CONSOLIDATED PLYWOOD INC. v. IFC LEASING G.R. NO. L-72593, APRIL 30, 1987 Gutierrez, JR., J.

Facts: The petitioner, Consolidated Plywood Industries Inc. (CPI Inc.), is a corporation involved in logging business and is in need of two (2) tractors. Cognizant of the CPIs need, the Atlantic Gulf and Pacific Company of Manila offered 2 used tractors through its sister company, Industrial Products Marketing (IPM), which specializes in heavy equipment business. IPM assured that the used tractors were fit for the job and even gave 90 days as warranty. Wee and Vergara, president and vice president of CPI, bought the tractors and paid in installments with P210,000.00 as down payment. After 14 days, one of the tractors broke down and after another 9 days, the other one broke down as well. Vergara informed IPM about the breakdown and asked for immediate repairs since the tractors are still under warranty. Mechanics were sent to the jobsite but unfortunately, the tractors were already unserviceable. Vergara suggested that the tractors be pulled out by the IPM to be reconditioned for sale. IPM did not respond despite several follow-up calls.

Issue: Whether or not the promissory note in question is a negotiable instrument

Held: 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.

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DE LA VICTORIA v. BURGOS G.R. No. 111190, June 27, 1995 Bellosillo, J.

Facts: Sesbreno filed a suit against Assistant City Fiscals Mabanto Jr., et al wherein the court decided in favor of the former and ordered the latter to pay a sum of P11,000.00. This order was questioned by the defendants before the Court of Appeals. A notice of garnishment was served on de la Victoria who was then a City Fiscal of Mandaue City where defendant Mabanto Jr. was then detailed. The notice required de la Victoria to withhold Mabanto Jr.s salary checks or monies under the penalty of law. The CA found out that de la Victoria did not follow the order. De la Victoria claimed that the checks were still public funds and are not subject to garnishment.

Issue: Whether or not a check still in the hands of the maker or its authorized representative is owned by the payee

Held: No, an undelivered check does not belong to a payee. Section 16 of the NIL provides that every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. The salary checks of Mabanto Jr. were all undelivered to him. All salary checks of government employees do not belong to him until it is physically delivered to him. Until physical delivery, the salary checks have a character of public funds and are not subject to garnishment.

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DEVELOPMENT BANK OF RIZAL v. SIMA WEI G.R. No. 85419, March 9, 1993 Campos, JR., J.

FACTS: Facts: The petitioner, Development Bank of Rizal (DBR), filed a complaint for a sum of money against Sima Wei. Sima Wei executed and delivered a promissory note to DBR, engaging to pay the bank or order the amount of P1,820,000.00. She made partial payments on the note, leaving a balance of P1,032,450.02. She then issued two checks payable to DBR drawn against China Banking Corp. for the amount of P550,000.00 and P500,000.00. The checks were issued to satisfy the previously delivered promissory note. With reasons unknown, the checks end up in the hands of someone else who deposited it without DBRs proper indorsement.

Issue: Whether or not DBR can enforce payment of the two undelivered checks executed by Sima Wei

Held: No, DBR cannot enforce the payment of the checks. Section 16 of the NIL provides that every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. DBR never received the checks and therefore it had no right or interest in the checks which have been violated by the one who fraudulently deposited it.

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METROPOL (BACOLOD) FINANCING AND INVESTMENT CORP. v. SAMBOK MOTORS CO. G.R. No. L-39641, February 28, 1983 De Castro, J.

Facts: Dr. Villareal executed a promissory note in favor of Ng Sambok Sons Motors Co., in the amount of P15,939.00 with an acceleration clause. On the same date, Sambok Motors Co. (SMC) negotiated and indorsed the note in favor of Metropol Financing and Investment Corp. (MFIC). Dr. Villareal defaulted in payment and this caused MFIC to demand payment from the maker. Dr. Villareal failed to pay the promissory note as demanded and thus prompted MFIC to demand payment from SMC. Sambok argues that he is a qualified indorser throught the wordings with recourse which is attached in the indorsement of the note and thus relieves SMC of its obligation.

Issue: Whether or not adding the words with recourse relieves SMC with its secondary liabilty

Held: No, adding the words with recourse in an indorsement of a note constitutes secondary liability. Sambok indorsed the note with recourse. Recourse means resort to a person who is secondarily liable after the default of the person who is primarily liable. The words added by SMC do not limit his liability, but rather confirm his obligation as a general indorser. Therefore, it is agreed that if Dr. Villareal fails to pay the note, MFIC can go after the general indorser SMC.

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GEMPESAW v. COURT OF APPEALS G.R. No. 92244, February 9, 1993 Campos, Jr., J.

Facts: Gempesaw appealed on the issue of the right of a drawer to recover from the drawee bank, Philippine Bank of Communications (PBC), who pays a check with a forged indorsement of the payee. Gempesaw owns four grocery stores. She paid her suppliers with checks drawn against PBC. The checks were prepared by her trusted bookkeeper, Galang. Gempesaw admitted that she signed every check without bothering to verify the accuracy of the checks against the sales invoices. She did not even verify if the checks were delivered to the payees. During her two years in business, there were incidents shown that the amounts paid for were in excess of what should have been paid. This cause Gempesaw to demand PBC to credit her account with the money value of the 82 checks totaling P1,208,60.89 for having been wrongfully debited against her account. PBC refused the demand.

Issue: Whether or not the drawee bank should bear the loss

Held: No, PBC can refuse Gempesaws demand and cannot be compelled to bear the loss. A drawee bank who has paid a check on which an indorsement has been forged cannot debit the account of the drawer for the said amount. However, if there is negligence on the part of the drawer, there will be an exception. Gempesaw relied fully on her trust and confidence on her bookkeeper which was exploited by the said bookkeeper. Therefore, it is Gempesaws negligence that is the proximate cause of her loss and does not give her the right to demand credit.

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SESBRENO v. COURT OF APPEALS G.R. No. 89252, May 24, 1993 Feliciano, J.

Facts: The petitioner, Raul Sesbreno, made a money market placement amounting to P300,000.00 with Philfinance, an entity engaged in the business of buying and selling debt instruments. On the same day, Philfinance issued post-dated checks which were dishonored for having been drawn against insufficient funds and a Certificate of Confirmation of Sale of one Delta Motors Corp. Promissory Note (DMS PN) No. 2731 which was in custodianship if Pilipinas Bank. Since the checks were dishonored, Sesbreno demanded the physical delivery if the DMC PN No. 2731. But he soon discovered that the PN was marked with non-negotiable. Philfinance never released the PN despite several demand letters by Sesbreno. As sesbreno failed to recover his investment and interest, he filed a case against Philfinance and DMC.

Issue: Whether or not an instrument marked as not-negotiable can be assigned

Held: Yes, an instrument marked as not-negotiable does not mean that it is also not-transferrable or notassignable. Negotiation is the transfer of an instrument from one person to another so as to constitute the transferee the holder of the instrument. A non-negotiable instrument cannot be negotiated but it can be transferred through assignment. DMC PN No. 2731 was deemed non-negotiable but was validly transferred through assignment to Sesbreno.

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