NEGO – Y2S1
Midterms Answers – Doctrine of Cases
 Bognot vs. RRI Lending Corporation – A check is not legal tender
and cannot constitute a valid tender of payment. Since a negotiable
instrument does not, by itself, operate as payment. Mere delivery of
checks does not discharge the obligation under a judgment.
 Traders Royal Bank vs. CA – Central bank certificate of
indebtedness is not a negotiable instrument, in the absence of words
of negotiability within the meaning of the negotiable instruments law;
the language of negotiability which characterized a negotiable paper
as a credit instrument is its freedom to circulate as a substitute for
money. Hence, freedom of negotiability is the touchstone relating to
the protection of holders in due course.
This freedom of negotiability is totally absent in CBCI as it merely
pays a sum of money to a specified person or entity for a period of
time.
 Caltex vs. CA – the accepted rule is that negotiability of an instrument
is determined from its writing, from the face of an instrument itself.
 Sesbreno vs. CA – The words non-negotiable stamped on the face
of the bill of lading, did not destroy its assignability. A non-negotiable
instrument may not be negotiated, but it may be assigned or
transferred absent an express prohibition against assignment or
transfer.
 Firestone vs. CA – essence of negotiability which characterized a
negotiable paper as a credit instrument lies in its freedom to circulate
freely as a substitute for money; a bank is under obligation to treat
the accounts of its depositors with meticulous care.
 Ang Tek Lian vs. CA – 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 drawer’s indorsement. The
word cash does not purport to be the name of any person, and
hence, the instrument is payable to bearer.
NOTE! If the bank is not sure of the bearer’s identity, it may require
indorsement of the drawer or some other person for its protection.
But if the bank is satisfied of the identity or the economic standing of
the bearer who tenders the check for collection, it will pay the
instrument without further question.
 De la Victoria vs. Burgos – every contract on a negotiable instrument
is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. Delivery is the transfer of possession
of the instrument by the m/d with the intent to transfer title to the
payee and recognize him as the holder thereof; the salary of a
government officer does not belong to him before it is physically
delivered.
 Philippine National Bank vs. Manila Oil – judgment notes
 Republic Planters Bank vs. CA – persons who write their names on
the face of promissory notes are makers and are liable as such; by
signing the notes, the maker promises to pay to the order of the
payee or any holder.
When an instrument containing the words “I promise to pay” is signed
by two or more persons, they are deemed to be jointly and severally
liable(Sec 17); which means that the makers bind themselves jointly
and individually to the payee so that they may all be sued together
for its enforcement, and that each is liable for the entire amount and
not just his proportionate share.
 Philippine National Bank vs. Rodriguez – when the payee is fictitious
or not intended to be the true recipient of the proceeds, the check is
considered as a bearer instrument.
In a fictitious-payee situation, the drawee bank is absolved from
liability and the drawer bears the loss. When faced with a check
payable to a fictitious payee, it is treated as a bearer instrument that
can be negotiated by mere delivery.
A requisite condition of a fictitious payee situation that the maker of
of the check intended for the payee to have no interest in the
transaction.
E! A showing of commercial bad faith on the part of the drawee bank
or any transferee of the check, will work to strip of its defense. The
exception will cause it to bear the loss. Commercial bad faith is
present if the transferee of the check acts dishonestly, is party to the
fraudulent schemes.
 Consolidated Plywood Industries v. IFC – the instrument in order to
be negotiable must contain the words of negotiability, must be
payable to “order” or “bearer” to signify an expression of consent that
the instrument may be transferred. W/O such, the instrument is
payable only to the person designated therein, and is non-
negotiable. It has the effect of being a mere assignee of the note,
and can never be a HDC.
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