NEGOTIABLE INSTRUMENTS NOTES

BASED ON AGBAYANIS BOOK AND ATTY. MERCADOS LECTURES

Page 187 of 190


BY: MA. ANGELA LEONOR C. AGUINALDO
ATENEO LAW 2D BATCH 2010

Whether BPI could lawfully limit the negotiability of the certified checks to
a period less than what is provided by the statute of limitations doesnt
seem material. The limitation imposed by the bank as to the time would
adversely only affect the payee Vidal but in this case, Vidal actually refused
to accept the checks.

But as to Araneta and Tuazon, the conditions specified in the certification
and the prevailing regulations of the bank were the law of the case. Not
only this, but they were aware of and abided by those reghulations and
practice, as instanced by the fact that the parties presented testimony to
prove those regulations and practice. And that Araneta knew that Vidal
hadnt cashed the checks within 90 days is not, and couldnt successfully
be, denied.

In these circumstances, the stipulation that the defendant or seller shall
not hold the buyer responsible for the loss of the checks is unconscionable
and void insofar as this would stretch Tuazons liability for more than 90
days.

191 EQUITABLE PCI BANK V. ONG
502 SCRA 119

FACTS:
Sarande deposited a check with her account. After getting assurance that
the said check had been cleared, she issued two checks in the same
amount as of the proceeds of the check. One of the checks issued was
given to Ong. Thereafter, Ong instead of depositing the check given, had a
managers check issued to him in the same value of the check. This she
tried to deposit but she received a notice that the bank has stopped
payment of the check. Despite her demands to make good the value of
her check, she was refused.

HELD:
PCI should be held liable. It had certified the check and since certification
is equivalent to acceptance, the bank as drawee bank is bound on the
instrument upon certification and it is immaterial to such liability in favor of
the plaintiff who is a holder in due course whether the drawer had funds or
not with the bank or the drawer was indebted to the bank for more than
the amount of the check as the certifying bank had the same liabilities as
acceptor.

It may be true that the check which was paid to her had no funds to
support it, nonetheless, as a holder in due course, the bank cannot
interpose the defense of want of consideration because that defense is only
personal. Therefore, when the check was accepted and certified, there was
already a valid consideration.

Furthermore, what was issued was a managers check. It stands in the
same footing as a certified check. Where a check is certified by a bank on
which it is drawn, the certification is equivalent to acceptance.

Sec. 188. Effect where the holder of check procures it to be
certified. - Where the holder of a check procures it to be accepted
or certified, the drawer and all indorsers are discharged from
liability thereon.

EFFECT WHERE HOLDER OBTAINS CERTIFICATION
! When the certification is obtained by the holder, the drawer and the
indorsers are discharged
! The certification has the same effect as if the holder has drawn the
money redeposited it and taken a certificate of deposit for it
! Only the indorsers at the time of the certification are discharged

REASON FOR THE RULE
! The moment that the check is certified, the funds ceased to exist to be
under the control of the original depositrors and pass under the control
of the person who procures the certification of the check drawn in his
favor

EFFECT WHERE CERTIFICATION OBTAINED BY OTHERS
! Where the certification is obtained by the drawer, even when the
drawer procures the certification at the instance of the payee
! Where the certification is obtained by a person who is neither the
holder nor drawer

Sec. 189. When check operates as an assignment. - A check of itself
does not operate as an assignment of any part of the funds to the
credit of the drawer with the bank, and the bank is not liable to the
holder unless and until it accepts or certifies the check.

CERTIFICATION OPERATES AS ASSIGNMENT OF FUNDS
! When the holder procures the check to be certified, the check operates
as an assignment of a part of the funds to the credit of the drawer with
the bank

DURATION OF TRANSFER OF FUND