H. Shirk and the appellee, who
were respectively president and assistant cashier of the First
National Bank of Peru; that thereupon Shirk addressed the
Brickley et al. v. Edwards el al.
foregoing letter to the appellant, who thereafter signed and

delivered to Holman the-reply for the purpose of aiding him
in negotiating and selling the note and mortgage. It is not
averred that Brickley had any knowledge of the relations
existing between Shirk and the appellee, or of their connec-
tion with the bank, nor is it averred that Brickley had any
knowledge of Holman’s intention to try to sell the note and
mortgage to the appellee, nor to any person other than to
Shirk, nor is it averred that his purpose was to aid him gen-
erally in an effort to sell them, or to sell them to any person
other than to Shirk. For some reason not disclosed by the
pleading, Shirk did not take the note, but the appellee did,
and insists that while the written statement of Brickley was
addressed to Shirk, he was authorized to and did rely upon
its statements when he purchased and took the assignment
of the note, and that the appellant is thereby estopped to
defend against him, either on the ground of fraud in the.
procurement of the note, or on the ground that he did not
execute it. This claim appellee’s counsel base on the ground
that the statements that the note and mortgage were all
right, and would be paid when due, were general statements,
without qualification, not made confidentially, but delivered
to a party who he knew was endeavoring to effect a sale of
the note for the purpose of aiding him in the sale.
The rule relating to declarations of the character in ques-
tion is correctly stated in an authority cited and quoted by
counsel for the appellee thus : “ A declaration made to one
party can rarely operate as an estoppel in favor of another.
Where, however, a declaration or admission is so general in
its terms or made under such circumstances as to indicate
that it was intended to reach or influence third persons, or
the community at large, the estoppel will be carried so far
as to protect every one who may be presumed to have acted
on or been governed by it.” 2 Smith Leading Cases, Star p.
799, note to Duchess of Kingston’s case.
Admissions which have been acted upon by others are
10 SUPREME COURT OP INDIANA,
Brickley el al. v. Edwards et al;
conclusive against the party making them in all cases be-

tween him and the person whose conduct he has thus in-
fluenced. This is true whether the admission or declaration
is made in express language to the person himself, or is made
in general terms, or may be implied from the open and gen-
eral conduct of the party. His open and general statements
may be considered as addressed to every one who may have
occasion to act upon them. 2 Greenleaf Ev., section
207. Does the statement addressed by the appellant to
Shirk fall within this rule? We think it does not. Upon
its face it is addressed to Shirk alone. It is in response toa
personal letter addressed to him by Shirk. An examination
of the authorities cited by the appellee will show that they
do not support his contention.
Dickerson v. Colgrove, 100 U. S. 578, is cited as being
similar to the case at bar. In that case the writer of a let-
ter to one person is held to have estopped himself to claim
any interest in certain land as against a third person to whom
the contents of the letter had been communicated. An ex-
amination of the case discloses the fact that in the letter itself
the writer expressly authorizes the communication of his dis-
claimer of any interest in the land to the third person, and
that this was done and had been acted upon. Page 580.
Weyh v. Boylan, 85 N. Y. 394, is also cited. In that case
the maker of a note and mortgage was held to be estopped
to defend on the ground of usury against one who had pur-
chased them, relying upon a certificate in some respects sim-
ilar to that made by the appellant in this case. Instead,
however, of being addressed to any particular person, or
written in response to any special inquiry, it was a certificate,
general in its terms, and addressed to no one. While it con-
tained a statement that the writer knew of 'a contemplated
assignment to certain persons, it also contained the general
statement that “ It will be good and valid in the hands of
an assignee.”
The note and mortgage were in fact assigned to the per-
sons named in the statement, and by them to the parties who

sought to enforce it. While we think that case was correctly
decided, we do not think it sustains appellee’s claim in the
■caseat bar. The cases of Mitchell v. Reed, 9 Cal. 204, and
Horn v. Cole, 51 N. H. 287, are also cited. In our opinion
neither of those cases was correctly decided, and we decline
to recognize them as authority. In the first case, Mitchell
was a merchant engaged in the sale of groceries and liquors.
His business was conducted by a clerk, one Haskell. Mitchell
was a Son of Temperance, and not wishing it known that he
dealt in liquors, said that the liquors in the store belonged
to Haskell, who sold them without his consent. This com-
ing to the knowledge of a creditor of Haskell, he commenced
attachment proceedings against Haskell, and Reed, a con-
stable, seized the liquors as Haskell’s. It was held that the
public statements made by Mitchell estopped him to claim
the liquors. It was not shown, however, that the creditor
had given credit to Haskell upon the strength of his reputed
ownership of the property, nor is it shown that he was in any
manner influenced by Mitchell’s statements, or knew of them
until the time when he commenced the attachment proceed-
ings.
The case of Horn v. Cole,supra, rests upon grounds equally
untenable. It is, however, an interesting and instructive
case, citing and reviewing a very large number of cases cov-
ering the general modern doctrine of estoppel in pais, and
while we can not approve of the conclusion reached on the
facts disclosed, we commend the learned and discriminating,
■discussionof the cases cited.
As was said by the Supreme Court of Connecticut in Kin-
ney v. Whiton, 44 Conn. 262 (26 Am. Rep. 462)-: “ It seems
to us to be an unsafe doctrine to adopt, that a person who gets
at second-hand a declaration not intended for the public and
not intended for him, may act upon it as safely as the person
to whom the declaration was addressed, and for whom alone
it was intended. Where the declaration was intended only
Briekley et al. v. Edwards tl al.
for the person to whom it was addressed the party making

it has assumed no obligation to any other person.”
In our opinion the appellee is not entitled to avail himself
of the statements contained in the letter addressed to Shirk
for the purpose of an estoppel in pais against the appellant.
See, also, Mayenborg v. Haynes, 50 N. Y. 675; Townsend
Savings Bank v. Todd, 47 Conn. 190.
The court erred in overruling the demurrer to the fifth
paragraph of reply.
We think it unnecessary to consider or pass upon the re-
maining errors assigned and discussed by the appellant.
They are such as may not and probably will not arise on an-
other trial of the cause.
The appellee has assigned several cross-errors. Of these,
only two are discussed. Through what was probably inad-
vertence, one of these presents no question for consideration.
The court sustained a demurrer to the first paragraph of
reply, which was addressed to the second paragraph of an-
swer, and overruled a demurrer to the second paragraph of
reply. We have considered that ruling on assignment of
error by the appellant.
Counsel assign as cross-error that the court sustained a de-
murrer to the second paragraph of reply. In our opinion
the court erred in sustaining the demurrer to the fourth par-
agraph of reply. This was pleaded to the verified seventh
paragraph of answer. This paragraph of answer was evi-
dently intended as.a special plea of non estfactum. The facts
:pleaded were not sufficient to negative the execution of the
note, and it was not good as a plea of non est factum.
It was, however, a good plea in bar, but the replication to
it was sufficient. It is unnecessary to state the reasons that
lead us to this conclusion, further than to refer to what we
have said as to the sufficiency of the second paragraph of
reply.
Because of the errors of the court in overruling the de-
murrer to the fifth paragraph of reply, and in sustaining the
Miller v. Hardy et al.
demurrer to the fourth paragraph, the cause is reversed, with

instructions to the circuit court to grant a new trial, and to
proceed in accordance with this opinion.
Filed March 17, 1892.
No. 15,379.
Miller v. Hardy et al.
Practice. —Erroneously Sustaining Demurrer to Reply.—Special Findings of

Fact Curing Error. —Error occasioned by improperly sustaining a de-
murrer to a reply is cured if the special finding of facts show that the
plaintiff was not deprived of putting his whole case into the record for
review by the Supreme Court.
Bankruptcy. —Foreclosure of MortgageonLands ofEstate PendingBankruptcy
Proceedings.—If suit be brought against- a bankrupt, pending his pro-
ceedings in bankruptcy, to foreclose a mortgage upon land which he
has assigned to his assignee in bankruptcy, and the assignee represents
to the United States Court, in which the proceedings in bankruptcy are
pending, that the lands ought to be abandoned because of no value to
the estate in bankruptcy, and the court so orders, the foreclosure will be
binding upon all who are parties to it. "
be
Res Judicata. —All DefencesMust Plead in ForeclosureProceedings.—In
a foreclosure proceeding the defendant must set up all defences he is
entitled to or he will be barred.
From the Montgomery Circuit Court.
G. D. Hurley and M. H. Clodfelter, for appellant.
H. H. Dochterman, A. W. Caldwell and J. L, Caldwell, for
appellees.
Miller, J- . The appellant filed her complaint in four

paragraphs, against the appellees. Demurrers were sustained
to the second and third paragraphs, and these rulings are
complained of in this court.
The first paragraph of complaint was in the ordinary form,
authorized by the code, for the recovery of real estate, dam-
ages for its detention, and for rents and profits.
GF THE ÜNlTED STATÉS, 385
1817.
Raborg
v.
Peyton.
Raborg et al. v. Peyton.
All action of debt will lie by the payee or endórsete of a bill of ex- c-
hange, against the acceptor, where it is.expressed to be for value
received.
Debt will lie by the payee of a note against a maker, where the note
is expressed to be for value received.
Error to the circuit court for the district of Co-

lumbia.
This Cause was argued by Mr. Jones, for the plain- March 14th.
tiffs in error, and by Mr. Taylor, for the defendant
in error.
Mr. Justice Story delivered the opinion of the March 15th.

court.
This is án actioh of debt brought against the
defendantin error, as acceptor of a bill of exchange by
the plaintiffs in error as endorsees. The declaration
alleges that the bill was drawn, accepted, and en-
dorsedpibr value received. The only question is.
Whether debt lies in such a case.
The géneral principle has been very correctly
stated by Lord Chief Baron Comyn, that debt lies
upon every express contract to pay a sum certains
and he adds, also, that it lies though there-bé only
an implied contract. (Com. Dig. Debt, a. 8. a. 9.)
But it has been sunposed that this principle does not
apply to an action on a bill of exchange, even where
the suit is brought by the payee against the acceptor,
Von. H. •• 3c
386 CASE'S IN THE SUPREME COURT
1817. and a fortiori not, where it is brought by the endor-

Xtaborg
see. It is admitted that in Hardres, 485., the court
v. held that debt does not lie by the payee of a bill of
Peyton. . mi
exciiange against the acceptor. I he reasons given
for this opinion were, first, that there is no privity of
contract between the parties; and, secondly, that an
acceptance is only in the nature of a collateral'pro-
mise or engagement to pay the debt of another,
which does not create a duty. It is very difficult to
perceive how it can be correctly affirmed that there
is no privity of contract between the payee and ac-
ceptor. There is, in the very nature of the engage-
ment, a direct and immediate contract between them.
The consideration may not always, although it fre-
quently does, arise between them; but privity of
contract may exist if there be an express contract,
although the consideration of the contract originated
aliunde. Besides, if one person deliver money to
another for the use of a third person, it has been
settled that such a privity exists that the latter may
maintain an action of debt against the bailee. (Harris
v- . De Bervoir, Cro. Jac. 687.) And it is clear
that an acceptance is evidence of money had and re-
ceived by the acceptor for the use of the holder.
(Tatlock v. Harris, 3 T. R. 174. Vere v. Lewis,
3 T. R. 182.) It is also evidence of money paid
by the holder to the use of the acceptor. (Ibid, and
Bailey on Bills, 164., 3d edition.) A privity of con-
tract, and a duty to pay, would seem, in such case,
to be completely established; and wherevpr the
common law raises a duty, debt lies. The other
reason woüld seem not better founded. An accept-
OF THE UNITED STATES. 387
anee is not a collateral engagement to pay the debt J817.
of another: it .is an absolute engagement to pay the
money to the holder of the bill; and the engage- v.
•Peyt°1'*-
ménts of all the other parties are merely collateral.
Prima facie, every acceptance affords a presumption
of funds of the drawer in the hands of the acceptor;
and is, of itself, an express appropriation of those
funds for the use of the holder. The case, may, in-
deed, be otherwise; and then the acceptor, in fact,
pays the debt of the drawer; but as between-himself
and the payee it is not a collateral, but an original
and direct undertaking. The payee accepts the ac-
ceptor as his debtor, and he cannot resort to the
drawer but upon a failure of due payment of the bill.
The engagement of the drawer, therefore, may more
properly be termed collateral, let it has been
held, that debt will lie in favour of a payee against
the drawer in case of non-payment by the acceptor.
(Hard’s case, Salk. 23. Hodges v. Steward, Skinn.
346.; and see Bishop v. Young, 2 Bos. & Pull 78.)
The reasons, then, assigned for the decision in Har-
dres are not satisfactory; and it deserves considera-
tion that it was made at a time when the principles
respecting mercantile contracts were not generally
understood.
The old doctrine upon this subject has been very
considerably shaken in modern times. An indebita-
tus assumpsit will now lie in favour of the payee
against the acceptor; and it is srenerallv true that
where such an action lies, debt will lie. And a
still stronger case is, that an acceptance is good evi-
dence on a count upon, an insimul computassent.
383 CASES IN THE SUPREME COURT
1817. (Israel v. Douglas, 1 H. Bl. 239.,) which can ohty

he upon the footing of a privity of contract.
v But the most important case is that of Bishop v.
Peyton.
Young, 2 Bos. & Pull. 78. It was theré held, in
opposition to what was supposed to have been the.
doctrine of former cases, that debt would lie by the
payee of a note against the maker, where the note
wa expressed to be for value received. That dfe-r
cisión was given with measured caution, and the
court expressly declined to give any opinion upon
any but the case in judgment. The case in Hardres
was there discussed, and although its reasoning was
not impugned, an authoritative weight was not at-
tempted to be given to it. In general, the legal
predicament of the maker of a note is like that
of the acceptor of a bill. Each is liable to the
payee for the payment of the note or bill in the first
instance; and after endorsement, each incurs the
same liabilities. And if an action of debt will lie
in favour of the payee of a note against the maker,
it is not easy to perceive any sound principle upon
which it ought to be denied against an acceptor of
a bill. The acceptance of a bill is just as much an
admission of a deht between the immediate parties
as the drawing of a note.
The case has been thus far considered as if the ac*.
tion were brought by the payee against the acceptor.
And this certainly , presents the strongest view in
favour of the argument. But in point of law every
subsequent holder, in respect to the acceptor of a
bill, and the maker of a note, stand's in the same
predipqrpent as the payee. An acceptance is as
OF THE UNITED STATES. 389
much evidence of money had and received by the 1817.
acceptor to the use of such holder, and of money Raborg
paid by such holder for the use of the acceptor, as v.
Peyton.
if he were the payee. (3 T. R. 172. Id. 184.
Grant v. Vaughan, 3 Burr. 1515.)
Upon the whole, we do not think that the autho-
rity in Hardres can be sustained upon principle;
and we see no inconvenience in adopting a rule more
Consonant to the just rights of the parties as re-
cognised in modern times. In so doing, we apply
the well-settled doctrine that debt lies in every case
where the common law creates a duty for the pay-
ment of money, and in every case where there is an
express contract for the payment, of money. We are,
therefore, of opinion, that debt lies upon a bill of ex-
change by an endorsee of the bill against the accep-
tor, when it is. expressed to be for value received.
The case at bar is somewhat stronger; for the decla-
ration expressly avers that the bill was drawn, en-
dorsed, and .accepted for value received, and the de-
murrer admits the truth of the averment.
This opinion must be certified io the circuit court
of the district of Columbia.
From the view which has been taken of the case it
is unnecessary to consider whether the statute of Vir-
ginia applies to it or not.
Certificate accordingly.
90 HARTFORD. MIDDLESEX AND TOLLAND.
Jarvis v. Wilson.
Joseph Jarvis vs. Allyn M. Wilson.
An order drawn thus:—“Mr. A. M. W. Please pay J. J. $189 and charge the

same to me. W. M.” Held to he a bill of exchange.
A bill of exchange may be accepted orally.
The statute of frauds does not apply to such an undertaking.
After acceptance the acceptor can not set up want of funds of the drawer in his
hands.
Assumpsitagainst the defendant as acceptor of an order

drawn on him in favor of the plaintiff; brought to the Court
of Common Picas of Hartford County, and tried to the court
on the general issue before McManus, J. Facts found and
judgment rendered for the plaintiff. Motion in error by the
defendant. The case is fully stated in the opinion.
Q. F. PerJeins, with whom was S. F. Jones, for the plaintiff
in error.
M. P- West, for the defendant in error.

Loomis, J. On the 8th of July, 1874, one William Murphy
owed the plaintiff $189.20, and drew his order on the defend-
ant in favor of the plaintiff in writing as follows:—
“Mr. A. M. Wilson. Please pay Joseph Jarvis one hund-
red and eighty-nine dollars and twenty cents, and charge the
same to me. William Murphy.”
Murphy, who was then and had been for some time in the
employ of the defendant, had been authorized by the latter to
draw orders in favor of his workmen, of whom the defendant
knew the plaintiff to be one.
The above order was duly presented for acceptance to the
defendant on the same day that it was given, and the defend-
ant said it was good, and verbally promised to pay it. It
afterwards appeared that there was in fact due from the
defendant to the drawer only $144.94, and thereupon the
defendant refused to pay the plaintiff as he had before agreed.
The court below upon these facts held the defendant liable
for the full amount of the order. We think the judgment
MAY TERM, 1878. 91
Jarvis v. Wilson.
must stand against all the objections urged in behalf of the

defendant.
The defendant claims, in limine, that his undertaking can-
not be regarded as subject to the rules applicable to bills of
exchange, but must be treated as a mere promise to pay
money. But we do not see why it does not contain every
essential element of the most approved definition of a bill of
exchange. It is a written order from Murphy, addressed to
the defendant, requesting him to pay the plaintiff a certain
sum of money therein named. 1 Bouvier’s Law Dict., Bill
of Exchange; Byles on Bills, 57; Story on Bills, §§ 3, 37,
40; Edwards on Bills and Notes, 150; Eastern R. R. Co. v.
Benedict, 15 Gray, 292; Kendall v. Galvin, 15 Maine, 131;
Michigan Ins. Co. v. Leavenworth, 30 Verm., 12.
But conceding the order to be a bill' of exchange, the
defendant further claims that he is not liable, because his
acceptance was only by parol, when it should have been in
writing.
It is true, as a general rule, that to make one liable as a
party to .a bill or note his name should appear thereon under
his own hand or that of his agent. A wise- policy may also
require that the liability of an acceptor should not depend on
parol evidence, and, recognizing this, some states have already
changed the 'rule of the common law as to an acceptor of a
bill of exchange. In New York it is required by statute that
the acceptance should be in writing, and there is a similar
statute in England as applicable to an inland bill. But where
there is no statute to control, the rule is quite general, both
in England and in the United States, that an acceptance of
a bill of exchange may be by parol. 1 Swift Dig., 424;
Story on Bills, §§ 242, 243, 246 ; 1 Parsons on Cont., 267;
Edwards on Bills and Notes, 409; Dunovan v. Flynn, 118
Mass., 539; Spaulding v. Andrews, 48 Penn. S. R., 411.
The statute of frauds does not apply to such an undertak-
ing. One reason may be that the acceptor is regarded as the
primary debtor, and his acceptance is an undertaking not
merely to pay a debt due from the drawer to the payee, but
to pay his own debt to the drawer.
92 HARTFORD, MIDDLESEX AND TOLLAND.
Johnson v. Phcenix Mut. Life Ins. Co.
But in this case the defendant relies on the fact that -when
he accepted the bill he had not in his hands sufficient funds
of the drawer.to pay the amount required, and contends that
the acceptance should therefore either be considered within
the statute, or should be held void for want of consideration.
This objection ignores the fundamental principle that the
acceptance admits every thing essential to the validity of the
bill, and that want or failure of consideration cannot be
shown in a suit by the payee against the acceptor. The pre-
sumption is that every bill of exchange is drawn on account
of some indebtedness from the drawee to the drawer, and.
that the acceptance is an appropriation of the funds of the
latter in the hands of the former. The rule of law is not
unjust that prevents the acceptor from showing as a defence
against a suit by the payee a want of funds of the drawer in
his hands, for it was his duty to ascertain before he accepted
the bill whether he owed the drawer that amount. This was
exclusively within his knowledge, but the plaintiff had no
means of knowing how the fact was, and he had a right to
assume that the defendant would not accept the bill unless he
had funds of the drawer sufficient to make good the accept-
ance. Fisher v. Beckwith, 19 Verm., 31; Arnold v. Sprague,
34 id., 402; United States v. Bank of Metropolis, 15 Pet.,
377; Grant v. Ellicott, 7 Wend., 227; Hoffman v. Bank of
Milwaukee, 12 Wall., 181; Parsons on Notes and Bills, 323;
1 Daniels on Negotiable Instruments, 135.
There is no error in the judgment complained of.
In this opinion the other judges concurred.
Charles W. Johnson vs. The Phœnix Mutual Life

Insurance Company.
The plaintiff, in December, 1870, sent the following communication to an insur-

ance company, who were tenants of certain rooms in a building owned by
himself and others:—“ Desiring to rent the office now occupied by you for a
190 SUPREME COURT OF LOUISIANA.
Martin vs. Muncy & Marcy.
No. 10,059.
Alphonse Martin vs. Muncy & Marcy.
The right of action of an accommodation acceptor of a draft, and who pays or retires tho
same with his own meaus against the drawer, is for reimbursement, and it rests on the
implied or conventional promise of the drawer to indemnify him.
By such a transaction the drafts have no longer any value as such, and the drawer is en •
tirely discharged of all obligations thereon, his liability being to the acceptor for in-
demnity, and the draft being an item of evidence.
The fact that a member of a commercial firm in whose name negotiable paper has been
issued by the managing partner, is ignorant of the transaction, and that ho entry of the
same has been made in the partnership books, will nob release him from liability if it is
in proof that tho transaction had been made for and had enured to the benefit of the
firm.
The acceptor who has paid such draft can recover only legal interest on the promise of in-
demnity.
A PPEAL from the Civil District Court for the Parish of Orleans.
LJL Tissot, J.
Okas. 8. Micefor Plaintiff and Appellee.

T. Gibnore <&Sons for Marcy, Defendant and Appellant.
The opinion of the Court was delivered by

Poché, J. This controversy arises out of the following facts :
Defendants were commercial partners as lumber dealers in New Or-
leans from August, 1878, to April 17, 1885.
In March, 1884, plaintiff, as an accommodation, endorsed a note of-
$6000- executed by Muncy in the namo of the partnership.
After several renewals of the note the debt was placed in a different
shape, and by consent of all parties it was represented by four drafts
of $1500 each, payable at three, six, nine and twelvemonths, with in-
terest of 8 per cent per annum from date, March 14, 1884, signed in
the name of Muncy and Marcy, to their order, and accepted by plain-
tiff.
Alleging that at the maturity of the three and six months’ drafts he
paid and retired them, plaintiff brings this suit to recover of the part-
ners of the firm now in liquidation, and ¿a solido, the aggregate amount
which he alleges to have paid for them as accommodation acceptor,
with 8 per cent interest per annum from March 14, 1885, until paid.
Muncy made no defense; Marcy pleaded a general denial, coupled
with the special averment that he knew nothing of the existence of
the drafts in question. He alone appeals from a judgment against
both defendants in solido, with interests as prayed for.
Under a proper application of the universal rules which govern the
NEW ORLEANS, FEBRUARY, 1888. 191
Martin vs. Aluney & Marcy.
rights and obligations of commercial partners, on proof of payment

of the two drafts in question, plaintiff’s right to recover of defendants
the amount thus paid, as their accommodation acceptor, can hardly be
questioned. Edwards on Bills, on Notes, etc., section 522.
But the pith of Marcy’s defense is that the original loan of $6000,
which was the consideration of the note endorsed by plaintiff,
was not a transaction, or for the benefit, of the partnership, but that
the amount thus borrowed was used by Muncy in his own private
affairs, entirely disconnected with the firm of Muncy & Marcy.
Hence he contends that the two drafts accepted by plaintiff and repre-
senting in part the original loan, were tainted with the same nullity as
an alleged debt of the firm, which characterized the original note of
$6000.
In support of that contention appellant relies on evidence which
shows that he was entirely ignorant of the whole transaction; that
the books contained no entry of the same, and that Muncy had had
during the existence of the partnership many business transactions on
his own individual account with plaintiff, who was, during all that
time, in the same line of business as the firm Those facts are unde-
niably shown by the record.
But, on the other hand, the evidence shows that Muncy was ihe man-
aging partner of the defendant firm, whose business was under his ex-
clusive control; that Marcy paid little or no attention to the partner-
ship operations or books, and that the business was conducted in a very
loose and irregular manner, in consequence of which many of the most
important transactions conducted by the managing parner, either on
the streets or at the lumber exchange, wero never reported to the
book-keeper, and of coujse never entered on the books of the con-
cern.
As an illustration, it appears from the record that Marcy’s father,
a man of wealth, who had assisted the firm, andhad had large and im-
portant transactions with it, appeared on the books as its debtor for
$80, when in truth he was- their creditor for $20,000, as judicially
demonstrated in suit by him against the firm at the time of its disso-
lution.
'While the record does show that Muncy had had numerous transac-
tions on his individual account with plaintiff, the e.vidonceis conclus-
ive of the fact that the sum of $6000realized on the note of March 13,
1884,endorsed by plaintiff, was actually used by Muncy, the man-
aging partner, for the use and in the business of the firm. Under its
192 SUPREME COURT OE LOUISIANA.
Martin vs. Muncy & Marcy.
effect plaintiff has discharged the burden of proof which was on him
to show that the transaction had been made truly in the name and for
the benefit of the firm. Mechanics and Traders’ Insurance Company
vs. Richardson & Cary, 33 Ann. 1308; Mutual National Bank vs. Rich-
ardson & Cary, 33 Ann. 1312.
Appellant’s next contention is that the evidence is insufficient to
prove the payment of the two drafts by plaintiff as acceptor, posses-
sion of the same being of itself insufficient to prove such payment.
The possession of the drafts is undoubtedly an important link in the
chain of evidence to that effect. Edwards, bills and notes, sec-
tion 522.
And in this case that evidence is supplemented by the testimony of
plaintiff and of the holder of the drafts. The latter testifies that the
payment was effected partly in money and partly by securities trans-
ferred to him by the acceptor. This is a sufficient and legal payment;
by it the drawers were fully discharged of all obligations resulting
from the drafts, and through it they have become liable on their
promise to plaintiff to reimburse him for such payment.
Appellant then makes the point that parol testimony is incompe-
tent to prove the promise to pay the debt of another, in support of
which he invokes the provisions of Act No. 208 of 1858, now article
2278 of the Civil Code.
But the prohibition therein contained has no possible application to
the facts of this case. The promise of plaintiff to pay the debt of de-
fendants was evidenced by the drafts, and therefore in writing; the
promise to reimburse him was not a promise to pay the debt of an-
other ; the obligation was to pay their own debt.
Appellant’s last contention is that plaintiff is not entitled to in-
terest of 8 per cent per annum, as allowed in the judgment. -That
point is partially good.
The drafts were stipulated to bear 8 per cent per annum interest
from date until paid.
That interest was paid by plaintiff, and defendants owe it to him.
But the interest on the amount paid by him, from the date of pay-
ment until final settlement, was not determined by contract, hence it
cannot be conventional, but only legal interest. The obligation of
the drawers to reimburse their accommodation acceptor, is not shown
to have been accompanied by any stipulation to pay any rate of in-
terest, hence none but legal interest can be claimed.
Our conclusion is therefore that plaintiff is entitled to recover the
full amount of the drafts, including 8 per cent per annum interest
NEW ORLEANS, FEBRUARY, 1888. 193
Kish & Co. vs. Sullivan.
thereon, which had accrued at the time that he took them up, with
legal interest thereon from the date of payment until final payment by
defendants, and the judgment must in consequence he amended on the
score of interests.
From the drafts it appears that interests had accrued on one of
them to the sum of thirty dollars, and on the other to sixty dollars,
the first having been taken up on June 17, and the other on September
14, 1885.
It is therefore ordered, adjudged and decreed that the judgment ap-
pealed from he amended by reducing the rate of interest allowed to
plaintiff from 8 to 5 per cent per annum, said interest to run on the
sum of $1530 from June 17, 1885, and on the sum of $1560 from Sep-
tember 14, 1885, until final payment, and that, as thus amended, said
judgment he affirmed, costs of appeal to be taxed to plaintiff and
appellee.
No. 10,058.
C. A. Fish & Co. vs. M. H. Sullivan.
A contract of affreightment- by charter party is valid when made by parol, and wlien ter-
minable at tbe will of tlie charterer.
There are two kinds of contract of affreightment by charter party. The first is where the
owner agrees to carry a cargo which the charterer agrees to provide. The second is
the contract of the instant case, that is to say, where there is an entire surrender by
the owner of the vessel to the charterer, who hires the vessel as one hires a house,
takes her empty, and provides the officers, crew, provisions, etc.
Tn such a contract, the charterer is substituted iu tlie place of the owner, and becomes
owner for the voyage, or owner pro hoc vice. Here, therefore, the charterer and not the
general owner is liable for materials and supplies.
In an action on account against the alleged owner of a ship for materials and supplies fur-
nished the vessel, under the general issue the defendant may prove a charter party
showing a demise of the ship to the charterer during the time covered by the account.
- Reaffirming R. R. Co. vs. Heirne, 2 Ann. 127.
A PPEAL from the Civil District Court, Parish of Orleans.

Monroe, J.
Aug. Bernau, for Plaintiffs and Appellees :

Where a ship owner is sought to be held liable for an iudebteduess of the ship as such,
owner, he cannot, under the general issue, be permitted to introduce evidence to prove
a charter party. 8M. 207.
A bill of sale of a ship accompanied by possession does not in itself constitute a good title
in law; it is only pHma facie evidence. It must be shown that the transfer is T)onafide
and for a valuable consideration. 16 Pet. 218; Desty’s Manual Shipping and Ad-
mirably .
The registry and enrollment of a vessel under the acts of Congress is, primarily, proof of
70 Industrial Bank v. Bowes. [165111.
for confirmation of the special assessment, and this case

forcibly illustrates the wisdom of the statute and deci-
sions above cited. If, as we think it may be fairly in-
ferred from the record, the date January 4, 1892, was a
mistake inadvertently made by the city clerk, it could
then have been readily corrected without defeating the
assessment.
In our opinion neither of the objections interposed in
the court below was valid, and the court erred in sus-
taining them and refusing the judgment applied for.
The judgment will be reversed and the cause re-
manded, with directions to the court below to enter a
judgment of sale as applied for.
Reversed and remanded.
The Industrial Bank of Chicago

v.
Edwin J. Bowes, Jr. et al.
Filed at Ottawa January 19, 1897.
1. Bills and notes—when an instrument is a check, and not a bill

of exchange. An architect’s certificate addressed to the owner of a
building, reciting that there was due the contractor a certain sum,
upon which the owner endorsed an order to a firm which was ad-
vancing money for the construction of the building, to pay the
contractor, is in substance a check, and not a bill of exchange.
2. Same—liability of drawer of bill of exchange on failure of prompt
presentment and notice of dishonor. A bill of exchange must be pre-
sented to the drawee for acceptance within a reasonable time, and
if payment is refused, prompt notice thereof must be given the
drawer, or he will be discharged from liability thereon.
3. Same—liability of drawer of check, on failure of prompt presentment
and notice of dishonor. Failure to promptly present a check for pay-
ment and to give prompt notice to the drawer of its dishonor will
not discharge the drawer from liability thereon unless he has suf-
fered some loss or injury thereby, and then only in proportion to
the loss sustained.
Bowes v. Industrial Bank of Chicago, 64 Ill. App. 300, reversed.
Jan.’97J Industrial Bank v. Bowes. 71
Appeal from the Appellate Court for the First Dis-'

trict;—heard in that court on appeal from the Superior
Court of Cook county; the Hon. James Goggin, Judge,
presiding.
This was an action of assumpsit brought by the In-

dustrial Bank of Chicago, against Edwin J. and John R.
Bowes, on the following instrument:
“$500. No. 4794.
CniGAGO,June 17, 1892.
“To E. J. Bowes, Jr. & Bros.:
“This is to certify that the Empire Building Company, con-
tractor for the entire work of your building No.....Fulton
street, is entitled to a payment of $500 by the terms of the
contract.
Contract........ $7850
Extra Work..... Remarks.
Deductions......
Total...
Previous Issues, $6325
Present Issue... 500 $6925
Balance........................................... 8925
Wilson & Marble.
By A. H. Dodd.”
Endorsed on the back thereof appears the following:
“Peabody, Houghteling & Co.:
’
“Pay to the order of Empire Building Company.
John B. Bowes.”
“Pay to the order of Industrial Bank.
Empire Building Co. ,
Q. O. McArthur, Treas
On a trial in the Superior Court of Cook county the
bank recovered a judgment for the amount named in the
order, but on appeal to the Appellate Court the judgment
was reversed and a judgment entered in favor of the ap-
pellees. The court also made a finding of facts, which
was incorporated in the judgment, as follows:
“June 17, 1892, Bowes Bros., by indorsement on an
architect’s certificate, gave an order to Peabody, Hough-
teling & Co. to pay to the Empire Building Company the
sum of $500, such paper being drawn on account of a
contract of $7850 for a building of Bowes Bros, under a
building loan furnished by Peabody, Houghteling & Co.;
that on said date $525 remained to be drawn on similar

architect’s certificates and orders; that the cashier of
Peabody, Houghteling & Co. was temporarily out of the
office, so payment was not made to the Empire Building
Company, and the Industrial Bank bought the paper
from said building company on the day of its date; that
the Industrial Bank had the paper presented for pay-
ment to Peabody, Houghteling & Co. twice,—once on June
19 and in the last week in June, 1892,—and they said they
were not ready to pay; that the Industrial Bank had the
paper presented by Schaar (cashier) to Peabody, Hough-
teling & Go. about July 17,1892, and it was not paid, and
again by Schaar about fourteen days thereafter, and pay-
ment was refused because Peabody, Houghteling & Co.
had paid all the money out; that about August 3, 1892,
Henriques (assistant cashier) presented the paper for the
bank to Peabody, Houghteling & Co., and payment was
refused for lack of funds, and for ihe first time on August
4, 1892, Bowes Bros, were notified that payment of the
paper was refused; that Peabody, Houghteling & Co. have
not failed or been financially embarrassed since June 17,
1892; that after the paper sued on was issued, the fund
and the amount of the contract were exhausted; that all
the parties interested lived in Chicago, and Bowes Bros,
were well known business men; that the Empire Building
Company broke up in business before this suit was begun.
It was therefore considered by the court.that appellants
recover from appellee their costs expended in Appellate
and Superior Courts, and have execution therefor.”
Jones & Strong, for appellant.
Woolfolk & Browning, for appellees.

Mr. Justice Craig delivered the opinion of the court:
It was conceded on the trial that John R. Bowes was
authorized to sign for E. J. Bowes, Jr. & Bros., and that
his signature represented the firm.
Jan. ’97.] Industrial Bank v. Bowes. 73
The certificate of the architect set out in the state-

ment shows that on June 17, 1892, there was due to the
Empire Building Company, the contractor, from Bowes
Bros., the defendants, $500. Peabody, Houghteling & Co.
had made Bowes Bros, a building loan, and the money
was drawn, from time to time, on architect’s certificates,
as needed, to pay for the construction of a building. On
the back of the certificate of the architect issued June
17,1892, for $500, Bowes Bros, wrote the following:
“Peabody, Houghteling & Go.:
“Pay to the order of the Empire Building Company.
John R Bowes.”
This certificate was subsequently endorsed to the In-
dustrial Bank by the Empire Building Company, and the
bank failing to collect the money named in the certifi-
cate, brought this action against Bowes Bros, on the
writing they had executed on the back of the certificate
of the architect. The bank recovered a judgment in the
Superior Court for the amount claimed to be due, but in
the Appellate Court the judgment was reversed on the
ground that the instrument sued upon was a bill of ex-
change, and plaintiff could not recover for the reason it
had failed to notify Bowes Bros, at once of the refusal
of Peabody, Houghteling & Co. to pay upon the presenta-
tion of the order.
The law is well settled that a bill of exchange must
be presented to the drawee within a reasonable time, and
where payment is refused notice must be given promptly
to the drawer, otherwise he cannot be held liable. (Mon-
telius v. Charles, 76 Ill. 303; Bickford v. First Nat. Bank of
Chicago, 42 id. 238; Story on Promissory Notes, sec. 492.)
But was the instrument sued on strictly a bill of ex-
change, so that it should be governed by the rules of law
applicable to such instruments? To a bill of exchange
there are three parties—drawer, drawee and payee. The
drawee is not bound until acceptance, and then, having
become the acceptor, he is regarded as primarily the
promisor and as the drawer only collaterally, and the

drawer is therefore liable in very much the same way as
the endorser of a note. (1 Parsons on Contracts, 250.)
In Story on Promissory Notes, (sec. 4,) in pointing out
the distinction between bills of exchange and promissory
notes, the author says: “In a bill of exchange there are
ordinarily three original'parties,—the drawer, the payee
and the drawee, who, after acceptance, becomes the ac-
ceptor. In a bill of exchange the acceptor is the primary
debtor, in the contemplation of law, to the payee, and
the drawer is but collaterally liable.” The author also
says: “The indorser of a note stands in the same relation
to the subsequent parties as the drawer of a bill, and the
maker of the note is under the same liabilities as the ac-
ceptor of a bill.” In the forms of bills of exchange given
by Chitty in his work on Bills it will be found the time
of payment is always specified, and on page 170, while
the author admits that the omission to state the time of
payment would not render the bill invalid, he says: “It
is advisable in all cases to express the time of payment
as clearly and intelligently as possible,. and it is there-
fore usual to write it in in words.”
As a general rule it is understood that a bill of ex-
change will be accepted by the drawee, hence it is drawn
payable on sight, or in thirty, sixty or ninety days, and
when presented to the drawee it is accepted, and from
that time he becomes bound to pay. The instrument in
question contains no time of payment, nor is there any-
thing to indicate, from the reading thereof, that it was
ever intended to be accepted by the drawee, as is usually
the case with a bill of exchange. While it has some of
the characteristics of a bill of exchange, we do not re-
gard it as such. On the other hand, it has all the ele-
ments of a check, and we think it clearly falls within the
definition given in the text books of a check. In 2 Dan-
iel on Negotiable Instruments (528) the author says: “A
check is a draft or order upon a bank or banking house,
Jan.’97.] Industrial Bank v. Bowes. 75
purporting to be drawn upon a deposit of funds, for the

payment, at all events, of a certain sum of money to a
person or his order, or to bearer, and payable instantly
on demand.” In 2 Parsons on Notes and Bills the author
says (p. 57): “A check is a brief draft or order upon a
bank or banking house, directing it to pay a certain sum
of money.” These definitions of a check were quoted and
approved by this court in Ridgely Bank v. Patton, 109 Ill.
479. Here, Peabody, Houghteling & Co. was not a regu-
lar bank, but the firm was the banker of Bowes Bros, and
was so treated and recognized, and, so far as the check
in question is concerned, the firm will be regarded as a
bank. The instrument in question was, then, a draft or
order upon a banking house directing it to pay a certain
sum of money, and, as declared by Parsons, a check; or
it was a draft or order upon a banking house, purport-
ing to be drawn upon a deposit of funds, for the payment,
at all events, of a certain sum of money to a person or
order, and payable instantly on demand,—which Daniel
declares to be a check. Under either definition the in-
strument in question was a check.
The instrument being a check, did the Industrial
Bank lose its right to recover from the drawers of the
check, for the reason the bank failed to present it for
payment within proper time, and failed to give notice
to the drawer of the refusal of Peabody, Houghteling &
Co. to make payment? The general rule is, that the
holder, in order to charge the drawer in case of dishonor,
is bound to present the check for payment within a rea-
sonable time and give notice to the drawer within a like
reasonable time, otherwise the delay will be at his own
peril. Story on Promissory Notes (sec. 493) lays down
the rule, that if the payee or holder of the check receives
it from the drawer in the same town or city where it is
payable, he is bound to present it for payment on the
next succeeding day after it is received; but where he
receives the check from the drawer in a place distant
from the place of payment, it will be sufficient for him to

forward it by the post to some person at the latter place
on the next day after it is received, and the person to
whom it is sent will not be required to present it for
payment until the next day after it has reached him in
the regular course of mail. But the rule just spoken of
only applies where, in the intermediate time between the
drawing of the check and presentment, there has been
a change of circumstances affecting the interests of the
drawer in respect to the banker upon whom the check
was- drawn. Where there has been a change the rule is
applied strictly. But Story (sec. 497) says: “The drawer
is in no case discharged from his responsibility to pay
the same unless he has suffered some loss or injury by
the omission or neglect to make such presentment, and
then onlj pro tanto. If the bank has failed or become
bankrupt, he will be discharged to the extent of the loss
he has sustained thereby.” This court has laid down the
same rule. Thus, in Heartt v. Rhodes, 66 Ill. 351, it is said
(p. 354): “The want of due presentment or notice of the
dishonor of a check does not discharge the drawer un-
less he has suffered some loss or injury thereby. This is
one point of difference between a check and a bill of ex-
change.” And in Stevens v. Park, 73 Ill. 387, it was held
that by failing to give notice to the drawer of a check
of its non-payment within a reasonable time, the holder
assumes the burden of showing that no damage has ac-
crued to the drawer. In speaking further on this sub-
ject, Story (sec. 498) says: “If the bank or banker still
remains in good credit and is able to pay the check, the
drawer will still remain liable to pay the same, notwith-
standing many months may have elapsed since the date
of the check, and before the presentment for payment
and notice of the dishonor. So if the drawer, at the date
of the check or at the time of the presentment of it for
payment, had no funds in the bank or banker’s hands, or
if, after drawing the check and before its presentment for
Jan.’97.] Industrial Bank v. Bowes. 77
payment and dishonor, he had withdrawn his funds, the

drawer would remain liable to pay the check notwith-
standing the lapse of time.”
Under the law as laid down in the authorities cited,
it is plain the drawers of the check, Bowes Bros., are lia-
ble for the amount thereof. From the facts as found by
the Appellate Court it appears the check was presented
to the bankers upon whom it was drawn on the date it
was issued, and again on the next business day there-
after, and again a week later, which was the last of June,
1892. It was again presented July 17, and also two weeks
after that date, when payment was refused because the
bankers, Peabody, Houghteling & Co., had paid all the
money out belonging to the drawers of the check. From
the facts as found there was no improper delay in pre-
senting the check for payment. The drawers of the check
were not notified until August 4, 1892, that payment was
refused, but the delay will not bar a recovery here. The
bankers upon whom the check was drawn did not fail nor
were they financially embarrassed. The drawers, there-
fore, sustained no loss which could defeat a recovery.
Indeed, the fund in the hands of Peabody, Houghteling
& Co., placed there by the drawers of the check for
its payment, was drawn out in subsequent checks which
they issued to other parties. The drawers themselves
were thus guilty of a manifest wrong in withdrawing the
funds which they had placed in the hands of the banker
for the purpose of paying the check in question, and it
would now be an act of great injustice to allow them to
defeat judgment on the check, as their wrongful act pre-
vented payment by the bankers on whom it was drawn.
Under the facts .as found by the Appellate Court we
are of opinion the bank was entitled to judgment. The
judgment of the Appellate Court will therefore be re-
versed and the judgment of the Superior Court of Cook
county will be affirmed. Judgment reversed.
FLORENCE MINING CO, v. BROWN, 385
Opinion of the Court.
FLORENCE MINING COMPANY v. BROWN.
APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOB

THE NORTHERN DISTRICT OF OHIO.
Argued December 1, 2, 1887. Decided January 23, 1888.
The insolvency of the vendee in a contract for the sale and future delivery
of personal property in instalments, payment to be made in notes of the
vendee as each instalment is delivered, is sufficient to justify the vendor
for refusing to continue the delivery, unless payment be made in cash;
but it does not absolve him from offering to deliver the property in per-
formance of the contract if he intends to hold the purchasing party to
it: he cannot insist upon damages for non-performance by the insolvent
without showing performance on his own part, or an offer to perform,
with ability to make the offer good.
A check upon a bank in the usual form, not accepted or certified by its
cashier to be good, does not constitute an equitable assignment of money
to the credit of the holder, but "issimply an order which may be counter-
manded,and whose payment may be forbidden by the drawer at any time
before it is actually cashed.
The Case is stated in the opinion of the court.

Mr. Harvey D. Ooulder for appellant. Mr. George D.
was with him on the brief.
Van JDyTee
Mr. Francis J. Wing for appellee.

Mr. Justice Field delivered the opinion of the court.
In February, 1883, three corporations, namely, the Lake

Superior- Iron Company, and the Jackson Iron Company,
created under the laws of Michigan, and the, Negaunee Con-
centrating Company, created under the laws of New York,
filed a bill in chancery in the Circuit Court of the United
States for the Northern District of Ohio against the defendant,
Brown, Bonnell & Company, a corporation created under the
laws of Ohio, alleging that they were creditors of the latter
corporation, and-designating the amounts of such indebted-
ness ; that owing to the first two named corporations consist-
vol. cxxrv—25
386 OCTOBER TERM, 1887.
ing of certain promissory notes of the defendant, and that

owing to the last named corporation being a judgment against
the defendant in the Circuit Court rendered on that day. The
bill purported to be filed, not only on behalf of the complain-
ants, but also on behalf of all other creditors whom it repre-
sented to be so numerous that it was impossible to make them
parties. It alleged that the defendant was insolvent; that it
had long been engaged in the business of manufacturing iron,
and had erected blast furnaces, rolling mills, and coke works,
and had opened and operated coal mines; that its plant was.
of great value; as was also the good will of its business ; and
that it employed at least 4000 persons in its mills and works.
It also alleged that vexatious litigation had been commenced
against the defendant, and more was threatened; that such
litigation was accompanied by attachments and seizures- of'
property, and the threatened litigation would also be accom-
panied by like attachments and seizures, and they would give,
to the creditors who were pursuing them undue advantage,
over those complainants whose claims were not yet due, and
work them irreparable injury; and that if such litigation
should be further instituted, and the property of the defendant,
be attached, there was danger that it would be to a great,
extent destroyed, and its long established business broken up.
It therefore prayed the appointment of a receiver to take
charge of the assets and property of the defendant, and for
further relief.
The defendant appeared at once to the bill, and thereupon,
pursuant to the complainant’s motion, Fayette Brown was.
appointed receiver of its assets and property.
In March, 1883, a supplemental bill was filed, setting-forth
that the property of the defendant was of such a peculiar-
nature that great and irreparable loss would be caused to the-
complainants and other of its creditors, unless its property
should be preserved by the receiver in its entirety as a business
during the time required to liquidate and adjust its afiiairs;,
that the Negaunee Concentrating Company, one of the com-
plainants, had recovered judgment against the defendant prior
to the filing of the bill; that its recovery gave to the company
FLORENCE MINING CO, v. BROWN* 387
a lien upon all the real estate of the defendant within the
jurisdiction of the court; that execution had been issued upon
said judgment- and been returned unsatisfied; that other claims
for hens and priorities of payment had been made by creditors
of the defendant, both secured and unsecured; and that many
claims were made, the justice of which was doubtful, and many
which were unliquidated. It therefore prayed the' appoint-
ment of a special master to ascertain the priorities of liehs and
the rights and claims of creditors generally, and report to the
court' his findings.-'
The court thereupon made an order requiring all thé credit-
ors of the defendant to file their claims in the office of the
clerk by petition' stating their amount and nature; and in
July following it appointed the special master prayed to
determine the rights of the several creditors of the defendant
who had, in accordance with its previous order, filed their
claims with the clerk, and to marshal the liens and priorities
of such claims.
Among the claims filed with the clerk pursuant to this
order was one presented by the Florence Mining Company,
a corporation of Michigan, for an amount alleged to' be due to
it upon a contract with Brown, Bonnell & Company for the
sale of certain iron ores. Among the transactions had under
the contract a check was given to the Florence Mining Com-
pany by Brown, Bonnell & Company, shortly before its fail-
ure, upon the Importers’ arid Traders’ National Bank of New
York, bn account of a cash payment .then due, which check, it
was contended,'operated as an equitable assignment of certain
moneys then in the bank to its credit.
■ These matters were considered by the special master, who
took testimony respecting them, and heard counsel thereon,
lie reported the amount due the Florence Mining Company,
deducting from the price for the whole ore.which was to be
delivered the value of the quantity undelivered, estrihated
according to the contract price, and he reported against the
alleged equitable assignment. Exceptions to his report were
overruled, and the report was confirmed. To review this rul- ■
'
ing the case is brought here on appeal. I
388 OCTOBER TERM,- 18871
The contract between the Florence Mining Company and

Brown, Bonnell & Company was made on the 13th of Febru-'
ary, 1882. By it the Florence Mining Company agreed 'to
sell to Brown, Bonnell & Company 30,000 gross tons of Flor-
ence iron ore, of its standard quality, deliverable at Cleveland
and Ashtabula, during the season of navigation of 1882, at the
docks of the New York, Pennsylvania and Ohio Bail way
Company, or of the Lake Shore and Michigan Southern Bail-
way Company, and as near one-sixth of the total quantity per
month-as practicable; “said ore to be paid for by the said
Brown, Bonnell & Company at the rate of $5.75per ton, in eight
equal payments'of $21,562.50 each, payable on the 15th days
of May, June, July, August, September, October, November,.^
and December next, respectively, in cash, all in funds par in
Cleveland or New York, making a total of one- hundred and
seventy-two thousand five hundred dollars' ($172,500). •The
said ore is to be consigned to. Florence Mining Company, and
to be subject to their order until forwarded from docks. It is
further agreed that promissory notes of Brown, Bonnell &
Company, drawn at four months from date, on which a cash
payment is due, with interest at the rate of six per cent per
annum ,added into the face, o'f note (making $21,993.75),may
be substituted for either of the . above cash-payments except
the last two due in November and December next, which are
to be paid only in cash. Said Brown, Bonnell & Company for
the above named consideration -hereby agrees to buy, -receive'
and pay for said ore' as above mentioned.”
The Florence Mining Company had the ore on thq docks
designated by November 1st, 1882. It was all consigned to-
the -company, as provided in the contract, and no part of it was
delivered to the vendee except upon the order of the company,
which continued the owner of the ore not delivered. Ship-
ments to the vendee were during this period, that is, from' the
date of the contract until November 1st, 1882, suspended at
the vendee’s request for about two months, but at other times
shipments were made as the ore was wanted. Prior to Febru-
ary 19th, 1883, the vendor haddelivered to the vendee 20,762
tons of the ore, and had the remaining 9238 tons on hand,
FLORENCE MINING CO, v. BROWN. 389
when, the vendee became insolvent, and the receiver of its

assets and property was appointed by the court. On the day
previous to this appointment, the vendor, having reason to
fear the insolvency of the vendee, ordered the suspension of
any further shipments of ores. No shipments to the vendee
were subsequently made, nor did' the vendor offer to make
any, or give notice that it was ready to deliver the ore. The
statement of its agent, that he asked the receiver to buy ore
of the company, does not show any offer to deliver the ore
under the contract, nor was it intended as such proof. In its
petition setting forth its claim, filed with the clerk of the
court, the company alleged that it was at all times ready,
•willing, and able to perform the contract on its part, but that •
the vendee, by reason of its insolvency and,the appointment
of a-receiver,'was unable to take and pay for the ore remain-
ing undelivered. These allegations were not admitted before
the.special master; but, if' true, the fact would not constitute
any performance of the' contract on its part without an' offer
to deliver the balance, or, at least, without notice to the.
vendee, or its receiver, of a readiness to do so. The insol-
vency of one party to a contract .does not release the other'
from its obligations, provided, always, the consideration prom-
ised, if money, be paid, or if the consideration be the note or
other obligation of the insolvent, money be tendered in its
place. The-mining cornpany contended that it should be
. allowed the difference between the contract price of the unde-
livered ore, $5.15 per ton, and the market price for it at the
time of the appointment of the receiver, which was only $4.50
per ton, making a difference of $11,517. This contention
•rested, as we have seen, solely upon the fact of the' insolvency
of the vendee before the whole of the ore was delivered; but
that fact, if excusing the delivery of the balance without pay-
ment, did not release the company from offering to deliver
•the property in performance of the contract, if it intended..to
hold the purchasing party to the contract. It could not insist
upon damages for non-performance of the contract by the
other party without showing performance or an offer to per-,
form it- on its párt with an ability tó inakfe good the offer if
accepted..
390 OCTOBER TERM, 1887.
Opinion of the Court,
Nor did the vendee or its receiver call upon the vendor for
the balance of the ore and offer cash in payment. Its ,non-
action for the enforcement of the contract and its silence on
the subject was evidence that it desired to rescind the con-
tract ; and the action of the vendor, its suspension of further
shipments to the vendee, and subsequent failure to deliver the
balance of the ore, or to call upon .the vendee to comply with
the contract, was evidence that it also desired to rescind the
contract. The master was therefore justified in holding that
the contract was in fact rescinded by the .consent of both
'parties.
Numerous cases have been cited to us upon the conduct
which a vendor should pursue to preserve his rights under a
contract for the sale of goods on credit, when he has refused
to proceed with its performance upon learning of the insol-,
vency of the vendee, but they exhibit so much difference of
judicial opinion on the subject that it is difficult, if not impos-
sible, to reconcile them.. Some of the divergences of opinion
may perhaps be traced to the different position of the vendor,
where he has sold the goods on credit, the title passing imme-
diately, but has stopped some of them in trcmsit/u,,and where
he has merely contracted to sell the, goods, the delivery to be
made by instalments, and payment made with each delivery,
the title only then vesting in the vendee. However this may
be .we do not deem it necessary to go over the cases in an
attempt either to reconcile or explain them. "We rest our
present decision on the fact that the conduct of vendor and
vendee in this case justified the conclusion that they both
assented to the rescission of the contract.
Upon the second point, as to the alleged equitable assign-
ment of the funds in the bank against which the check was
drawn by Brown, Bonnell & Company, and given to the
Florence Mining Company, we do not think there can be any
serious question .of the correctness of the master’s decision.
The check was not drawn against any particular fund. There
was, indeed, no"fund out of which it could have been paid.
There was only a little more than one-fifth of its amount on
deposit at the time to the credit of the drawer. The notes
MARSHALL v. UNITED STATES. . 391
Statement of the Case.
sent to the bank for discount at the time the check was given
were never discounted, and were returned to the sender. •
They were not to be used for'the payment of the check unless
discounted.
An order to pay á particular sum.out of a special fund can-
not be treated as an equitable assignment pro tcunto unless
accompanied with such a relinquishment of control over the
sum designated that' the fund-holder can safely pay it, and be •
compelled to do so, though forbidden by the drawer. A gen-
eral deposit in a bank is so much money to the depositor’s
credit; it is a debt to him by the bank, payable on demand to
his order, not property capable of identification. and specific
appropriation. A check upon the bank in the usual form, not
accepted or certified by its cashier to be good, does not consti-
tute a.transfer of any money to the credit of the holder; it is
simply an order which may be countermanded, and payment
forbidden, by the drawer at any time before it is actually
cashed. It creates no lien on the money, which the holder
can enforce against the bank. It does not of itself operate as
an equitable assignment.
Judgment affirmed.
Me. Justioe Matthews did not sit in this case or take any
part.in the decision.
MARSHALL v. UNITED STATES.
APPEAL EEOM THE COUET OE CLAIMS.
Submitted January 5, 1888. Decided January 23, 1888.
Seventy-five per cent of forty-five hundred dollars is the maximum pay to

which an officer of the Army of the United States placed on the retired
list as a colonel is entitled.
The appellant brought suit against the United States in the

Court of Claims, where judgment was entered against his
claim. The case is stated in the opinion of the-court.
Brandt v. Public Bank. 173
App. Div.] Second Department, June, 1910.
sion, without any material change in conditions as they had prevailed
for several months, until the twenty-third day of October, and we are
persuaded that .the evidence was sufficient to establish a holding over,
hieither the fact that some items of personal property were left
upon the premises nor that the key was not delivered to the plain-
tiff is conclusive evidence of a holding over, but these facts, in con-
nection with the facts which were brought out in the evidence
showing that there was practically no change in the manner of. the
defendant’s possession for a period of several months, and that the
defendant did not act with promptness even when it was notified of
the holding over, shows a disregard of the plaintiff’s rights which
justified holding that the defendant had become liable for the new
term at the election of the plaintiff.
The' suggestion that the plaintiff has accepted the surrender of
the premises by leasing them to a third party without the defend-
ant’s acquiescence is met by the fact that it is in evidence that the
defendant agreed to such a leasing on its behalf, and by the fur-
ther fact that it does not appear that the plaintiff has leased the
premises.
The judgment appealed from should be affirmed, with costs.
Jenks, Burr, Rich and Carr, JJ., concurred.
Judgment of the Municipal Court affirmed, with costs.
Max Brandt, Appellant, v. The Public Bank, Respondent.

Second Department, June 17, 1910.
Evidence—written memoranda —admissibility of whole paper—bank-
ing —notice to stop payment on check—dismissal of complaint.
If a party uses books of account or other papers against his adversary he makes
them evidence against himself on the same subject; and, if part is used, the
whole is admissible.
Where in an action by a depositor against a bank to recover money paid on plain-
tiff’s check after notice to stop payment, it appears from memoranda on the
stop payment notice which was introduced in evidence by the plaintiff that
although it was dated November 1, 1909, it was-not received by the bank
until the fifth of the month and that this was after .the check had been paid,
"
the complaint should be dismissed.
174 Brandt v. Public Bank.
Second Department, June, 1910. [Vol. 189.
Appeal by the plaintiff, Max Brandt, from .a judgment of the
Municipal Court of the city of New York, borough -of Brooklyn,
in favor of the defendant, rendered on the 16th day of March,
1910,. dismissing the complaint, at the-close.of the plaintiff’s case.
Morris Salpeter, for the appellant.
Henry Fluegelman, for the respondent.

Woodward, J.:
The. plaintiff sued to recover fifty dollars which, it was claimed,
the defendant had paid out upon the plaintiff’s check, after having
been notified that the plaintiff wanted to stop payment. At the
close of plaintiff’s evidence, the court granted defendant’s motion
to dismiss the complaint, on the ground that the plaintiff had failed
to produce evidence to sustain a cause of action.. The plaintiff
appeals to this court.
The plaintiff, in support of his cause "of action, introduced in evi-
denóe, without qualification, a notice to stop payment on the plain-
tiff’s check. This notice was a printed form, filled in by the plain-
tiff, and was dated on the first day of November, the same date
which appears upon the check, though it is claimed that the check
was written and delivered on the 31st day of October, 1909. This
blank, which is about the size of an ordinary check, had the foliow-
. ing words printed upon it: “ In receiving the above stop payment
notice, it is agreed that this bank will use all due diligence, but
will not be held liable in any event.” But in addition to these
words, there was a written memorandum,' evidently by the bank
officers^ saying: “Received Nov. 5, ’09,” and on the upper left-
hand corner there was a like memorandum, “ Pd. report by M.
Bank mth 4,” and the indorsement on the check, which is likewise
in evidence without objection or limitation, shows that the check
was paid by the Metropolitan Bank on the third day of November,
which would be in harmony with the memorandum that it was
reported on the, fourth of the month by the. M. Bank. It thus
appears from the plaintiff’s own evidence that, while the stop pay-,
ment notice is dated November first,"it was not received by the
Public Bank until the fifth of that month, while the payment was
made by way of the Metropolitan Bank on the fourth. The rule is
Close v. Caldee Co. 175
App. Div.] Second Department, June, 1910.
that if a party uses books of account or other papers against liis-
adversary, he makes them evidence for him on the same subject.
They are like any declaration or admission, by writing or orally; if
part is used, the whole relating to the same matter is admissible
(Pendleton v. Weed, 17 N. Y. 72, 76; Dewey v. Hotchkiss, 30. id.
497, 500), and, being in the case, they must be given force. Pass-
ing over the disclaimer of responsibility on the part of the bank,
which was a part of the stop payment notice, as well as one of
the regulations printed in the defendant’s pass book delivered to
the plaintiff, there was evidence in the case to establish that the
notice was not given to the bank until the 5tli day of November,
1909, at least one day after its payment by the defendant, and this,
of course, justified a dismissal of the compjaint.
The judgment appealed from should be affirmed, with costs.
Jenks, Burr, Bioh and Carr, JJ., concurred.
Judgment of the Municipal Court affirmed, with costs, without

prejudice to a new action. '
Catherine Close, Plaintiff, v. William M. Calder Company,

Defendant.
Second Department, June 17, 1910.
Process —service by publication—partition —real property—failure to

name defendants in notice —marketable title.
Where the summons in a partition action is served by publication, failure to name

the defendants in the notice required by section 443 of the Code of Civil Pro-
cedure does not deprive the court of jurisdiction, or defeat a title to the prem
ises derived through the partition sale, especially if it appear that all the
defendants acknowledged receipt of copies of the summons.
Submission of a controversy upon an agreed statement of- facts

pursuant to section 1279 of the Code of Civil Procedure.
James A. Sheehan, for the plaintiff,
Harry Percy David, for the defendant.

FIRST DIVISION
[G.R. No. 212050. January 15, 2020.]
QUINTIN ARTACHO LLORENTE , petitioner, vs. STAR CITY PTY

LIMITED, represented by the JIMENO AND COPE LAW OFFICES
as Attorney-in-Fact, respondent.
[G.R. No. 212216. January 15, 2020.]
STAR CITY PTY LIMITED, represented by the JIMENO COPE &

DAVID LAW OFFICES as its Attorney-in-Fact , petitioner, vs.
QUINTIN ARTACHO LLORENTE and EQUITABLE PCI BANK (now
BDO Unibank, Inc.), respondents.
DECISION
CAGUIOA, J : p
Before the Court are petitions for review on certiorari 1 under Rule 45 of the
Rules of Court respectively filed by petitioner Quintin Llorente (Llorente) in G.R.
No. 212050 and petitioner Star City Pty Limited (SCPL) in G.R. No. 212216
assailing the Decision 2 dated September 30, 2013 (Decision) and the Resolution
3 dated April 10, 2014 of the Court of Appeals 4 (CA) in CA-G.R. CV No. 94736.
The CA Decision affirmed with modification the Decision 5 dated April 16, 2009
rendered by the Regional Trial Court, Branch 134, City of Makati (RTC) in Civil
Case No. 02-1423. The CA Resolution dated April 10, 2014 denied the motions for
reconsideration filed by Llorente and SCPL. SDAaTC
The Facts and Antecedent Proceedings

The CA Decision narrates the factual antecedents as follows:
x x x [SCPL] is an Australian corporation which operates the Star
City Casino in Sydney, New South Wales, Australia. Claiming that it is not
doing business in the Philippines and is suing for an isolated transaction, it
filed on 25 November 2002 through its attorney-in-fact, Jimeno Jalandoni
and Cope Law Offices, a complaint for collection of sum of money with
prayer for preliminary attachment against x x x Llorente, who was a
patron of its Star City casino and Equitable PCI Bank (EPCIB, for brevity).
This case was docketed as Civil Case No. 02-1423 and raffled to Branch
134 of the Regional Trial Court (RTC) in the City of Makati.
[SCPL] alleged that Llorente is one of the numerous patrons of its
casino in Sydney, Australia. As such, he maintained therein Patron
Account Number 471741. On 12 July 2000, he negotiated two (2) Equitable
PCI bank drafts with check numbers 034967 and 034968 worth
US$150,000.00 each or for the total amount of US$300,000.00 ("subject
[demand/bank] 6 drafts" [or simply "subject drafts"]) in order to play in the
Premium Programme of the casino. This Premium Programme offers the
patron a 1% commission rebate on his turnover at the gambling table and
a .10% rebate for complimentary expenses. Before upgrading x x x
Llorente to this programme, [SCPL] contacted first EPCIB to check the
status of the subject drafts. The latter confirmed that the same were
issued on clear funds without any stop payment orders. Thus, Llorente was
allowed to buy in on a Premium Programme and his front money account
in the casino was credited with US$300,000.00.
On 18 July 2000, [SCPL] deposited the subject drafts with Thomas
Cook Ltd. On 1 August 2000, it received the advice of Bank of New York
about the "Stop Payment Order" prompting it to make several demands,
the final being on 22 August 2002, upon Llorente to make good his
obligation. However, the latter refused to pay. It likewise asked EPCIB on
30 August 2002 for a settlement which the latter denied on the ground
that it was Llorente who requested the Stop Payment Order and no notice
of dishonor was given. AaCTcI
On 28 January 2003, the [RTC] deemed it proper to grant and issue

a writ of preliminary attachment because the acts of Llorente, i.e., leaving
the hotel premises without informing [SCPL] of his whereabouts, failing to
pay for all the services he had availed and/or not making sure that these
would be paid by the checks he negotiated and indorsed, requesting for a
Stop Payment Order despite knowledge that these checks are to answer
for the payment for all services he had availed, failing to communicate for
the settlement of his outstanding obligation and for leaving and/or
transferring residence without notifying [SCPL] of his forwarding address,
are clear indications of his intention to renege on his obligation and
defraud [SCPL].
For his part, Llorente alleged that he caused the stoppage of the
subject drafts' payment because [SCPL's] personnel and representatives
committed fraud and unfair gaming practices during his stay in the casino
on 12 July up to 17 July 2000. He also countered that the case should be
dismissed on the ground that [SCPL] lacks the legal capacity to sue since
the "isolated transaction rule" for which it anchored its right to bring
action in our courts presupposes that the transaction subject matter of the
complaint must have occurred in the Philippines, which however, is not the
situation at bar since it is clear from the narration that the same occurred
in Australia.
On the other hand, EPCIB, in its Answer, not only alleged [SCPL's]
lack of personality to sue before Philippine courts, but denied also that it
unjustifiably and maliciously refused to settle the obligation since it
merely complied with the instructions of Llorente, as payee of the subject
drafts, to stop payment thereon. It further went on saying that [SCPL] had
no cause of action against it because there was no privity of contract
between them. EPCIB likewise filed a cross-claim against Llorente since it
already reimbursed the face value of the subject drafts, pursuant to the
demand of the latter. For such reason, it should be relieved of any and all
liabilities under the subject drafts.
acEHCD
Finding that [SCPL] had the legal capacity to sue and seek judicial
relief before Philippine courts, the [RTC], on 16 April 2009, rendered a
Decision holding both [Llorente and EPCIB] solidarily liable for the value of
the subject drafts. It ruled that when Llorente, as payee of the subject
drafts, signed at the back thereof, he is said to ha[ve] become an indorser
who warrants that on due presentment, the instruments would be
accepted or paid or both, as the case may be, according to their tenor,
and that if they be dishonored and the necessary proceedings on dishonor
be duly taken, they will pay the amount thereof to the holder. The same is
also true for EPCIB, being the drawer of the subject drafts. It is of no
moment if the bank was not a privy to the transaction for its liability as a
drawer is not based on direct transaction but by virtue of the warranties it
made within the purview of the Negotiable Instruments Law. The [RTC]
even pointed that [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.
The trial court did not also consider Llorente's justification for
ordering a stopped payment as it found that it was done in order to
escape liability of paying his obligations with [SCPL]. The decretal portion
of [the RTC] Decision reads as:
"WHEREFORE, premises considered, judgment is hereby
rendered in favor of the plaintiff [SCPL] and against both
defendants Llorente and [EPCIB], as follows:
1. Ordering defendants Quintin Llorente and
Equitable PCI Bank to pay the plaintiff [SCPL], jointly and
severally the amount of the subject bank drafts in the sum of
US$300,000[.00];
2. Ordering defendants Quintin Llorente and
Equitable PCI Bank to pay the plaintiff [SCPL], jointly and
severally, five (5%) percent of the amount claimed, or
US$15,000.00, x x x as and by way of attorney's fees; and,EcTCAD
3. Costs of suit.
For lack of merit, both defendants Llorente and Equitable
PCI Bank's counterclaims as well as defendant Equitable PCI
Bank's cross-claim against defendant Llorente are DENIED.
SO ORDERED."
Aggrieved with the said ruling, both [Llorente and EPCIB] appealed
before [the CA]. x x x 7
Ruling of the CA
The CA identified the following 3 issues raised in the appeals filed by
Llorente and Equitable PCI Bank 8 (EPCIB): (1) SCPL's personality to sue before
Philippine courts under the isolated transaction rule; (2) SCPL's being a holder in
due course; and (3) solidary liability of EPCIB. 9
Anent the first issue, the CA held that SCPL has pleaded the required
averments in the complaint — it is a foreign corporation not doing business in the
Philippines suing upon a singular and isolated transaction — which sufficiently
clothed it the necessary legal capacity to sue in this jurisdiction. 10 The CA
emphasized that the subject drafts were drawn by EPCIB, which is a Philippine
bank, and since the drawer is a bank organized and existing in the Philippines
then naturally a suit on the draft or check it issued can be filed in any of the
places where the check is drawn, issued, delivered or dishonored, which, in this
case, can be either the Philippines where the drafts were drawn and issued, or
Australia where the indorsement and dishonor happened. 11
On the second issue, the CA held that, contrary to EPCIB's assertion that the
subject drafts were drawn without any value, the fact that Llorente used them to
"buy in" into the Premium Programme of SCPL's casino which would entitle him
to earn 1% cash commission or 0.1% 12 rebate on his gaming turn-over is
enough to constitute as the "value" contemplated by the law, making SCPL a
holder in due course. 13 SDHTEC
On SCPL's good faith in view of Llorente's averment about the impossibility

of having no face cards coming out after seven consecutive deals, the CA found
the following explanation in the judicial affidavit of Paul Arbuckle 14 (Arbuckle)
sufficient:
x x x The game of Baccarat as played at Star City uses 8 decks of
cards by 52 cards in each deck. There are 416 cards in total with 128
cards being denoted as "face" cards including the "ten value card." A
single deal of [B]accarat consists of a minimum of 4 cards to a maximum
of 6 cards. If we use 5 cards as an average then over 6 or 7 deals of
Baccarat approximately 35 to 42 cards will be expended. Around 8.4% to
a maximum of 10% of the total amount of cards available, I would
consider it possible, and in fact, very likely that with such a small
percentage of the total number of cards exposed that no face cards would
appear. 15
Also, the CA pointed out that Llorente's conduct — "in spite of the alleged
irregularities in the [B]accarat table, continued to play in said casino x x x [and]
he should have stopped playing and betting because it would entail huge losses
on his part" 16 — counteracted whatever truth his claim has. 17
Regarding the third issue, the CA deemed it proper to discharge EPCIB from
any responsibility considering that it already paid Llorente the face amount of the
subject drafts amounting to US$300,000.00 as evidenced by the Quitclaim,
Indemnity and Confidentiality Agreement 18 (Indemnity Agreement) executed on
August 8, 2002. 19 The CA further reasoned that allowing EPCIB's solidary liability
would sanction unjust enrichment on Llorente's part who would be allowed to
profit or enrich himself inequitably at EPCIB's expense. 20 HSAcaE
Thus, the CA in its Decision dated September 30, 2013 ruled that Llorente's
appeal was bereft of any merit while that of EPCIB was partially considered. 21
The dispositive portion of the CA Decision states:
WHEREFORE, premises considered, the instant appeal is
PARTIALLY GRANTED . The assailed Decision dated 16 April 2009 of the
Regional Trial Court is AFFIRMED with the modification that EPCIB is
ABSOLVED from any liability under Civil Case No. 02-1423.
SO ORDERED. 22
Llorente filed a motion for reconsideration while SCPL filed a motion for
partial reconsideration. The CA denied both motions in its Resolution 23 dated
April 10, 2014.
Hence, the instant Rule 45 petitions for review on certiorari in G.R. No.
212050 filed by Llorente and in G.R. No. 212216 filed by SCPL, respectively.
Regarding G.R. No. 212050, SCPL filed its Comment 24 dated September 24,
2014 and Llorente filed his Reply 25 dated October 8, 2014. Regarding G.R. No.
212216, EPCIB filed its Comment 26 dated October 4, 2014. Llorente filed an
Explanation 27 dated August 14, 2015 wherein he manifested that he deemed it
more proper and appropriate to forego the filing of a Comment in G.R. No.
212216 considering the consolidation of the two petitions and the issues and
arguments raised therein are substantially the same and inter-related with one
another. 28
The Issues
In G.R. No. 212050, Llorente raises the following issues:
1. whether the CA erred in affirming the RTC Decision despite the
latter's lack of jurisdiction over the subject matter of the complaint;
2. whether the CA erred in finding that SCPL has legal capacity to sue
under the isolated transaction rule; andAScHCD
3. whether the designation of the law firm of Jimeno, Jalandoni and Cope
(JJC Law) as attorney-in-fact of SCPL constitutes gross violation of
Section 69 of the Corporation Code. 29
In G.R. No. 212216, SCPL raises the following issues:
1. whether the CA erred when it modified the RTC Decision by absolving
EPCIB of any liability; and
2. whether in absolving EPCIB the CA ignored the express provisions of
law and anchored its ratio on evidence that was not at all proven in
trial. 30
The Court's Ruling
G.R. No. 212050
Llorente's Petition lacks any merit.
On the issue of jurisdiction, Llorente argues that except for the mere
issuance of the 2 bank drafts by EPCIB, all the material acts and transactions
between him and SCPL transpired in Australia; and, in fact, his front money
account with SCPL was even credited while he was in Australia. 31 Thus, the sole
jurisdiction to hear and decide SCPL's complaint pertains to the Australian Court
rather than the Philippine Court. 32
On SCPL's capacity to sue, Llorente argues that the condition sine qua non
of the application of the isolated transaction rule is that the alleged delict or
wrongful act must have occurred in the Philippines and the transaction between
him and SCPL was in pursuance of the latter's casino business. 33
Regarding the designation of JJC Law as SCPL's attorney-in-fact, Llorente
argues that it is violative of Section 69 of the Corporation Code because SCPL is
not licensed to do business in the Philippines. 34 As such, SCPL's complaint is a
mere scrap of paper and any judgment rendered in connection therewith is a
nullity which may be struck down even on appeal. 35 HESIcT
On the capacity of a foreign corporation to sue before Philippine courts, the

applicable law is clear.
Under Republic Act No. (RA) 11232 36 or the Revised Corporation Code of
the Philippines (Revised Corporation Code), which became effective on February
23, 2019 37 the pertinent provision is Section 150, which states:
SEC. 150. Doing Business without a License. — No foreign
corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any
action, suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of
action recognized under Philippine laws.
Section 150 of the Revised Corporation Code is a verbatim reproduction of
Section 133 of Batas Pambansa Blg. (BP) 68 or the Corporation Code of the
Philippines (Corporation Code), which provided: AcICHD
Sec. 133. Doing business without a license . — No foreign

corporation transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any
action, suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against
before Philippine courts or administrative tribunals on any valid cause of
action recognized under Philippine laws. (69a)
It must be noted that the Revised Corporation Code repealed the Corporation
Code and any law, presidential decree or issuance, executive order, letter of
instruction, administrative order, rule or regulation contrary or inconsistent with
any provision of the Revised Corporation Code is modified or repealed
accordingly. 38
While the law (presently the Revised Corporation Code or its predecessor,
the Corporation Code) grants to foreign corporations with Philippine license the
right to sue in the Philippines, the Court, however, in a long line of cases under
the regime of the Corporation Code has held that a foreign corporation not
engaged in business in the Philippines may not be denied the right to file an
action in the Philippine courts for an isolated transaction. 39 The issue on whether
a foreign corporation which does not have license to engage in business in the
Philippines can seek redress in Philippine courts depends on whether it is doing
business or it merely entered into an isolated transaction. 40 A foreign
corporation that is not doing business in the Philippines must disclose such fact if
it desires to sue in Philippine courts under the "isolated transaction rule" because
without such disclosure, the court may choose to deny it the right to sue. 41
The right and capacity to sue, being, to a great extent, matters of pleading
and procedure, depend upon the sufficiency of the allegations in the complaint.
Thus, as to a foreign corporation, the qualifying circumstance that if it is doing
business in the Philippines, it is duly licensed or if it is not, it is suing upon a
singular and isolated transaction, is an essential part of the element of the
plaintiff's capacity to sue and must be affirmatively pleaded. 42
These pronouncements equally obtain under the Revised Corporation Code
given the reproduction of the exact wording of Section 133, Corporation Code in
Section 150 of the Revised Corporation Code. caITAC
Based on the parameters discussed above, the CA has correctly ruled that
SCPL has personality to sue before Philippine courts under the isolated
transaction rule, to wit:
x x x [A] foreign corporation needs no license to sue before
Philippine courts on an isolated transaction. 43 However, to say merely
that a foreign corporation not doing business in the Philippines does not
need a license in order to sue in our courts does not completely resolve
the issue. 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 suing corporation is exempt therefrom, 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 in this requirement, the
complaint filed by plaintiff with the trial court, it must be said, fails to
show its legal capacity to sue. 44 x x x
In the case at bar, [SCPL] alleged in its complaint that "it is a foreign
corporation which operates its business at the Star City Casino in Sydney,
New South Wales, Australia; that it is not doing business in the Philippines;
and that it is suing upon a singular and isolated transaction." It also
appointed Jimeno, Jalandoni and Cope Law Offices as its attorney-in-fact.
Following the pronouncement mentioned above and having pleaded these
averments in the complaint sufficiently clothed [SCPL] the necessary legal
capacity to sue before Philippine courts. 45 TAIaHE
The appointment of JJC Law as attorney-in-fact of SCPL is irrelevant on the

latter's capacity to sue in the Philippines under an isolated transaction.
Further, the following observation of the RTC is apropos:
Besides, it is observed that defendant Llorente in [his] answer
pleaded [an] affirmative relief for damages from plaintiff [SCPL] by way of
a counterclaim. This is contrary to his position that plaintiff has no
capacity to sue in the Philippines because such contention likewise entails
that plaintiff may be sued in the Philippines as defendant Llorente also
prayed for affirmative relief against the plaintiff. He is deemed to have
admitted the capacity of plaintiff to be subject of our judicial process. It
would be unfair to rule that plaintiff may be sued in the Philippines without
at the same time allowing it to sue on an isolated transaction here. 46
On the issue of jurisdiction, the argument of Llorente that Australian courts
have jurisdiction over the case because all the material acts and transactions
between him and SCPL transpired in Australia, except for the mere issuance of
the two bank drafts by EPCIB in the Philippines also fails.
It must be remembered that the complaint filed by SCPL against Llorente
and EPCIB is for collection of sum of money, which is a civil case. Under BP 129,
Section 19, RTCs have exclusive jurisdiction "[i]n all other cases in which the
demand, exclusive of interest, damages of whatever kind, attorney's fees,
litigation expenses, and costs or the value of property in controversy exceeds
Three hundred thousand pesos (P300,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the abovementioned items exceeds Four
hundred thousand pesos (P400,000.00)." 47 Since the amount demanded by SCPL
against Llorente and EPCIB in solidary capacity, which is "USD$300,000.00 plus
legal interest from date of first demand on December 20, 2000 until full
payment," 48 is above P400,000.00, the RTC has jurisdiction over SCPL's
complaint. ICHDca
Also, from the point of view of territorial jurisdiction in criminal cases49

involving checks, any of the places where the check is drawn, issued, delivered,
or dishonored has jurisdiction. 50 As the CA emphasized, "[w]hile it is true that
the stopped payment occurred in Australia per advice of Union Bank of California
to the Bank of New York, x x x the subject matter of the instant complaint are the
subject drafts drawn by EPCIB, which is a Philippine bank." 51
G.R. No. 212216
SCPL's Petition is meritorious.
The CA absolved EPCIB from any liability in this wise:
Relative to EPCIB's solidary liability, We deem it proper to discharge
it from any responsibility considering that it already paid Llorente the face
value of the subject drafts amounting to US$300,000.00 as evidenced by
the Quitclaim, Indemnity and Confidentiality Agreement executed on 8
August 2002. It would be very unfair to hold EPCIB solidarily liable with
Llorente because it already paid/refunded to the latter the total amount of
the subject drafts. Moreover, allowing such solidary liability would, indeed,
be to sanction unjust enrichment on the part of Llorente, who will be
allowed to profit or enrich himself inequitabl[y] at EPCIB's expense, 52
since he was already paid and yet, the latter, who was without any fault, is
still bound to share the responsibility without any assurance of being paid.
Hence, it is only just and equitable to relieve the bank from any liability to
pay considering the execution of the above agreement in favor of Llorente.
53
In its Petition, SCPL posits that it is an established fact that EPCIB issued
the subject demand drafts since it was never denied by EPCIB and was even
confirmed by the bank's counsel in a letter dated September 16, 2002 to SCPL's
counsel. 54 According to SCPL, in issuing the subject demand drafts, EPCIB is
considered by law as the drawer and being the drawer, it represented that on
due presentment the checks would be accepted or paid, or both, according to
their tenor and if they be dishonored and the necessary proceedings be taken it
would be the one who would pay pursuant to Section 61 of the Negotiable
Instruments Law (NIL). 55 cDHAES
Additionally, SCPL argues that under the NIL, while the maker and the
acceptor of the negotiable instrument are primarily liable, the drawer and
endorser are secondarily liable; and the drawer's secondary liability to pay the
amount of the checks arises from its warranties as the drawer. 56 Being a holder
in due course, as the CA has recognized, SCPL may enforce payment of the
instrument for its full amount against all parties liable thereon. 57 SCPL concludes
that there is no room for the application of equity and unjust enrichment because
the rights, liabilities and representations of the parties are explicitly provided in
the NIL and equity, being invoked only in the absence of law, may supplement
the law but it can neither contravene nor supplant it. 58
As to the Indemnity Agreement allegedly executed on August 8, 2002, SCPL
further posits that the CA has no basis to give it weight as it was never presented
as evidence on EPCIB's behalf and was never formally offered or identified by a
proper witness in court. 59 Even assuming that the Indemnity Agreement can be
used as evidence, SCPL takes the position that it is only valid between Llorente
and EPCIB and cannot be enforced to defeat SCPL's right as a holder in due
course to enforce payment of the instrument for the full amount thereof against
all parties liable thereon. 60
In its Comment, 61 EPCIB counters that the CA correctly absolved EPCIB
from any liability by reason of unjust enrichment and cites Article 22 of the Civil
Code, which provides that every person who through an act or performance of
another, or any other means, acquires or comes into possession of something at
the expense of the latter without just or legal ground, shall return the same to
h i m . 62 EPCIB argues that the unjust enrichment principle is applicable
considering that Llorente already received the value of the subject bank drafts
from EPCIB; and requiring it again to pay the face value of the bank drafts would
amount to Llorente's unjust enrichment to its prejudice. 63 TCAScE
As another ground, EPCIB argues that SCPL and EPCIB have no privity of
contract as they never transacted with each other. 64 Invoking the basic principle
of relativity of contracts, EPCIB states that it would be highly iniquitous if it is
made liable in any way for whatever controversy that arose between SCPL and
Llorente. 65
Given the foregoing, EPCIB has apparently abandoned its arguments before
the CA that: (1) SCPL is not a holder in due course because it took the subject
bank drafts without any value since the funds corresponding thereto had been
withdrawn by Llorente, and (2) SCPL cannot be considered in good faith because
of Llorente's averment regarding the impossibility of having no face cards
coming out of several deals despite a considerable amount of time. 66
The CA has rejected the said arguments and admitted that SCPL is a holder
in due course, viz.:
Section 52 of the [NIL] gives the conditions in order to consider [a]
person as a holder in due course, to wit:
"SEC. 52. What constitutes a holder in due course. —
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 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." ASEcHI
As a general rule, under the above provision, every holder is

presumed prima facie to be a holder in due course. 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. 67 At
bar, EPCIB failed to prove that the elements of good faith and value are
wanting.
Anent the element of good faith, [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 x x x [.]
xxx xxx xxx
It 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, could not 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.
Moreover, Llorente's conduct after he complained about the
purported fraud in the casino counteracted whatever truth his claim has.
For this purpose, We acknowledge the [RTC's] disquisition, viz[.]:
xxx xxx xxx
The [c]ourt finds it quite interesting, and contrary to
human behavior, that x x x Llorente, in spite of the alleged
irregularities in the [B]accarat table, continued to play in said
casino. If there were indeed irregularities, as being claimed by
x x x Llorente, he should have stopped playing and betting
because it would entail huge losses on his part. Considering
that the amount of capital involved was very substantial and
considering further that x x x Llorente, as his qualifications
show, is admittedly an experienced casino player x x x, the
court finds it hard to believe that, if indeed there were
unlawful activities going on in the casino, specifically in the
[B]accarat table, that x x x Llorente would still choose to
continue playing, further risking his money. cTDaEH
xxx xxx xxx

Contrary to EPCIB's assertion that the subject drafts were taken
without any value, We would like to point out 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." 68 Here, it was established that Llorente used the subject
drafts to buy-in into the Premium Programme of [SCPL's] casino which
would entitle him to earn one x x x percent [(1%)] cash commission or
[zero point] one x x x percent [(0.1%)] rebate on his gaming turn-over.
This right to play under the Premium Programme is enough to constitute
as a "value" contemplated by the law, thus, making [SCPL] a holder in due
course.
Said status of [SCPL] remained despite the withdrawal of the funds
because at the time Llorente negotiated the subject drafts, [SCPL] had no
notice that the same had been previously dishonored. In fact, it even
verified the status by calling x x x EPCIB, who advised it through the
latter's employee x x x Consuelo Conigado that the same were issued on
clear funds and there [was] no stop payment orders. 69
The Court notes that while Llorente testified that he purportedly reported
the fraud or "cheating" incident in SCPL's casino to the branch office of the
Australian Gaming Commission (AGC) at the ground floor of the casino, he
presented no proof, documentary or otherwise, that he in fact did file a
complaint; and the RTC found his account of how he allegedly brought the matter
to the AGC "not highly persuasive" noting that Llorente never mentioned
anything about him having reported the incident to the AGC in his Answer, an
information so vital to support his claim of fraud. 70 ITAaHc
American jurisprudence explains the nature of drafts in this wise:

A draft in the law of bills and notes is a "drawing" and has been
defined as an open letter of request from, and an order by, one person on
another to pay a sum of money therein mentioned to a third person on
demand or at a future time specified therein. A draft is a bill of exchange,
and the term "draft" is commonly employed as a synonym for the words
"bill of exchange" or "check," although it cannot be the latter if it lacks the
requirements of a check as distinguished from other bills of exchange.
Banks are perhaps the greatest users of drafts, and they sell them to
persons who desire to transmit funds. Thus a draft has been defined as
a check drawn by a bank, the only distinguishing feature between a
draft and an ordinary check being the character of the drawer. The
instrument which is usually denominated a "bank draft" 71 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 time], 72
there is a distinction between the two in this respect.
In its usual form a draft is a negotiable instrument. 73 (Emphasis
and underscoring provided) cSaATC
When the CA recognized SCPL as a holder in due course74 and it did not
overturn the finding of the RTC that the subject demand/bank drafts are
negotiable instruments, 75 the CA in effect ruled that the two demand/bank drafts
drawn by EPCIB with Llorente as the payee are negotiable instruments. The Court
totally agrees with the RTC's finding, to wit:
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. Where the order is made by one
bank to another bank, as in this case, it is referred to as a bank draft.
Needless to say, the bank drafts, subject of this case are negotiable
instruments and are therefore governed by the provisions of the
Negotiable Instruments Law. 76
Both the RTC and CA correctly recognized EPCIB as the drawer of the
subject demand/bank drafts. The liability of the drawer is spelled out in Section
61 of the NIL, which provides:
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.
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; 77 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. 78 CHTAIc
Generally, by drawing a check, the drawer: admits the existence of the

payee and his then capacity to endorse; impliedly represents that he (the payee)
has funds or credits available for its payment in the bank in which it is drawn;
engages that if the bill is not paid by the drawee and due proceedings on
dishonor are taken by the holder, he will upon demand pay the amount of the bill
together with the damages and expenses accruing to the holder by reason of the
dishonor of the instrument; and, if the drawee refuses to accept a bill drawn upon
him, becomes liable to pay the instrument according to his original undertaking.
79
However, the liability of the drawer 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. 80 Thus, under Section 84 of the
NIL, 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.
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. 81
There are however cases which hold that a draft drawn by one bank upon
another and bought and paid for by a remitter, as the equivalent of money or as
an executed sale of credit by the drawer, is not subject to rescission or
countermand so as to avoid the drawer's liability thereon. 82 Moreover, 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. 83 Stated differently, stopping payment does not discharge the liability of
the drawer of a check or other bill to the payee or other holder. 84 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. 85 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. 86 cHDAIS
In the instant case, on July 27, 2002 Llorente applied for and executed a
Stop Payment Order (SPO) on the subject demand/bank drafts on the pretext
that the said drafts which he issued/negotiated to SCPL allegedly exceeded the
amount he was obliged to pay SCPL 87 contrary to his position that SCPL
committed fraud and unfair gaming practices. The execution of the SPO by
Llorente did not discharge the liability of EPCIB, the drawer, to SCPL, the holder of
the subject demand/bank drafts. Given that an SPO was issued, the dishonor and
non-payment of the subject demand/bank drafts were to be expected, triggering
the immediate right of recourse of the holder to all parties secondarily liable,
including the drawer, pursuant to the NIL. As the RTC noted: "[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." 88
The finding of both the RTC and the CA that SCPL is a holder in due course
is not even disputed by EPCIB in its Comment 89 dated October 4, 2014 to the
SCPL Petition. To recall, EPCIB merely argued that the CA was correct in
absolving it from liability by applying the principle of unjust enrichment. 90 EPCIB
added that it had no privity of contract between SCPL and Llorente. 91
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." In addition, under
Section 51 of the NIL, every holder of a negotiable in instrument may sue thereon
in his own name; and payment to him in due course discharges the instrument.
Having recognized the status of SCPL as a holder in due course and EPCIB
as the drawer of the subject demand/bank drafts, was the CA correct in absolving
EPCIB from any liability in view of the Indemnity Agreement dated August 8,
2002 between Llorente and EPCIB? EATCcI
In absolving EPCIB from liability, the CA forwarded the following

justification:
Relative to EPCIB's solidary liability, We deem it proper to discharge
it from any responsibility considering that it already paid Llorente the face
value of the subject drafts amounting to US$300,00[0].00 as evidenced by
the Quitclaim, Indemnity and Confidentiality Agreement executed on 8
August 2002. It would be very unfair to hold EPCIB solidarily liable with
Llorente because it already paid/refunded to the latter the total amount of
the subject drafts. Moreover, allowing such solidary liability would, indeed,
be to sanction unjust enrichment on the part of Llorente, who [would] be
allowed to profit or enrich himself inequitabl[y] at EPCIB's expense, since
he was already paid and yet, the latter, who was without any fault, is still
bound to share the responsibility without any assurance of being paid.
Hence, it is only just and equitable to relieve the bank from any liability to
pay considering the execution of the above agreement in favor of Llorente.
92
The Court finds, and so holds, that the CA erred in discharging EPCIB from
its liability as the drawer of the subject demand/bank drafts.
A review of the records confirms SCPL's argument that the Indemnity
Agreement cannot be considered as evidence because it was not formally
offered. In addition, even if it were given some evidentiary weight, it will
nevertheless not bind SCPL pursuant to the principle of relativity of contracts
under Article 1311 of the Civil Code, which provides that "[c]ontracts take effect
only between the parties, their assigns and heirs, except in case where the rights
and obligations arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law."
As to the unjust enrichment principle applied by the CA, the same is not
proper. EPCIB's invocation of unjust enrichment to avoid its liability as the drawer
of the subject demand/bank draft evinces bad faith in that rather than
discharging its obligation as the drawer, EPCIB presents the Indemnity
Agreement as an afterthought to shield itself from liability. ISHCcT
Firstly, the liability of EPCIB as the drawer cannot be abrogated by virtue of

the Indemnity Agreement because it arises from the subject demand/bank drafts,
which are negotiable instruments, that it issued. Its secondary liability under
Section 61 of the NIL became primary when the payment of the subject
demand/bank drafts had been stopped which had the same effect as if the
instruments had been dishonored and notice thereof was given to the drawer
pursuant to Section 84 of the NIL. Given the nature of the liability of the drawer
of a negotiable instrument, EPCIB's argument that it is not liable to SCPL because
they have no privity of contract is utterly without merit.
Secondly, the reimbursement/return by EPCIB to Llorente of the face value
of the subject demand/bank drafts in the total amount of US$300,000.00 by
virtue of the Indemnity Agreement, assuming this had any probative value, is
subject to the following provision:
4. Claimant [(Llorente)] also agrees to execute and post an
indemnity bond in an amount equivalent to US$300,000.00 in favor of
EPCIBank, Star Casino (US$ Drafts Holder/Endorsee), Union Bank of
California (UBOC), and to any other person or entity who may have been
prejudiced by Claimant for whatever damages that may be suffered by
EPCIBank, and other third parties as a consequence of Claimant's SPO
[(Stop Payment Order)] and reimbursement of the amount of
US$300,000.00. 93
Thus, if EPCIB is made liable on the subject demand/bank drafts, it has a
recourse against the indemnity bond. To be sure, the posting of the indemnity
bond required by EPCIB of Llorente is in effect an admission of his liability to
SCPL and the provision in the Whereas clause that: "On 27 July 2002, Claimant
[(Llorente)] applied for and executed a Stop Payment Order (SPO) on the two
drafts, citing as reason that the drafts he issued/negotiated to Star Casino
exceeded the amount he was [obliged] to pay" 94 may be taken against him to
weaken his allegation of fraud and unfair gaming practices against SCPL. DHITCc
Lastly, for the unjust enrichment principle to apply against SCPL, it should
be the party who is benefitted from the reimbursement or return of the funds by
EPCIB. In this case, the party who received the benefit was Llorente. Any
payment to SCPL arising from the subject demand/bank drafts by EPCIB and/or
Llorente can never be by mistake. As provided in Article 2154 of the Civil Code, if
something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises; and, under Article
2163, there is payment by mistake if something which has never been due or has
already been paid is delivered.
While EPCIB is clearly liable as the drawer of the subject demand/bank
drafts, there is no legal basis to make it solidarily liable with Llorente.
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.
Consequently, both Llorente and EPCIB are individually and primarily liable
as endorser and drawer of the subject demand/bank drafts, respectively. Given
the nature of their liability, SCPL may proceed to collect the damages hereinafter
awarded simultaneously against both Llorente and EPCIB, or alternatively against
either Llorente or EPCIB, provided that in no event can SCPL recover from both
more than the damages awarded. CAacTH
In the event that SCPL is able to collect from EPCIB based on this judgment,
any amount that EPCIB pays to SCPL can be collected by EPCIB from Llorente by
virtue of its cross-claim against Llorente and pursuant to the indemnity clause of
the Indemnity Agreement, which is valid as between Llorente and EPCIB.
The monetary awards imposed by the RTC upon Llorente and EPCIB have to
be modified pursuant to Lara's Gifts & Decors, Inc. v. Midtown Industrial Sales,
Inc., 95 wherein the majority of the Court en banc revised the guidelines on
interest in Eastern Shipping Lines, Inc. v. Court of Appeals 96 and Nacar v. Gallery
Frames 97 and the ponente filed a Concurring and Dissenting Opinion. Thus, the
payment of the amount of the subject bank drafts in the sum of US$300,000.00
should bear interest at the legal rate of 12% per annum from the date of
extrajudicial demand, which is August 30, 2002 98 (as this is the date the
extrajudicial demand against EPCIB that was made subsequent to the
extrajudicial demand for payment against Llorente), to June 30, 2013 and at 6%
per annum from July 1, 2013 until full payment and the payment of the attorney's
fees equivalent to 5% of the amount of demand or US$15,000.00 should bear
interest at the rate of 6% per annum from finality of this Decision until full
payment.
WHEREFORE, the Petition in G.R. No. 212050 is hereby DENIED while the
Petition in G.R. No. 212216 is GRANTED. The Decision dated September 30,
2013 and the Resolution dated April 10, 2014 of the Court of Appeals in CA-G.R.
CV No. 94736 are PARTIALLY REVERSED and SET ASIDE insofar as the Court
of Appeals absolved Equitable PCI Bank from any liability is concerned. The
Decision dated April 16, 2009 rendered by the Regional Trial Court, Branch 134,
Makati City in Civil Case No. 02-1423 is REINSTATED with MODIFICATION:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiff Star City Pty Limited and against both defendants
Quintin Llorente and Equitable PCI Bank, as follows:
1. Finding both defendants Quintin Llorente and Equitable PCI
Bank individually and primarily liable and:
(a) Ordering defendants Quintin Llorente and Equitable PCI Bank
to pay the plaintiff Star City Pty Limited the amount of the
subject bank drafts in the sum of US$300,000.00 with interest
at 12% per annum from August 30, 2002 to June 30, 2013 and
at 6% per annum from July 1, 2013 until full payment;
(b) Ordering defendants Quintin Llorente and Equitable PCI Bank
to pay the plaintiff Star City Pty Limited 5% of the amount
claimed, or US$15,000.00, as and by way of attorney's fees with
interest at 6% per annum from the finality of this Decision until
full payment; and,cEaSHC
2. Costs of suit.
For lack of merit, both defendants Quintin Llorente's and Equitable
PCI Bank's counterclaims are DENIED. Defendant Equitable PCI Bank's
cross-claim against defendant Quintin Llorente is GRANTED.
SO ORDERED.
Peralta, C.J., J.C. Reyes, Jr., Lazaro-Javier and M.V. Lopez, JJ., concur.
Footnotes
1. Rollo (G.R. No. 212050), pp. 10-23, excluding Annexes; rollo (G.R. No. 212216), pp.
45-62, excluding Annexes.
2. Id. at 24-38; id. at 10-24. Penned by Associate Justice Elihu A. Ybañez, with Associate
Justices Japar B. Dimaampao and Victoria Isabel A. Paredes concurring.
3. Id. at 55-57; id. at 41-43.

4. Fourteenth Division and Former Fourteenth Division, respectively.
5. Rollo (G.R. No. 212050), pp. 39-54. Penned by Presiding Judge Perpetua Atal-Paño.
6. EPCIB in its "Comment on the Petition for Review" dated October 4, 2014 used the
terms "demand/bank drafts," "subject bank drafts" and "bank drafts" to refer to
the drafts which it drew with Llorente as payee. Rollo (G.R. No. 212216), pp. 132-
145.
7. Rollo (G.R. No. 212050), pp. 25-29; rollo (G.R. No. 212216), pp. 11-15.
8. Now BDO Unibank, Inc.; rollo (G.R. No. 212216), p. 132.
9. Rollo (G.R. No. 212050), p. 31; rollo (G.R. No. 212216), p. 17.
10. Id. at 32-33; id. at 18-19.

11. Id. at 33; id. at 19.
12. Erroneously reflected as 1% in CA Decision, id. at 36; id. at 22.

13. Rollo (G.R. No. 212050), pp. 36-37; rollo (G.R. No. 212216), pp. 22-23.
14. As Star City Casino's Head of Gaming and given his 30 years work experience in the
different casinos located in Australia, Arbuckle had gained knowledge and
expertise in the different casino games particularly Baccarat according to the CA.
Id. at 35; id. at 21.
15. Id.; id.
16. Id. at 36; id. at 22, citing the RTC Decision dated April 16, 2009, rollo (G.R. No.
212050), p. 49.
17. Id.; id.
18. Rollo (G.R. No. 212216), pp. 146-149.

19. Rollo (G.R. No. 212050), p. 37; id. at 23.
20. Id.; id.
21. Id. at 31; id. at 17.

22. Id. at 37-38; id. at 23-24.
23. Id. at 55-57; id. at 41-43.
24. Id. at 82-97.

25. Id. at 98-104.
26. Rollo (G.R. No. 212216), pp. 132-145.

27. Id. at 165-170.
28. Id. at 166.
29. Rollo (G.R. No. 212050), p. 14.

30. Rollo (G.R. No. 212216), pp. 52-53.
31. Rollo (G.R. No. 212050), pp. 14-15.

32. Id. at 15.
33. Id. at 15-16.
34. Id. at 16-17.

35. Id. at 17.
36. AN ACT PROVIDING FOR THE REVISED CORPORATION CODE OF THE PHILIPPINES.
Approved on February 20, 2019.
37. Upon completion of its publication in Manila Bulletin and the Business Mirror on
February 23, 2019, see <http://www.sec.gov.ph/wp-
content/uploads/2019/03/2019Legislation_RevisedCorporationCodeEffectivity.pdf>.
38. RA 11232, Sec. 187.
39. The Commissioner of Customs v. K.M.K. Gani, Indrapal & Co., 261 Phil. 717, 723
(1990), citing Bulakhidas v. Navarro, 225 Phil. 500, 501 (1986); Antam
Consolidated, Inc. v. CA, 227 Phil. 267 (1986); Universal Rubber Products, Inc. v.
CA, 215 Phil. 85 (1984).
40. The Commissioner of Customs v. K.M.K. Gani, Indrapal & Co., id. at 723.
41. Id., citing Atlantic Mutual Insurance Co. v. Cebu Stevedoring Co., 124 Phil. 463
(1966).
42. Id. at 725, citing Atlantic Mutual Insurance Co. v. Cebu Stevedoring Co., id. at 466-
467.
43. Citing Lorenzo Shipping Corp. v. Chubb and Sons, Inc., 475 Phil. 169, 183 (2004).
44. Citing New York Marine Managers, Inc. v. Court of Appeals , 319 Phil. 538, 543-544
(1995).
45. Rollo (G.R. No. 212050), pp. 32-33.
46. Id. at 44.

47. BP 129, Sec. 19 (8), as amended by RA 7691.
48. Rollo (G.R. No. 212050), p. 64.

49. Like violation of BP 22.
50. See Brodeth v. People , G.R. No. 197849, November 29, 2017, 847 SCRA 92, 111.
51. Rollo (G.R. No. 212050), p. 33.

52. Citing Grandteq Industrial Steel Products, Inc. v. Margallo , 611 Phil. 612, 627-628
(2009).
54. Rollo (G.R. No. 212216), p. 53.

55. Id. at 54.
56. Id.
57. Id. at 55-56.

58. Id. at 56.
59. Id. at 57.

60. Id. at 58.
61. Id. at 132-145.
62. Id. at 139.

63. Id. at 140.
64. Id.
65. Id.
66. Id. at 19; rollo (G.R. No. 212050), p. 33.

67. Citing Bank of the Philippine Islands v. Roxas, 562 Phil. 161, 165 (2007).
68. Citing Bank of the Philippine Islands v. Roxas, id. at 166.
69. Rollo (G.R. No. 212216), pp. 20-23.

70. Rollo (G.R. No. 212050), pp. 51-53.
71. Bank draft is a bill of exchange payable on demand. 11 Am. Jur. 2d, Drafts, §14,
note 6, p. 43 (1963), citing Bank of Republic v. Republic State Bank, 328 Mo 848,
42 SW2d 27.
72. 11 Am. Jur. 2d, Drafts, §14, note 12, p. 43 (1963), citing Branch Banking & Trust Co.
v. Bank of Washington, 255 NC 205, 120 SE2d 830.
73. Id. at 43-44, citations omitted.
74. The CA found that the conditions in order to consider a person a holder in due
course are present in this case and discussed extensively the elements of good
faith, for value and lack of notice of infirmity or defect in the title of the person
negotiating the negotiable instrument. See rollo (G.R. No. 212216), pp. 20-23.
75. Rollo (G.R. No. 212050), p. 46.
76. Id.
77. 11 Am. Jur. 2d, Drawer, Generally, § 589, p. 657 (1963). Citations omitted.
78. Gambord Meat Co. v. Corbari, 109 Cal App 2d 161, 240 P2d 342 cited in 11 Am. Jur.
2d, id., note 20.
79. 11 Am. Jur. 2d, Drawer, Generally, § 589, pp. 658-660 (1963). Citations omitted.
80. Id. at 659. Citations omitted.

81. Id., Countermand or stopping payment, § 590, p. 660. Citations omitted.
82. Id.
83. Id. at 660-661. Citations omitted.

84. Id. at 661.
85. Id.
86. Id. Citations omitted.
87. Rollo (G.R. No. 212216), p. 146.
88. Rollo (G.R. No. 212050), p. 28; id. at 14.

89. Rollo (G.R. No. 212216), pp. 132-145.
90. Id. at 139-140.

91. Id. at 140-141.

92. Id. at 23.
93. Id. at 147.
94. Id. at 146.

95. G.R. No. 225433, August 28, 2019.
96. 304 Phil. 236 (1994).

97. 716 Phil. 267 (2013).

SECOND DIVISION
[G.R. No. 219037. October 19, 2016.]
RCBC SAVINGS BANK, petitioner, vs. NOEL M. ODRADA,

respondent.
DECISION
CARPIO, J : p
The Case
Before the Court is a petition for review, on certiorari 1 assailing the 26
March 2014 Decision 2 and the 18 June 2015 Resolution 3 of the Court of
Appeals in CA-G.R. CV No. 94890.
The Facts
In April 2002, respondent Noel M. Odrada (Odrada) sold a second-hand
Mitsubishi Montero (Montero) to Teodoro L. Lim (Lim) for One Million Five
Hundred Ten Thousand Pesos (P1,510,000). Of the total consideration, Six
Hundred Ten Thousand Pesos (P610,000) was initially paid by Lim and the
balance of Nine Hundred Thousand Pesos (P900,000) was financed by
petitioner RCBC Savings Bank (RCBC) through a car loan obtained by Lim. 4
As a requisite for the approval of the loan, RCBC required Lim to submit the
original copies of the Certificate of Registration (CR) and Official Receipt
(OR) in his name. Unable to produce the Montero's OR and CR, Lim
requested RCBC to execute a letter addressed to Odrada informing the latter
that his application for a car loan had been approved.
On 5 April 2002, RCBC issued a letter that the balance of the loan
would be delivered to Odrada upon submission of the OR and CR. Following
the letter and initial down payment, Odrada executed a Deed of Absolute
Sale on 9 April 2002 in favor of Lim and the latter took possession of the
Montero. 5
When RCBC received the documents, RCBC issued two manager's
checks dated 12 April 2002 payable to Odrada for Nine Hundred Thousand
Pesos (P900,000) and Thirteen Thousand Five Hundred Pesos (P13,500). 6
After the issuance of the manager's checks and their turnover to Odrada but
prior to the checks' presentation, Lim notified Odrada in a letter dated 15
April 2002 that there was an issue regarding the roadworthiness of the
Montero. The letter states: CAIHTE
April 15, 2002

Mr. Noel M. Odrada
C/o Kotse Pilipinas
Fronting Ultra, Pasig City
Thru: Shan Mendez
Dear Mr. Odrada,
Please be inform[ed] that I am going to cancel or exchange the
(1) one unit Montero that you sold to me thru Mr. Shan Mendez
because it did not match your representations the way Mr. Shan
Mendez explained to me like:
1. You told me that the said vehicle has not
experience[d] collision. However, it is hidden, when you
open its engine cover there is a trace of a head-on
collision. The condenser is smashed, the fender support is
not align[ed], both bumper support[s] connecting [the]
chassis were crippled and welded, the hood support was
repaired, etc.
2. The 4-wheel drive shift is not functioning. When Mr.
Mendez was asked about it, he said it would not function
until you can reach the speed of 30 miles.
3. During Mr. Mendez['s] representation, he said the
odometer has still an original mileage data but found
tampered.
4. You represented the vehicle as model 1998
however; it is indicated in the front left A-pillar inscribed
at the identification plate [as] model 1997.
Therefore, please show your sincerity by personally inspecting
the said vehicle at RCBC, Pacific Bldg. Pearl Drive, Ortigas Center,
Pasig City. Let us meet at the said bank at 10:00 A.M., April 17, 2002.
Meanwhile, kindly hold or do not encash the manager's
check[s] issued to you by RCBC until you have clarified and satisfied
my complaints.
Sincerely yours,
Teodoro L. Lim
Cc: Dario E. Santiago, RCBC loan
Legal 7
Odrada did not go to the slated meeting and instead deposited the
manager's checks with International Exchange Bank (Ibank) on 16 April 2002
and redeposited them on 19 April 2002 but the checks were dishonored both
times apparently upon Lim's instruction to RCBC. 8 Consequently, Odrada
filed a collection suit 9 against Lim and RCBC in the Regional Trial Court of
Makati. 10
In his Answer, 11 Lim alleged that the cancellation of the loan was at
his instance, upon discovery of the misrepresentations by Odrada about the
Montero's roadworthiness. Lim claimed that the cancellation was not done
ex parte but through a letter 12 dated 15 April 2002. 13 He further alleged
that the letter was delivered to Odrada prior to the presentation of the
manager's checks to RCBC. 14
On the other hand, RCBC contended that the manager's checks were
dishonored because Lim had cancelled the loan. RCBC claimed that the
cancellation of the loan was prior to the presentation of the manager's
checks. Moreover, RCBC alleged that despite notice of the defective
condition of the Montero, which constituted a failure of consideration,
Odrada still proceeded with presenting the manager's checks.
It was later disclosed during trial that RCBC also sent a formal notice of
cancellation of the loan on 18 April 2002 to both Odrada and Lim. 15 DETA
Ca
The Regional Trial Court's Ruling

In its Decision 16 dated 1 October 2009, the trial court ruled in favor of
Odrada. The trial court held that Odrada was the proper party to ask for
rescission. 17 The lower court reasoned that the right of rescission is implied
in reciprocal obligations where one party fails to perform what is incumbent
upon him when the other is willing and ready to comply. The trial court ruled
that it was not proper for Lim to exercise the right of rescission since Odrada
had already complied with the contract of sale by delivering the Montero
while Lim remained delinquent in payment. 18 Since Lim was not ready,
willing, and able to comply with the contract of sale, he was not the proper
party entitled to rescind the contract.
The trial court ruled that the defective condition of the Montero was
not a supervening event that would justify the dishonor of the manager's
checks. The trial court reasoned that a manager's check is equivalent to
cash and is really the bank's own check. It may be treated as a promissory
note with the bank as maker. Hence, the check becomes the primary
obligation of the bank which issued it and constitutes a written promise to
pay on demand. 19 Being the party primarily liable, the trial court ruled that
RCBC was liable to Odrada for the value of the manager's checks.
Finally, the trial court found that Odrada suffered sleepless nights,
humiliation, and was constrained to hire the services of a lawyer meriting
the award of damages. 20
The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered:
(a) Directing defendant RCBC to pay plaintiff the
amount of Php913,500.00 representing the cash
equivalent of the two (2) manager's checks, plus 12%
interest from the date of filing of the case until fully paid;
(b) Directing defendants to solidarily pay moral
damages in the amount of Php500,000.00 and exemplary
damages in the amount of Php500,000.00;
(c) Directing defendants to solidarily pay
attorney's fees in the amount of Php300,000.00.
Finally, granting the cross-claim of defendant RCBC, Teodoro L.
Lim is hereby directed to indemnify RCBC Savings Bank for the
amount adjudged for it to pay plaintiff.
SO ORDERED. 21

RCBC and Lim appealed from the trial court's decision.
The Court of Appeals' Ruling
In its assailed 26 March 2014 Decision, the Court of Appeals dismissed
the appeal and affirmed the trial court's 1 October 2009 Decision. ATICcS
The Court of Appeals ruled that the two manager's checks, which were
complete and regular, reached the hands of Lim who deposited the same in
his bank account with Ibank. RCBC knew that the amount reflected on the
manager's checks represented Lim's payment for the remaining balance of
the Montero's purchase price. The appellate court held that when RCBC
issued the manager's checks in favor of Odrada, RCBC admitted the
existence of the payee and his then capacity to endorse, and undertook that
on due presentment the checks which were negotiable instruments would be
accepted or paid, or both according to its tenor. 22 The appellate court held
that the effective delivery of the checks to Odrada made RCBC liable for the
checks. 23
On RCBC's defense of want of consideration, the Court of Appeals
affirmed the finding of the trial court that Odrada was a holder in due
course. The appellate court ruled that the defense of want of consideration is
not available against a holder in due course. 24
Lastly, the Court of Appeals found that the award of moral and
exemplary damages and attorney's fees was excessive. Hence, modification
was proper.
The dispositive portion of the Decision reads:
WHEREFORE, the impugned Decision of the court a quo in Civil
Case No. 02-453 is hereby AFFIRMED with MODIFICATION insofar as
the reduction of awards for moral, exemplary damages and attorney's
fees to P50,000.00, P20,000.00, and P20,000.00 respectively.
SO ORDERED. 25 ETHIDa
RCBC and Lim filed a motion for reconsideration 26 on 28 April 2014. In

its 18 June 2015 Resolution, the Court of Appeals denied the motion for lack
of merit. 27
RCBC alone 28 filed this petition before the Court. Thus, the decision of
the Court of Appeals became final and executory as to Lim.
The Issues
RCBC presented the following issues in this petition:
A. The court a quo gravely erred in finding that as between
Odrada as seller and Lim as buyer of the vehicle, only the former has
the right to rescind the contract of sale finding failure to perform an
obligation under the contract of sale on the part of the latter only
despite the contested roadworthiness of the vehicle, subject matter of
the sale.
1. Whether or not the court a quo erred in holding
that Lim cannot cancel the auto loan despite the failure in
consideration due to the contested roadworthiness of the
vehicle delivered by Odrada to him. 29
B. The court a quo gravely erred when it found that Odrada

is a holder in due course of the manager's checks in question despite
being informed of the cancellation of the auto loan by the borrower,
Lim.
1. Whether or not Lim can validly countermand the
manager's checks in the hands of a holder who does not
hold the same in due course. 30
Odrada failed to file a comment 31 within the period prescribed by this
Court. 32
The Ruling of this Court
We grant the petition.
Under the law on sales, a contract of sale is perfected the moment
there is a meeting of the minds upon the thing which is the object of the
contract and upon the price which is the consideration. From that moment,
the parties may reciprocally demand performance. 33 Performance may be
done through delivery, actual or constructive. Through delivery, ownership is
transferred to the vendee. 34 However, the obligations between the parties
do not cease upon delivery of the subject matter. The vendor and vendee
remain concurrently bound by specific obligations. The vendor, in particular,
is responsible for an implied warranty against hidden defects.
Article 1547 of the Civil Code states: "In a contract of sale, unless a
contrary intention appears, there is an implied warranty that the thing shall
be free from any hidden faults or defects." 35 Article 1566 of the Civil Code
provides that "the vendor is responsible to the vendee for any hidden faults
or defects in the thing sold, even though he was not aware thereof." 36 As a
consequence, the law fixes the liability of the vendor for hidden defects
whether known or unknown to him at the time of the sale.
The law defines a hidden defect as one which would render the thing
sold unfit for the use for which it is intended, or would diminish its fitness for
such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it. 37 cSEDTC
In this case, Odrada and Lim entered into a contract of sale of the
Montero. Following the initial downpayment and execution of the deed of
sale, the Montero was delivered by Odrada to Lim and the latter took
possession of the Montero. Notably, under the law, Odrada's warranties
against hidden defects continued even after the Montero's delivery.
Consequently, a misrepresentation as to the Montero's roadworthiness
constitutes a breach of warranty against hidden defects.
In Supercars Management & Development Corporation v. Flores, 38 we
held that a breach of warranty against hidden defects occurred when the
vehicle, after it was delivered to respondent, malfunctioned despite repairs
by petitioner. 39 In the present case, when Lim acquired possession, he
discovered that the Montero was not roadworthy. The engine was
misaligned, the automatic transmission was malfunctioning, and the brake
rotor disks needed refacing. 40 However, during the proceedings in the trial
court, Lim's testimony was stricken off the record because he failed to
appear during cross-examination. 41 In effect, Lim was not able to present
clear preponderant evidence of the Montero's defective condition.
RCBC May Refuse to Pay Manager's Checks
We address the legal question of whether or not the drawee bank of a
manager's check has the option of refusing payment by interposing a
personal defense of the purchaser of the manager's check who delivered the
check to a third party.
In resolving this legal question, this Court will examine the nature of a
manager's check and its relation to personal defenses under the Negotiable
Instruments Law. 42
Jurisprudence defines a manager's check as a check drawn by the
bank's manager upon the bank itself and accepted in advance by the bank
by the act of its issuance. 43 It is really the bank's own check and may be
treated as a promissory note with the bank as its maker. 44 Consequently,
upon its purchase, the check becomes the primary obligation of the bank
and constitutes its written promise to pay the holder upon demand. 45 It is
similar to a cashier's check 46 both as to effect and use in that the bank
represents that the check is drawn against sufficient funds. 47
As a general rule, the drawee bank is not liable until it accepts. 48 Prior
to a bill's acceptance, no contractual relation exists between the holder 49
and the drawee. Acceptance, therefore, creates a privity of contract between
the holder and the drawee so much so that the latter, once it accepts,
becomes the party primarily liable on the instrument. 50 Accordingly,
acceptance is the act which triggers the operation of the liabilities of the
drawee (acceptor) under Section 62 51 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.
As can be gleaned in a long line of cases decided by this Court, a
manager's check is accepted by the bank upon its issuance. As compared to
an ordinary bill of exchange where acceptance occurs after the bill is
presented to the drawee, the distinct feature of a manager's check is that it
is accepted in advance. Notably, the mere issuance of a manager's check
creates a privity of contract between the holder and the drawee bank, the
latter primarily binding itself to pay according to the tenor of its acceptance.
SDAaTC
The drawee bank, as a result, has the unconditional obligation to pay a

manager's check to a holder in due course irrespective of any available
personal defenses. However, while this Court has consistently held that a
manager's check is automatically accepted, a holder other than a holder
in due course is still subject to defenses. In International Corporate Bank v.
Spouses Gueco, 52 which involves a delivered manager's check, the Court
still considered whether the check had become stale:
It has been held that, if the check had become stale, it becomes
imperative that the circumstances that caused its non-presentment
be determined. In the case at bar, there is no doubt that the
petitioner bank held on the check and refused to encash the same
because of the controversy surrounding the signing of the joint
motion to dismiss. We see no bad faith or negligence in this position
taken by the bank. 53
I n International Corporate Bank, this Court considered whether the holder
presented the manager's check within a reasonable time after its issuance —
a circumstance required for holding the instrument in due course. 54 AaCTcI
Similarly, in Rizal Commercial Banking Corporation v. Hi-Tri

Development Corporation, 55 the Court observed that the mere issuance of a
manager's check does not ipso facto work as an automatic transfer of funds
to the account of the payee. 56 In order for the holder to acquire title to the
instrument, there still must have been effective delivery. Accordingly, the
Court, taking exception to the manager's check automatic transfer of funds
to the payee, declared that: "the doctrine that the deposit represented by a
manager's check automatically passes to the payee is inapplicable, because
the instrument — although accepted in advance remains undelivered." 57
This Court ruled that the holder did not acquire the instrument in due course
since title had not passed for lack of delivery. 58
We now address the main legal question: if the holder of a manager's
check is not a holder in due course, can the drawee bank interpose a
personal defense of the purchaser?
Our rulings in Mesina v. Intermediate Appellate Court 59 and United
Coconut Planters Bank v. Intermediate Appellate Court 60 shed light on the
matter.
In Mesina, Jose Go purchased a manager's check from Associated Bank.
As he left the bank, Go inadvertently left the check on top of the desk of the
bank manager. The bank manager entrusted the check for safekeeping to
another bank official who at the time was attending to a customer named
Alexander Lim. 61 After the bank official answered the telephone and
returned from the men's room, the manager's check could no longer be
found. After learning that his manager's check was missing, Go immediately
returned to the bank to give a stop payment order on the check. A third
party named Marcelo Mesina deposited the manager's check with Prudential
Bank but the drawee bank sent back the manager's check to the collecting
bank with the words "payment stopped." When asked how he obtained the
manager's check, Mesina claimed it was paid to him by Lim in a "certain
transaction." 62
While this Court acknowledged the general causes and effects of a
manager's check, it noted that other factors were needed to be considered,
namely the manner by which Mesina acquired the instrument. This Court
declared:
Petitioner's allegations hold no water. Theories and examples
advanced by petitioner on causes and effects of a cashier's check
such as (1) it cannot be countermanded in the hands of a holder in
due course and (2) a cashier's check is a bill of exchange drawn by
the bank against itself — are general principles which cannot be aptly
applied to the case at bar, without considering other things. Petitioner
failed to substantiate his claim that he is a holder in due course and
for consideration or value as shown by the established facts of the
case. Admittedly, petitioner became the holder of the cashier's check
as endorsed by Alexander Lim who stole the check. He refused to say
how and why it was passed to him. He had therefore notice of the
defect of his title over the check from the start. 63
Ultimately, the notice of defect affected Mesina's claim as a holder of
the manager's check. This Court ruled that the issuing bank could
validly refuse payment because Mesina was not a holder in due
course. Unequivocally, the Court declared: "the holder of a cashier's
check who is not a holder in due course cannot enforce such check
against the issuing bank which dishonors the same." 64 EcTCAD
In the same manner, in United Coconut Planters Bank (UCPB), 65 this

Court ruled that the drawee bank was legally, justified in refusing to pay the
holder of a manager's check who did not hold the check in due course. In
UCPB, Altiura Investors, Inc. purchased a manager's check from UCPB, which
then issued a manager's check in the amount of Four Hundred Ninety Four
Thousand Pesos (P494,000) to Makati Bel-Air Developers, Inc. The manager's
check represented the payment of Altiura Investors, Inc. for a condominium
unit it purchased from Makati Bel-Air Developers, Inc. Subsequently, Altiura
Investors, Inc. instructed UCPB to hold payment due to material
misrepresentations by Makati Bel-Air Developers, Inc. regarding the
condominium unit. 66 Pending negotiations and while the stop payment
order was in effect, Makati Bel-Air Developers, Inc. insisted that UCPB pay
the value of the manager's check. UCPB refused to pay and filed an
interpleader to allow Altiura Investors, Inc. and Makati Bel-Air Developers,
Inc. to litigate their respective claims. Makati Bel-Air Developers, Inc. also
filed a counterclaim against UCPB in the amount of Five Million Pesos
(P5,000,000) based on UCPB's violation of its warranty on its manager's
check. 67
In upholding UCPB's refusal to pay the value of the manager's check,
this Court reasoned that Makati Bel-Air Developers, Inc.'s title to the
instrument became defective when there arose a partial failure of
consideration. 68 We held that UCPB could validly invoke a personal defense
of the purchaser against Makati Bel-Air Developers, Inc. because the latter
was not a holder in due course of the manager's check:
There are other considerations supporting the conclusion
reached by this Court that respondent appellate court had committed
reversible error. Makati Bel-Air was a party to the contract of sale of
an office condominium unit to Altiura, for the payment of which the
manager's check was issued. Accordingly, Makati Bel-Air was fully
aware, at the time it had received the manager's check, that there
was, or had arisen, at least partial failure of consideration since it was
unable to comply with its obligation to deliver office space amounting
to 165 square meters to Altiura. Makati Bel-Air was also aware that
petitioner Bank had been informed by Altiura of the claimed defect in
Makati Bel-Air's title to the manager's check or its right to the
proceeds thereof. Vis-a-vis both Altiura and petitioner Bank, Makati
Bel-Air was not a holder in due course of the manager's check. 69
The foregoing rulings clearly establish that the drawee bank of a
manager's check may interpose personal defenses of the purchaser of the
manager's check if the holder is not a holder in due course. In short, the
purchaser of a manager's check may validly countermand payment to a
holder who is not a holder in due course. Accordingly, the drawee bank may
refuse to pay the manager's check by interposing a personal defense of the
purchaser. Hence, the resolution of the present case requires a
determination of the status of Odrada as holder of the manager's checks.
In this case, the Court of Appeals gravely erred when it considered
Odrada as a holder in due course. Section 52 of the Negotiable Instruments
Law defines a holder in due course as one who has taken the instrument
under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue,
and without notice that it has been previously dishonored, if such was
the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no
notice of any infirmity in the instrument or defect in the title of the
person negotiating it. (Emphasis supplied)
To be a holder in due course, the law requires that a party must have
acquired the instrument in good faith and for value.
Good faith means that the person taking the instrument has acted with
due honesty with regard to the rights of the parties liable on the instrument
and that at the time he took the instrument, the holder has no knowledge of
any defect or infirmity of the instrument. 70 To constitute notice of an
infirmity in the instrument or defect in the title of the person negotiating the
same, the person to whom it is negotiated must have had actual knowledge
of the infirmity or defect, or knowledge of such facts that his action in taking
the instrument would amount to bad faith. 71
Value, on the other hand, is defined as any consideration sufficient to
support a simple contract. 72
In the present case, Odrada attempted to deposit the manager's
checks on 16 April 2002, a day after Lim had informed him that there was a
serious problem with the Montero. Instead of addressing the issue, Odrada
decided to deposit the manager's checks. Odrada's actions do not amount to
good faith. Clearly, Odrada failed to make an inquiry even when the
circumstances strongly indicated that there arose, at the very least, a partial
failure of consideration due to the hidden defects of the Montero. Odrada's
action in depositing the manager's checks despite knowledge of the
Montero's defects amounted to bad faith. Moreover, when Odrada
redeposited the manager's checks on 19 April 2002, he was already formally
notified by RCBC the previous day of the cancellation of Lim's auto loan
transaction. Following UCPB, 73 RCBC may refuse payment by interposing a
personal defense of Lim — that the title of Odrada had become defective
when there arose a partial failure or lack of consideration. 74
AScHCD
RCBC acted in good faith in following the instructions of Lim. The

records show that Lim notified RCBC of the defective condition of the
Montero before Odrada presented the manager's checks. 75 Lim informed
RCBC of the hidden defects of the Montero including a misaligned engine,
smashed condenser, crippled bumper support, and defective transmission.
RCBC also received a formal notice of cancellation of the auto loan from Lim
and this prompted RCBC to cancel the manager's checks since the auto loan
was the consideration for issuing the manager's checks. RCBC acted in good
faith in stopping the payment of the manager's checks.
Section 58 of the Negotiable Instruments Law provides: "In the hands
of any holder other than a holder in due course, a negotiable instrument is
subject to the same defenses as if it were non-negotiable. . . . ." Since
Odrada was not a holder in due course, the instrument becomes subject to
personal defenses under the Negotiable Instruments Law. Hence, RCBC may
legally act on a countermand by Lim, the purchaser of the manager's
checks.
Lastly, since Lim's testimony involving the Montero's hidden defects
was stricken off the record by the trial court, Lim failed to prove the
existence of the hidden defects and thus Lim remains liable to Odrada for
the purchase price of the Montero. Lim's failure to file an appeal from the
decision of the Court of Appeals made the decision of the appellate court
final and executory as to Lim. RCBC cannot be made liable because it acted
in good faith in carrying out the stop payment order of Lim who presented to
RCBC the complaint letter to Odrada when Lim issued the stop payment
order.
WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE

the 26 March 2014 Decision and the 18 June 2015 Resolution of the Court of
Appeals in CA-G.R. CV No. 94890 only insofar as RCBC Savings Bank is
concerned.
SO ORDERED.
Brion, Del Castillo and Mendoza, JJ., concur.
Leonen, * J., is on official leave.
Footnotes
* On official leave.
1. Rollo, pp. 9-23. Under Rule 45 of the 1997 Rules of Civil Procedure.
2. Id. at 29-36. Penned by Associate Justice Eduardo B. Peralta, Jr., with Associate
Justices Magdangal M. De Leon and Stephen C. Cruz concurring.
3. Id. at 52-53.
4. Id. at 29.
5. Id. at 30.
6. Id.
7. Records, p. 23.
8. Rollo, p. 30.
9. Civil Case No. 02-453.

10. Branch 66, Makati City.
11. Records, pp. 18-21.

12. Id. at 23.
13. Id. at 19.
14. Id.
15. Rollo, p. 30.

16. Id. at 55-62. Penned by Judge Joselito Villarosa.
17. Id. at 59.

18. Id.
19. Id. at 60.
20. Id. at 61.
21. Id. at 62.

22. Id. at 34.
23. Id.
24. Act No. 2031 (1911), Sec. 24.
25. Rollo, p. 35.

26. Id. at 38-50.
27. Id. at 52-53.

28. The records show that RCBC was the only party in the original case which
filed an appeal to this Court.
29. Rollo, p. 13.

30. Id. at 19.
31. Rule 47, Sec. 7. Effect of failure to file comment. — When no comment is filed
by any of the respondents, the case may be decided on the basis of the
record, without prejudice to any disciplinary action which the court may
take against the disobedient party.
32. Counsel for Odrada failed to file comment on the petition within the period
prescribed in the Resolution dated 30 September 2015, which period
expired on 22 November 2015.
33. CIVIL CODE, Art. 1475.

35. CIVIL CODE, Art. 1547 (2).

38. 487 Phil. 259 (2004).

39. Id. at 268.
40. Records, pp. 27-29.
41. Id. at 213.

42. Act No. 2031 (1911).
43. Rizal Commercial Banking Corporation v. Hi-Tri Development Corporation ,

687 Phil. 481 (2012); Bank of the Philippine Islands v. Roxas , 562 Phil. 161
(2007); Bank of the Philippine Islands v. Court of Appeals, 383 Phil. 538
(2000); Tan v. Court of Appeals, G.R. No. 108555, 20 December 1994, 239
SCRA 310.
44. Id.
45. Tan v. Court of Appeals, G.R. No. 108555, 20 December 1994, 239 SCRA 310.
46. For purposes of brevity and applying the previous rulings of this Court when
the Court refers to a manager's check, cashier's checks are also included.
47. Bank of the Philippine Islands v. Court of Appeals, 383 Phil. 538 (2000).
48. Act No. 2031 (1911), Sec. 127.

49. Payee or indorsee of a bill or note who is in possession of it, or the bearer
thereof.
50. Act No. 2031 (1911), Sec. 127.
51. Sec. 62. Liability of Acceptor. — The acceptor, by accepting the instrument,
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.
52. 404 Phil. 353 (2001).
53. Id. at 368.
54. Sec. 53. When person not deemed holder in due course. — Where an
instrument payable on demand is negotiated on an unreasonable length
of time after its issue, the holder is not deemed a holder in due course.
55. 687 Phil. 481 (2012).

56. Id. at 499.
57. Id. at 500.
58. Notably, under Section 16 of the Negotiable Instruments Law, a complete yet
undelivered negotiable instrument gives rise to a personal defense.
59. 229 Phil. 495 (1986).
60. 262 Phil. 397 (1990).
61. Mesina v. Intermediate Appellate Court, supra at 498.


65. United Coconut Planters Bank v. Intermediate Appellate Court, supra note 60.
66. United Coconut Planters Bank v. Intermediate Appellate Court, supra note 60
at 399.
at 400.
at 403.
at 403.
70. Act No. 2031 (1911), Sec. 52.

71. Act No. 2031 (1911), Sec. 56.
72. Act No. 2031 (1911), Sec. 25.
73. Supra note 60.

74. Sec. 28. Effect of want of consideration. — Absence or failure of consideration
is a matter of defense as against any person not a holder in due course . .
..
75. Records, pp. 51-52.

THIRD DIVISION
[G.R. No. 248821. October 10, 2022.]
PHILIPPINE NATIONAL BANK, petitioner, vs. SPS. PEDRO

CAGUIMBAL AND VIVIAN CAGUIMBAL, respondents.
DECISION
INTING, ** J : p
Before the Court is a Petition for Review on Certiorari 1 under Rule 45

of the Rules of Court filed by Philippine National Bank (PNB) assailing the
Decision 2 dated February 19, 2019 and the Resolution 3 dated July 1, 2019
of the Court of Appeals (CA) in CA-G.R. CV No. 04755-MIN. The assailed
Decision: (1) set aside the Decision 4 dated April 27, 2017 of Branch 5,
Regional Trial Court (RTC) of Butuan City which dismissed the Complaint 5
for sum of money, damages and attorney's fees filed by Spouses Pedro
Caguimbal and Vivian Caguimbal (respondents) and (2) ordered PNB to pay
respondents P100,000.00 as moral damages, P100,000.00 as exemplary
damages, and P50,000.00 as attorney's fees and costs of litigation.
The Antecedents
Respondent Vivian is a sub-contractor of logs for SAMMILIA Federation
of People's Forest Development Cooperative (SAMMILIA) 6 in Diatagon,
Lianga, Surigao del Sur. SAMMILIA, in turn, sells the logs to Baganga Plywood
Corporation (Baganga Ply). Sometime in 2010, Vivian delivered logs to
Baganga Ply and the latter issued six (6) PNB-Mati checks to Vivian in the
total amount of P3,494,129.50 described as follows:
a. Check No. 42439 in the amount of P1,319,085.00;
b. Check No. 42400 in the amount of P1,000,000.00;
c. Check No. 42438 in the amount of P98,075.00;
d. Check No. 42399 in the amount of P1,000,000.00;
e. Check No. 42437 in the amount of P39,011.00; and
f. Check No. 42445 in the amount of P37,958.50. 7
On August 9, 2010, Faith Caguimbal (Faith), Vivian's daughter, went to
PNB-Butuan Branch to verify if the checks were good. She approached PNB-
Butuan Branch Sales and Service Officer, Grace Besa (Grace) to make such
inquiry. Upon verification, Grace informed Faith that a Stop Payment Order
(SPO) was issued by Baganga Ply on the said checks. 8
On August 12, 2010, the checks were again presented to PNB-Butuan
Branch. This time, it was presented for deposit by Jill Martirez, cousin of
Faith, to the branch's Sales and Service Head, Carlos S. Lim, Jr. (Carlos).
Carlos, not knowing that the checks were previously inquired for verification,
accepted all six (6) checks for deposit and sent them for clearing. 9
On August 16, 2010, five (5) out of the six (6) checks were returned
with stamp marks "SPO-funded" and accordingly, the amounts corresponding
the five (5) checks earlier deposited to the joint account of Vivian and Faith
were debited. Meanwhile, the other check in the amount of P1,000,000.00
(Check No. 42399) was not returned by the bank. When Vivian and Faith
inquired as to its status, they were informed by Grace that the check "might
be delayed for a day." 10 In the meantime, Vivian sent a letter to Baganga
Ply asking the latter to lift the SPO at least on the subject check. 11 CAIHTE
On August 19, 2010, Faith went to PNB-Butuan Branch to update their

passbook and saw that the amount of P1,000,000.00 was still intact and
remained credited prompting respondents to assume that Baganga Ply had
lifted the SPO on the subject check. 12 For the period of August 18, 2010 to
August 31, 2010, Faith deposited and withdrew from the joint account and
during the duration of which the amount of P1,000,000.00 remained intact in
the balance of the joint account. 13
On September 1, 2010, after Faith withdrew P25,000.00 from the joint
account, she was shocked to see that the remaining balance left in the
account was only P10,518.61. When Faith inquired from the branch
manager, she was informed that the amount of P1,000,000.00 was debited
from the account in order to implement the SPO made in relation to the
subject check. 14
The following day, September 2, 2010, PNB-Butuan Branch contacted
Vivian and informed her about the SPO of the last check. When Vivian
demanded for an explanation, she was eventually informed that it was only
on August 27, 2010 that PNB learned that the subject check was only
cleared through mistake after PNB received a complaint from Baganga Ply.
However, Vivian refused to accept the explanation contending that the check
was already cleared considering that the SPO came only 15 days after it was
deposited when the clearing period was only 7 days. Meanwhile, Vivian was
forced to borrow money from friends and associates to pay for her
obligations which she was supposedly going to pay using the P1,000,000.00
from her account. 15
When PNB refused to return the P1,000,000.00 despite demands of
Vivian, she filed the present complaint. 16
In its Answer, 17 PNB alleged, among others, that respondents have no
cause of action against it because it merely implemented the SPO of its
client. It further averred that the actual knowledge of respondents of the
existence of the SPO makes them not holders in due course of the subject
check negating their right to sue nor demand for the payment of the check
under the Negotiable Instruments Law. PNB further claimed for moral
damages, exemplary damages, and attorney's fees by way of counterclaim.
18
The Ruling of the RTC

In its Decision 19 dated April 27, 2017, the RTC dismissed the
complaint. It ruled that respondents have no right over the amount of the
check for their failure to show by concrete evidence that Baganga Ply lifted
the SPO made on the subject check. Not being entitled to the amount of the
check, PNB did not violate any right of respondents as to give rise to a cause
of action. It further ruled that respondents should have impleaded Baganga
Ply as the real party in interest, it being the drawer of the check. 20
Aggrieved, respondents appealed to the CA.
The Ruling of the CA
The CA rendered a Decision 21 dated February 19, 2019, the dispositive
portion of which states:
WHEREFORE, the appeal is partly GRANTED. The April 27, 2017
Decision of the Regional Trial Court of Agusan del Norte, Branch 5,
Butuan City, in Civil Case No. 6090 is SET ASIDE and a new one is
entered ordering PNB to pay plaintiffs-appellants (herein
respondents) P100,000.00 as moral damages, P100,000.00 as
exemplary damages, and P50,000.00 as attorney's fees and costs of
litigation.
SO ORDERED. 22
The CA decreed that while PNB has the right to debit the amount
erroneously credited to respondents' account, especially when respondents
can hardly be considered as holders in due course of the check because they
were fully aware that the check was previously subject to a SPO, PNB was
nevertheless grossly negligent in attending to its business when it abruptly
debited the account of respondents without prior notice rendering it liable
for damages. 23
Petitioner filed a Motion for Reconsideration 24 which the CA denied in
a Resolution 25 dated July 1, 2019.
Hence, petitioner filed the present petition raising the following errors:
Issues
I.
WHILE THE HONORABLE COURT OF APPEALS HAS CORRECTLY RULED
THAT PETITIONER HAS THE RIGHT TO DEBIT/REVERSE/RECOVER
FROM RESPONDENTS' ACCOUNT THE CHECK DEPOSIT FOR PHP1
MILLION WHICH WAS THE SUBJECT OF A STANDING SPO, IT
COMMITTED A MISAPPREHENSION OF FACTS WHEN IT HELD THAT
PETITIONER DID SO IN AN ARBITRARY MANNER.
II.
THE COURT OF APPEALS HAS DECIDED IN A MANNER CONTRARY TO
LAW AND SETTLED JURISPRUDENCE WHEN IT HELD THAT
RESPONDENTS ARE ENTITLED TO MORAL AND EXEMPLARY DAMAGES,
AND ATTORNEY'S FEES AND EXPENSES OF LITIGATION. 26
In its Petition for Review on Certiorari, 27 petitioner argues that the
manner it recalled the amount of P1,000,000.00 from the account of
respondents cannot be considered as arbitrary considering that respondents
were very much aware of the standing SPO on the subject check even before
they deposited it in their account. It avers that it was constrained to
immediately debit the account of respondents in order to preserve the funds
considering the frequency by which respondents were withdrawing from
their account, otherwise, had respondents withdrawn the amount before it
could recall the same, it would only result in another cycle of litigation for
recovery of the subject amount. DETACa
Petitioner further argues that the subject check was only inadvertently
cleared because of an honest mistake and was not attended with fraud or
bad faith that would warrant the imposition of moral damages, exemplary
damages, and attorney's fees in favor of respondents.
In their Comment, 28 respondents assert that the CA's findings are
substantiated by the records and not based on mere speculations. They also
assert that the CA committed no reversible error in awarding moral and
exemplary damages and attorney's fees as they have sufficiently proved and
established their entitlement to it.
Thereafter, petitioner filed its Reply, 29 reiterating the arguments
raised in its petition.
Our Ruling
The petition is unmeritorious.
The crux of the controversy revolves around the determination of
whether PNB observed the due diligence expected of it as a banking
institution when it handled the account of respondents.
The Court reiterates that its jurisdiction in a petition for review on
certiorari under Rule 45 of the Rules of Court is generally limited only to
errors involving questions of law. However, one of the recognized exceptions
30 is when the findings of the RTC and the CA are conflicting or contradictory
as in the present case. Thus, the Court is constrained to review and
reevaluate the evidence of the parties in order to resolve the issues raised.
31
Time and again, the Court has consistently emphasized that the degree
of diligence required of banks is more than that of a good father of a family.
32 The banking industry is impressed with public interest and as such, banks
are expected to exercise the highest degree of diligence as well as high
standards, and integrity and performance in all its transactions. By the
nature of its functions, a bank is under obligation to treat the accounts of its
depositors with meticulous care and always to have in mind the fiduciary
nature of its relationship with them. 33
In fact, as early as 1990, the Court in the landmark case ofSimex
International (Manila), Inc. v. Court of Appeals 34 has already stressed the
fiduciary duty of banks towards their clients:
The banking system is an indispensable institution in the
modern world and plays a vital role in the economic life of every
civilized nation. Whether as mere passive entities for the safekeeping
and saving of money or as active instruments of business and
commerce, banks have become an ubiquitous presence among the
people, who have come to regard them with respect and even
gratitude and, most of all, confidence. Thus, even the humble wage-
earner has not hesitated to entrust his life's savings to the bank of his
choice, knowing that they will be safe in its custody and will even
earn some interest for him. The ordinary person, with equal faith,
usually maintains a modest checking account for security and
convenience in the settling of his monthly bills and the payment of
ordinary expenses. As for business entities like the petitioner, the
bank is a trusted and active associate that can help in the running of
their affairs, not only in the form of loans when needed but more
often in the conduct of their day-to-day transactions like the issuance
or encashment of checks.
In every case, the depositor expects the bank to treat his
account with the utmost fidelity, whether such account consists only
of a few hundred pesos or of millions. The bank must record every
single transaction accurately, down to the last centavo, and as
promptly as possible. This has to be done if the account is to reflect at
any given time the amount of money the depositor can dispose of as
he sees fit, confident that the bank will deliver it as and to whomever
he directs. x x x
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. x x x 35
Thus, the fiduciary nature of the banking business requires banks to
comply with two essential and fundamental obligations — to treat their
clients' accounts with utmost fidelity and meticulous care, and to record all
transactions accurately and promptly. 36
In the case at bar, PNB clearly failed to meet these two essential and
fundamental obligations.
First, PNB admitted having cleared and credited the subject check to
respondents' account by mistake despite the SPO of Baganga Ply. Its
defense that it did not act with fraud or bad faith does not alter the fact that
it was negligent in handling its affairs.
For one thing, banks, an industry where the general public's trust and
confidence in the system is of paramount importance, 37 cannot afford to
commit any mistake in handling their affairs no matter how slight.
Second, PNB's negligence in handling the account of respondents was
further exemplified by the actions it took from the time the check was
deposited on August 12, 2010 until it discovered its mistake on August 27,
2010. aDSIHc
While PNB consistently asserted that respondents were fully informed

that the subject check will eventually be dishonored and that the return of
the actual check "might be delayed for a day," thereby implying that it was
also expecting its return, its admission that it was only on August 27, 2010
or fifteen (15) days after the subject check was deposited that it discovered
its mistake and only after Baganga Ply had called its attention contradicts its
position. If what PNB claims is true, it should have actively monitored the
status and whereabouts of the subject check in order to maintain the
accuracy of its records, especially the accounts of Baganga Ply and
respondents.
Moreover, instead of promptly contacting respondents on August 27,
2010 to discuss its intention of debiting their account due to the discovery of
the error, PNB chose the opposite. It waited until September 1, 2010 before
informing respondents of the dishonor and only after it had debited their
account.
PNB's explanation that it could not have informed respondents on
August 27, 2010 about the dishonor because its Butuan Branch only received
the e-mail instructions to reverse the P1,000,000.00 from respondents'
account on August 31, 2010 from its Mati Branch at the closing hours of
August 27, 2010, making it appear that it has no control over the operating
procedures of its branches, deserves scant consideration.
In the case, considering that the dishonor of the subject check
transpired in 2010 when cellular phones and internet connections were
already very much accessible, the manager or any responsible officer of Mati
Branch could have simply called its counterpart at Butuan to immediately
relay and explain the situation to respondents.
PNB, owing to its fiduciary duty to its depositors, should have taken the
extra steps of finding a way to immediately apprise respondents of the
situation even if it would mean that its officers would have to work beyond
the official banking hours of August 27, 2010 to rectify or at least deescalate
the situation.
Incidentally, when Faith withdrew from the account on August 31,
2010, PNB still did not inform Faith or respondents about the possible recall
of the P1,000,000.00 from their account. To make things worse, on
September 1, 2010, the entries in respondents' passbook show that after
Faith withdrew P25,000.00, the initial balance of P1,035,518.61 suddenly fell
to P10,518.61. It was only after Faith complained about the loss of the
P1,000,000.00 that PNB corrected the entries in the passbook by adding a
new debit entry of P1,000,000.00 with remarks "vs SPO" and explained its
reason to her. Otherwise stated, had Faith not noticed the loss of the
P1,000,000.00 from the balance of the account, PNB would not even bother
itself to take the initiative of informing respondents regarding the debit of
the subject amount.
Furthermore, PNB's argument that respondents should have expected
the reversal of the P1,000,000.00 from their account by reason of their
knowledge of the SPO on the subject check does not obliterate PNB's
negligence. Respondents should not be faulted for assuming that the SPO on
the subject check was eventually lifted by Baganga Ply because the
P1,000,000.00 remained in their account for at least thirteen (13) days from
August 19, 2010, the day they sent a letter request to Baganga Ply to allow
the payment of the subject check.
Certainly, PNB's lackadaisical attitude in dealing with the account of
respondents falls short even of the slightest degree of diligence required of
it. The business of a bank is imbued with public interest; thus, it requires due
diligence and meticulousness in giving irreproachable service. For this
reason, the bank should guard against injury attributable to negligence or
bad faith on its part. The banking sector must at all times maintain a high
level of meticulousness. 38
Thus, the Court is compelled to sustain the moral damages, exemplary
damages, attorney's fees and costs of litigation awarded by the CA in favor
of respondents.
Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate
result of the defendant's wrongful act or omission. 39 Further, moral
damages are not awarded to penalize the defendant but to compensate the
plaintiff for the injuries he may have suffered. 40 Moreover, in view of the
significant role of banking institutions in commercial transactions, not to
mention its contribution, to the economy in general, 41 the Court, in several
cases, 42 has imposed damages and attorney's fees against them for their
failure to exercise the highest degree of diligence, along with high standards
of integrity and performance in the discharge of its functions. 43
In the case, PNB allowed the P1,000,000.00 to remain in respondents
account for more than two (2) weeks from the time it was deposited making
them believe that it was within their disposal. When PNB realized that the
P1,000,000.00 was only credited to respondents' account due to an error, it
unceremoniously debited the amount from respondents' account. Worse,
PNB only offered to explain the deduction after Faith complained about it.
Simply put, PNB's failure to exercise the highest degree of diligence
expected of it justifies the imposition of moral damages against it. This is in
addition to the anxiety and social humiliation suffered by respondent Vivian
when she had to seek for loans from friends and associates to cover the
amount.
With regard to the award of exemplary damages, the Court sustains
the award of exemplary damages in view of PNB's negligence to promptly
and accurately record respondents' transactions. Such damages are
imposed by way of example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory damages. 44
Finally, the award of attorney's fees and costs of litigation is
maintained since respondents were compelled to litigate and protect their
rights consistent with Article 2208 of the Civil Code. 45
WHEREFORE, the Petition for Review on Certiorari is DENIED. The
Decision dated February 19, 2019 and Resolution dated July 1, 2019 of the
Court of Appeals in CA-G.R. CV No. 04755-MIN are AFFIRMED with
MODIFICATION. Petitioner Philippine National Bank is ordered to pay
respondents Spouses Pedro Caguimbal and Vivian Caguimbal P100,000.00
as moral damages, P100,000.00 as exemplary damages, and P50,000.00 as
attorney's fees and costs of litigation, all with legal interest at the rate of 6%
per annum from the date of finality of this Decision until fully paid. ETHIDa
SO ORDERED.
Gaerlan, Dimaampao and Singh, JJ., concur.
Caguioa, * J., is on official leave.
Footnotes
* On official leave.
** Per Special Order No. 2918-Revised dated October 12, 2022.

1. Rollo, pp. 46-95.
2. Id. at 97-129. Penned by Associate Justice Loida S. Posadas-Kahulugan and

concurred in by Associate Justices Tita Marilyn Payoyo-Villordon and Evalyn
N. Arellano-Morales.
3. Id. at 131-133.
4. Id. at 332-340. Penned by Presiding Judge Augustus L. Calo.
5. Id. at 134-154.
6. Referred to as "SAMMILLA" in some parts of the rollo.
7. See id. at 146-147.

8. Id. at 333.
9. Id.
10. Id. at 98.
11. Id. at 102.
12. Id. at 338.

13. Id. at 333.
14. Id. at 99-100.

15. Id.
16. Id. at 134-154.

17. Id. at 155-176.
18. Id. at 335.
19. Id. at 332-340.

20. Id. at 339.
21. Id. at 97-129.

22. Id. at 128.
23. Id. at 122.

24. Id. at 395-402.
25. Id. at 131-133.

26. Id. at 61-62.
27. Id. at 46-95.
28. Id. at 407-417.

29. Id. at 436-463.
30. Miro v. Vda. de Erederos, 721 Phil. 772, 786 (2013). See also Cirtek Employees
Labor Union-Federation of Free Workers v. Cirtek Electronics, Inc., 665 Phil.
784, 789 (2011), where the Court enumerated the following exceptions to
the general rule: (1) When the conclusion is a finding grounded entirely on
speculation, surmises and conjectures; (2) When the inference made is
manifestly mistaken, absurd or impossible; (3) Where there is a grave abuse
of discretion; (4) When the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting; (6) When the Court of Appeals,
in making its findings, went beyond the issues of the case and the same is
contrary to the admissions of both appellant and appellee; (7) When the
findings are contrary to those of the trial court; (8) When the findings of fact
are conclusions without citation of specific evidence on which they are
based; (9) When the facts set forth in the petition as well as in the
petitioners' main and reply briefs are not disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record.
31. MOF Company, Inc. v. Shin Yang Brokerage Corp. , 623 Phil. 424, 433 (2009).
32. Philippine National Bank v. Pike, 507 Phil. 322, 341 (2005).
33. Consolidated Bank and Trust Corporation v. Court of Appeals, 457 Phil. 688,
690 (2003).
34. 262 Phil. 387 (1990).
35. Id. at 395-396.
36. Metropolitan Bank and Trust Company v. Carmelita Cruz and Vilma Lowtay,
G.R. No. 221220, January 19, 2021.
37. Bank of the Philippine Islands v. Court of Appeals, 383 Phil. 538, 554 (2000).
38. Solidbank Corporation v. Sps. Arrieta, 492 Phil. 95, 105 (2005).
39. Civil Code of the Philippines, Art. 2217.

40. Bank of Commerce v. Spouses San Pablo, Jr., 550 Phil. 805, 823 (2007).
41. Philippine National Bank v. Vila , 792 Phil. 86, 98-99 (2016).
42. Philippine Savings Bank v. Chowking Food Corporation, 579 Phil. 589, 596-597
(2008); Gonzales v. Phil. Commercial and International Bank, 659 Phil. 244,
272 (2011); Philippine National Bank v. Vila , 792 Phil. 86, 98-99 (2016).
43. Banta v. Equitable Bank, Inc., G.R. No. 223694, February 10, 2021.
44. Article 2229, Civil Code of the Philippines.
45. Article 2208. In the absence of stipulation, attorney's fees and expenses of
litigation, other than judicial costs, cannot be recovered, except:
xxx xxx xxx
(2) When the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest.

FIRST DIVISION
[G.R. No. 141408. October 18, 2007.]
METROPOLITAN BANK AND TRUST COMPANY , petitioner, vs.

PHILIPPINE BANK OF COMMUNICATIONS, FILIPINAS ORIENT
FINANCE CORPORATION, PIPE MASTER CORPORATION and
TAN JUAN LIAN, respondents.
[G.R. No. 141429. October 18, 2007.]
SOLID BANK CORPORATION , petitioner, vs. FILIPINAS ORIENT

FINANCE CORPORATION, PIPE MASTER CORPORATION, TAN
JUAN LIAN and/or PHILIPPINE BANK OF COMMUNICATIONS ,
respondents.
DECISION
SANDOVAL-GUTIERREZ, J : p
Sometime in 1978, Pipe Master Corporation (Pipe Master) represented

by Yu Kio, its president, applied for check discounting with Filipinas Orient
Finance Corporation (Filipinas Orient). The latter approved and granted the
same.
On July 1, 1978, the Board of Directors of Pipe Master issued a Board
Resolution authorizing Yu Kio, in his capacity as president, and/or Tan Juan
Lian, in his capacity as vice-president, to execute, indorse, make, sign,
deliver or negotiate instruments, documents and such other papers
necessary in connection with any transaction coursed through Filipinas
Orient for and in behalf of the corporation.
Tan Juan Lian then executed in favor of Filipinas Orient a continuing
guaranty that he shall pay at maturity any and all promissory notes, drafts,
checks, or other instruments or evidence of indebtedness for which Pipe
Master may become liable; that the extent of his liability shall not at any one
time exceed the sum of P1,000,000.00; and that in the event of default by
Pipe Master, Filipinas Orient may proceed directly against him.
On April 9, 1980, under the check discounting agreement between Pipe
Master and Filipinas Orient, Yu Kio sold to Filipinas Orient four Metropolitan
Bank and Trust Company (Metro Bank) checks amounting to P1,000,000.00.
In exchange for the four Metro Bank checks, Filipinas Orient issued to Yu Kio
four Philippine Bank of Communications (PBCom) crossed checks totaling
P964,303.62, payable to Pipe Master with the statement "for payee's
account only."
Upon his receipt of the four PBCom checks, Yu Kio indorsed and
deposited in the Metro Bank, in his personal account, three of the checks
valued at P721,596.95. As to the remaining check amounting to
P242,706.67, he deposited it in the Solid Bank Corporation (Solid Bank), also
in his personal account. Eventually, PBCom paid Metro Bank and Solid Bank
the amounts of the checks. In turn, Metro Bank and Solid Bank credited the
value of the checks to the personal accounts of Yu Kio. STCDaI
Subsequently, when Filipinas Orient presented the four Metro Bank

checks equivalent to P1,000,000.00 it received from Yu Kio, they were
dishonored by the drawee bank. Pipe Master, the drawer, refused to pay the
amounts of the checks, claiming that it never received the proceeds of the
PBCom checks as they were delivered and paid to the wrong party, Yu Kio,
who was not the named payee.
Filipinas Orient then demanded that PBCom restore to its (Filipinas
Orient's) account the value of the PBCom checks. In turn, PBCom sought
reimbursement from Metro Bank and Solid Bank, being the collecting banks,
but they refused. Thus, Filipinas Orient filed with the Regional Trial Court
(RTC), Branch 39, Manila a complaint for a sum of money against Pipe
Master, Tan Juan Lian and/or PBCom.
In their answer to the complaint, Pipe Master and Tan Juan Lian averred
that they did not authorize Yu Kio to negotiate and enter into discounting
transaction with Filipinas Orient, and even if Yu Kio was so authorized, Pipe
Master never received the proceeds of the checks. Consequently, they filed a
cross-claim against PBCom for gross negligence for having paid the wrong
party. In turn, PBCom, Pipe Master and Tan Juan Lian filed third-party
complaints against Metro Bank and Solid Bank.
On July 12, 1990, the RTC rendered a Decision against Metro Bank and
Solid Bank, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering third-party defendant Metro Bank to pay plaintiff the
amount of Seven Hundred Twenty One Thousand Five Hundred
Ninety Six Pesos and Ninety-Five Centavos (P721,596.95) plus
legal interest;
2. Ordering third-party defendant Solid Bank to pay plaintiff the amount
of Two Hundred Forty-Two Thousand Seven Hundred Six Pesos
and Sixty-Seven Centavos (P242,706.67) plus legal interest;
3. Ordering third-party defendants to pay the costs of suit.
SO ORDERED.
On appeal, the appellate court affirmed in toto the Decision of the trial
court. Metro Bank and Solid Bank filed their respective motions for
reconsideration but the same were denied.
Hence, the instant consolidated petitions for review on certiorari filed
by Metro Bank and Solid Bank.
The issue for our resolution is whether Metro Bank and Solid Bank,
petitioners, are liable to respondent Filipinas Orient for accepting the PBCom
crossed checks payable to Pipe Master.
Petitioner banks contend that respondents Pipe Master, Tan Juan Lian
and/or PBCom should be made liable to respondent Filipinas Orient for the
value of the checks.
Respondents Pipe Master and Tan Juan Lian counter that although Yu
Kio was expressly authorized to indorse Pipe Master's checks, such authority
extended only to acts done in the ordinary course of business, not in his
personal capacity. For its part, respondent Filipinas Orient contends that
petitioner banks were negligent in allowing Yu Kio to deposit the PBCom
checks in his account. Respondent PBCom, as the drawee bank, maintains
that it has no liability because in clearing the checks, it relied on the express
guarantee made by petitioner banks that the checks were validly indorsed.
TICAcD
We find in favor of respondents.

A check is defined by law as a bill of exchange drawn on a bank
payable on demand. 1 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." 3
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.
In Associated Bank v. Court of Appeals, 6 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.
PBCom, as the drawee bank, cannot be held liable since it mainly
relied on the express guarantee made by petitioners, the collecting banks, of
all prior indorsements.
Evidently, petitioner banks disregarded established banking rules and
procedures. They were negligent in accepting the checks and allowing the
transaction to push through. In Jai-Alai Corp. of the Phil. v. Bank of the Phil.
Islands, 7 we ruled that one who accepts and encashes a check from an
individual knowing that the payee is a corporation does so at his peril.
Therefore, petitioner banks are liable to respondent Filipinas Orient.
In fine, it must be emphasized that the law imposes on the collecting
bank the duty to diligently scrutinize the 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 on this field, and the law thus holds it to a high standard of
conduct. 8 Since petitioner banks' negligence was the direct cause of the
misappropriation of the checks, they should bear and answer for respondent
Filipinas Orient's loss, without prejudice to their filing of an appropriate
action against Yu Kio.
WHEREFORE, we DENY the petitions. The challenged Decision 9 and
Resolution of the Court of Appeals in CA-G.R. CV No. 30702 are AFFIRMED.
Costs against petitioners. HEcIDa
SO ORDERED.
Puno, C.J., Corona, Azcuna and Garcia, JJ., concur.
Footnotes
1. Section 185, Act No. 2031, The Negotiable Instruments Law.

2. State Investment House v. Intermediate Appellate Court, G.R. No. 72764, July
13, 1989, 175 SCRA 310.
3. Philippine Commercial International Bank v. Court of Appeals, G.R. No. 121413,
January 29, 2001, 350 SCRA 446.
4. Under Section 72 of the Negotiable Instruments Law, presentment for payment,
to be sufficient, must be made by the holder, or by some person authorized
to receive payment on his behalf.
5. Yang v. Court of Appeals, G.R. No. 138074, August 15, 2003, 409 SCRA 159.
6. G.R. Nos. 107382 and 107612, January 31, 1996, 252 SCRA 620, citing Bank of
the Philippine Islands v. Court of Appeals, G.R. No. 102383, November 26,
1992, 216 SCRA 51.
7. No. L-29432, August 6, 1975, 66 SCRA 29.
8. Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corp., No. L-
74917, January 20, 1988, 157 SCRA 188.

9. Penned by Associate Justice B.A. Adefuin-de la Cruz and concurred in by
Associate Justice Eugenio S. Labitoria (retired) and Associate Justice
Presbitero J. Velasco, Jr. (now a member of this Court).IHaCDE

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AUGUST TERM, 1878.

Corbett vs. Clark and another.

no sncli demand, no right of action therefor had been perfected

Corbett vs. Clark and another.

Bill of Exchange: (1) What constitutes. (2, 3) When acceptance abso-

APPEAL from tbe Circuit Court for Fond d%tLao County.

Corbett vs. Clark and another.

and oral argument by Ghas. E. Shepard. They contended,

ORTON,J. This action is brought by the payee, the re-

Corbett vs. Clark and another.

order the words, “ Order accepted,’’ and signed tbe same, by

Corbett vs. Claris and another.

Corbett ys. Clark and another.

By tbe above test there would seem to be no question that

Corbett vs. Clark and another.

and that the payment, when made, was to be carried to a par-

Corbett vs. Clark and another.

Corbett vs. Clark and another.

held that it was not a bill of exchange, but a mere engage-

Corbett vs. Clark and another.

mands against the assignor arising from other transactions in

rules of statutory construction, hold that the law of May 1,.

Brinkerhoff, C.J., and Scott, Sutliff, and Gholson, JJ.;

George Myers, John C. Fall and John A. Collins v. Need-

Motion for a new trial, reserved in tbe district court of'

and a verdict rendered for the plaintiffs. After the verdict, a

.their clerk and S. A. Wheeler, one of the partners of Stand-

fore stated, of the declaration of one of the partners, as to-

It. P. Spalding, for defendant Chamberlin, in support of

ed., 1830; Byles on Bills, marg. p. 238; Hill v. Varrett, 3

timied to exist. And in such cases only is a notice of disso-

H. Griswold, for plaintiffs.

470; 7 East, 231; 5 Pick. 444; Chitty on Bills, 163; 16

given notice of dissolution, or that the plaintiffs had actual

Gholson, J. The first reason assigned for a new trial is

of Salem, 1 Ohio St. Rep. 206. And the whole statement

acceptance must be obtained and acted on substantially as that

time and mode of forwarding funds to meet the bill, and of

new consideration. We think that partners who, after disso

consideration. The motion for a new trial will be overruled;

Brinkerhoff, C.J., and Scott, Sutliff and Peck, JJ.,

Hiram Fisher’s executor v. James Mossman et al.

In Chancery. Reserved in the district court of Gallia

The case is sufficiently stated in the opinion of the court.

John W. Andrews, for plaintiff.

A. G. Thurman and A. T. Fullerton, for defendants.

Brinkerhoff, C.J. This is a bill in chancery for foreclo-

Newhall & another v. Clark.

renders him liable in an action for the price of the goods.

Moreton Newhall & another vs. Joseph W. Clark.

The plaintiffs, as the payees, brought this action against

The trial was before Colby, J., in the court of common

complete the work, and that in February, 1845, the work

* Fletcher, J., did not sit in this case.

within this category. The acceptance was an agreement to

ance ; and the defendant, therefore, did not become liable by

must be done not merely by showing a cancellation of the

Thomas Foster vs. George H. Plummer & others.