Nego Week 14

NEGOTIABLE INSTRUMENTS

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WEEK 14

Clark v. Sellner McCormick v. Shea Maglione v. Penta Nyco Sales Corporation v. BA Finance Corp

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CLARK VS. SELLNER GR. No. 16477, 22 November 1921

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Facts: o George Sellner, with WH Clarke and John Mave, signed a note in favor of RN Clark dated 1 July 1914 in Manila for the amount of P12,000. o The note matured, but its amount was not paid. Action was filed in court. o Sellner’s counsel alleges that Sellner did not receive anything of value for the transaction, that the instrument was not presented to Sellner for payment, and that Sellner, being an accommodation party is not liable unless the note is negotiated, which was allegedly not done. Issues: 1. Whether Sellner is an accommodation party liable for the note Ratio: o Sellner, as one of the signers of the note, is one of the joint and several debtors on the note, and as such he is liable under Section 60 of the Negotiable Instruments Law/ Sellner lent his name, not to the creditor, but to those who signed with him placing himself with respect to the creditor in the same position and with the same liability as the said signers; and thus is a joint surety rather than an accommodation party. As to the presentment for payment, such action is not necessary in order to charge the person primarily liable, as is Sellner (Section 70, Negotiable Instruments Law) Ponch Pinlac

MCCORMICK VS. SHEA 99 N.Y. Supp. 467 (1906)

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SUBJECT: Promissory Note MAKER: Thomas Shea PAYEE: John McCormick INDORSER: Annie Shea Before maturity Shea’s indorsement was cancelled through the representative of the attorney of Shea in the presence of McCormick. Shea claims that the cancellation was part of their claims against each other while McCormick claims that the cancellation was not authorized and that there was no consideration for such cancellation. Also, McCormick claims that even if he did agree, the effect would only be to release the indorser as a person secondarily liable.

Issues: Who bears the burden of proving the cancellation without authority Ratio: o o

The burden of proof was with Shea. A cancellation made unintentionally or under a mistake or without the authority of the holder is inoperative; but where an instrument or any signature thereon appears to have been cancelled, the burden of proof lies on the party who alleges that the cancellation was made unintentionally or under a mistake or without authority.

WHEREFORE, Judgment affirmed.

Mars Sacdalan

Mara del Rosario MAGLIONE V PENTA Facts: Penta is a payee of a note secured by mortgage. Penta indorsed the note and assigned the mortgage to Maglione. A subsequent foreclosure (on the mortgage) was instituted by Maglione. But he dropped the foreclosure suit and mortgagor paid $300. Some months later, Penta inquired of Maglione whether the note and mortgage have been paid. Maglione said that he had a

Facts: ADARNA AGUILA ALFONSO ARAGONES BARTOLOME BESANES CABRALES CASIPIT CRUZ B. CRUZ D. DABAO DEL ROSARIO DELA CRUZ FERMIN GANZON GARCIA GO GUEVARA HADUCA HUSSIN KAW LEE MACALINO MACATANGAY MELCHOR NAVALLASCA ONG PINLAC RAMOS R. RAMOS V. REAS SACDALAN SANTOS SEGOVIA SULTAN TAGRA TORRIJOS YAN

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satisfactory arrangement with the maker-mortgagor. Maker defaulted so Maglione sued indorser Penta. The jury found that Maglione had entered into a valid and binding agreement with maker to extend deadline of note

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Issue: WON Penta being secondarily liable for the note is discharged from liability in lieu of Maglione’s agreement with the maker-mortgagor

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Ratio: YES o If the plaintiff made a valid and binding agreement with the makers of the note extending the time of payment without the knowledge and consent of the surety, the surety is thereby discharged. As an indorser, Penta was secondarily liable. But the jury found that there was a valid and binding agreement between Maglione and the makers thereby discharging Penta from his liability. Pearl Ganzon

Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in favor of BA Finance. At the back thereof and of every deed was the Continuing Suretyship Agreement where the Fernandezes unconditionally guaranteed to BA Finance the full, faithful and prompt payment and discharge of all indebtedness of Nyco. BPI dishonored the check. BA Finance reported it to the Fernandezes who issued a substitute check, a Security Bank and Trust Company check, which was again dishonored. Despite repeated demands, both Nyco and the Fernandezes failed to settle their obligations. Both trial and appellate courts ruled in favor of BA Finance. Nyco contends that it was disgharched of its liability when BA Finance failed to give it a notice of dishonor.

Issue: 1.

WON Nyco was discharged of its liability over the SBTC check when BA Finance failed to give it a notice of dishonor.

Held/Ratio: 1.

NO o

NYCO SALES CORP. V. BA FINANCE CORP. GR No. 71694 August 16, 1991 Facts: o

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Santiago and Renato Fernandez (Fernandezes), for Sanshell Corp., approached Yao, president and general manager of Nyco, for credit accommodation and requested Nyco, thru Yao, to grant Sanshell discounting privileges Nyco had with BA Finance. Yao acquiesced. Fernandezes went to Yao to discount Sanshell's BPI post-dated check. It was payable to Nyco. Nyco endorsed the check to BA Finance. Thereafter, BA Finance issued a check payable to Nyco, who endorsed it to Sanshell who further negotiated the check.

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Nyco's pretension that it had not been notified of the dishonor is belied not only by the formal demand letter but also by the findings of the trial court that Yao and the Fernandezes had frequent contacts before, during and after the dishonor. It fails to realize that for as long as the credit remains outstanding, it shall continue to be liable to BA Finance as its assignor. The dishonor of an assigned check simply stresses its liability and the failure to give a notice of dishonor will not discharge it from such liability. The cause of action stems from the breach of warranties embodied in the Deed of Assignment, and not from the dishonoring of the check alone. According to Article 1628 of the Civil Code, the assignorvendor warrants both the credit itself and the person of the debtor, if so stipulated, as in the case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor should be held answerable. The assignor-

ADARNA AGUILA ALFONSO ARAGONES BARTOLOME BESANES CABRALES CASIPIT CRUZ B. CRUZ D. DABAO DEL ROSARIO DELA CRUZ FERMIN GANZON GARCIA GO GUEVARA HADUCA HUSSIN KAW LEE MACALINO MACATANGAY MELCHOR NAVALLASCA ONG PINLAC RAMOS R. RAMOS V. REAS SACDALAN SANTOS SEGOVIA SULTAN TAGRA TORRIJOS YAN

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vendor is liable for the invalidity of whatever he has signed to the assignee-vendee. Sher Macatangay

Firestone Tire & Rubber Co. of the Phils. vs. Court of Appeals [G.R. No. 113236. March 5, 2001] FACTS: Fojas-Arca Enterprises Company maintained a special account with respondent Luzon Development Bank which authorized and allowed the former to withdraw funds from its account through the medium of special withdrawal slips. Fojas-Arca purchased on credit products from Firestone with a total amount of P4,896,000.00. In payment of these purchases, Fojas-Arca delivered to plaintiff six special withdrawal slips drawn upon the respondent bank. In turn, these were deposited by the plaintiff with its current account with the Citibank. All of them were honored and paid by the defendant. However, in a subsequent transaction involving the payment of withdrawal slips by Fojas-Arca for purchases on credit from petitioner, two withdrawal slips for the total sum of P2,078,092.80 were dishonored and not paid by respondent bank for the reason "NO ARRANGEMENT".

Whether respondent bank should be held liable for damages suffered by petitioner, due to its allegedly belated notice of non-payment of the subject withdrawal slips. RULING: The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this character. As the withdrawal slips in question were non-negotiable, the rules governing the giving of immediate notice of dishonor of negotiable instruments do not apply. The respondent bank was under no obligation to give immediate notice that it would not make payment on the subject withdrawal slips. Citibank should have known that withdrawal slips were not negotiable instruments. It could not expect these slips to be treated as checks by other entities. Payment or notice of dishonor from respondent bank could not be expected immediately, in contrast to the situation involving checks. Citibank was not bound to accept the withdrawal slips as a valid mode of deposit. But having erroneously accepted them as such, Citibank – and petitioner as account-holder – must bear the risks attendant to the acceptance of these instruments.

ISSUE:

ADARNA AGUILA ALFONSO ARAGONES BARTOLOME BESANES CABRALES CASIPIT CRUZ B. CRUZ D. DABAO DEL ROSARIO DELA CRUZ FERMIN GANZON GARCIA GO GUEVARA HADUCA HUSSIN KAW LEE MACALINO MACATANGAY MELCHOR NAVALLASCA ONG PINLAC RAMOS R. RAMOS V. REAS SACDALAN SANTOS SEGOVIA SULTAN TAGRA TORRIJOS YAN

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