Cebu Financial vs CA and Alegre Credit Digest

Cebu Financial vs CA and Alegre Credit Digest

Cebu Financial vs CA and Alegre GR No. 123031, 12 October 1999 316 SCRA 488 FACTS Vicente Alegre invested with Cebu International Finance Corporation (CIFC) P500,000 in cash. CIFC issued promissory note which covered private respondent’s placement. CIFC issued BPI Check No. 513397 (the Check) in favor of private respondent as proceeds of his matured investment. Mrs. Alegre deposited the Check with RCBC but BPI dishonoured it, annotating therein that the “Check is subject of an investigation”. BPI took possession of the Check pending investigation of several counterfeit checks drawn against CIFC’s checking account. Private respondent demanded from CIFC that he be paid in cash but the latter refused. Private respondent Alegre filed a case for recovery of a sum of money against CIFC. CIFC asserts that since BPI accepted the instrument, the bank became primarily liable for the payment of the Check. When BPI offset the value of the Check against the losses from the forged cheks allegedly committed by private respondent, the Check was deemed paid. ISSUE Whether or not petitioner CIFC is discharged from the liability of paying the value of the Check. HELD The Court held in the negative. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer. A check is not legal tender, and therefore cannot constitute valid tender of payment. Since a negotiable instrument is only substitute for money and not money, the delivery of such an instrument does not by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized. (Article 1249) Petition denied.

316 SCRA 488 FACTS: Petitioner is a quasi-banking institution involved in money market transactions. Alegre invested with petitioner P500,000. Petitioner issued then a promissory note, which would mature approximately after a month. The note covered for Alegre’s placement plus interest. On the maturity of the note, petitioner

issued a check payable to Alegre, covering the whole amount due. It was drawn from petitioner’s current account in BPI. When the wife of Alegre tried to deposit the check, the bank dishonored the check. Petitioner was notified of this matter and Alegre demanded the immediate payment in cash. In turn, petitioner promised to replace the check on the impossible premise that the first issued be returned to them. This prompted Alegre to file a complaint against petitioner and petitioner in turn, filed a case against BPI for allegedly unlawfully deducting from its account counterfeit checks. The trial court decided in favor of Alegre.

ISSUE: Whether or not the Negotiable Instruments Law is applicable to the money market transaction held between petitioner and Alegre?

HELD: Considering the nature of the money market transaction, Article 1249 of the CC is the applicable provision should be applied. A money market has been defined to be a market dealing in standardized short-term credit instruments where lenders and borrowers don’t deal directly with each other but through a middleman or dealer in the open market. In a money market transaction, the investor is the lender who loans his money to a borrower through a middleman or dealer. In the case at bar, the transaction is in the nature of a loan. Petitioner accepted the check but when he tried to encash it, it was dishonored. The holder has an immediate recourse against the drawer, and consequently could immediately file an action for the recovery of the value of the check. Further, in a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check. A check is not legal tender, and therefore cannot constitute valid tender of payment.