NATIVIDAD GEMPESAW vs. CA and PHILIPPINE BANK OF COMMUNICATIONS - G.R. No. 92244

NATIVIDAD GEMPESAW vs. CA and PHILIPPINE BANK OF COMMUNICATIONS

G.R. No. 92244            February 9, 1993

Natividad Gempesaw issued checks, prepared by her bookkeeper, a total of 82 checks in favor of several supplies. Most of the checks for amounts in excess of actual obligations as shown in their corresponding invoices. It was only after the lapse of more than 2 years did she discovered the fraudulent manipulations of her bookkeeper. It was also learned that the indorsements of the payee were forged, and the checks were brought to the chief accountant of Philippine Bank of Commerce (the Drawee Bank, Buendia Branch) who deposited them in the accounts of Alfredo Romero and Benito Lam. Gempesaw made demand upon the bank to credit the amount charged due the checks. The bank refused. Hence, the present action.

Issue: Who shall bear the loss resulting from the forged indorsements.

Held: As a rule, a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer’s account for the amount of said check. An exception to the rule is where the drawer is guilty of such negligence which causes the bank to honor such checks. Gempesaw did not exercise prudence in taking steps that a careful and prudent businessman would take in circumstances to discover discrepancies in her account. Her negligence was the proximate cause of her loss, and under Section 23 of the Negotiable Instruments Law, is precluded from using forgery as a defense. On the other hand, the banking rule banning acceptance of checks for deposit or cash payment with more than one indorsement unless cleared by some bank officials does not invalidate the instrument; neither does it invalidate the negotiation or transfer of said checks. The only kind of indorsement which stops the further negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation thereof, pursuant to Section 36 of the Negotiable Instruments Law. In light of any case not provided for in the Act that is to be governed by the provisions of existing legislation, pursuant to Section 196 of the Negotiable Instruments Law, the bank may be held liable for damages in accordance with Article 1170 of the Civil Code. The drawee bank, in its failure to discover the fraud committed by its employee and in contravention banking rules in allowing a chief accountant to deposit the checks bearing second indorsements, was adjudged liable to share the loss with Gempesaw on a 50:50 ratio.

MANILA LIGHTER TRANSPORTATION, INC. vs. CA - G.R. No. L-50373

MANILA LIGHTER TRANSPORTATION, INC. vs. CA

and CHINA BANKING CORPORATION

G.R. No. L-50373         February 15, 1990

Manila Lighter Transportation issued 49 checks to its customers in payment of brokerage or lighterage services and were all delivered to its collector, Augusto Perez. Upon forged indorsements of the company’s General Manager, Luis Gaskell, the checks found their way to the accounts of third persons and were later withdrawn. A complaint to recover the value of the checks were filed against China Bank. Bank denied liability.

Issue: Whether or not the bank is negligent as to bear the loss resulting from the checks with forged indorsements.

Held: Since Manila Lighter Transportation was not a client of the bank, the latter had no way of ascertaining the authenticity of its indorsements on the checks which were deposited in the accounts of third persons (Ko Lit and Cao Pek) in said bank. The bank was not negligent because, in accordance with banking practice, it caused the checks to pass through the clearing house before it allowed their proceeds to be withdrawn by the depositors.

REPUBLIC BANK vs. CA and FIRST NATIONAL CITY BANK - G.R. No. 42725

REPUBLIC BANK vs. CA and FIRST NATIONAL CITY BANK

G.R. No. 42725                        April 22, 1991

San Miguel Corporation issued a dividend check for P240 in favor of J. Roberto Delgado, a stockholder. Delgado altered the amount of the check to P9,240. The check was indorsed and deposited by Delgado with Republic Bank. Republic Bank endorsed the check to First National City Bank (FNCB), the drawee bank, by stamping on the back of the check “all prior and / or lack of indorsements guaranteed. Relying on the endorsement, FNCB paid the amount to Republic Bank. Later on, San Miguel informed FNCB of the material alteration of the amount. FNCB recredited the amount to San Miguel’s account, and demanded refund from Republic Bank. Republic Bank refused. Hence, the present action.

Issue: Whether or not the bank shall bear the loss resulting from the altered check.

Held: Yes. When an indorsement is forged, the collecting bank or last indorser, as a general rule, bears the loss. But the unqualified indorsement of the collecting bank on the check should be read together with the 24-hour regulation on clearing house operation. Thus, when the drawee bank fails to return a forged or altered check to the collecting bank within the 24-hour clearing period (as provided by Section 4c of Central Bank Circular 9, as amended), the collecting bank is absolved from liability. The drawee bank, FNCB, should bear the loss for the payment of the altered check for its failure to detect and warn Republic Bank of the fraudulent character of the check within the 24-hour clearing house rule.

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM vs. CA - G.R. No. L-62943

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM vs. CA

and THE PHILIPPINE NATIONAL BANK

G.R. No. L-62943         July 14, 1986

By special arrangement with PNB, MWSS used personalized checks in drawing from its account. The checks were printed by its printer, F. Mesina Enterprises. 23 checks were paid and cleared by PNB, and debited against MWSS’ account from March to May 1969. The checks were deposited by payees Raul Dizon, Arturo Sison, and Antonio Mendoza in their account with PCIBank. Said persons were later found to be fictitious. MWSS requested PNB to restore the amount debited due to the 23 checks, allegedly forged, to its account. The bank refused. Hence, the present action.

Issue: Whether or not the bank shall bear the loss resulting from the alleged forged checks.

Held: No. There was no express and categorical finding that the 23 checks were forged or signed by persons other than the authorized MWSS signatories. Forgery is not presumed but should be established by clear, positive and convincing evidence. MWSS is barred from setting up defense of forgery under Section 23 of the Negotiable Instruments Law as MWSS committed gross negligence in the printing of its personalized checks, failed to reconcile its bank statements with its own records, and failed to provide appropriate security measures over its own record. PNB, the drawee bank, had taken necessary measures in the detection of forged checks and the prevention of their fraudulent encashment through constant reminders to all its current account bookkeepers informing them of the activities of forgery syndicates. MWSS’ gross negligence was the proximate cause of the loss (P3 million), and should bear the loss.

PNB vs. QUIMPO - G.R. No. L-53194

PHILIPPINE NATIONAL BANK vs. HON. ROMULO S. QUIMPO

and FRANCISCO S. GOZON II

G.R. No. L-53194         March 14, 1988

Francisco Gozon was a depositor of the Philippine National Bank (PNB Caloocan City branch). Ernesto Santos, Gozon’s friend, took a check from the latter’s checkbook which was left in the car, filled it up for the amount of P5,000, forged Gozon’s signature, and encashed it. Gozon learned about the transaction upon receipt of the bank’s statement of account, and requested the bank to recredit the amount to his account. The bank refused. Hence, the present action.

Issue: Whether or not the bank shall bear the loss resulting from the forged check.

Held: Yes. The prime duty of a bank is to ascertain the genuineness of the signature of the drawer or the depositor on the check being encashed. It is expected to use reasonable business prudence in accepting and cashing a check being encashed or presented to it. Payment in neglect of duty places upon him the result of such negligence. Still, Gozon’s act in leaving his checkbook in the car, where his trusted friend remained in, cannot be considered negligence sufficient to excuse the bank from its own negligence. The bank bears the loss.

REPUBLIC BANK vs. EBRADA - G.R. No. L-40796

REPUBLIC BANK vs. MAURICIA T. EBRADA

G.R. No. L-40796         July 31, 1975

Mauricia Ebrada encashed a back pay check for P1246.08 at Republic Bank (Escolta Branch). The Bureau of Treasury, which issued the check advised the bank that the alleged indorsement of the check by one “Martin Lorenzo” was a forgery as the latter has been dead since 14 July 1952; and requested that it be refunded he sum deducted from its account. The bank refunded the amount to the Bureau and demanded upon Ebrada the sum in question, who refused. Hence, the present action.

Issue: Whether or not the bank can recover from the last indorser.

Held: According to Section 23 of the Negotiable Instruments Law, where the signature on a negotiable instrument is forged, the negotiation of the check is without force or effect. However, following the ruling in Beam vs. Farrel (US case), where a check has several indorsements on it, only the negotiation based on the forged or unauthorized signature which is inoperative. The last indorser, Ebrada, was duty-bound to ascertain whether the check was genuine before presenting it to the bank for payment. Her failure to do so makes her liable for the loss and the Bank may recover from her the money she received for the check. Had she performed her duty, the forgery would have been detected and fraud defeated. Even if she turned over the amount to Dominguez immediately after receiving the cash proceeds of the check, she is liable as an accommodation party under Section 29 of the Negotiable Instruments Law.

ASSOCIATED BANK vs. CA - G.R. No. 107382/G.R. No. 107612

ASSOCIATED BANK vs. CA,

PROVINCE OF TARLAC and PHILIPPINE NATIONAL BANK

G.R. No. 107382/G.R. No. 107612             January 31, 1996

The Province of Tarlac maintains a current account with the Philippine National Bank (PNB Tarlac Branch) where the provincial funds are deposited. Portions of the funds were allocated to the Concepcion Emergency Hospital. Checks were issued to it and were received by the hospital’s administrative officer and cashier (Fausto Pangilinan). Pangilinan, through the help of Associated Bank but after forging the signature of the hospital’s chief (Adena Canlas), was able to deposit the checks in his personal account. All the checks bore the stamp “All prior endorsement guaranteed Associated Bank.” Through post-audit, the province discovered that the hospital did not receive several allotted checks, and sought the restoration of the debited amounts from PNB. In turn, PNB demanded reimbursement from Associated Bank. Both banks resisted payment. Hence, the present action.

Issue: Who shall bear the loss resulting from the forged checks.

Held: PNB is not negligent as it is not required to return the check to the collecting bank within 24 hours as the banks involved are covered by Central Bank Circular 580 and not the rules of the Philippine Clearing House. Associated Bank, and not PNB, is the one duty-bound to warrant the instrument as genuine, valid and subsisting at the time of indorsement pursuant to Section 66 of the Negotiable Instruments Law. The stamp guaranteeing prior indorsement is not an empty rubric; the collecting bank is held accountable for checks deposited by its customers. However, due to the fact that the Province of Tarlac is equally negligent in permitting Pangilinan to collect the checks when he was no longer connected with the hospital, it shares the burden of loss from the checks bearing a forged indorsement. Therefore, the Province can only recover 50% of the amount from the drawee bank (PNB), and the collecting bank (Associated Bank) is liable to PNB for 50% of the same amount.

PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. CA - G.R. No. 121413

PHILIPPINE COMMERCIAL INTERNATIONAL BANK vs. CA

and FORD PHILIPPINES, INC. and CITIBANK, N.A.

G.R. No. 121413          January 29, 2001

Ford issued Citibank checks in favor of the Commissioner of Internal Revenue as payments of its taxes, through the depository bank Insular Bank of Asia and America (later PCIBank). Proceeds of the checks were never received by the Commissioner, but were encashed and diverted to the accounts of members of a syndicate, to which Ford’s General Ledger Accountant Godofredo Rivera belongs. Upon demand of the Commissioner anew, Ford was forced to make second payment of its taxes. Thus, Ford instituted actions to recover the amounts from the collecting (depository) and drawee banks.

Issue: Whether or not Ford has the right to recover from the collecting bank (PCI Bank) and/or the drawee bank (Citibank) the value of the checks.

Held: The mere fact that forgery was committed by a drawer-payor’s confidential employee or agent, who by virtue of his position had unusual facilities to perpetrate the fraud and imposing the forged paper upon the bank, does not entitle the bank to shift the loss to the drawer-payor, in the absence of some circumstance raising estoppel against the drawer. The rule applies to checks fraudulently negotiated or diverted by the confidential employees who hold them in their possession.

In GRs 121413 and 121479, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. Furthermore, PCIBank’s clearing stamp which guarantees prior or lack of indorsements render PCIBank liable as it allowed Citibank without any other option but to pay the checks. PCIBank, being a depository / collecting bank of the BIR, had the responsibility to make sure that the crossed checks were deposited in “Payee’s account only” as found in the instrument.

In GR 128604, on the other hand, the switching operation involving the checks, while in transit for clearing, were the clandestine or hidden actuations performed by the members of the syndicate in their own personal, covert and private capacity; without the knowledge nor official or conscious participation of PCIBank in the process of embezzlement. Central Bank Circular 580 (1977), however, provide d that any theft affecting items in transit for clearing are for the account of the sending bank (herein PCIBank). Still, Citibank was likewise negligent in the performance of its duties as it failed to establish its payment of Ford’s checks were made in due course and legally in order. The fact that drawee bank did not discover the irregularity seasonably constitutes negligence in carrying out the bank’s duty to its depositors.

REPUBLIC PLANTERS BANK vs. CA - G.R. No. 93073

REPUBLIC PLANTERS BANK vs. CA and FERMIN CANLAS

G.R. No. 93073            December 21, 1992

Republic Planters Bank issued 9 promissory notes signed by Shozo Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc. Yamaguchi and Canlas were authorized by the corporation to apply for credit facilities with the bank in form of export advances and letters of credit or trust receipts accommodations. Three years after, the bank filed an action to recover the sums of money covered by the promissory notes. Worldwide Garment Manufacturing changed its name to Pinch Manufacturing Corp. Canlas alleged he was not liable personally for the corporate acts that he performed, and that the notes were still blank when he signed them.

Issue: Whether or not the corporate treasurer is liable for the amounts in the promissory notes.

Held: Canlas is a co-maker of the promissory notes, under the law, and cannot escape liability arising therefrom. Inasmuch as the instrument contained the words “I promise to pay” and is signed by two or more persons, said persons are deemed to be jointly and severally liable thereon. As the promissory notes are stereotype ones issued by the bank in printed form with blank spaces filled up as per agreed terms of the loan, following customary procedures, leaving the debtors to do nothing but read the terms and conditions therein and to sign as makers or co-makers. Section 14 of the Negotiable Instruments Law, therefore, does not apply. Canlas is solidarily liable with the corporation for the amount of the 9 promissory notes.

DE LA VICTORIA vs. BURGOS - G.R. No. 111190

LORETO D. DE LA VICTORIA vs.

HON. JOSE P. BURGOS, and RAUL H. SESBREÑO

G.R. No. 111190 June 27, 1995

Raul Sesbreno filed a complaint for damages against Assistant City Fiscal Bienvenido Mabanto before the RTC of Cebu City. After trial, judgment was rendered ordering Mabanto to pay Sesbreno P11,000. The decision having become final and executory, the trial court ordered its execution upon Sesbreno’s motion. The writ of execution was issued despite Mabanto’s objection. A notice of garnishment was served upon Loreto de la Victoria as City Fiscal of Mandaue City where Mabanto was then detailed. De la Victoria moved to quash the notice of garnishment claiming that he was not in possession of any money, funds, etc. belonging to Mabanto until delivered to him, and as such are still public funds which could not be subject of garnishment.

Issue: Whether or not the checks subject of garnishment belong to Mabanto or whether they still belong to the government.

Held: Under Section 16 of the Negotiable Instruments Law, every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or drawer with the intent to transfer title to the payee and recognize him as the holder thereof. Herein, the salary check of a government officer or employee does not belong to him before it is physically delivered to him. Inasmuch as said checks had not yet been delivered to Mabanto, they did not belong to him and still had the character of public funds. As a necessary consequence of being public fund, the checks may not be garnished to satisfy the judgment.

KALALO vs. LUZ - G.R. No. L-27782

OCTAVIO A. KALALO vs. ALFREDO J. LUZ

G.R. No. L-27782         July 31, 1970

On 17 November 1959, Octavio Kalalo entered into an agreement with Alfredo Luz where he was to render engineering design services for a fee. On 11 December 1961, Kalalo sent Luz a statement of account where the balance due for services rendered was P59,505. On 18 May 1962, Luz sent Kalalo a resume of fees due to the latter, and a check for P10,861.08. Kalalo refused to accept the check as full payment of the balance of the fees due him. On 10 August 1962, Kalalo filed a complaint containing 4 causes of action, i.e. $28,000 (representing 20% of the amount paid to Luz in the International Research Institute project) and the balance of P30,881.25 as fees; P17,0000 as consequential and moral damages; P55,000 as moral damages, attorney’s fees and litigation expenses; and P25,000 as actual damages, attorney’s fees and litigation expenses). The trial court ruled in favor of Kalalo. Luz filed an appeal directly with the Supreme Court raising only questions of law.

Issue: Whether or not the rate of exchange of dollar to peso are those at the time of the payment of the judgment or at the time when the research institute project became due and demandable.

Held: Luz’ obligation to pay Kalalo the sum of US$28,000 accrued on 25 August 1961, or after the enactment of RA 529 (16 June 1950). Thus, the provision of the statute which requires payment at the prevailing rate of exchange when the obligation was incurred cannot be applied. RA 529 does not provide for the rate of exchange for the payment of obligation incurred after the enactment of the Act, and thus the rate of exchange should be that prevailing at the time of payment. The view finds support in the ruling of the Court in Engel vs. Velasco & Co. The trial court did not err in holding the rate of exchange is that at the time of payment.

PONCE vs. CA - G.R. No. L-49494

NELIA G. PONCE and VICENTE C. PONCE, vs. CA,

and JESUSA B. AFABLE

G.R. No. L-49494         May 31, 1979

On 3 June 1969, Jesus Afable, together with Feliza Mendoza and Ma. Aurora Dino executed a promissory note in favor of Nelia Ponce in the sum of P814,868.42 payable without interest on or before 31 July 1969, subject to an interest of 12% per annum if not paid at maturity, and an additional sum equivalent to 10% of total amount due as attorney’s fees in case it is necessary to bring suit, and the execution of a first mortgage on their properties or the Carmen Planas Memorial Inc. in the event of failure to pay the indebtedness in accordance with the terms. Upon failure of the debtors to pay, a complaint was filed against them for the recovery of the principal sum, plus interest and damages. The trial court rendered judgment in favor of Ponce. The Court of Appeals affirmed the decision of the trial court. On the second motion for reconsideration, however, the appellate court reversed the judgment and opined that the intent of the parties was that the note was payable in US dollars which is illegal, with neither party entitled to recover under the “in pari delicto” rule.

Issue: Whether or not n agreement to pay in dollars defeat a creditor’s claim for payment.

Held: If there is an agreement to pay an obligation in a currency other than Philippine legal tender, the same is illegal / null and void as contrary to public policy, pursuant to RA 529, and the most that can be demanded is to pay the said obligation in Philippine currency. It cannot defeat a creditor’s claim for payment, for such will allow a person to enrich himself inequitably at another’s expense. What RA 529 prohibits is the payment of an obligation in dollars. A creditor cannot oblige the debtor to pay in dollars, even if the loan was given in said currency. In such case, the indemnity is expressed in Philippine currency on the basis of the current rate of exchange at the time of payment.

Intestate of Luther Young and Pacita Young, spouses. PACIFICA JIMENEZ vs. DR. JOSE BUCOY - G.R. No. L-10221

Intestate of Luther Young and Pacita Young, spouses. PACIFICA JIMENEZ vs.

DR. JOSE BUCOY

G.R. No. L-10221             February 28, 1958

In the proceedings in the intestate of Luther Young and Pacita Young who died in 1954 and 1952, respectively, Pacifica Jimenez presented for payment 4 promissory notes signed by Pacita for different amounts totalling P21,000. Acknowledging receipt by Pacita during the Japanese occupation, in the currency then prevailing, the Administrator manifested willingness to pay provided adjustment of the sums be made in line with the Ballantyne schedule. The claimant objected to the adjustment insisting on full payment in accordance with the notes. The court held that the notes should be paid in the currency prevailing after the war, and thus entitling Jimemez to recover P21,000 plus P2,000 as attorney’s fees. Hence, the appeal.

Issue: Whether or not the amounts should be paid, peso for peso; or whether a reduction should be made in accordance with the Ballantyne schedule.

Held: If the loan was expressly agreed to be payable only after the war, or after liberation, or became payable after those dates, no reduction could be effected, and peso-for-peso payment shall be ordered in Philippine currency. The Ballantyne Conversion Table does not apply where the monetary obligation, under the contract, was not payable during the Japanese occupation. Herein, the debtor undertook to pay “six months after the war,” peso for peso payment is indicated.

PBCom vs. ARUEGO - G.R. Nos. L-25836-37

THE PHILIPPINE BANK OF COMMERCE vs. JOSE M. ARUEGO

G.R. Nos. L-25836-37              January 31, 1981

Jose Aruego publishes a periodical called “World Current Events.” To facilitate payment of the printing, Aruego obtained a credit accommodation from the Philippine Bank of Commerce. For every printing of the periodical, the printer (Encal Press and Photo-Engraving) collected the cost of printing by drawing a draft against the bank, said draft being sent later to Aruego for acceptance. As an added security for the payment of the amounts advanced to the printer, the bank also required Aruego to execute a trust receipt in favor of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to sell the same with the promise to turn over to the bank the proceeds of the sale to answer for the payment of all obligations arising from the draft. The bank instituted an action against Aruego to recover the cost of printing of the latter’s periodical for the period of 28 August 1950 to 14 March 1951.

Issue : Whether or not the drafts were bills of exchange or mere pieces of evidence of indebtedness.

Held : Under the Negotiable Instruments Law, a bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. As long as a commercial paper conforms with the definition of a bill of exchange, that paper is considered a bill of exchange. The nature of acceptance is important only in the determination of the kind of liabilities of the parties involved, but not in the determination of whether a commercial paper is a bill of exchange or not.

ABUBAKAR vs. THE AUDITOR GENERAL - G.R. No. L-1405

BENJAMIN ABUBAKAR vs. THE AUDITOR GENERAL

G.R. No. L-1405             July 31, 1948

Treasury Warrant A-2867376 was issued in favor of Placide S. Urbanes on 10 December 1941 for P1,000, but is now in the hands of Benjamin Abubakar. The Auditor refused to authorize the payment of the treasury warrant. Abubakar contends that he is a holder in good faith and for value and thus, entitled to the rights and privileges of a holder in due course.

Issue: Whether or not Abubakar is a holder in due course.

Held: A treasury warrant is not a negotiable instrument; it being an order for payment out of a “particular fund”, and is not unconditional and does not fulfill one of the essential requirements of a negotiable instrument. Therefore, a holder of a treasury warrant cannot argue that he is a holder in good faith and for value of a negotiable instrument and thus entitled to the rights and privileges of a holder in due course, free from defenses.

SESBREÑO vs. CA - G.R. No. 89252

RAUL SESBREÑO vs. CA,

DELTA MOTORS CORPORATION AND PILIPINAS BANK

G.R. No. 89252            May 24, 1993

On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000 with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and America for P304,533.33 payable on 13 March 1981. The checks were dishonored for having been drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno. Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker, and was stamped “non-negotiable” on its face. As Sesbreno was unable to collect his investment and interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank.

Issue: Whether or not non-negotiability of a promissory note prevents its assignment.

Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiated either by indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form. A negotiable instrument, instead of being negotiated, may also be assigned or transferred. The legal consequences of negotiation and assignment of the instrument are different. A negotiable instrument may not be negotiated but may be assigned or transferred, absent an express prohibition against assignment or transfer written in the face of the instrument. Herein, there was no prohibition stipulated.

VDA. DE EDUQUE vs. OCAMPO - G.R. No. L-222

SALVACION F. VDA. DE EDUQUE, ET AL. vs. JOSE M. OCAMPO

G.R. No. L-222             April 26, 1950

On 16 February 1935, Dr. Jose Eduque secured two loans from Mariano Ocampo de Leon, Dona Escolastica delos Reyes and Don Jose M. Ocampo, with amount s of P40,000 and P15,000, both payable within 20 years with interest of 5% per annum. Payment of the loans was guaranteed by mortgage on real property. On 6 December 1943, Salvacion F. Vda de Eduque, as administratrix of the estate of Dr. Jose Eduque, tendered payment by means of a cashier’s check representing Japanese War notes to Jose M. Ocampo, who refused payment. By reason of such refusal, an action was brought and the cashier’s check was deposited in court. After trial, judgment was rendered against Ocampo compelling him to accept the amount, to pay the expenses of consignation, etc. Ocampo accepted the judgment as to the second loan but appealed as to the first loan.

Issue: Whether or not there is a tender of payment by means of a cashier’s check representing war notes.

Held: Japanese military notes were legal tender during the Japanese occupation; and Ocampo impliedly accepted the consignation of the cashier’s check when he asked the court that he be paid the amount of the second loan (P15,000). It is a rule that a cashier’s check may constitute a sufficient tender where no objection is made on this ground.

CRYSTAL vs. CA - G.R. No. L-35767

RAYMUNDO A. CRYSTAL vs. CA and PELAGIA OCANG DE GRACIA, et al

G.R. No. L-35767         June 18, 1976

The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the Court of Appeals, holding that Raymundo Crystal’s redemption of the property acquired by Pelagia Ocang, Pacita, Teodulo, Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was invalid as the check which Crystal used in paying the redemption price has been either dishonored or had become stale (Ergo, the value of the check was never realized). Crystal filed a motion for reconsideration.

ISSUE: Whether or not the conflicting circumstances of the check being dishonored and becoming stale affect the validity of the redemption sale.

HELD: For a check to be dishonored upon presentment and to be stale for not being presented at all in time are incompatible developments that have variant legal consequences. If indeed the questioned check was

dishonored, the redemption was null and void. If it had only become state, it becomes imperative that the

circumstances that caused its non-presentment be determined, for if it was not due to the fault of the drawer, it would be unfair to deprive him of the rights he had acquired as redemptioner. Herein, it appears that there is a strong showing that the check was not dishonored, although it became stale, and that Pelagia Ocang had actually been paid the full value thereof. The Supreme Court, thus, reconsidered its decision and remanded the case to the trial court for further proceedings.

TIBAJIA vs CA - G.R. No. 100290

NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA vs. CA and EDEN TAN

G.R. No. 100290          June 4, 1993

A suit for collection of sum of money was ruled in favor of Eden Tan and against the spouses Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed a motion for execution and levied upon the garnished funds which were deposited by the spouses with the cashier of the Regional Trial Court of Pasig. The spouses, however, delivered to the deputy sheriff the total money judgment in the form of Cashier’s Check (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon the garnished funds to satisfy the judgment obligation. The spouses filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid. The motion was denied.

ISSUE: Whether or not the spouses have satisfied the judgment obligation after the delivery of the cashier’s check

and cash to the deputy sheriff.

HELD: 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

(Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate Appellate

Court). The court is not, by decision, sanctioning the use of a check for the payment of obligations over the objection of the creditor (Fortunado vs. Court of Appeals).

LEE vs CA and PBCOM - G.R. No. 114913

CHARLES LEE, ET AL. vs. CA and PHILIPPINE BANK OF COMMUNICATIONS

G.R. No. 117913          February 1, 2002

Charles Lee, as President of MICO requested private respondent Philippine Bank of Communications (PBCom) for a grant of a discounting loan/credit line for the purpose of carrying out MICOs line of business and for the purpose of opening letters of credit and trust receipts. As security for the loans, MICO through its Vice-President and General Manager, Mariano Sio, executed a Deed of Real Estate Mortgage over its properties situated in Pasig, Metro Manila. Upon maturity of all credit availments obtained by MICO from PBCom, the latter made a demand for payment.[30] For failure of petitioner MICO to pay the obligations incurred despite repeated demands, private respondent PBCom extrajudicially foreclosed MICOs real estate mortgage and sold the said mortgaged properties in a public auction sale. Private respondent PBCom which emerged as the highest bidder in the auction sale, applied the proceeds of the purchase price at public auction to the expenses of the foreclosure, interest and charges and part of the principal of the loans. Aside from the unpaid balance, MICO had another standing obligation representing its trust receipts liabilities to private respondent. PBCom then demanded the settlement of the aforesaid obligations from herein petitioners-sureties who, however, refused to acknowledge their obligations to PBCom under the surety agreements. Hence, PBCom filed a complaint with prayer for writ of preliminary attachment. The trial court gave credence to the testimonies of herein petitioners and dismissed the complaint filed by PBCom. The trial court said that PBCom failed to adequately prove that the proceeds of the loans were ever delivered to MICO.

ISSUE:

WON it is presumed that said negotiable instruments were issued for valuable consideration while the subject promissory notes and letters of credit issued by the PBCom made no mention of delivery of cash.

HELD:

Yes. Under Section 3, Rule 131 of the Rules of Court, the following presumptions, are satisfactory if uncontradicted: a) That there was a sufficient consideration for a contract and b) That a negotiable instrument was given or indorsed for sufficient consideration. Negotiable instruments include promissory notes, bills of exchange and checks. Letters of credit and trust receipts are, however, not negotiable instruments. But drafts issued in connection with letters of credit are negotiable instruments. Hence, petitioners should have presented credible evidence to rebut that presumption, as well as the evidence presented by private respondent PBCom. Respondent PBCom, as plaintiff in the trial court, has in fact presented sufficient documentary and testimonial evidence that proved by preponderance of evidence its subject collection case against the defendants who are the petitioners herein.