METRO BANK VS. CA

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    METRO BANK VS. CA



Treasury Warrants are not Negotiable Instruments for being payable from a particular fund. 

Metropolitan Bank and Trust Company, petitioner, vs. Court of Appeals, Golden Savings & Loan Association, and Castillo, respondents.
G.R No. 88866. February 18, 1991

Facts:

Golden Savings and Loan Association was, operating in Calapan, Mindoro, with other private respondents as its principal officers. In January 1979, Gomez opened an account with Golden Savings and deposited over a period of 2 months 38 treasury warrants with a total value of P1,755,228. 37. They were all drawn by the Philippine Fish Marketing Authority and purportedly signed by its General Manager and counter signed by its Auditor. 6 of these were directly payable to Gomez while others appeared to have been endorsed by their respective payees, followed by Gomez as second endorser.
All these warrants were subsequently indorsed by Castillo as cashier of Golden Savings and deposited to its Savings Account in Metro bank, they were then sent for clearing by the branch office to principal office, which forwarded them to the Bureau of Treasury for special clearing.

More than 2 weeks after the deposits, the Cashier went to Calapan Branch several times to ask whether the warrants had been cleared. She was told to wait and was not allowed to withdraw from the account; Later however being annoyed over Gloria’s repeated inquiries and as accommodation for a valued client, petitioner says it finally decided to allow Golden Savings to withdraw from the proceeds of the warrants and the total withdrawal made by Golden Saving was 968,000.00 In turn Golden Savings subsequently allowed Gomez to make withdrawals from his own account, eventually collecting the total amount of P 1,167, 500.00 from the proceeds of the apparently cleared warrants.

Later after the last withdrawal was made, Metro bank informed Golden Savings that 32 of the warrants had been dishonored by the Bureau of Treasury and demanded the refund by Golden Savings of the account it had previously withdrawn, to make up the deficit in its account.
The Demand was rejected.

ISSUE:

Whether or not Treasury Warrants are Negotiable Instruments

HELD: 

No.  treasury warrants in question are not negotiable instruments. Clearly stamped on their face is the word “non-negotiable”. Moreover, and this is of equal significance, it is indicated that they are payable from a particular fund, to wit, “Fund 501.”

The following sections of the Negotiable Instruments Law, especially the underscored parts, are pertinent:

SECTION 1. Form of negotiable instruments.· An instrument to be negotiable must conform to the following requirements:
    a)     It must be in writing and signed by the maker or drawer

    b)    It must contain an unconditional promise or order to pay a sum certain in money

    c)     It must be payable on demand, or at a fixed, or determinable future time

    d)     It must be payable to order or to bearer, and

    e)     Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

x x x
SEC. 3. When promise is unconditional.·An unqualified order or promise to pay is unconditional within the meaning of this Act though coupled with·

   A)      An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or
     B)      A statement of the transaction which gives rise to the instrument.
But an order or promise to pay out of a particular fund is not unconditional.

The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay „not unconditional‰ and the warrants themselves non-negotiable. There should be no question that the exception on Section 3 of the Negotiable Instruments Law is applicable in the case at bar. This conclusion conforms to Abubakar vs. Auditor General where the Court held:

The petitioner argues that he is a holder in good faith and for value of a negotiable instrument and is entitled to the rights and privileges of a holder in due course, free from defenses. But this treasury warrant is not within the scope of the negotiable instrument law. For one thing, the document bearing on its face the words „pay-able from the appropriation for food administration, is actually an Order for payment out of „a particular fund, and is not unconditional and does not fulfill one of the essential requirements of a negotiable instrument (Sec. 3 last sentence and section [1(b)] of the Negotiable Instruments Law).

Challenged decision is affirmed with modification.

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