Negotiable Instruments - Case Digest

Negotiable Instruments Case Digest BENJAMIN ABUBAKAR v. THE AUDITOR GENERAL G.R. No. L-1405 July 31, 1948 BENGZON, J.: Facts: Treasury Warrant was made payable to Placido S. Urbanes in his capacity as disbursing officer of the Food Administration for "additional cash advance for Food Production Campaign in La Union. “ It was regularly indorsed by the payee and is now in the custody of the herein petitioner who is a private individual. Auditor General refused to authorize the payment of the same because: (1) the money available for the redemption of treasury warrants is appropriated by Republic Act No. 80 and this warrant does not come within the purview of said appropriation; and (2) because on of the requirements of his office had not been complied with, namely, that it must be shown that the holders of warrants covering payment or replenishment of cash advances for official expenditures (as this warrant is) received them in payment of definite government obligations. The petitioner argued that he is a holder in good faith and for value of a negotiable instrument and is entitled to the rights and privileges of a holder in due course, free from defenses. Issue: Whether said warrant negotiable? Ruling: No. But this treasury warrant is not within the scope of the negotiable instruments law. For one thing, the document bearing on its face the words "payable from the appropriation for food administration," is actually an order for payment out of "a particular fund," and is not unconditional, and does not fulfill one of the essential requirements of a negotiable instrument. (Section 3 last sentenced and section 1[b] of the Negotiable Instruments Law.) In the United States, government warrants for the payment of money are not negotiable instruments nor commercial proper. PHILIPPINE EDUCATION CO., INC. v. MAURICIO A. SORIANO, ET AL. G.R. No. L-22405 June 30, 1971 DIZON, J.: Facts: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders of P200.00 each payable to E. P. Montinola with address at Lucena, Quezon. After the postal teller had made out money orders numbered, Montinola offered to pay for them with a private check. As private checks were not generally accepted in payment of money orders, the teller advised him to see the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave the building with his own check and the 10 money orders without the knowledge of the teller. Upon discovery of the disappearance of the unpaid money orders, an urgent message was sent to all postmasters, and the following day notice was likewise served upon all banks instructing them not to pay anyone of the money orders aforesaid if presented for payment. One of the money orders was received by Philippine Education Co. as part of its sales receipts. The following day it deposited the same with the Bank of America, and one day thereafter the latter cleared it with the Bureau of Posts and received from the latter

Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post Office, acting for and in behalf of Post-master Enrico Palomar, notified the Bank of America that money order 124688 attached to his letter had been found to have been irregularly issued and that, in view thereof, the amount it represented had been deducted from the bank's clearing account. The Bank of America debited Philippine Education Co.'s account with the same amount and gave it advice thereof by means of a debit memo. Philippine Education Co. requested the Postmaster General to reconsider the action taken by his office from the clearing account of the Bank of America, but his request was denied. The matter was elevated to the Secretary of Public Works and Communications, but the latter sustained the actions taken by the postal officers.

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Negotiable Instruments Case Digest Montinola was charged with theft in the Court of First Instance of Manila but he was acquitted on the ground of reasonable doubt. Philippine Education Co. filed an action against Soriano in the Municipal Court of Manila. The municipal court ordered Soriano, et al. to countermand the notice given to the Bank of America Upon appeal, CA dismissed the complaint hence this petition. Issue: Whether the postal money order is a negotiable instrument? Ruling: Philippine postal statutes were patterned after similar statutes in force in the United States. For this reason, Philippine postal statutes are generally construed in accordance with the construction given in the United States to their own postal statutes, in the absence of any special reason justifying a departure from this policy or practice. The weight of authority in the United Status is that postal money orders are not negotiable instruments; the reason behind this rule being that, in establishing and operating a postal money order system, the government is not engaging in commercial transactions but merely exercises a governmental power for the public benefit. Some of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the character of negotiable instruments. For instance, such laws and regulations usually provide for not more than one endorsement; payment of money orders may be withheld under a variety of circumstances.

Sesbreño v. CA FACTS: Petitioner Raul Sesbreno made a money market placement with the Philippine Underwriters Finance Corporation (Philfinance), with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Sale of a Delta Motor Corporation Promissory Note, the Certificate lf Securities Delivery Rseceipt indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks drawn againsy the Insular Bank of Asia and America payable on March 13, 1981. The checks were dishonored for having been drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; but the latter learned that the securit was issued on April 10, 1980, maturing on April 6, 1981 with Philfinance as payee and Delta Motors as maker; and was stamped "non-negotiable" on its face. As Sesbreno was unable to collect his investment and interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank. Delta Motors contents that said promissory note was not intended to be negotiated or otherwise transferred by Philfinance as manifested by the word "non-negotiable" stamped across the face of the note. ISSUE: Whether the non-negotiability of a promissory note prevents its assignment. HELD: A negitiable instrument, instead of being negotiated, may also be assigned or transferred. The legal consequences of negotiation and assignment of the instrument are different. A non-negotiable instrument may not be negotiated but may be assigned or transferred, absent an express prohibition against assignment or transfer written in the face of the written. The subject promissory note, while marked "non-negotiable" was not at the same time stamped "nontransferable" or "non-assignable." It contained no stipulation which prohibited Philfinance from assigning or transferring such note, in whole or in part. BELISARIO V. NATIVIDAD ZULUETA G.R. NO. 39815 APRIL 28, 1934 BUTTE, J.: FACTS: EULALIO BELISARIO sold the said lands absolutely and without reservation to PAZ NATIVIDAD VIUDA DE ZULUETA for the consideration of P37,000, which was duly paid, and the agreement on the part of the grantee to assume an indebtedness secured by a lien for 4, 500, which was likewise duly paid. The deed recites that the sale is absolute and in perpetuity and the grantor warrants to defend the title. On the same date the defendant executed and delivered in favor of the plaintiff Exhibit B which, after reciting that the defendant is the plaintiff an option to repurchase the lands on or before the end of May, 1931, for the sum of P37,000. Plaintiff appeared at the house of the defendant and offered to exercise his option of repurchase under said Exhibit B by tendering to the defendant a check in the sum of P37,000.

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Negotiable Instruments Case Digest ISSUE: Whether or not the payment by check satisfy the requirements of a legal tender? RULING: NO. A creditor is not bound to accept a check in satisfaction of his demand, because a check, even if good when offered, does not meet the requirements of a legal tender.

G.R. No. L-41764 December 19, 1980 NEW PACIFIC TIMBER & SUPPLY COMPANY, INC., petitioner, vs. HON. ALBERTO V. SENERIS, RICARDO A. TONG and EX-OFFICIO SHERIFF HAKIM S. ABDULWAHID, respondents. CONCEPCION JR., J.: Facts: Zamboanga City. Herein petitioner is the defendant in a complaint for collection of a sum of money filed by the private respondent. A compromise judgment was rendered by the respondent Judge in accordance with an amicable settlement entered into by the parties the terms and conditions. For failure of the petitioner to comply with his judgment obligation, the respondent Judge, upon motion of the private respondent, issued an order for the issuance of a writ of execution. Accordingly, writ of execution was issued for the amount of P63,130.00 pursuant to which, the ExOfficio Sheriff levied on some properties and set the auction sale. Private respondent through counsel, refused to accept the cashier’s check as well as the cash deposit. The Sheriff proceeded with the sale in which every item was won by the private respondent. Petitioner contended that the auction was held in bad faith as the Sheriff erred in not accepting the Check as payment. Issue: Whether or not the private respondent can validly refuse acceptance of the payment of the judgment obligation made by the petitioner consisting of P50,000.00 in Cashier's Check and P13,130.00 in cash which it deposited with the Ex-Officio Sheriff before the date of the scheduled auction sale Ruling: No. The payment of the said check is valid. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired. It is to be emphasized in this connection that the check deposited by the petitioner in the amount of P50,000.00 is not an ordinary check but a Cashier's Check of the Equitable Banking Corporation, a bank of good standing and reputation. As testified to by the Ex-Officio Sheriff with whom it has been deposited, it is a certified crossed check. It is a well-known and accepted practice in the business sector that a Cashier's Check is deemed as cash. Moreover, since the said check had been certified by the drawee bank, by the certification, the funds represented by the check are transferred from the credit of the maker to that of the payee or holder, and for all intents and purposes, the latter becomes the depositor of the drawee bank, with rights and duties of one in such situation. Where a check is certified by the bank on which it is drawn, the certification is equivalent to acceptance. Said certification "implies that the check is drawn upon sufficient funds in the hands of the drawee, that they have been set apart for its satisfaction, and that they shall be so applied whenever the check is presented for payment. It is an understanding that the check is good then, and shall continue good, and this agreement is as binding on the bank as its notes in circulation, a certificate of deposit payable to the order of the depositor, or any other obligation it can assume. The object of certifying a check, as regards both parties, is to enable the holder to use it as money." When the holder procures the check to be certified, "the check operates as an assignment of a part of the funds to the creditors." Hence, the exception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his account" shall apply in this case. Crystal vs Court of Appeals G.R. No. L-35767 | 1988-04-15

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Negotiable Instruments Case Digest BARREDO, J.: Facts: The Supreme Court, in its decision of 25 February 1975, affirmed the decision of the Court of Appeals holding that Raymundo Crystal’s redemption of the property acquired by Pelagia Ocang, Pacita, Teodulo, Felicisimo, Pablo, Lydia, Dioscoro and Rodrigo, all surnamed de Garcia, was invalid as the check which Crystal used in paying the redemption price has been either dishonored or had become stale (Ergo, the value of the check was never realized). Crystal filed a motion for reconsideration. Issue: WON the conflicting circumstances of the check being dishonored and becoming stale affect the validity of the redemption sale. Held: No For a check to be dishonored upon presentment and to be stale for not being presented at all in time are incompatible developments that have variant legal consequences. If indeed the questioned check was dishonored, the redemption was null and void. If it had only become stale, it becomes imperative that the circumstances that caused its nonpresentment be determined, for if it was not due to the fault of the drawer, it would be unfair to deprive him of the rights he had acquired as redemptioner. Herein, it appears that there is a strong showing that the check was not dishonored, although it became stale, and that Pelagia Ocang had actually been paid the full value thereof. Indeed, We are now convinced that it is but fair and just that the trial court should be allowed to receive all relevant and competent evidence the parties may wish to present relative to the issue of whether or not respondent Pelagia Ocang has already received in one form or another, directly or indirectly, the full amount of P11,200 as redemption price of the four (4) parcels of land in dispute, as well as to all other facts which might affect the validity of the redemption here in controversy. Withal, should it be found by the trial court that the redemption was invalid, because the redemption price has not been fully paid, it should further determine who made the improvements found on said lands, in order that if it should turn out that they were introduced by petitioner, possession may not be awarded to respondents unless said improvements are first properly and fully reimbursed to petitioner. It goes without saying that the proceedings herein contemplated are to be held in Civil Case No. R-1666. Correspondingly, Civil Case No. 62-T and the other case reviewing the same should be deemed academic. The Supreme Court, thus, reconsidered its decision and remanded the case to the trial court for further proceedings

G.R. No. L-222

April 26, 1950

SALVACION F. VDA. DE EDUQUE, ETC., plaintiff-appellee, vs. JOSE M. OCAMPO, defendant-appellant. FACTS: Dr. Jose Eduque secured two loans by a mortgage on real property: first in the amount of P40,000 and the second P15,000. Both amounts are payable within the twenty years with an interest rate of 5 percent per annum. In the mortgage contract it is stipulated that any of the mortgage creditors may receive payment and execute deeds of cancellation of the mortgage debts. After 8 years, Salvacion Eduque, as administrator of the estate of the deceased Dr. Jose Eduque, tendered payment, by means of a P55,000 cashier's check, to Jose M. Ocampo, one of the creditors, who refused to accept payment. By reason of such refusal, an action was brought and the cashier’s check was deposited in court. Judgment was rendered against defendant compelling him to accept amount deposited, to issue deeds for cancellation of the mortgage debts, and to pay the expenses of consignation and costs. Defendant only accepted the P15,000 after deducting other costs upon the ground that in the deed of mortgage it clearly appeared that the loan was payable within 20 years. The order was executed and such amount was delivered to the defendant.

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Negotiable Instruments Case Digest ISSUE: Whether or not the tender of payment by means of a cashier’s check representing Japanese war notes is not valid. HELD: Affirmative. The tender of payment of a cashier’s check is valid. The Supreme Court has ruled that Japanese military notes were legal tender during the Japanese occupation. But appellant argues, further, that the consignation of a cashier's check, which is not legal tender, is not binding upon him. This question, however, has never been raised in the lower court. Furthermore, the defendant accepted impliedly the consignation of the cashier's check when he himself asked the court that out of the money thus consigned he be paid the amount of the second loan of P15,000. It is a rule that "a cashier's check may constitute a sufficient tender where no objection is made on this ground." Caltex – Supra Jimenez – Supra CONSOLIDATED PLYWOOD INDUSTRIES, INC., WEE, & VERGARA, v. IFC LEASING AND ACCEPTANCE CORPORATION, Facts: The petitioner is a corporation engaged in the logging business. Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company Industrial Products Marketing (seller-assignor), two used tractors. The sellerassignor issued the sales invoice for the two 2) units of tractors and at the same time, the deed of sale with chattel mortgage with promissory note was executed. Simultaneously with the execution of the deed of sale with chattel mortgage with promissory note, the seller-assignor, by means of a deed of assignment, assigned its rights and interest in the chattel mortgage in favor of the respondent. Petitioner Vergara formally advised the seller-assignor of the fact that the tractors broke down and requested for the seller-assignor's usual prompt attention under the warranty. The seller-assignor sent to the job site its mechanics for the necessary repairs. Because of the breaking down of the tractors, the road building and simultaneous logging operations of petitioner-corporation were delayed and petitioner Vergara advised the seller-assignor that the payments of the installments as listed in the promissory note would likewise be delayed until the seller-assignor completely fulfills its obligation under its warranty. Since the tractors were no longer serviceable, petitioner Wee asked the seller-assignor to pull out the units and have them reconditioned, and thereafter to offer them for sale. But such remained unheeded. Upon appeal before the Intermediate Appellate Court, the latter affirmed in toto the trial court’s ruling and held that the elements of negotiability has been met, hence, it is legally and conclusively enforceable against the defendantsappellants. Issue: Whether or not the promissory note in question is a negotiable instrument so as to bar completely all the available defenses of the petitioner against the respondent-assignee. Held: NO. The pertinent portion of the note issued by the Corporation is as follows: “FOR VALUE RECEIVED, I/we jointly and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the sum of (P1,093,789.71), Philippine Currency, the said principal sum, to be payable in 24 monthly installments. . .” Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a promissory note “must be payable to order or bearer,” it cannot be denied that the promissory note in question is not a negotiable instrument. “The instrument in order to be considered negotiable must contain the so called ‘words of negotiability’ — i.e., must be payable to ‘order’ or ‘bearer’. These words serve as an expression of consent that the instrument may be transferred. This consent is indispensable since a maker assumes greater risk under a negotiable instrument than under a nonnegotiable one.

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Negotiable Instruments Case Digest “There are the only two ways by which an instrument may be made payable to order. There must always be a specified person named in the instrument. It means that the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. Without the words ‘or order’ or ‘to the order of,’ the instrument is payable only to the person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument, but will merely ‘step into the shoes’ of the person designated in the instrument and will thus be open to all defenses available against the latter.” Therefore, considering that the subject promissory note is not a negotiable instrument, it follows that the respondent can never be a holder in due course but remains a mere assignee of the note in question. Thus, the petitioner may raise against the respondent all defenses available to it as against the seller-assignor, Industrial Products Marketing. TRADERS ROYAL BANK V. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES G.R. No. 93397

March 3, 1997

TORRES, JR., J.: FACTS: Defendant Filriters is the registered owner of Central Bank Certificate of Indebtedness (CBCI) No. D891. Under a deed of assignment Filriters transferred CBCI No. D891 to Philippine Underwriters Finance Corporation (Philfinance). Subsequently, Philfinance transferred CBCI No. D891, which was still registered in the name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made under a repurchase agreement, granting Philfinance the right to repurchase the instrument on or before April 27, 1981. When Philfinance failed to buy back the note on maturity date, it executed a deed of assignment, conveying to appellant TRB all its rights and title to CBCI No.D891. Armed with the deed of assignment, TRB then sought the transfer and registration of CBCI No. D891 in its name before the Security and Servicing Department of the Central Bank (CB). Central Bank, however, refused to effect the transfer and registration in view of an adverse claim filed by defendant Filriters. RTC favored respondents. On appeal, Petitioner argued that the subject CBCI was a negotiable instrument, and having acquired the said certificate from Philfinance as a holder in due course, its possession of the same is thus free from any defect of title of prior parties and from any defense available to prior parties among themselves, and it may thus, enforce payment of the instrument for the full amount thereof against all parties liable thereon. In ignoring said argument, the appellate court that the CBCI is not a negotiable instrument, since the instrument clearly stated that it was payable to Filriters, the registered owner, whose name was inscribed thereon, and that the certificate lacked the words of negotiability which serve as an expression of consent that the instrument may be transferred by negotiation. Hence, this petition. ISSUE: Whether CBCI is an negotiable instrument. RULING: NO. Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiability within the meaning of the negotiable instruments law (Act 2031). The pertinent portions of the subject CBCI read: xxx xxx xxx The Central Bank of the Philippines (the Bank) for value received, hereby promises to pay bearer, of if this Certificate of indebtedness be registered, to FILRITERS GUARANTY ASSURANCE CORPORATION, the registered owner hereof, the principal sum of FIVE HUNDRED THOUSAND PESOS. xxx xxx xxx Properly understood, a certificate of indebtedness pertains to certificates for the creation and maintenance of a permanent improvement revolving fund, is similar to a "bond," (82 Minn. 202). Being equivalent to a bond, it is properly understood as acknowledgment of an obligation to pay a fixed sum of money. It is usually used for the purpose of long term loans. The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that:

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Negotiable Instruments Case Digest As worded, the instrument provides a promise "to pay Filriters Guaranty Assurance Corporation, the registered owner hereof." Very clearly, the instrument is payable only to Filriters, the registered owner, whose name is inscribed thereon. It lacks the words of negotiability which should have served as an expression of consent that the instrument may be transferred by negotiation. 15 A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY ASSURANCE CORPORATION, and to no one else, thus, discounting the petitioner's submission that the same is a negotiable instrument, and that it is a holder in due course of the certificate. The language of negotiability which characterize a negotiable paper as a credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchtone relating to the protection of holders in due course, and the freedom of negotiability is the foundation for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This freedom in negotiability is totally absent in a certificate indebtedness as it merely to pay a sum of money to a specified person or entity for a period of time. REPUBLIC PLANTERS BANK VS COURT OF APPEALS – KIN FLORES FACTS: World Garment Manufacturing, through its board authorized Shozo Yamaguchi (president) and Fermin Canlas (treasurer) to obtain credit facilities from Republic Planters Bank (RPB). For this, 9 promissory notes were executed. Each promissory note was uniformly written in the following manner: ___________, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(….) Philippine Currency… Please credit proceeds of this note to: ________ Savings Account ______XX Current Account No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP. Sgd. Shozo Yamaguchi Sgd. Fermin Canlas The note became due and no payment was made. RPB eventually sued Yamaguchi and Canlas. Only defendant Fermin Canlas appealed to the then Intermediate Court (now the Court Appeals). His contention was that inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing, Inc, he should not be held personally liable for such authorized corporate acts that he performed. It is now the contention of the petitioner Republic Planters Bank that having unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi, jointly and severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine notes. ISSUE: Whether or not Canlas should be held liable for the promissory notes. HELD: We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons: The promissory Notes are negotiable instruments and must be governed by the Negotiable Instruments Law. 2 Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. 3 By signing the notes, the maker promises to pay to the order of the payee or any holder4 according to

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Negotiable Instruments Case Digest the tenor thereof. 5 Based on the above provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape liability arising therefrom. Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon. 6 An instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons, makes them solidarily liable. 7 The fact that the singular pronoun is used indicates that the promise is individual as to each other; meaning that each of the co-signers is deemed to have made an independent singular promise to pay the notes in full. In the case at bar, the solidary liability of private respondent Fermin Canlas is 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. A joint and several note is one in which the makers bind themselves both jointly and individually to the payee so that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit. 8 A joint and several obligation in common law corresponds to a civil law solidary obligation; that is, one of several debtors bound in such wise that each is liable for the entire amount, and not merely for his proportionate share. 9 By making a joint and several promise to pay to the order of Republic Planters Bank, private respondent Fermin Canlas assumed the solidary liability of a debtor and the payee may choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch Manufacturing Corporation as solidary debtors.

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