295051133 Compiled Case Digest NEGO PDF

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Agapay.Albarillo.Ambito.Arevalo.Baguilat.Bunag.Cabrera.Claveria.Escalona.Fernando.Ferrer.Flores.Hernando.Hipolito.Lara .Mella.Nasam.Nunez.Retardo.Rodriguez.Soriano.Tamayao Negotiability Philippine Education v. Soriano GR L-22405, 30 June 1971 || Negotiability FACTS: Enrique Montinola sought to purch...

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SBCA-SOL ’14-‘15

Negotiable Instruments Law Case Digests

Agapay.Albarillo.Ambito.Arevalo.Baguilat.Bunag.Cabrera.Claveria.Escalona.Fernando.Ferrer.Flores.Hernando.Hipolito.Lara.Melgar .Mella.Nasam.Nunez.Retardo.Rodriguez.Soriano.Tamayao.Ubaldo

Negotiability Philippine Education v. Soriano GR L-22405, 30 June 1971 || Negotiability FACTS: Enrique Montinola sought to purchase from the Manila Post Office 10 money orders (P200 each), offering to pay for them with a private check. Montinola was able to leave the building with his check and the 10 money orders without the knowledge of the teller. Upon discovery, message was sent to all postmasters and banks involving the unpaid money orders. One of the money orders was received by the Philippine Education Co. as part of its sales receipt. It was deposited by the company with the Bank of America, which cleared it with the Bureau of Post. The Postmaster, through the Chief of the Money Order Division of the Manila Post Office informed the bank of the irregular issuance of the money order. The bank debited the account of the company. The company moved for reconsideration. ISSUE: Whether postal money orders are negotiable instruments HELD: Philippine postal statutes are patterned from those of the United States, and the weight of authority in said country is that Postal money orders are not negotiable instruments inasmuch as the establishment of a postal money order is an exercise of governmental power for the public’s benefit. Furthermore, some of the restrictions imposed upon money order by postal laws and regulations are inconsistent with the character of negotiable instruments. For instance, postal money orders may be withheld under a variety of circumstances, and which are restricted to not more than one indorsement. Caltex Philippines vs. Court of Appeals 212 SCRA 448 G.R. No. 97753 || Negotiability FACTS: 280 Certificates of Time Deposit (CTDs) were issued by the Security Bank and Trust Company in favor of Angel Dela Cruz, who deposited a collective amount of Php 1,120,000. Such CTDs were then delivered by Dela Cruz to Caltex Phils. for the purchase of fuel products.

Dela Cruz lost all the CTDs in March 1982 and informed the manager of Security Bank. The manager arranged for the replacement of the lost CTDs upon compliance of Dela Cruz to their bank procedure which entails execution of a notarized Affidavit of Loss. Upon replacement of the allegedly lost CTDs, Dela Cruz obtained a loan of P875,000 from same bank. He then executed a notarized Deed of Assignment of Time Deposit, surrendering to the bank full control of the time deposit account, allowing the latter to apply the said time deposits to the payment of whatever amounts may be due on the loan upon maturity. On the other hand, in November 1982, Mr. Aranas, the credit manager of Caltex, presented to Security Bank for verification the CTDs declared lost by Dela Cruz. Aranas claimed that the same were delivered to Caltex “as security for purchases made”. Accordingly, Security Bank rejected Caltex’s demand for the payment of the value of the CTDs. In April 1983, the loan of Dela Cruz with the Security Bank matured and the latter applied the time deposits in question as payment of the matured loan. Caltex then filed a complaint demanding payment of the value of the CTDs plus accrued interest and compounded interest. The Regional Trial Court dismissed the case. The Court of Appeals also dismissed the case. ISSUE(S): 1. Whether or not the subject Certificates of Time Deposit are negotiable instruments 2. Whether or not Caltex can recover the value of the CTDs HELD: 1. YES. A sample text of the CTD states: “This is to Certify that B E A R E R has deposited in this Bank the sum of PESOS: FOUR THOUSAND ONLY, SECURITY BANK SUCAT OFFICE P4,000 & 00 CTS Pesos, Philippine Currency, repayable to said depositor 731 days. After date, upon presentation and surrender of this certificate, with interest at the rate of 16% per cent per annum.” Section 1 of the NIL requires among others, that for an instrument to be negotiable, it must be payable to the order or to bearer (par. 1 |C a b u c h a n . N e g o C a s e D i g e s t s

Negotiable Instruments Law Case Digests

SBCA-SOL ’14-‘15

Agapay.Albarillo.Ambito.Arevalo.Baguilat.Bunag.Cabrera.Claveria.Escalona.Fernando.Ferrer.Flores.Hernando.Hipolito.Lara.Melgar .Mella.Nasam.Nunez.Retardo.Rodriguez.Soriano.Tamayao.Ubaldo

D). The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. The documents provide that the amounts deposited shall be repayable to the depositor. The court ruled that the “depositor” indicated is actually the “bearer”. The documents do not say that the depositor is Angel Dela Cruz and that the amounts deposited are payable only to him. If it was really the intention of the bank to pay the amount to Dela Cruz only, then it could have so expressed in clear and categorical terms instead of having the word “bearer” stamped on the space provided for the name of the depositor in each CTD. The Security Bank, through its manager, testified that the depositor referred to is Angel Dela Cruz. However, the court ruled that the manager merely declared that Dela Cruz is the depositor, “insofar as the bank is concerned,” but obviously other parties not privy to the transaction between them would not know that the depositor is not the bearer stated in the CTDs. Hence, the situation would require any party dealing with the CTDs to go behind the plain import of what is written thereon. This need for resort to extrinsic evidence is what is sought to be avoided by the NIL and calls for application of the elementary rule that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 2. NO. Unfortunately for Caltex, although the CTDs are bearer instruments, a valid negotiation thereof for the purpose and agreement between it and Dela Cruz, requires both delivery and indorsement. As stated by Mr. Aranas in a letter addressed to the bank, “these certificates of deposit were negotiated to us by Mr. Dela Cruz to guarantee his purchases of fuel products.” This admission is conclusive upon Caltex. Under the doctrine of Estoppel, an admission is rendered conclusive upon the person making it and cannot be denied against the person relying thereon. If it were true that the CTDs were delivered as payment and not as security, Aranas could have easily said so, instead of using the words “to guarantee.”

Under the NIL, an instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof, and a holder may be the payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In the present case, however, there was no negotiation in the sense of a transfer of a legal title, in which case delivery would have sufficed. Here, the delivery of the CTDs was only as security for the purchases of Dela Cruz. Therefore, Caltex could only have been a holder for value by reason of lien. Accordingly, a negotiation for such purpose cannot be effected by mere delivery of the instrument because the terms thereof and the subsequent disposition of such security, in the event of non-payment of the principal obligation, must be contractually provided for. Metropolitan Bank vs Court of Appeals 194 SCRA 169 || Negotiability FACTS: Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants over a period of two months. These warrants were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and counter-signed by its Auditor. Six of these were directly payable to Gomez while the others appeared to have been indorsed by their respective payees, followed by Gomez as second indorser. All these warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to its Savings Account in Metrobank, Calapan branch. The warrants were then sent to the main office of Metrobank and then to the Bureau of Treasury for special clearing. More than two weeks after the deposits, Gloria Castillo went to Metrobank several times to ask whether the warrants had been cleared. Later, however, "exasperated" over Gloria's repeated inquiries and also as an accommodation for a "valued client," the Metrobank allowed Golden Savings to withdraw from the proceeds of the warrants. Three withdrawal were made by Golden Savings with a total amount of P968,000.00 and in turn, Golden Savings allowed Gomez to make withdrawals from his own account, eventually collecting the total amount of P1,167,500.00 from the proceeds of the apparently cleared warrants. 2 |C a b u c h a n . N e g o C a s e D i g e s t s

SBCA-SOL ’14-‘15

Negotiable Instruments Law Case Digests

Agapay.Albarillo.Ambito.Arevalo.Baguilat.Bunag.Cabrera.Claveria.Escalona.Fernando.Ferrer.Flores.Hernando.Hipolito.Lara.Melgar .Mella.Nasam.Nunez.Retardo.Rodriguez.Soriano.Tamayao.Ubaldo

After the withdrawal of Gomez, Metrobank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury because of the forgery of the signatures of the drawers and demanded the refund of the amount it had previously withdrawn but the demand was rejected. The Regional Trial Court rendered judgment in favor of Golden Savings and on appeal, the decision of the lower court was affirmed. ISSUES: (1) Whether or not the instruments are negotiable (2) Whether or not Golden Savings should be held liable for its warranty as general indorser HELD: (1) No. Clearly stamped on their face is the word, “non -negotiable” and that they are payable from a particular fund, Fund 501. According to Section 1 and Section 3 of the Negotiable Instruments Law, the indication of Fund 501 as the source of payment to me be made on the treasury warrants makes the order or promise to pay “not unconditional” and the warrants themselves non-negotiable. (2) No. Metrobank cannot also contend that the act of Golden Savings of indorsing the warrants assumed that they were ‘genuine in all respects what they purport to’ be since according to Section 66 of the Negotiable Instruments Law, it is only applicable to negotiable treasury warrants. The indorsement was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but to deposit them with Metrobank for clearing. It was Metrobank that made the guarantee by stamping in the back of the warrants: “All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust Co., Calapan Branch” Further, Metrobank was negligent of giving the clearance and assurance to Golden Savings that it was already safe for Gomez to withdraw the proceeds of the treasury warrants due to it being “exasperated” with the continuous inquiry of Gloria Castillo. It is important to note that without such assurance given by Metrobank, Golden Savings would not have allowed such transaction.

Sesbreno vs. CA GR 89252, 24 May 1993 FACTS: On 9 February 1981, Raul Sesbreno made a money market placement in the amount of P300,000 with the Philippine Underwriters Finance Corporation (PhilFinance), with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of a Delta Motor Corporation Promissory Note (2731), the Certificate of Securities Delivery Receipt indicating the sale of the note with notation that said security was in the custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and America for P304,533.33 payable on 13 March 1981. The checks were dishonored for having been drawn against insufficient funds. Pilipinas Bank never released the note, nor any instrument related thereto, to Sesbreno; but Sesbreno learned that the security was issued 10 April 1980, maturing on 6 April 1981, has a face value of P2,300,833.33 with PhilFinance as payee and Delta Motors as maker; and was stamped “non-negotiable” on its face. As Sesbreno was unable to collect his investment and interest thereon, he filed an action for damages against Delta Motors and Pilipinas Bank. ISSUE: Whether non-negotiability of a promissory note prevents its assignment. HELD: 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. herein, there was no prohibition stipulated. FIRESTONE TIRE VS CA GR No. 113236 || Negotiability FACTS: Fojas-Arca purchased tires from petitioner with special withdrawal slips drawn upon Fojas-Arca's special savings account with respondent bank. 3 |C a b u c h a n . N e g o C a s e D i g e s t s

SBCA-SOL ’14-‘15

Negotiable Instruments Law Case Digests

Agapay.Albarillo.Ambito.Arevalo.Baguilat.Bunag.Cabrera.Claveria.Escalona.Fernando.Ferrer.Flores.Hernando.Hipolito.Lara.Melgar .Mella.Nasam.Nunez.Retardo.Rodriguez.Soriano.Tamayao.Ubaldo

Petitioner in turn deposited these withdrawal slips with Citibank. The latter credited the same to petitioner's current account, then presented the slips for payment to respondent bank. This singular circumstance made plaintiff believe and rely on the fact that the succeeding special withdrawal slips drawn upon the defendant would be sufficiently funded. Thereafter, Fojas-Arca, again, purchased Firestone products on credit using withdrawal slips. On December 14, 1978, Citibank informed petitioner that special withdrawal slips Nos. 42127 and 42129 dated June 15, 1978 and August 15, 1978, respectively, were refused payment by respondent bank due to insufficiency of Fojas-Arca's funds on deposit. That information came about six months from the time Fojas-Arca purchased tires from petitioner using the subject withdrawal slips. Citibank then debited the amount of these withdrawal slips from petitioner's account, causing the alleged pecuniary damage subject of petitioner's cause of action.

ISSUE: Whether or not respondent bank should be held liable for damages suffered by petitioner, due to its allegedly belated notice of non-payment of the subject withdrawal slips HELD: No, respondent bank should not be held liable. Petitioner admitted that the withdrawal slips in question were non-negotiable. Hence, the rules governing the giving of immediate notice of dishonor of negotiable instruments do not apply in this case. Thus, respondent bank was under no obligation to give immediate notice that it would not make payment on the subject 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. Citibank should have known that withdrawal slips were not negotiable instruments. Citibank was not bound to accept the withdrawal slips as a valid mode of deposit. But having erroneously accepted them as such, Citibank — and petitioner as account-holder — must bear the risks attendant to the acceptance of these instruments. Petitioner and Citibank could not now shift the risk and hold private respondent liable for their admitted mistake.

Payable to Bearer ANG TEK LIAN v. CA G.R. No. L-2516 || Payable to Bearer FACTS: For having issued a rubber check, AngTekLian was convicted of estafa in the Court of First Instance of Manila. The Court of Appeals affirmed the verdict. Knowing he had no funds therefor, AngTekLian drew the check upon the China Banking Corporation for the sum of P4,000, payable to the order of "cash". He delivered it to Lee Hua Hong in exchange for money which the latter handed in act. On November 18, 1946, the next business day, the check was presented by Lee Hua Hong to the drawee bank for payment, but it was dishonored for insufficiency of funds, the balance of the deposit of AngTekLian on both dates being P335 only. ISSUE: WoN the check in question need endorsement considering that it is made payable to the order of “cash” HELD: It depends upon the circumstances of each transaction.Under the Negotiable Instruments Law (sec. 9 [d], 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. A check payable to the order of cash is a bearer instrument. Where a check is made payable to the order of "cash", the word cash "does not purport to be the name of any person", and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it to the person presenting it without any indorsement. Of course, if the bank is not sure of the bearer's identity or financial solvency, it has the right to demand identification and /or assurance against possible complications, — for instance, (a) forgery of drawer's signature, (b) loss of the check by the rightful owner, (c) raising of the amount payable, etc. The bank may therefore require, for its protection, that the indorsement of the drawer — or of some other person known to it — be obtained. But where the Bank is satisfied of the identity and /or the economic standing of the bearer who tenders the check for collection, 4 |C a b u c h a n . N e g o C a s e D i g e s t s

Negotiable Instruments Law Case Digests

SBCA-SOL ’14-‘15

Agapay.Albarillo.Ambito.Arevalo.Baguilat.Bunag.Cabrera.Claveria.Escalona.Fernando.Ferrer.Flores.Hernando.Hipolito.Lara.Melgar .Mella.Nasam.Nunez.Retardo.Rodriguez.Soriano.Tamayao.Ubaldo

it will pay the instrument without further question; and it would incur no liability to the drawer in thus acting. Petition dismissed. CA’s decision affirmed.

Complete but Undelivered Development Bank of Rizal vs. Sima Wei GR 85419 || Complete but undelivered. (Section 16 of Negotiable Instruments Law) Facts: Sima We executed and delivered to the Development Bank of Rizal(DBR) a promissory note, engaging to pay DBR or order the amount of P1,820,000.00 with interest at 32% per annum. Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. Sima Wei issued two crossed checks payable to DBR drawn against China Banking Corporation, bearing respectively the serial numbers 384934, for the amount of P550,000.00 and 384935, for the amount of P500,000.00. The said checks were allegedly issued in full settlement of the drawer's account evidenced by the promissory note. These two checks were not delivered to DBR or to any of its authorized representatives. For reasons not shown, these checks came into the possession of Lee Kian Huat, who deposited the checks without DBR's indorsement (forged or otherwise) to the account of the Asian Industrial Plastic Corporation, at the Balintawak branch, Caloocan City, of the Producers Bank. Cheng Uy, Branch Manager of the Balintawak Branch of Producers Bank, relying on the assurance of Samson Tung, President of Plastic Corporation, that the transaction was legal and regular, instructed the cashier of Producers Bank to accept the checks for deposit and to credit them to the account of said Plastic Corporation, inspite of the fact that the checks were crossed and payable to DBR and bore no indorsement of the latter. Issue: Whether DBR, as the intended payee of the instrument, has a cause of action against any or all of the defendants, in the alternative or otherwise Held: No. A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a species of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so must a negotiable instrument be delivered to the payee in order to