CASE Firestone tire and rubbers co. vs.

CA (2001)

FACTS RTC Fojas-Arca has a special savings Dismisse account at Luzon Development Bank d the and issues a special withdrawal petition Function receipt drawn from such bank. and Fojas-Arca entered Law Case Negotiable Instrumentsinto a franchise Factoid importance dealership agreement with of Firestone. Fojas-Arca purchased negotiable from the latter on credit and in turn instrument issues its special withdrawal slips. s Firestone deposited the same at Citibank. At first the withdrawal slips were honored when Citibank deposited them at the drawee bank. However, in the subsequent transactions, some of the special withdrawal slips were dishonored and not paid for reason of no arrangement, so Citibank debited the same to Firestones account. Cebu Function CICF is a quasi banking corp., In favor Intl. and engaged in money market of Alegre Finance importance operation (market dealing in Corp vs. of standardized short-term credit CA (1999) Negotiable instruments (involving large instrument amounts) where lenders and borrowers do not deal directly with each other but through a middle man or dealer in open market. In a money market transaction, the investor is a lender who loans his money to a borrower through a middleman or dealer). Alegre invested 50k cash. He was issued a promissory note by CIFC. When the PN became due, he was issued a check drawn from CIFCs account in BPI. Alegres wife deposited the same in RCBC but the chack was refused and dishonored because of BPIs annotation that the same was subject to an investigation.

TOPIC Essential features

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CA Affirmed the RTC decision

ISSUE WON Luzon Development Bank is liable for damages for its failure to notify Firestone of the nonpayment of the special withdrawal slips at the earliest possible time.

RULING NO! It bears stressing that Citibank could not have missed the non-negotiable nature of the withdrawal slips. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this character.

Affirmed the RTC decision

WON the NIL is applicable in money market transactions.

State investme nt house

Function and importance

Nora Moulic issued to Corazon Victoriano two post dated Equitable Banking Corp. checks (50k) as a

Dismisse d the complaint

Affirmed the decision

WON State investment is a holder of the

NO! In the case at bar, the money market transaction between the petitioner and the private respondent is in the nature of a loan. xxx In a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check. A check is not a legal tender, and therefore cannot constitute valid tender of payment. In the case of Philippine Airlines, Inc. vs. Court of Appeals,14 [181 SCRA 557 (1990)] this Court held: "Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment (citation omitted). A check, whether a manager's check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art. 1249, Civil Code, par. 3.)" YES. In this regard, Sec. 52 of the Negotiable Instruments Law provides -

Negotiable Instruments Law Case Factoid

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