Nego Digest Cases

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  c   Posted by Berne Guerrero under (a) oas , digests No Comments     
 GR 76974, 18 November 1988 Third Division, Fernan (J) Ko Hu issued 5 post dated checks amounting to P200,000 allegedly in payment of a certain obligation to Benito Lim. Said checks were handed to Lim¶s brother, Vicente, at Ko Hu¶s office in Nueva Street, Manila for delivery to Benito Lim in Baguio City. When presented at Lim¶s depository bank in Baguio City, the checks were dishonored for having been drawn against a closed account. Lim filed a suit against Ko Hu for violation of BP 22 in Baguio City.   Whether the delivery of the checks to Benito Lim¶s brother is the delivery contemplated by law (prelude to juridictional issue) ! The venue of the offense lies at the place where the check was executed and delivered to the payee and that the place where a check was written, signed or dated does not fix the place where it was executed, as what is of decisive importance is the delivery thereof which is the final act essential to its consummation as an obligation. The ³delivery´ contemplated by law ³must be to a person who takes the check as a holder,´ i.e. ³the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof.´ Vicente Lim, Benito¶s brother, cannot be said to have taken the checks in the concept of a holder for he is neither the payee or indorsee thereof. Neither could he be deemed to be Benito¶s agent with respect thereto, for he was purposely sent to Ko Hu to get certain stock certificates and not the checks in question (This is similar to the People vs. Yabut case).

Thu 25 Mar 2004

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   " #!  $%%$ & #  '%%% Posted by Berne Guerrero under (a) oas , digests No Comments    " #! GR 130038, 18 September 2000 En Banc, Pardo (J)

Rosa Lim bought various kinds of jewelry worth P300,000 from the store of Maria Antonia Seguan, by issuing a check payable to ³cash´ drawn against MetroBank. The next day, Lim again purchased jewelry valued at P241,668 by issuing another check payable to cash likewise drawn against MetroBank. Seguan deposited the checks with her bank. The checks were returned with a notice of dishonor as Lim¶s accounts in said bank were already closed. Upon demand, Lim promised to pay Seguan the amounts of the two dishonored checks. She never did. Rosa Lim was charge for two counts of violation of BP 22, where she was found guilty, and sentenced to 1 year imprisonment with fine (P200,000).  Whether Lim has knowledge of the insufficiency of funds when issuing the checks. !The elements of BP22 are (1) the making, drawing and issuance of any check to apply for account or for value, (2) the knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment, and (3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. Lim never denied issuing the check. Section 2 of BP 22 creates a presumption juris tantum that the second element prima facie exists when the first and third elements are present. If not rebutted, it suffices to sustain a conviction. It must be noted that similar to the Vaca case, the Court deleted the prison sentences imposed upon Lim, holding that the two fines imposed for each of the violation (P200,000 each ) are appropriate and sufficient. Subsidiary imprisonment not exceeding 6 months is provided in case of insolvency or non-payment of the fines as decreed.

Thu 25 Mar 2004

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   () %*    + Posted by Berne Guerrero under (a) oas , digests No Comments    () GR 107898, 19 December 1995 First Division, Bellosillo (J)

 Spouses Manuel and Rosita Lim are the president and treasurer, respectively, of RIGI Built Industries Inc. RIGI had been transacting business with Linton Commercial Company for years, the latter supplying the former with steel plates, steel bars, flat bars and purlin sticks which the company uses in the fabrication, installation and building of steel structures. The Lims ordered steel plates from Linton Commercial, delivering checks to the latter¶s collector as payment. The checks were dishonored for ³insufficiency of funds´ with the additional notation ³payment stopped´ (The Lims claimed that the supplies delivered by Linton Commercial were not in accordance with the specifications of purchase orders). Despite demands, the Lims refused to make good the checks or to pay value of the deliveries.   Whether the receipt of the checks by the collector of Linton is the issuance and delivery to the payee within the contemplation of the law (as prelude to jurisdiction issue). ! ³Issue´ means the first delivery of the instrument complete in form to a person who takes it as a holder. ³Holder³ refers to the payee or indorsee of a note or who is in possession of it or the bearer thereof. The issuance as well as the delivery of the check must be to a person who takes it as a holder. Delivery of the checks signifies transfer of possession (actual or constructive) from one person to another with intent to transfer title thereto; the delivery being the final act essential to its consummation as an obligation. The collector was not the person who could take the checks as a holder. Neither could the collector be deemed an agent of Linton Commercial with respect to the checks because he was a mere employee.

Thu 25 Mar 2004

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,  () %+ c  $ Posted by Berne Guerrero under (a) oas , digests No Comments ,  () GR 105461, 11 November 1993 Second Division, Padilla (J) Marlyn Lazaro received from Rudy Chua the amount of P90,000 as advanced payment for deliveries of sugar, etc. Lazaro was only able to deliver partial delivery. To refund the undelivered goods, she issued a check

for P72,000. When deposited, the check was dishonored and stamped ³account closed.´ To make up for the dishonor, Lazaro indorsed a check issued by one Lolita Soriano, payable to ³Cash.´ It was likewise dishonored and marked ³account closed.´ Chua sent a demand letter asking for the payment of the amount covered by the first check within days from receipt of letter. For failure of the accused to pay the amount, Chua filed cases for estafa and violation of BP 22.   Whether damage or prejudice is an element of BP 22 violation. - !The clear intention of the framers of BP 22 is to make the mere act of issuing a check that is worthless malum prohibitum. The law does not require that there be damage or prejudice to the individual complainant by reason of the issuance of the check. The fine provided for in BP 22 was intended as an additional penalty for the act of issuing a worthless check. BP 22 provides that a fine of not less than but not more than double the amount of the dishonored check may be imposed by the court.

Thu 25 Mar 2004

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  () '%./   Posted by Berne Guerrero under (a) oas , digests No Comments   () GR 119178, 20 June 1997 Third Division, Panganiban (J) Lim Lim Lao was a junior officer of Premier Investment House in its Binondo branch. She was authorized to sign checks for and in behalf of the corporation. In the course of business, she met Fr. Artelijo Palijo, provincial treasurer of the Society of the Divine Word. Fr. Palijo was authorized to invest donations of the society and had been investing the society¶s money with Premiere. Fr. Palijo was issued checks in payment of interest for the society¶s investments. The checks were dishonored for ³insufficiency of funds.´ Fr. Palijo was only able to acquire P5,000 for his efforts in demanding the payment of the checks. Premiere, subsequently, was placed under receivership. Fr. Palijo filed a suit against Lim Lao and his cosignatory, Teodulo Asprec, head of operations for violation of BP 22.  Whether an employee who, as part of her regular duties, signs blank

corporate check, be held for violation of BP22. !The checks co-signed by Lim Lao were signed in advance and in blank, delivered to the head of operations, who subsequently filled in the name of he payee, the amounts and corresponding dates of maturity; this procedure followed in keeping with her duties as a junior officer. Though BP 22 provides the presumption that a drawer is knowledgeable of the fact of insufficiency of funds, such presumption may be debunked by contrary evidence. Herein, Lim Lao does not have the power, duty or responsibility to monitor and assess the balances against the issuance, nor to make sure that the checks were funded. Such responsibility devolved upon the corporation¶s Treasury Department in Cubao, Quezon City. Furthermore, no notice of dishonor was actually sent or received by Lim Lao to support the prima facie evidence of knowledge of insufficient funds. She was thus acquitted.

Thu 25 Mar 2004

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0!!  , ''$.!1 % Posted by Berne Guerrero under (a) oas , digests No Comments 0!!  , GR L-27782, 31 July 1970 En Banc, Zaldivar (J) 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.   Whether 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. ! 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.

Thu 25 Mar 2004

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. / ,  21 %'''  1+ Posted by Berne Guerrero under (a) oas , digests No Comments . / ,  21 GR L-10221, 28 February 1958 En Banc, Bengzon (J)  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.   Whether the amounts should be paid, peso for peso; or whether a reduction should be made in accordance with the Ballantyne schedule. ! 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 ³six months after the war,´ peso for peso payment is indicated.

Thu 25 Mar 2004

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  () + & #   Posted by Berne Guerrero under (a) oas , digests No Comments   () GR 117488, 5 September 1996 Third Division, Davide Jr. (J) The Ibasco spouses requested credit accommodation fro the supply of ingredients in the manufacture of animal feeds from the Trivinio spouses. Ibasco issued 3 checks for 3 deliveries of darak. The checks bounced and the Ibasco spouses were notified of the dishonor. Ibasco instead offered a property in Daet. The property, being across the sea, the Trivinio spouses did not inspect the property. For the failure of the Ibasco spouses to settle their account, the Trivinio spouses filed criminal cases against the former for violation of BP22.   Whether the checks were for accommodation or guarantee to acquire the benefits of the interpretation of Ministry Circular 4 of the Department of Justice in relation to BP 22. !Ministry Circular 4, issued 1 December 1981 by the Department of Justice, provides that where a check is issued as part of an arrangement to guarantee or secure the payment of the obligation, pre-existing or not, the drawer is not criminally liable for either estafa or violation of BP 22. Incidents however indicate that the checks were issued as payment and for value, and not for accommodation (i.e. pertaining to an arrangement made a favor to another, not upon a consideration received). as the checks failed to bear any statement ³for accommodation´ and ³for guarantee´ to show Ibasco¶s intent. ( It must be noted, however, that BP22 does not distinguish and applies even in cases where dishonored checks were issued as a guarantee or for deposit only. The erroneous interpretation of Ministry Circular 4 was rectified by the repealing Ministry Circular 12, issued on 8 August 1984).

Thu 25 Mar 2004

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52/3  " #! 62/3/7 30 September 1970 First Division, Fernando (J)

GR L-28226,

 The Philippine Long Distance Telephone Company (PLDT) drew a check on the Hongkong & Shanghai Banking Corporation (HSBC) in the latter¶s favor for P14,608.05, and sent it through mail. The check fell into the hands of Florentino Changco, who was able to erase the name of the payee and substituted his own, and deposited the altered check in his current account with the People¶s Bank and Trust Co. (PBTC). The check was cleared by HSBC, and PBTC credited Changco the amount. The alteration was known when the cancelled check was returned to PLDT. HSBC requested PBTC to refund the amount, but the latter refused.   Whether HSBC can claim reimbursement from PBTC. - !A person who presents fro payment checks guarantees the genuineness of the check, and the drawee bank need to concern itself with nothing but the genuineness of the signature, and the state of the account with it of the drawee. If at all, whatever remedy, whatever remedy HSBC has would lie not against PBTC but as against the party responsible for changing the name of the payee (i.e. Changco). Its failure to call the attention of PBTC as to such alteration until after the lapse of 27 days would, in the light of Central Bank Circular 9 (24-hour clearing house rule), negate whatever right it might have had against PBTC.

Thu 25 Mar 2004

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 # 8  () ''  1$ Posted by Berne Guerrero under (a) oas , digests

No Comments  # 8  () Jr. (J)

GR 92244, 9 February 1993

Second Division, Campos

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.  Who shall bear the loss resulting from the forged indorsements. !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.

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 / 7 /    /  (5 4(  %9  Posted by Berne Guerrero under (a) oas , digests No Comments  / 7 /    / (5 4( GR L-17106, 19

October 1966

En Banc, Regala (J)

The check was intended as part of the payment of Ines Chaves¶ debt. When presented to the Security Bank and Trust Co. by Firestone, the check was returned for insufficiency of funds. Despite repeated demands, Ines Chaves failed to settle its account; hence, the suit.  Whether good faith is required in the issuance of a check. !Everyone must in the performance of his duties, observe honesty and good faith. Where a person issues a postdated check without funds to cover it and informs the payee of this fact, he cannot be held guilty of estafa because there is no deceit. Herein, there is nothing in the record to show that Firestone knew that there were no funds when it accepted the check, much less that Firestone agreed to take the check with knowledge of the lack of funds. As Ines Chavez is guilty of fraud (bad faith) in the performance of its obligation, it is liable for damages. Its conduct wanting in good faith, the award of attorney¶s fees was warranted.

Thu 25 Mar 2004

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 % './ + Posted by Berne Guerrero under (a) oas , digests No Comments * !:  2
 GR 111190, 27 June 1995 Bellosillo (J)

First Division,

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..

 Whether the checks subject of garnishment belong to Mabanto or whether they still belong to the government. !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.

Thu 25 Mar 2004

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:  () $+$9  $ Posted by Berne Guerrero under (a) oas , digests No Comments :  () GR 43596, 31 October 1936 En Banc, Recto (J) Eduardo Vaca is the president and owner of Ervine International while Fernando Nieto, Vaca¶s son-in-law, is the firm¶s purchasing manager. They issued a check for P10,000 to the General Agency for Reconnaissance, Detection and Security (GARDS) and drawn against China Bank. When deposited with PCIBank, the check was dishonored for insufficiency of funds. GARDS sent a demand letter but the drawers failed to pay within the time given (7 days from notice). A few days later, however, Vaca issued a check to GARDS for P19,866.16, drawn against Associated Bank, replacing the dishonored check. GARDS did not return the dishonored check. Later on, GARDS Acting Operations Manager filed a criminal suit against Vaca and Nieto for violation of BP 22. The trial court sentenced each to 1 year imprisonment and to pay a fine of P10,000 and costs.  ;