Uy vs. CA
GR 119000, 28 June 1997
First Division, Bellosillo (J)

Facts: Rosa Uy and Consolacion Leong, who are friends, formed a partnership; with Consolacion contributing additional capital for the expansion of Rosa’s lumber business. The friendship between the two soured when the partnership documents were never processed. Consolacion asked for the return of her investments. Rosa issued check which were dishonored for insufficiency of funds. Uy was charged for estafa and violation of BP 22.

Issue: Whether knowledge of insufficiency of funds is transitory or simultaneous with the issuance of the instrument.

Held: Even if it is true that BP 22 is a transitory or continuing offense and as such a person indicted with a transitory offense may be validly tried in any jurisdiction where the offense was in part committed, knowledge by the maker or drawer of the fact that he has no sufficient funds to cover the check or of having sufficient funds is simultaneous to the issuance of the instrument. None of the essential ingredients of BP 22 was committed in the City of Manila; i.e. Consolacion was a resident of Makati while Uy was a resident of Caloocan City; the place of business of the alleged partnership is in Malabon; the drawee bank was located in Malabon; and the checks were all deposited for collection in Makati.

Travel On vs. CA
GR 56169, 26 June 1992
Third Division, Feliciano (J)

Facts: Travel-On Inc. is a travel agency selling airline tickets on commission basis for and in behalf of different airline companies. Arturo S. Miranda had a revolving credit line with Travel-On. He procured tickets on behalf of airline passengers and derived commissions therefrom. Miranda apparently owed Travel-On the amount of P278,201.57 (the value of airline tickets sold to the former), to which Miranda paid various amounts in cash and in kind. He thereafter issued 6 post-dated checks amounting to P115,000 which were all dishonored by the drawee bank. Travel-On filed suit to recover the value of the checks. Miranda countered that he instead overpaid his obligations, and that he merely issued the checks for purposes of accommodation as he allegedly had in the past accorded Travel-On.

Issue: Whether Miranda is indebted to Travel-On, or whether he is an accommodation party.

Held: A check which is regular on its face is deemed prima facie to have been issued for a valuable consideration and every person whose signature appears thereon is deemed to have become a party thereto for value. Thus, the mere introduction of the instrument sued on, in evidence prima facie, entitles the plaintiff to recovery. Such presumption subsists unless otherwise contradicted by other competent evidence. The checks, being presented for payment, were thus intended for encashment. There is nothing in the checks (nor in other documents) that stated otherwise. Travel-On was a payee, not an accommodated party for the checks, as it realized no value on the checks which bounced. Travel-On, thus, is entitled to the benefit of the presumption that it is a holder in due course.

Tibajia vs. CA
GR 100290, 4 June 1993
Second Division, Padilla (J)

Facts: A suit for collection of sum of money was ruled in favor of Eden Tan and against the spouses Norberto Jr. and Carmen Tibajia. After the decision was made final, Tan filed a motion for execution and levied upon the garnished funds which were deposited by the spouses with the cashier of the Regional Trial Court of Pasig. The spouses, however, delivered to the deputy sheriff the total money judgment in the form of Cashier’s Check (P262,750) and Cash (P135,733.70). Tan refused the payment and insisted upon the garnished funds to satisfy the judgment obligation. The spouses filed a motion to lift the writ of execution on the ground that the judgment debt had already been paid. The motion was denied.

Issue: Whether the spouses have satisfied the judgment obligation after the delivery of the cashier’s check and cash to the deputy sheriff.

Held: A check, whether a manager’s check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor (Philippine Airlines vs. Court of Appeals; Roman Catholic Bishop of Malolos vs. Intermediate Appellate Court). The court is not, by decision, sanctioning the use of a check for the payment of obligations over the objection of the creditor (Fortunado vs. Court of Appeals).

Tan vs. CA
GR 108555, 20 December 1994
First Division, Kapunan (J)

Facts: Ramon Tan, a businessman from Puerto Princesa, secured a Cashier’s Check from Philippine Commercial Industrial Bank (PCIBank) to P30,000 payable to his order to avoid carrying cash while enroute to Manila. He deposited the check in his account in Rizal Commercial Banking Corporation (RCBC) in its Binondo Branch. RCBC sent the check for clearing to the Central Bank which was returned for having been “missent” or “misrouted.” RCBC debited Tan’s account without informing him. Relying on common knowledge that a cashier’s check was as good as cash, and a month after depositing the check, he issued two personal checks in the name of Go Lak and MS Development Trading Corporation. Both checks bounced due to “insufficiency of funds.” Tan filed a suit for damages against RCBC.

Issue: Whether a cashier’s check is as good as cash, so as to have funded the two checks subsequently drawn.

Held: An ordinary check is not a mere undertaking to pay an amount of money. There is an element of certainty or assurance that it will be paid upon presentation; that is why it is perceived as a convenient substitute for currency in commercial and financial transactions. Herein, what is involved is more than an ordinary check, but a cashier’s check. A cashier’s check is a primary obligation of the issuing bank and accepted in advance by its mere issuance. By its very nature, a cashier’s check is a bank’s order to pay what is drawn upon itself, committing in effect its total resources, integrity and honor beyond the check. Herein, PCIB by issuing the check created an unconditional credit in favor any collecting bank. Reliance on the layman’s perception that a cashier’s check is as good as cash is not entirely misplaced, as it is rooted in practice, tradition and principle.

Stelco Marketing vs. CA
GR 96160, 17 June 1992
Second Division, Narvasa (J)

Facts: Stelco Marketing Corporation sold steel bars and GI wires to RYL Construction Inc. worth P126,859.61. RYL gave Stelco’s “sister corporation,” Armstrong Industries, a MetroBank check from Steelweld Corporation (The check was issued apparently by Steelweld’s President Peter Rafael Limson to Romeo Lim, President of RYL and Limson’ friend, by way of accommodation, as a guaranty and not in payment of an obligation). When Armstrong deposited the check at its bank, it was dishonored because it was drawn against insufficient funds. When so deposited, the check bore 2 indorsements, i.e. RYL and Armstrong. A criminal case was instituted against Limson, etc. for violation of BP 22, Subsequently, Stelco filed a civil case against RYL and Steelweld to recover the value of the steel products.

Issue: Whether Stelco was a holder in due course of the check issued by Steelweld.

Held: The records do not show any intervention or participation by Stelco in any manner or form whatsoever in the transaction involving the check, or any communication of any sort between Steelweld and Stelco, or between either of them and Armstrong Industries, at any time before the dishonor of the check. The record does show that after the check was deposited and dishonored, Stelco came into possession of it in some way. Stelco cannot thus be deemed a holder of the check for value as it does not meet two essential requisites prescribed by the statute, i.e. that it did not become “the holder of it before it was overdue, and without notice that it had been previously dishonored,” and that it did not take the check “in good faith and for value.”

State Investment House vs. IAC
GR 72764, 13 July 1989
Third Division, Fernan (J)

Facts: New Sikatuna Wood Industries Inc. (NSWI) requested for a loan from Harris Chua, who issued 3 crossed checks. Subsequently, NSWI entered in an agreement with the State Investment House Inc. (SIHI), under a deed of sale, where the former assigned and discounted 11 postdated checks including the 3 issued by Chua. When the 3 checks were allegedly deposited by SIHI, the checks were dishonored by reason of “insufficient funds,” “stop payment” and “account closed.” SIHI made demands upon Chua to make good said checks, Chua failed to do so.

Issue: Whether SIHI is a holder in due course so as to recover the amounts in the checks from Chua, the drawer.

Held: The Negotiable Instruments Law does not mention “crossed checks” but the Court has recognized the practice that crossing the check (by two parallel lines in the upper left portion of the check) means that the check may only be deposited in the bank and that the check may be negotiated only once (to one who has an account with a bank). The act of crossing a check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise he is not a holder in due course. Herein, SIHI rediscounted the check knowing that it was a crossed check. His failure to inquire from the holder (NSWI) the purpose for which the checks were crossed prevents him from being considered in good faith, and thus, as a holder in due course. SIHI, therefor is subject to personal defenses, such as the lack of consideration between the NSWI and Chua, i.e. resulting from the non-consummation of the loan.

State Investment House vs. CA
GR 101163, 11 January 1993
First Division, Bellosillo (J)

Facts: Nora B. Moulic issued to Corazon Victoriano checks, as security for pieces of jewelry sold on commission. Victoriano negotiated  the checks to the State Investment House Inc. (SIHI). Moulic failed to sell the pieces of jewelry, so he returned them to the payee before the maturity of the checks. The checks, however, could not be retrieved as they had already been negotiated. Before the check’s maturity dates, Moulic withdrew her funds from the drawee bank. Upon presentment of the checks for payment, they were dishonored for insufficiency of funds. SIHI sued to recover the value of the checks.

Issue: Whether the personal defense of failure or absence of consideration is available, or conversely, whether SIHI is a holder in due course.

Held: On their faces, the post-dated checks were complete and regular; SIHI bought the checks from the payee (Victoriano) before their due dates; SIHI took the checks in good faith and for value, albeit at a discounted price; and SIHI was never informed not made aware that the checks were merely issued to payee as security and not for value. Complying with the requisites of Section 52 of the Negotiable Instruments Law, SIHI is a holder in due course. As such, it holds the instruments free from any defect of title of prior parties, and from defenses available to prior parties among themselves. SIHI may enforce full payment of the checks. The defense of failure or absence of consideration is not available as SIHI was not privy to the purpose for which the checks were issued.

That the post-dated checks were merely issued as security is not a ground for the discharge of the instrument as against a holder in due course. It is not one of the grounds outlined in Section 119 of the Negotiable Instrument Law, for the instrument to be discharged.

It must be noted that the drawing and negotiation of a check have certain effects aside from the transfer of title or the incurring of liability in regard to the instrument by the transferor. The holder who takes the negotiated paper makes a contract with the parties on the face of the instrument. There is an implied representation that funds or credit are available for the payment of the instrument in the bank upon which it is drawn. Consequently, the withdrawal of the money from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in due course.

The drawer, Moulic, is liable to the holder in due course, SIHI.

Sesbreno vs. CA
GR 89252, 24 May 1993
Third Division, Feliciano (J)

Facts: On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000 with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and America for P304,533.33 payable on 13 March 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 Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has  a face value of P2,300,833.33 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.

Issue: Whether non-negotiability of a promissory note prevents its assignment.

Held: Only an instrument qualifying as a negotiable instrument under the relevant statute may be negotiated either by indorsement thereof coupled with delivery, or by delivery alone if it is in bearer form. A negotiable instrument, instead of being negotiated, may also be assigned or transferred. The legal consequences of negotiation and assignment of the instrument are different. A 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 instrument. herein, there was no prohibition stipulated.

San Carlos Milling vs. BPI
GR 37467, 11 December 1933
Second Division, Hull (J)

Facts: Joseph Wilson, the principal employee of San Carlos Milling Co. Ltd. in the Manila Office, conspired with one Alfredo Dolores, a messenger-clerk in the same office, in sending a cablegram in code to the company in Honolulu requesting a telegraphic transfer of $100,000 to China Bank of Manila. Upon receipt of the money, China Bank sent an exchange contract to San Carlos Milling offering the sum of P201,000, which was then the current rate of exchange. On this contract was forged the name of Newland Baldwin. A manager’s check on China Bank payable to San Carlos Milling or order was receipt for by Dolores. The check was deposited with BPI indorsed by a spurious signature of Baldwin. After clearing, BPI received a letter, purportedly signed by Baldwin, directing the shipment and delivery of P201,000. Dolores witnessed the packing of the money and returned with the check for P201,000 purportedly signed by Baldwin. Dolores turned the money over to Wilson and received as his share P10,000. When the crime was discovered, BPI refused to credit San Carlos Milling’s account with the amount withdrawn by the forged checks.

Issue: Who shall be liable for the value of the forged check.

Held: A bank that cashes a check must know to whom it pays. It is an elementary principle both in banking and of the Negotiable Instruments Law that a bank is bound to know the signatures of its customers; and if it pays a forged check, it must be considered as making the payment out of its own funds, and cannot ordinarily charge the amount so paid to the account of the depositor whose name was forged. As the proximate cause of loss was due to the negligence of BPI in honoring and cashing the forged checks, it is liable for the amount of P201,000 with legal interest thereon from 23 December 1928, until payment.

Republic Planters Bank vs. CA
GR 93073, 21 December 1992
Second Division, Campos Jr. (J)

Facts: Republic Planters Bank  issued 9 promissory notes signed by Shozo Yamaguchi (President) and Fermin Canlas (Treasurer) of Worldwide Garment Manufacturing Inc. Yamaguchi and Canlas were authorized by the corporation to apply for credit facilities with the bank in form of export advances and letters of credit  or trust receipts accommodations. Three years after, the bank filed an action to recover the sums of money covered by the promissory notes. Worldwide Garment Manufacturing changed its name to Pinch Manufacturing Corp. Canlas alleged he was not liable personally for the corporate acts that he performed, and that the notes were still blank when he signed them.

Issue: Whether the corporate treasurer is liable for the amounts in the promissory notes.

Held: Canlas is a co-maker of the promissory notes, under the law, and cannot escape liability arising therefrom. Inasmuch as the instrument contained the words “I promise to pay” and is signed by two or more persons, said persons are deemed to be jointly and severally liable thereon. As the promissory notes are stereotype ones issued by the bank in printed form with blank spaces filled up as per agreed terms of the loan, following customary procedures, leaving the debtors to do nothing but read the terms and conditions therein and to sign as makers or co-makers. Section 14 of the Negotiable Instruments Law, therefore, does not apply. Canlas is solidarily liable with the corporation for the amount of the 9 promissory notes.