15. Alvin Patrimonio v. Napoleon Gutierrez , et. al. G.R. No.

187769 June 04, 2014

FACTS: The petitioner and the respondent Gutierrez entered into a business venture under the name of
Slam Dunk Corporation, a production outfit that produced mini-concerts and shows related to basketball.

Patrimonio pre-signed several checks to answer for the expenses of Slam Dunk. Although signed, these
checks had no payee’s name, date or amount. The blank checks were entrusted to Gutierrez with the
specific instruction not to fill them out without previous notification to and approval by the petitioner.

Without the petitioner’s knowledge and consent, Gutierrez went to Marasigan to secure a loan in the
amount of P200,000.00 on the excuse that the petitioner needed the money for the construction of his
house. In addition to the payment of the principal, Gutierrez assured Marasigan that he would be paid an
interest of 5% per month.

Marasigan acceded to Gutierrez’ request and gave him P200,000.00. Gutierrez simultaneously delivered
to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank with the blank portions
filled out with the words “Cash” “Two Hundred Thousand Pesos Only”, and the amount of “P200,000.00.”

Marasigan deposited the check but it was dishonored for the reason “ACCOUNT CLOSED.” It was later
revealed that petitioner’s account with the bank had been closed.

Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand letters to the
petitioner asking for the payment of P200,000.00, but his demands likewise went unheeded.
Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner.

RTC— in favor of Marasigan. It found that the petitioner, in issuing the pre-signed blank checks, had the
intention of issuing a negotiable instrument, albeit with specific instructions to Gutierrez not to negotiate or
issue the check without his approval. RTC declared Marasigan as a holder in due course and accordingly
dismissed the petitioner’s complaint for declaration of nullity of the loan. It ordered the petitioner to pay
Marasigan the face value of the check with a right to claim reimbursement from Gutierrez. CA— affirmed
the RTC ruling.

ISSUE: Whether or not Marasigan is a holder in due course thus may hold Patrimonio liable
HELD: No. Section 14 of the Negotiable Instruments Law provides for when blanks may be filled. This
provision applies to an incomplete but delivered instrument. Under this rule, if the maker or drawer
delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable
instrument, that person is deemed to have prima facie authority to fill it up. It merely requires that the
instrument be in the possession of a person other than the drawer or maker and from such possession,
together with the fact that the instrument is wanting in a material particular, the law presumes agency to
fill up the blanks.

In order however that one who is not a holder in due course can enforce the instrument against a party
prior to the instrument’s completion, two requisites must exist: (1) that the blank must be filled strictly in
accordance with the authority given; and (2) it must be filled up within a reasonable time. If it was proven
that the instrument had not been filled up strictly in accordance with the authority given and within a
reasonable time, the maker can set this up as a personal defense and avoid liability.

Section 52(c) of the NIL states that a holder in due course is one who takes the instrument “in good faith
and for value.” It also provides in Section 52(d) that in order that one may be a holder in due course, it is
necessary that 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.

Acquisition in good faith means taking without knowledge or notice of equities of any sort which could
beset up against a prior holder of the instrument. It means that he does not have any knowledge of fact
which would render it dishonest for him to take a negotiable paper. The absence of the defense, when the
instrument was taken, is the essential element of good faith.

In order to show that the defendant had “knowledge of such facts that his action in taking the instrument
amounted to bad faith,” it is not necessary to prove that the defendant knew the exact fraud that was
practiced upon the plaintiff by the defendant’s assignor, it being sufficient to show that the defendant had
notice that there was something wrong about his assignor’s acquisition of title, although he did not have
notice of the particular wrong that was committed. In the present case, Marasigan’s knowledge that the
petitioner is not a party or a privy to the contract of loan, and correspondingly had no obligation or liability
to him, renders him dishonest, hence, in bad faith.

Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally
barred from recovery.

Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the
authority when he used the check to pay the loan he supposedly contracted for the construction of
petitioner’s house. This is a clear violation of the petitioner’s instruction to use the checks for the
expenses of Slam Dunk. It cannot therefore be validly concluded that the check was completed strictly in
accordance with the authority given by the petitioner.

16. Areza vs. Express Savings Bank

(G.R. No. 176697, September 10, 2014)

Doctrines: A depositary/collecting bank where a check is deposited, and which endorses the check upon
presentment with the drawee bank, is an endorser. Under Section 66 of the Negotiable Instruments Law,
an endorser warrants “that the instrument is genuine and in all respects what it purports to be; that he has
good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his
endorsement valid and subsisting.”

It is well-settled that the relationship of the depositors and the Bank or similar institution is that of creditor-
debtor. Article 1980 of the New Civil Code provides that fixed, savings and current deposits of money in
banks and similar institutions shall be governed by the provisions concerning simple loans. The bank is
the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to
pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties.

Facts: Petitioners received an order for the purchase of a motor vehicle from Gerry Mambuay where the
latter paid petitioners with nine (9) Philippine Veterans Affairs Office (PVAO) checks payable to different
payees and drawn against the Philippine Veterans Bank (drawee), each valued at Two Hundred
Thousand Pesos (₱200,000.00). Petitioners deposited the said checks in their savings account with the
Express Savings Bank which, in turn, deposited the checks with its depositary bank, Equitable-PCI Bank
and the latter presented the checks to the drawee, the Philippine Veterans Bank, which honored the
checks. However, the subject checks were returned by PVAO to the drawee on the ground that the
amount on the face of the checks was altered from the original amount of ₱4,000.00 to ₱200,000.00.
After informing Express Savings Bank that the drawee dishonored the checks, Equitable-PCI Bank
debited the deposit account of ESB in the amount of P1.8M. Express Savings Bank then withdrew the
amount of P1.8M representing the returned checks from petitioners saving account.

Issue: Whether or not Express Savings Bank had the right to debit₱1,800,000.00 from
petitioners’ accounts.
Held: No, Express Savings Bank cannot debit the savings account of petitioners. A depositary/collecting
bank where a check is deposited, and which endorses the check upon presentment with the drawee
bank, is an endorser. Under Section 66 of the Negotiable Instruments Law, an endorser warrants “that the
instrument is genuine and in all respects what it purports to be; that he has good title to it; that all prior
parties had capacity to contract; and that the instrument is at the time of his endorsement valid and
subsisting.” As collecting bank, Express Savings Bank is liable for the amount of the materially altered
checks. It cannot further pass the liability back to the petitioners absent any showing in the negligence on
the part of the petitioners which substantially contributed to the loss from alteration.

17.Metropolitan Bank and Trust Company vs. Wilfred N. Chiok

(G.R. No. 172652; November 26, 2014)

Doctrine: While manager’s and cashier’s checks are still subject to clearing, they cannot be
countermanded for being drawn against a closed account, for being drawn against insufficient funds, or
for similar reasons such as a condition not appearing on the face of the check.

Facts: On July 5, 1995, respondent Wilfred N. Chiok (Chiok) bought US$1,022,288.50 dollars from
Gonzalo B. Nuguid (Nuguid) where Chiok deposited the three manager’s checks (Asian Bank MC Nos.
025935 and 025939, and Metrobank CC No. 003380), with an aggregate value of₱26,068,350.00 in
Nuguid’s account with petitioner Bank of the Philippine Islands (BPI). Nuguid, however, failed to deliver
the dollar equivalent of the three checks as agreed upon, prompting Chiok to request that payment on the
three checks be stopped. On the following day, July 6, 1995, Chiok filed a Complaint for damages with
application for ex parte restraining order and/or preliminary injunction with the Regional Trial Court (RTC)
of Quezon City against the spouses Gonzalo and Marinella Nuguid, and the depositary banks, Asian
Bank and Metrobank. On July 25, 1995, the RTC issued an Order directing the issuance of a writ of
preliminary prohibitory injunction. When checks were presented for payment, Asian Bank refused to
honor MC Nos. 025935 and 025939 in deference to the TRO.

Issue: Whether or not payment of manager’s and cashier’s checks are subject to the condition that the
payee thereof should comply with his obligations to the purchaser of the checks.

Held: No. A manager’s check, like a cashier’s check, is an order of the bank to pay, drawn upon itself,
committing in effect its total resources, integrity, and honor behind its issuance. By its peculiar character
and general use in commerce, a manager’s check or a cashier’s check is regarded substantially to be as
good as the money it represents. While manager’s and cashier’s checks are still subject to clearing, they
cannot be countermanded for being drawn against a closed account, for being drawn against insufficient
funds, or for similar reasons such as a condition not appearing on the face of the check. Long standing
and accepted banking practices do not countenance the countermanding of manager’s and cashier’s
checks on the basis of a mere allegation of failure of the payee to comply with its obligations towards the
purchaser. Therefore, when Nuguid failed to deliver the agreed amount to Chiok, the latter had a cause of
action against Nuguid to ask for the rescission of their contract; but, Chiok did not have a cause of action
against Metrobank and Global Bank that would allow him to rescind the contracts of sale of the manager’s
or cashier’s checks, which would have resulted in the crediting of the amounts thereof back to his
accounts.