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5. Because of this agreement, the petitioner E.T. Henry & Co. was able to re-discount its
client’s checks
(NOTES:
re-discount discounting for the 2nd time
Usually a discount is by agreement, and includes the common situation in which a holder
of a long-term promissory note or material goods will sell it/them for less than face value
in order to get cash now---the difference is the discount.)
6. For every transaction, respondent bank required E.T. Henry to execute a promissory note
and a deed of assignment bearing the conformity of the client (customers of the
Spouses Tan like Hi-cement) to the re-discounting.
7. However, in February 1981, 20 checks of Hi-Cement were dishonored, so with the other
customers of E.T. Henry & Co.
8. Respondent bank filed a complaint for sum of money against E.T. Henry & Co., Sps.
Tan, Hi-Cement, and the other customers
9. According to respondent bank, the dishonored checks made them suffer actual damages
NOTE why actual damages: prior to actual date of the check nawalan na siya ng money regardless if the
funds were available or not nilabas na niya yung money by encashing the post-dated crossed checks)
10.Hi-Cement argued that:
(1) its general manager and treasurer were not authorized to issue the post-dated
crossed checks in E.T. Henry's favor;
(2) the deed of assignment purportedly executed by Hi-Cement assigning them to
respondent only bore the conformity of its treasurer and
(3) respondent was not a holder in due course as it should not have discounted
them for being "crossed checks."
11. RTC: Ruled in favor of the respondent bank
12. CA: affirmed RTC thus these consolidated petitions
(case #1 Hi Cement v. Insular Bank Hi Cement disclaims liability for the postdated crossed checks ; #2 E.T
Henry & Sps. Tan v. Insular Bank)
ISSUE: W/N the respondent bank is a holder in due course
HELD: NO
Respondent bank failed to meet the requisites of a holder in due course, specifically (c) &
(d) of Section 52 of the Negotiable Instruments Law
(c) he took it in good faith and for value and
(d) at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.
In the instant case, the checks were crossed and specifically indorsed for deposit to payee's
account only. From the beginning, The BANK was aware of the fact that the checks
were all for deposit only to payee's account, meaning E.T. Henry hence, they could
not be further negotiated to it.
Clearly, then, it could not be considered a holder in due course.
Good faith herein is negated by gross negligent conduct in dealing with the subjected
checks
(infirmity) In addition, records show that respondent bank completely disregarded a
telling sign of irregularity in the re-discounting of the checks when the general
manager did not acquiesce or consent to it. Only the treasurer’s signature appeared on
the deed of assignment
It is then settled that CROSSING OF CHECKS should put the holder on inquiry and
upon him devolves the duty to ascertain the indorser's title to the check or the nature
of his possession failure to do so = lack of good faith
Banks are expected to observe extraordinary diligence in ever transaction
NOTE: We note, however, that in the two aforementioned cases, we made it clear that the
NIL does not absolutely bar a holder who is not a holder in due course from recovering on
the checks. In both, we ruled that it may recover from the party who indorsed/encashed the
checks "if the latter has no valid excuse for refusing payment."
ISSUE: W/N Roxas a holder in due course (when he held a cashier’s check that was dishonoured
for lack of consideration or value, i.e., the account from which the check should be drawn closed)
HELD: YES.
As a general rule, every holder is presumed prima facie to be a holder in due course.
One who claims otherwise has the onus probandi to prove that one or more of the
conditions required to constitute a holder in due course are lacking. In this case,
petitioner contends that the element of "value" is not present, therefore, respondent could
not be a holder in due course.
Section 25 of the NIL states: Value, what constitutes. – Value is any consideration
sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value;
and is deemed as such whether the instrument is payable on demand or at a future time.
Court ruled in several cases that value "in general terms may be some right, interest, profit
or benefit to the party who makes the contract or some forbearance, detriment, loan,
responsibility, etc. on the other side."
Here, there is no dispute that respondent received Rodrigo Cawili's cashier's check as
payment for the former's vegetable oil.
The fact that it was Rodrigo who purchased the cashier's check from petitioner bank will
not affect respondent's (Roxas) status as a holder for value since the check was delivered
to him as payment for the vegetable oil HE SOLD to spouses Cawili.
Furthermore, it bears emphasis that the disputed check is a cashier's check.
A cashier’s check is really the bank’s own check and may be treated as a promissory note
with the bank as the maker. The check becomes the primary obligation of the bank which
issues it and constitutes a written promise to pay upon demand. This Court took judicial
notice of the "well-known and accepted practice in the business sector that a cashier’s check
is deemed as cash." This is because the mere issuance of a cashier’s check is considered
acceptance thereof.
HELD: NO
Fossum is far from being a holder in due course. He was himself a party to the contract
which supplied the consideration for the draft, albeit acting in a representative capacity.
Also, he procured the instrument to be indorsed by the bank and delivered to himself
without the payment of value, after it was overdue, and with full notice that, as between
the original parties, the consideration had completely failed.
Facts:
1. Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge
of marketing and sales; and the president of the said corporation was Atty. Oscar Z.
Benares. Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita
Ong, issued check against Traders Royal Bank, payable to defendant Ernestina Crisologo-
Jose.
2. Since the check was under the account of Mover Enterprises, Inc., the same was to be
signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation.
3. However, since at that time, the treasurer of Mover Enterprises was not available, Atty.
Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check.
4. The check was issued to defendant Ernestina Crisologo-Jose in consideration of the waiver
or quitclaim by said defendant over a certain property which the Government Service
Insurance System (GSIS) agreed to sell to the spouses Jaime and Clarita Ong, with the
understanding that upon approval by the GSIS of the compromise agreement with the
spouses Ong, the check will be encashed accordingly.
5. Since the compromise agreement was not approved within the expected period of time, the
aforesaid check was replaced by Atty. Benares.
6. This replacement check was also signed by Atty. Oscar Z. Benares and by the plaintiff
Ricardo S. Santos, Jr. When defendant deposited this replacement check with her account
at Family Savings Bank, Mayon Branch, it was dishonored for insufficiency of funds. The
petitioner filed an action against the corporation for accommodation party.
Accommodation party liable on the instrument to a 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.
Hence, one who has taken the instrument with knowledge of the accommodation nature
thereof cannot recover against a corporation where it is only an accommodation party.
If the form of the instrument, or the nature of the transaction, is such as to charge the
indorsee with knowledge that the issue or indorsement of the instrument by the corporation
is for the accommodation of another, he cannot recover against the corporation thereon. By
way of exception, an officer or agent of a corporation shall have the power to execute or
indorse a negotiable paper in the name of the corporation for the accommodation of a third
person only if specifically authorized to do so. Corollarily, corporate officers, such as the
president and vice-president, have no power to execute for mere accommodation a
negotiable instrument of the corporation for their individual debts or transactions arising
from or in relation to matters in which the corporation has no legitimate concern.
Since such accommodation paper cannot thus be enforced against the corporation,
especially since it is not involved in any aspect of the corporate business or operations, the
inescapable conclusion in law and in logic is that the signatories thereof shall be personally
liable therefor, as well as the consequences arising from their acts in connection therewith.