PNB vs Rodriguez (GR No.

170325, Sept 2008)

Fictitious Payee rule According to Sec. 9 of the NIL, if a negotiable instrument is
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payable to the order of a fictitious or inexistent person (Sec. 9c) and such
fact is known to the person making it so payable, the instrument is a bearer
instrument. An actual, existing, and living payee may also be fictitious if the
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maker of the check did not intend for the payee to in fact receive the
proceeds of the check. In a fictitious-payee situation, the drawee bank is
absolved from liability and the drawer bears the loss.
EXCEPTION to the Fictitious Payee rule: However, there is a commercial bad
faith exception to the fictitious-payee rule. A showing of commercial bad
faith on the part of the drawee bank, or any transferee of the check for that
matter, will work to strip it of this defense. The exception will cause it to bear
the loss. Commercial bad faith is present if the transferee of the check acts
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dishonestly, and 2is a party to the fraudulent scheme.
Order vs Bearer instrument bearer can be negotiated by delivery and there is no
need for indorsement, unlike an order instrument (Sec. 30)