circulate freely as a substitute for money.
The withdrawal slips lacked this
Case Doctrines on Negotaible Instruments Law
Philippine Education Co. vs. Soriano
The Weight of authority in the United States is that postal money orders are not
negotiable instruments, the reason being that in establishing and operating a postal
money order system, the government is not engaged in commercial transactions but
merely exercises a governmental power for the public benefit. Moreover, some of
the restrictions imposed upon money orders by postal laws and regulations are
inconsistent with the character of negotiable instruments. For instance, such laws
and regulations usually provide for not more than one endorsement; payment of
money orders may be withheld under a variety of circumstances.
Caltex Phil. vs. Court of Appeals
A negotiable instrument that is payable to bearer may be negotiated by mere
delivery. No further act other than delivery is necessary in order to negotiate the
instrument and to make the transferee a holder.
Metrobank vs. Court of Appeals
An instrument to be negotiable instrument must contain an unconditional promise
or orders to pay a sum certain in money. As provided by Sec 3 of NIL an unqualified
order or promise to pay is unconditional though coupled with: 1 st, an indication of
a particular fund out of which reimbursement is to be made or a particular account
to be debited with the amount; or 2nd, a statement of the transaction which give rise
to the instrument. But an order to promise to pay out of particular fund is not
unconditional.
Sesbreno vs. Court of Appeals
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.
Firestone Tire & rubber Co. vs. Court of Appeals
Withdrawal slips are non negotiable instruments. The essence of negotiability
which characterizes a negotiable paper as a credit instrument lies in its freedom to
character.
Ang Tek Lian vs. Court of Appeals
A check drawn payable to the order of cash is a check payable to bearer and the
bank may pay it to the person presenting it for payment without the drawers
indorsement. However, if the bank is not sure of the bearers identity or financial
solvency, it has the right to demand identification or assurance against possible
complication. But where the bank is satisfied of the identity or economic standing
of the bearer who tenders the check for collection, it will pay the instrument without
further question; and it would incur no liability to the drawer in thus acting.
Development Bank of the Phils. vs. Sima Wei
The payee of a negotiable instrument acquires no interest with respect thereto until
its delivery to him. Delivery of an instrument means transfer of possession, actual
or constructive, from one person to another. Without the initial delivery of the
instrument from the drawer to the payee, there can be no liability on the instrument.
Moreover, such delivery must be intended to give effect to the instrument.
Philippine Bank of Commerce vs. Aruego
There is a difference between a qualified indorser and a person negotiating by mere
delivery. While a qualified indorser warrants to all subsequent holders, the
warranties of the person negotiating by mere delivery extends only in favor of his
immediate transferee.
Francisco vs. Court of Appeals
The negotiable Instruments Law provides that when a person is under obligation
to indorse in a representative capacity, he may indorse in such terms as to negative
personal liability. An agent, when so signing, should indicate that he is merely
signing as an agent in behalf of
the principal and must disclose the name of his principal. Otherwise, he
will be held liable personally
Jail-Alai vs. Bank of the Philippine Islands
Holders of checks may obtain payment from the drawee bank by presenting it for
payment directly with the bank or by depositing it in his account in another bank
known as the collecting bank or depositary bank. When the holder deposits his
check with the collecting bank, the nature of the relationship created at that stage is
one of agency, that is the bank is to collect from the drawee of the check the
corresponding proceeds.
Republic Bank vs. Ebreda
Where the signature on a negotiable instrument is forged, the negotiation of the
check is without force or effect. However, where a check has several indorsersment
on it, it is only the negotiation based on the forged or unauthorized signature is
inoperative. It will not render void all the other negotiations of the check with
respect to other parties whose signatures are genuine.
MWSS vs. Court of Appeals
It is basic that whoever alleges forgery must prove such fact. Forgery cannot be
presumed, it must be duly established.
Banco de Oro vs. Equitable Banking Corporation
If the instrument involved is a check, the drawee cannot charge the account of the
drawer if the payees or indorsers signature is forged. The drawee, in turn has the
right of recourse against the collecting bank.
The drawer generally owes no duty of diligence to the collecting bak, the law
imposes a duty of diligence on the collecting bank to scrutinize checks deposited
with it for the purpose of determining their genuineness and regularity. The
collecting bank being primarily engaged in banking holds itself out to the public as
the expert and the law holds it to high standard of conduct.
It is the collecting bank that generally suffers the loss with regard to forged
indorsements because it had the duty to ascertain the genuineness of all prior
indorsements considering that the act of presenting the check for payment to the
drawee is an assertion that the party making the presentment has done its duty to
ascertain the genuineness of the indorsements.
Gempesaw vs. Court of Appeals
A forged signature is wholly inoperative, no one can gain title to the instrument
through such forged insdorsement. Such indorsement prevents any subsequent
partyfrom acquiring any right as against parties prior to the forgery. Although rights
may exist between and among parties subsequent to the forged instrument, not one
of the can acquire rights agasint parties prior to the forgery. Such forged instrument
cuts-off the rights of all subsequent parties as against parties prior to the forgery.
However, the law makes an exception to these rules where party is precluded from
setting up forgery as a defense.
Associated Bank vs. Court of Appeals
When a check is deposited with the collecting bank, it takes a risk on its depositor.
It is only logical that this bank be held accountable for checks deposited by its
customers. It is important to mention that Payee whose signature was forged may
directly proceed against the collecting bank. However, the drawer cannot opt to
recover from the collecting bank. There is no privity of contract between the drawer
and the collecting bank.
Metrobank vs. First National City Bank
When the indorsement itself is very clear when it begins with the words For
clearance, clearing office such indorsement must be read together with the 24-hour
rule regulation of the House operations of the Central Bank. Once that 24-hour
period is over, the liability on such indorsement has ceased. Failure of drawee bank
to call the attention of collecting bank to the alteration of the check in question until
after the lapse of 24 hours negates whatever right it might have against the
collecting bank. Its remedy lies not against collecting bank but against the party
responsible for the changing of the name of the payee and the amount on the face
of the check.
Republic Bank vs. Court of Appeals
The 24-hour clearing house rule is valid rule applicable to commercial banks. As
general rule, the collecting bank or last endorser bears the loss when the
indorsement was forged. But the unqualified endorsement of the collecting bank on
the check should be read together with the 24-hour regulation on the clearing house
operation. Thus, when the drawee bank fails to return a forged or altered check to
the collecting bank is absolved from liability. Unless an alteration is attributable to
the fault or negligence of the drawer himself, the remedy of the drawee bank that
negligently clears a forged and/or honor altered check for payment is against the
party responsible for the forgery or alteration, otherwise, it bears the loss.
Philippine Commercial International Bank vs. Court of Appeals
A bank (in this case PCIB) which cashes a check drawn upon another bank (in this
case Citibank), without requiring proof as to the identity of persons presenting it,
or making inquiries with regard to them, cannot hold the proceeds against the
drawee when the proceeds of the checks were afterwards diverted to the hands of a
third party.
Ramon Illusorio vs. Court of Appeals
The collecting bank or last endorser generally suffers the loss because it has the
duty to ascertain the genuineness of all prior indorsements considering that the act
of presenting the check for payment to the drawee is an assertion that the party
making the presentment has done its duty to ascertain the genuineness of the
indorsements. As between the drawer and the drawee bank, the drawee bank should
bear the loss. The drawee bank shall have recourse against the collecting bank
because such collecting bank guarantees that all prior endorsements are genuine.
The collecting bank then can go against the forger. In cases involving a forged
check, where the drawers is forged, drawer can recover from the drawee bank. No
drawee bank has a right to pay a forged check. If it does, it shall have to recredit the
amount of check to the account of the drawer. The liability chain ends with drawee
bank whose responsibility it is to know the drawers signature since the latter is its
customer.
Samsung Construction Co. Phils, Inc vs. FEBTC and CA
Under Sec. 62 of NIL, among the warranties to be assumed by the acceptor is it
admits the existence of the drawer, the genuineness of his signature, and his
capacity and authority to draw the instrument. It is incumbent upon the drawee bank
to ascertain the genuineness of the signature of its depositor. The respondent bank
in this case did not exercise the degree of diligence required to enable it to detect
the forgery. Aside from the warranties as an indorser, the collecting bank is made
liable because it is privy to the depositor who negotiated the check because it knows
him, his address and history for being a client thereof. Thus, it is in a better position
to detect forgery or irregularity in the indorsement aka Doctrine of Comparative
Negligence
Philippine National Bank vs. Court of Appeals
An alteration is said to be material if it alters the effect of the instrument. It means
an unauthorized change in an instrument that purports to modify in any respect the
obligation of a party or an unauthorized addition of words or numbers or other
change to an incomplete instrument relating to the obligation of a party. In other
words, material alteration is one which changes the items which is required to be
stated under Sec 1 of NIL.
Sadaya vs. Sevilla
On principle, a solidary accommodation makerwho made paymenthas the
right to contribution, from his co-accomodation maker, in the absence of agreement
to the contrary between them, subject to conditions imposed
by law. This right springs from an implied promise to share equally the
burdens thay may ensue from their having consented to stamp their signatures
on the promissory note.
Crisologo-Jose vs. Court of Appeals
The provision of NIL which holds an accommodation party liable on the instrument
to holder for value, although such holder at the time of taking the instrument knew
him to be only an accommodation party, does not include nor apply to corporations
which are accommodation parties. This is because the issue or indorsement of
negotiable paper by a corporation without consideration and for accommodation of
another is ultra vires. Hence, one who has taken the instrument with knowledge of
the accommodation nature thereof cannot recover against a corporation where it is
only a accommodation party.
Stelco Marketing vs. Court of Appeals
A person cannot be holder of the check for value if it does not meet the essential
requisites prescribed by the law. He must become the holder of it before it was
overdue, and without notice that it had previously dishonored, and he took the
check in good faith and for value before he can be considered as a holder of the
check for value.
Travel-On BPI vs. Court of Appeals
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. Further the rule is quite settled that a
negotiable instrument is presumed to have been given or indorsed for a sufficient
consideration unless otherwise contradicted and overcome by another evidence.
In the accommodation transactions recognized by the NIL, an
accommodating party lends his credit to the accommodated party, by issuing or
indorsing a check which is held by the payee or indorsee as a holder in due course,
who gave full value which the accommodated party must repay the accommodating
party, unless of course the accommodating party intended to make a donation to the
accommodated party. But the accommodating party is bound on the check to the
holder in due course who is necessarily a third party and is not the accommodated
party. Having issued or indorsed the check, the accommodating party has warranted
to the holder in due course that he will pay the same according to its tenor.
De Ocampo vs. Gatchalian
Good faith on the part of the holder is presumed, such presumption is destroyed if
the payee or indorsee acquired possession of the instrument under circumstances
that should have put it to inquiry as to the title of the holder who negotiated the
instrument. The burden is now on the part of the holder to show that
notwithstanding the suspicious circumstances, it acquired in the actual good faith.
Mesina vs. IAC
The holder of a cashiers check who is not a holder in due course
cannot enforce payment against the issuing bank which dishonors the same. If
a payee of a cashiers check obtained it from the issuing bank by
fraud, or if there is some other reason why the payee is not entitled to
collect the check, the bank would of course have the right to refuse payment
of the check when presented by payee.
Metropol vs. Sambok
A qualified indorserment constitutes the indorser a mere assignor of the title to the
instrument. It may be made by adding to the indorsers signature the words without
recourse or any words of similar import. Such indorsement relieves the indorser
of the general obligation to pay if the instrument is dishonored but not of the liability
arising from warranties on the instrument as provided by section 65 of NIL.
Recourse means resort to a person who is secondarily liable after the default of the
person who is primarily liable. A person who indorses without qualification
engages that on due presentment, the note shall be accepted or paid, or both as the
case maybe, and that if it be dishonored, he will pay the amount thereof to the
holder.
Sepiera vs. Court of Appeals
Every indorser who indorses without qualification, warrants to all subsequent
holders in due course that, on due presentment, it shall be accepted or paid or both,
according to its tenor, and that if it be dishonored and the necessary proceedings on
dishonor be duly taken, he will pay the amount thereof to the holder or to any
subsequent indorser who may be compelled to pay it.
Prudencial Bank vs. IAC
Acceptance is presumed to be unqualified or absolute. If the drawee intends
toqualify his acceptance, he must do so distinctly and unmistakably or else the
acceptance will be taken as absolute.
Wong vs. Court of Appeals
A check must be presented for payment within a reasonable time after its issue or
the drawer will be discharged from liability thereon to the extent of the loss caused
by the delay. By current banking practice, a check becomes stale after more than
six (6) months, or 180 days.
The International Corporate Bank vs. Francis S. Gueco and Ma. Luz E Gueco
A stale check is one which has not been presented for payment within a reasonable
time after its issue. It is valueless and, therefore, should not be paid. Under the
negotiable instruments law, an instrument not payable on demand must be
presented for payment on the day it falls due. When the instrument is payable on
demand, presentment must be made within a reasonable time after its issue. In the
case of a bill of exchange, presentment is sufficient if made within a reasonable
time after the last negotiation thereof. A check must be presented for payment
within a reasonable time after its issue, and in determining what is a "reasonable
time," regard is to be had to the nature of the instrument, the usage of trade or
business with respect to such instruments, and the facts of the particular case. The
test is whether the payee employed suchdiligence as a prudent man exercises in his
own affairs. This is because the nature and theory behind the useof a check points
to its immediate use and payability.
State Investment House Inc. vs. CA
The withdrawal of the money from the drawee bank to avoid liability on the checks
cannot prejudice the rights of holders in due course. For the reason that 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 withdrawn.
Bataan Cigar and Cigarette Factory, Inc. vs. CA
In order to preserve the credit worthiness of checks, jurisprudence has pronounced
that crossing a check should have the following effects: (1) check may not be
encashed but only deposited in the bank; (2) the check may be negotiated only once,
to one who has an account with a bank; (3) and the act of crossing the 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.
Citytrust banking Corp., vs. Intermediate Appellate Court
Even there was error on the account number the controlling in determining in whose
account the deposit is name of the account owner. This is so because it is not likely
to commit an error in ones name than merely relying on numbers which are
difficult to remember. Numbers are for the convenience of the bank but was never
intended to disregard the real name of its depositors. The bank is engaged in
business impressed with public trust, and it is its duty to protect in return its clients
and depositors who transact business with it.

Tan vs. Court of Appeals

A cashiers check is a primary obligation of the issuing bank and accepted in
advance by its mere issuance, and by its peculiar character and general use in the
commercial world is regarded substantially to be as good as the money which it
represents.

Papa vs. A.U. Valencia

After more than 10 years from the payment in part by cash and in part by check, the
presumption is that the check had been encashed. Failure of the payee to encash a
check for more than 10 years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.

Bank of the Philippine Islands vs. Court of Appeals

Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration; every person whose signature appears thereon to have
become a party thereto for value. Therefore, it is up to the party who alleges that
there was absence of consideration to prove such fact.
The presumption will operate only if there was negotiation. Consideration is not
presumed if there was transfer without indorsement.