NIL Case Digests

BPI vs Spouses Royeca G.R. No. 176664, July 21, 2008 FACTS: Spouses Reynaldo and Victoria Royeca (respondents) executed and delivered to Toyota Shaw, Inc. a Promissory Note payable in 48 equal monthly installments. The Promissory Note provides for a penalty of 3% for every month or fraction of a month that an installment remains unpaid. Respondents executed a Chattel Mortgage in favor of Toyota over a certain motor vehicle. Toyota, with notice to respondents, executed a Deed of Assignment transferring all its rights, title, and interest in the Chattel Mortgage to Far East Bank and Trust Company (FEBTC). Claiming that the respondents failed to pay four (4) monthly, FEBTC sent a formal demand to respondents, asking for the payment thereof, plus penalty. The respondents refused to pay on the ground that they had already paid their obligation. FEBTC filed a Complaint for Replevin and Damages against the respondents with the Metropolitan Trial Court (MeTC) of Manila praying for the delivery of the vehicle. The complaint was later amended to substitute BPI as plaintiff when it merged with and absorbed FEBTC. Respondents alleged that they delivered to the Auto Financing Department of FEBTC eight (8) postdated checks in different amount. The Acknowledgment Receipt, which they attached to the Answer, showed that FEBTC received the checks. respondents further averred that they did not receive any notice from the drawee banks or from FEBTC that these checks were dishonored. They explained that, considering this and the fact that the checks were issued three years ago, they believed in good faith that their obligation had already been fully paid. They alleged that the complaint is frivolous and plainly vexatious. FEBTC admitted that they had, in fact, received the eight checks from the respondents. However, two of these were dishonored. He recalled that the remaining two checks were not deposited anymore due to the previous dishonor of the two checks. ISSUE: Whether tender of checks constitutes payment. RULING: NO. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized. Consolidated Plywood Inc. vs. Ifc Leasing G.R. No. L-72593, April 30, 1987 FACTS: Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company Industrial Products Marketing, two used tractors. Petitioner was issued a sales invoice for the two used tractors. At the same time, the deed of sale with chattel mortgage with promissory note was issued.

Page 1 of 3

Simultaneously, the seller assigned the deed of sale with chattel mortgage and promissory note to respondent. The used tractors were then delivered but barely 14 days after, the tractors broke down. The seller sent mechanics but the tractors were not repaired accordingly as they were no longer serviceable. Petitioner would delay the payments on the promissory notes until the seller completes its obligation under the warranty. Thereafter, a collection suit was filed against petitioner for the payment of the promissory note. ISSUE: Whether the promissory note in question is a negotiable instrument RULING: No, the instrument is not negotiable. A portion of the note is as follows, “For value received, I/We jointly and severally promise to pay to the IPM, the sum of P1,093,789.71 only…”. It can be clearly observed that the instrument does not manifest transferability since it does not contain the so-called “words of negotiability” which includes to order or to bearer. Philippine Bank of Commerce vs. Aruego GR L-25836-37, 31 January 1981, 102 scra 530 FACTS: To facilitate payment of the printing of a periodical called “World Current Events.”, Aruego, its publisher, obtained a credit accommodation from the Philippine Bank of Commerce. For every printing of the periodical, the printer collected the cost of printing by drawing a draft against the bank, said draft being sent later to Aruego for acceptance. As an added security for the payment of the amounts advanced to the printer, the bank also required Aruego to execute a trust receipt in favor of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to sell the same with the promise to turn over to the bank the proceeds of the sale to answer for the payment of all obligations arising from the draft. The bank instituted an action against Aruego to recover the cost of printing of the latter’s periodical. Aruego however argues that he signed the supposed bills of exchange only as an agent of the Philippine Education Foundation Company where he is president. ISSUES: Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange only as an agent of Philippine Education Foundation Company. RULING: Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of the Philippine Education Foundation Company. For failure to disclose his principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the NIL which provides that when 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 filing a representative character, without disclosing his principal, does not exempt him from personal liability.

Page 2 of 3

Page 3 of 3