Digested Cases: Negotiable Instruments Law

Caltex vs. CA G.R. No. 97753 August 10, 1992

FACTS: Defendant Bank(Security Bank and Trust Co.) issued (280) certificates of time deposit(CTDs) in favor of Angel dela Cruz who deposited Php 1,120,000.xx. Dela Cruz delivered to plaintiff(Caltex) said certificates, in connection to the former’s fuel purchases. Dela Cruz then informed the Bank that all the CTDs were lost and requested by the Bank to procure an affidavit of loss. After submitting the affidavit, (280) CTDs were issued in replacement. Subsequently, dela Cruz obtained a loan from the Bank and surrendered full control of the CTDs for whatever amount may be due on the load upon its maturity. Petitioner presented the CTDs for verification, but was rejected by the bank. Petitioner then filed a complaint which was dismissed on the ground that the CTDs were non-negotiable.

ISSUE: Whether or not the CTDs were negotiable instruments. RULING: Yes. The CTDs were negotiable as they met the requirements of the law for negotiability as provided in Section 1 of the NIL. The documents provide that the amounts deposited shall be payable to the depositor, and in this case, the depositor is the “bearer” as indicated in the document. The document does no say that the amounts deposited are payable to Angel dela Cruz and that the amounts are payable specifically to him. However, plaintiff cannot recover the CTDs because a valid negotiation would require both delivery and endorsement. In this case, there was no endorsement as the CTDs were not delivered as payment but as security for dela Cruz’ purchases. The accepted rule is that the negotiability of an instrument is determined from the writing thereof.

G.R. No. 74451 May 25, 1988 EQUITABLE BANKING CORPORATION vs. IAC

FACTS: Liberato Casals of Casville Enterprises, went to buy two garrett skidders (bulldozers) from Edward J. Nell Company amounting to P970,000.00. To pay the bulldozers, Casals agreed to open a letter of credit with the Equitable Banking Corporation. Nell Company shipped one of the bulldozers to Casville. Casville advised Nell Company that in order for the letter of credit to be opened, Casville needed to deposit P427,300.00 with Equitable Bank, and that since Casville was a little short, it requested Nell Company to pay the deposit in the meantime.

Nell Company agreed and sent a check in the amount of P427,300.00. The check read: Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE ENTERPRISES Nell Company sent the check to Casville so that it would be the latter who would send it to Bank to cover the deposit in lieu of the letter of credit. When Casals received the check, he went to the Bank, and the teller received the check. The teller, instead of applying the amount as deposit in lieu of the letter of credit, credited the check to Casville’s account with Equitable Bank. Casals later withdrew all the P427,300.00 and appropriated it to himself.

ISSUE: Won the Bank was liable to Nell company. HELD: No. Contrary to the findings of the Trial Court, Equitable Bank was not liable because of its employee’s mistake but it was Nell Company’s fault due to how the check was worded. The subject check was equivocal and patently ambiguous. By making the check read: Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE ENTERPRISES, INC. the payee ceased to be indicated with reasonable certainty in contravention of Section 8 of the Negotiable Instruments Law. As worded, it could be accepted as deposit to the account of the party named after the symbols "A/C," or payable to the Bank as trustee, or as an agent, for Casville Enterprises, Inc., with the latter being the ultimate

beneficiary. That ambiguity is to be taken contra proferentem that is, construed against NELL who caused the ambiguity and could have also avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code, provides: Art. 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Yang V. CA 138074 August 15, 2003 FACTS: Cely Yang and Prem Chandiramani entered into an agreement whereby Yang was to give 2 P2.087M PCIB managers check in the amount of P4.2 million both payable to the order of Fernando David. Yang and Chandiramani agreed that the difference of P26K in the exchange would be their profit to be divided equally between them. Yang and Chandiramani also further agreed that the Yang would secure from FEBTC a dollar draft in the amount of US$200K, payable to PCIB FCDU Account No. 419501165-2, which Chandiramani would exchange for another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong. Yang gave the cashiers checks and dollar drafts to her business associate, Albert Liong, to be delivered to Chandiramani by Liongs messenger, Danilo Ranigo. Ranigo was to meet Chandiramani at 2 p.m. but Chandiramani did not appear. Ranigo reported the alleged loss of the checks and the dollar draft to Liong. But Chandiramani was able to get hold of the instruments and delivered the 2 cashiers checks to Fernando. In exchange, he got US$360K from David, which he deposited in the savings account of his wife and his mother and also deposited the FEBTC Dollar Draft Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost and oth banks complied with her request. Yang filed against David and Chandiramani. The CA affirms the decision of the RTC in favor of David ISSUE: Whether or not David is a holder in due course HELD: YES. Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value

David took the step of asking the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being assured that there was nothing wrong with said checks David did not close his eyes deliberately to the nature or the particulars of a fraud allegedly committed by Chandiramani upon the petitioner, absent any knowledge on his part that the action in taking the instruments amounted to bad faith.