Nego Digests - Wk3

Caltex (Phils.) Inc. V. CA And Security Bank And Trust Co. (1992)  G.R. No. 97753 August 10, 1992 Lessons Applicable: Requisites of negotiability to antedated and postdated instruments (Negotiable Instrument Law)

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FACTS:  Security Bank and Trust Company (Security Bank), a commercial banking institution, through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor of Angel dela Cruz who deposited with Security Bank the total amount of P1,120,000  Angel delivered the CTDs to Caltex for his purchase of fuel products  March 18, 1982: Angel informed Mr. Tiangco, the Sucat Branch Manager that he lost all CTDs, submitted the required Affidavit of Loss and received the replacement  March 25, 1982: Angel dela Cruz negotiated and obtained a loan from Security Bank in the amount of P875,000 and executed a notarized Deed of Assignment of Time Deposit  November, 1982: Mr. Aranas, Credit Manager of Caltex went to the Sucat branch to verify the CTDs declared lost by Angel  November 26, 1982: Security Bank received a letter from Caltex formally informing it of its possession of the CTDs in question and of its decision to pre-terminate the same.  December 8, 1982: Caltex was requested by Security Bank to furnish:  a copy of the document evidencing the guarantee agreement with Mr. Angel dela Cruz  the details of Mr. Angel's obligation against which Caltex proposed to apply the time deposits  Security Bank rejected Caltex demand for payment bec. it failed to furnish a copy of its agreement w/ Angel  April 1983, the loan of Angel dela Cruz with Security Bank matured  August 5, 1983: CTD were set-off w/ the matured loan  Caltex filed a complaint praying the bank to pay 1,120,000 plus 16% interest  CA affirmed RTC to dismiss complaint ISSUE: 1. 2.

W/N the CTDs are negotiable W/N Caltex as holder in due course can rightfully recover on the CTDs

HELD: Petition is Denied and appealed decision is affirmed. 1. YES. Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an instrument to become negotiable, viz: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d) Must be payable to order or to bearer; and -check (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

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The documents provide that the amounts deposited shall be repayable to the depositor depositor = bearer If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in the documents, instead of having the word "BEARER" stamped on the space provided for the name of the depositor in each CTD negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself

2. NO.  although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement  CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel products  There was no negotiation in the sense of a transfer of the legal title to the CTDs in favor of petitioner in which situation, for obvious reasons, mere delivery of the bearer CTDs would have sufficed.  Where the holder has a lien on the instrument arising from contract, he is deemed a holder for value to the extent of his lien.  As such holder of collateral security, he would be a pledgee but the requirements therefor and the effects thereof, not being provided for by the Negotiable Instruments Law, shall be governed by the Civil Code provisions on pledge of incorporeal rights: Art. 2095. Incorporeal rights, evidenced by negotiable instruments, . . . may also be pledged. The instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed. Art. 2096. A pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument. Art. 1625. An assignment of credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property.

ISSUE: W/N Roxas should be jointly and severally liable with Astro

Astro Electronics Corp. V. Phil. Export And Foreign Loan Guarantee Corp. (2003) G.R. No. 136729 September 23 ,2003 Lessons Applicable: Promissory notes and checks (Negotiable Instruments Law) FACTS: 

HELD: YES. CA affirmed  Under the Negotiable Instruments Law, persons who write their names on the face of promissory notes are makers, promising that they will pay to the order of the payee or any holder according to its tenor. 

even without the phrase personal capacity, Roxas will still be primarily liable as a joint and several debtor under the notes considering that his intention to be liable as such is manifested by the fact that he affixed his signature on each of the promissory notes twice which necessarily would imply that he is undertaking the obligation in 2 different capacities, official and personal.

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3 promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly, severally and solidarily, promise to pay to PHILTRUST BANK or order...

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begins with I, We, or Either of us promise to pay, when signed by two or more persons = solidarily liable

Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting P3M w/ interest and secured by 3 promissory notes: 

December 14, 1981: P600,000.00

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December 14, 1981: P400,000.00

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August 27, 1981: P2,000,000.00

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Roxas signed twice the promissory notes as President of Astro in his personal capacity

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Subrogation is the transfer of all the rights of the creditor to a third person, who substitutes him in all his rights

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Roxas also signed a Continuing Surety ship Agreement in favor of Philtrust Bank, as President of Astro and as surety

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Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust the payment of 70% of Astros loan, subject to the condition that upon payment by Philguanrantee, it shall be proportionally subrogated to the rights of Philtrust against Astro

Philguarantee has all the right to proceed against petitioner, it is subrogated to the rights of Philtrust to demand for and collect payment from both Roxas and Astro since it already paid the value of 70% of roxas and Astro Electronics Corp.s loan obligation

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Roxas acquiescence is not necessary for subrogation to take place because the instant case is one of the legal subrogation that occurs by operation of law, and without need of the debtors knowledge

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Philguarantee, as guarantor, became the transferee of all the rights of Philtrust as against Roxas and Astro because the guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor

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Upon Astros failure to pay, Philguarantee paid 70% of the guaranteed loan to Philtrust.

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Subsequently, Philguarantee filed against Astro and Roxas a complaint for sum of money with the RTC

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Roxas: alleged that he merely signed the same in blank and the phrases in his personal capacity and in his official capacity were fraudulently inserted without his knowledge

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RTC: favored Philguarantee holding Astro and Roxas jointly and severally liable if Roxas really intended to sign the instruments merely in his capacity as President of Astro, then he should have signed only once CA affirmed RTC

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Republic Planters Bank V. CA (1992) G.R. No. 93073 December 21, 1992 Lessons Applicable: Incomplete instruments to rules of construction (Negotiable Instrument Law)

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HELD: CA absolving Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby rendered declaring private respondent Fermin Canlas jointly and severally liable on all 9 promissory notes with the following sums and at 16% interest per annum

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GR: officers or directors under the old corporate name bear no personal liability for acts done or contracts entered into by officers of the corporation, if duly authorized. Inasmuch as such officers acted in their capacity as agent of the old corporation and the change of name meant only the continuation of the old juridical entity, the corporation bearing the same name is still bound by the acts of its agents if authorized by the Board.

FACTS: Shozo Yamaguchi (President/Chief Operating Officer) and Fermin Canlas (Treasurer) by virtue of Board Resolution of Worldwide Garment Manufacturing, Inc were authorized to apply for credit facilities with the Republic Planters Bank in the forms of export advances and letters of credit/trust receipts accommodations. 9 promissory notes with Worldwide Garment Manufacturing, Inc. was apparently rubber stamped above the signatures of Yamaguchi and Canlas were issued to Republic Planters Bank December 20, 1982: Worldwide Garment Manufacturing, Inc. changed its corporate name to Pinch Manufacturing Corporation February 5, 1982: Republic Planters filed a complaint for the recovery of sums of money Shozo Yamaguchi did not file an Amended Answer and failed to appear at the scheduled pretrial conference despite due notice Fermin Canlas denied having issued the promissory notes as an officer of Pinch Manufacturing Corporation and when he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., it was in blank (typewritten entries not appearing when he signed) ISSUE: W/N Fermin Canlas is solidarily liable with the other defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi on the 9 promissory notes because they are negotiable and ruled by the Negotiable Instruments Law

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Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. Fermin Canlas, one of the co-makers of the promissory notes, cannot escape liability arising therefrom made clearer and certain, without reason for ambiguity, by the presence of the phrase "joint and several" as describing the unconditional promise to pay to the order of Republic Planters Bank Severally and jointly or solidarily liable "I promise to pay" is signed by 2 or more persons

"I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons "and (in) his personal capacity" below the signatures of the makers - immaterial and will not affect to the liability of Fermin Canlas as a joint and several debtor of the notes. With or without it, he is primarily liable as a co-maker of each of the notes and his liability is that of a solidary debtor A change in the corporate name does not make a new corporation, and whether effected by special act or under a general law, has no affect on the identity of the corporation, or on its property, rights, or liabilities The corporation continues, as before, responsible in its new name for all debts or other liabilities which it had previously contracted or incurred.

EX: Under the Negotiable Instruments Law, the liability of a person signing as an agent is specifically provided for as follows: Sec. 20. Liability of a person signing as agent and so forth. Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal , or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability. Where the agent signs his name but nowhere in the instrument has he disclosed the fact that he is acting in a representative capacity or the name of the third party for whom he might have acted as agent, the agent is personally liable to take holder of the instrument and cannot be permitted to prove that he was merely acting as agent of another and parol or extrinsic evidence is not admissible to avoid the agent's personal liability. 

incomplete stereotype printed form of promissory notes generally used by commercial banking institutions to be signed by their clients in obtaining loans.

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blank spaces to be filled up on material particulars such as payee's name, amount of the loan, rate of interest, date of issue and the maturity date.

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An incomplete instrument which has been delivered to the borrower for his signature is governed by Section 14 of the Negotiable Instruments Law: Sec. 14. Blanks: when may be filled. — Where the instrument is wanting in any material particular, the person in possesion thereof has a prima facie authority to complete it by filling up the blanks therein. ... In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time... The notes were not incomplete instruments; neither were they given to private respondent Fermin Canlas in blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.

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San Miguel Corp. v Puzon Jr.

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To determine whether the ownership of the subject check was transferred to SMC, it is relevant to consider the INTENT OF THE RESPONDENT. On this point, the Negotiable Instrument Law provides:

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Sec. 12. Antedated and postdated – The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.

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It must be emphasized that the term “delivery” used in the aforementioned provision means that the party delivering did so for the purpose of giving effect thereto. Otherwise, it cannot be said that there has been delivery of the negotiable instrument. Once there is delivery, the person to whom the instrument is delivered gets the title to the instrument completely and irrevocably.

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To apply, if the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. However, if the check was not given s payment, there being no intent to give effect to the instrument, then ownership of the check was not transferred to SMC.

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The evidence of SMC failed to establish that the check was given in payment of the obligation of Puzon. There was no provisional receipt or official receipt issued for the amount of the check. What was issued was a receipt for the document, a “POSTDATED CHECK SLIP”.

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Furthermore, the evidence proves that the check was accepted, not as payment, but in accordance with the long-standing policy of SMC to require its dealers to issue postdated checks to cover its receivables. The check was only meant to cover the transaction and in the meantime, Puzon was to pay for the transaction by some other means other than the check. This being so, title to the check did not transfer to SMC; it remained with Puzon.

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Respondent Puzon was a dealer of beer products of petitioner SMC for Paranaque City. Puzon purchased SMC products on credit. To ensure payment and as a business practice, SMC required him to issue postdated checks equivalent to the value of the products purchased on credit before the same were released to him. Said checks were returned to Puzon when the transactions covered by these checks were paid or settled in full. Subsequently, Puzon purchased products on credit amounting to P11,820,327 for which he issued, and gave to SMC, BPI Check Nos. 27904 (for P309,500.00) and 27903 (for P11,510,827.00) to cover the said transaction. Puzon visited SMC office and while on the same place, the former requested to see BPI Check No. 17657. However, when he got hold of BPI Check No. 27903 which was attached to a bond paper together with BPI Check No. 17657 he allegedly immediately left the office with his accountant, bringing the checks with them. SMC sent a demand letter to Puzon, however, the latter ignored it. Thus, SMC filed a complaint. ISSUE: W/N the postdated checks were issued by Puzon in payment of his beer purchases or were used merely as security to ensure payment of his obligaton.

HELD: THE CHECK WAS NOT GIVEN AS PAYMENT OF RESPONDENT’S OBLIGATION.

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Hence, the checks was not given as payment of respondent’s obligation but were used merely as security to ensure payment of his obligation.