NEGOTIABLE INSTRUMENTS CASE DIGESTS
NEGOTIABLE INSTRUMENT LAW
SECTION 1
1) PHILIPPINE
EDUCATION CO., INC., VS. SORIANO ET.AL
Money
Orders are not Negotiable Instruments because the in operating this system, the
government is not engaged in a commercial transactions but in a governmental
power for public benefit. And for some condition imposed upon money orders that
limits its negotiability as provided in section 1.b
39 SCRA 587.
JUNE 30, 1971
Dizon.,
This is an
appeal from a decision of the Court of First Instance of Manila dismissing the
Complaint filed by the Philippine Education against the defendants.
FACTS:
Enrique
Montinola sought to purchase from the Manila, Post Office ten (10) money orders
of P200.00 each payable to E.P Montinola. After the teller had made out the
money orders, Montinola offered to pay for them with private check. As private
checks were not generally accepted in payment of money orders, the teller
advised him to see the Chief of the money order division, but instead of doing
so, Montinola managed to leave the building with his own check and the ten
money orders without the knowledge of the teller.
On the same date
(April 18, 1958), upon discovery of the disappearance of the unpaid money
orders, a notice was served upon all banks, instructing them not to pay anyone
of the money orders with numbers given if presented for payment. The bank of
America received a copy of said notice 3 days later.
On April 23, one
of the money orders was received by the appellant Philippine
Education., as part of its sales receipts. The following day, it
deposited the same with the Bank of America and one day thereafter the latter
cleared and received from the Bureau of Posts its face value of P200.00 and so
was deposited to the appellant's bank account.
On September 27,
1961 appellee Soriano, Chief of Money Order Division of the
Manila Post Office, notified the Bank of America that such money order attached
to his letter had been found to have been irregularly issued and that, in view
thereof, the amount it represented had been deducted from the Bank's clearing
account. For its part, the Bank of America debited appellant's account
(Phil.Edu.) with the same amount.
The appellant
Phil.Edu invoked that the money order was duly negotiated to them and thus they
are entitled to the amount it represents and thus raised that the postal money
order in question is a negotiable instrument; and that the money orders, once
issued create a contractual relationship of debtor and creditor, respectively
bet. the government and the remitters payees or endorsees.
ISSUE:
Whether or not
the postal money order is a negotiable instrument.
HELD:
No Postal
Money Order is not negotiable instrument. Philippine postal statutes were
patterned after similar statutes enforced in United States and for this reason,
ours are generally construed in accordance with the construction given in U.S to
their own postal statutes. The weight of authority in U.S is that postal money
orders are not negotiable instruments, the reason being that in establishing
and operating a postal money order system, the government is not engaged in
commercial transactions but merely exercises a governmental power for the
public benefit.
Moreover, some
restrictions are imposed upon money orders by postal laws are inconsistent with
the character of negotiable instruments or limiting its negotiability, for
instance, as far back in 1948 there is already an agreement between Bank of
America and the Manila Post Office that payment of money orders may be
withheld under a variety of circumstances, for example, in case of adverse
claim against any Bank of America depositor involving postal money orders
issued by the Post Office, all amounts cleared in relation thereto shall be
refunded back to the post office's account, this special condition attached
limits the negotiability of the money orders.
The appealed
decision is affirmed.
2)
CALTEX (PHILIPPINES) VS. COURT OF APPEALS
G.R.
NO. 97753. AUGUST 10, 1992
The Certificate
of Time Deposit is Negotiable Instrument.
But delivery
thereof only as security for the purchases and without endorsement could
constitute petitioner only as a holder for value by reason of his lien.
CALTEX
(PHILIPPINES), PETITIONER VS. CA AND SECURITY BANK AND TRUST COMPANY,
RESPONDENTS
FACTS:
On various
dates, defendant bank issued 280 certificates of time deposits (CTDs) in favor
of Angel Dela Cruz who deposited with herein defendant the aggregate amount of
P1,120,000.00. Angel delivered the saied CTDs to herein plaintiff Caltex in
connection with his purchase of fuel products from the latter.
Angel informed
the Sucat Branch Manager of the defendant Bank and on the basis of
affidavit of loss, 280 replacement CTDs were issued in favor of said depositor
Angel; after days, she negotiated and obtained a loan from defendant bank in
the amount of P 875,000.00 and on the same date she executed a Deed of
Assignment of Time Deposit which stated that he (dela Cruz) surrenders to
defendant bank full control of the indicated time deposits from and after the
date of the assignment and further authorizes the bank to preterminate, set off
and apply the said time deposits to the payment of whatever amounts may be due
in the loan upon its maturity.
Sometime in
November 1982, the Credit Manager of plaintiff Caltex went to defendant bank
and presented for verification the CTDs declared lost by Angel alleging that
the same were delivered to them as security for purchases made with them by
said depositor. Subsequently, the defendant bank received a letter from Caltex
informing them of its possession of the CTDs and its decision to pre—terminate
the same. The Bank requested Caltex to furnish the copy of the document
evidencing the guarantee agreement but no copy was furnished hence Bank
rejected the plaintiff’s demand and claim for payment of the value of CTDs.
In April 1983,
the loan of Angel with the defendant bank matured and fell due on August 1983,
the latter set off and applied the same deposits in question to the payment of
the matured loan.
In view of the
foregoing, plaintiff filed an instant complaint praying that defendant bank be
ordered to pay it the aggregate value of the CTDs of P 1,120,000.00 plus
accrued interest and compounded interest therein of 16% per annum plus other
damages. Petitioner alleges that respondent court erred in its ruling that CTDs
are not negotiable instruments, that the petitioner is not holder in due course
and in disregarding the provision of Code of Commerce relating to lost
instruments payable to bearer.
ISSUE:
1) Whether or not the
Certificate of Time Deposit is Negotiable Instrument.
2) Whether Petitioner can rightfully recover on the CTDs.
HELD:
1 ) Yes. Section 1
of Act No. 2031 (The Negotiable Instruments Law) enumerates the requisites for
an instrument to become negotiable.
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.
CTDs in question
undoubtedly meet the requirements of the law for negotiability. The Instrument
contained the term bearer without the name of Angel in it.
On this score,
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. In the construction of a bill or note, the intention of the
parties is to control, if it can be legally ascertained. While the writing may
be read in the light of surrounding circumstances in order to more perfectly
understand the intent and meaning of the parties, yet as they have constituted
the writing to be the only outward and visible expression of their meaning, no
other words are to be added to it or substituted in its stead. The duty of the
court in such case is to ascertain, not what the parties may have secretly
intended as distinguished from what their words express, but what is the meaning
of the words they have used. What the parties meant must be determined by what
they said.
2) No. CTDs were in
reality delivered it as a security for Angel’s purchases of its fuel products
as expressly stated in the letter of the petitioner to herein respondent bank
as he uses as guarantee and not as payment therefore applying the doctrine of
estoppel, the petitioner admission is conclusive upon the person relying
thereon.
The pertinent
law on this point is that where the holder has a lien on the instrument arising
from contract, he is deemed a holder for value to the extent of his lien. As
such holder of collateral security, he would be a pledgee but the requirements
therefor and the effects thereof, not being provided for by the Negotiable
Instruments Law, shall be governed by the Civil Code provisions on pledge of
incorporeal rights, which inceptively provide:
“Art. 2095.
Incorporeal rights, evidenced by negotiable instruments, x x x may also be
pledged. The instrument proving the right pledged shall be delivered to the
creditor, and if negotiable, must be
indorsed.”
“Art. 2096. A
pledge shall not take effect against third persons if a description of the
thing pledged and the date of the pledge do not appear in a public instrument.”
Aside from the fact that the CTDs were only delivered but not indorsed, the
factual findings of respondent court quoted at the start of this opinion show
that petitioner failed to produce any document evidencing any contract of
pledge or guarantee agreement between it and Angel de la Cruz. Consequently,
the mere delivery of the CTDs did not legally vest in petitioner any right
effective against and binding upon respondent bank.
Under
the Negotiable Instruments Law, an instrument is negotiated when it is transferred
form 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 the legal title
to the CTDs in favor of petitioner in which situation, for obvious reasons,
mere delivery of the bearer CTDs would have sufficed. Here, the delivery
thereof only as security for the purchases of Angel de la Cruz (and we even
disregard the fact that the amount involved was not disclosed) could at the
most constitute petitioner only as a holder for value by reason of his lien.
Accordingly, a negotiation for such purpose cannot be effected by mere delivery
of the instrument since, necessarily, 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.
3) 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
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:
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.
4) BPI FAMILY SAVINGS BANK. VS.
MANIKAN
Manager's and Cashier's Checks are regarded as
substantially to be as good as the money it represents. But allowing the
delivery to a person not directly charged with the collection, the drawer
assumed the risks of its misapplication.
BPI Family
Savings Bank, Inc. and Bayaborda, petitioner vs. Romeo Manikan, respondent.
G.R. No. 148789. January 16, 2003
FACTS:
Petitioners seek
a review of the decision of the CA which has affirmed the judgment of the RTC
of Iloilo CIty, dismissing the complaint of petitioners for mandamus and
ordering them to pay respondent the sum of P30,000.00 by way of attorney's
fees.
Being the City
Treasurer of Iloilo City, respondent assessed petitioner bank business taxes
for the years 1992 and 1993. In 1994, the bank issued 2 manager's checks
payable to the City Treasurer of IloIlo City, the first check for P462,270.60
was to cover the business tax for the year 1992 and the second check for
482,988.45 was to settle the business tax for the year 1993.
Bayaborda, the
manager of bank's Iloilo branch, instructed an employee Sablo, to deliver the 2
checks to the Secretary to the City Mayor, a certain Espenosa handed then over
to his secretary, Salcedo for transmittal to the City Treasurer. The value of
the checks were eventually credited to the account of the City Treasurer. The
checks however, were not applied to satisfy the tax liabilities of petitioner
but of other taxpayers.
The
misapplication of the proceeds of the checks came to the knowledge of
respondent City Treasurer who, thereupon, created a committee to look into the
matter. The investigation revealed that it was upon the representation of
Salcedo that the manager's checks were used to pay tax liabilities of other
taxpayers and not those of petitioner bank. Meanwhile, the respondent bank,
made a demand on respondent to issue official receipts to show that it had paid
its business taxes for the year 1992 and 1993 covered by the diverted
manager's checks. When he refused to issue the receipts requested, respondent
was sued by the petitioners for mandamus and damages.
On appeal, petitioner contends that the receipt by the
City Treasurer's Office of Iloilo City of the Face Value of the two Manager's
checks intended for payment of its business taxes for the year 1992 and 1993
entitles it to the issuance of an official receipt enforceable by a Writ of
Mandamus.
ISSUE:
Whether or not the petitioner is entitled for the
issuance of official receipts for the 2 manager's checks it draws for the
payment of its business taxes delivered to a person not directly charge with
the collection.
HELD:
No. Although the checks delivered by petitioner
bank to Espinosa were manager's checks. 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, these are regarded as substantially to
be as good as the money it represents.
However, by allowing the delivery of the subject
checks to a person who is not directly charged with the collection of its tax
liabilities, the bank must be deemed to have assumed the risk of a possible
misuse thereof even as it appears to have fallen short of the diligence
ordinarily expected of it. The bank, of course, is not precluded from pursuing
a right of action against those who could have been responsible for the
wrongdoing or who might have have been unjustly benefited from it.
Instant petition is partly granted. The appealed
decision is affirmed but deleted the award of attorney's fees i favor of the
private respondents.
5) PNB VS. MANILA OIL
Invalid stipulations will not affect the negotiability
of the instrument with all the requisites present under Section 1 of NIL.
Philippine
National Bank, plaintiff-appellee vs. Manila Oil Refining and By-Products
Company Inc., defendant-appellant
G.R. No. 18103. June 8, 1922
Facts:
Appeal from the judgment of the Court of First
Instance of Manila.
The manager and the treasurer of Manila Oil Refining
executed and delivered to the Philippine National Bank, a written instrument
with authorization on its face that in case the note be not paid at maturity,
it authorizes any attorney in the PNB to appear in the name of the respondent
and confess judgment for the above sum (61,000.00) with interest, a release of
all errors and waiver of all rights to inquisition and appeal and to the
benefit of all laws exempting property, real or persona), from levy for sale.
(commission of judgment is commonly known as judgment note)
Manila Oil Company failed to pay the promissory note
on demand. PNB brought action in the Court of First Instance of Manila to
recover P61,000.00 the amount of the note, together with the interest and
costs. An Attorney associated with PNB entered his appearance in representation
of the defendant and filed motion confessing judgment, the defendant however
objected strongly to the unsolicited representation of the attorney.
Defendant filed a Demurer (a request to a court
pleading that it should dismiss a lawsuit on the grounds that there is no legal
claim made or for which relief can be granted), and this was overruled.
Appellant claims that the instrument is not negotiable
because of the stipulation is not valid re: in a promissory note whereby in
case the same is not paid at maturity, the maker authorizes any attorney to
appear and confess judgment thereon for the principal amount, with interest,
costs, and attorney's fees and waived all errors, rights to inquisition, and
appeal, and all property exemptions.
ISSUE:
Whether or not the warrants of Attorney to confess
judgment affect the negotiability of the instrument.
HELD:
No, as provided in Section 5 of the Negotiable
Instruments Law: the negotiable character of an instrument otherwise negotiable
is not affected by a provision which authorizes a confession of judgment,
although the last paragraph of said Section said that nothing shall validate
any provision or stipulation which are otherwise illegal.
Thus, as Warrants of attorney to confess judgment are
void as against public policy and is not authorized nor contemplated in our
law, because 1) they enlarge the field for fraud, 2) because under these
instruments the promisor bargains away his right to a day in court, as regards
to the constitutional safeguards to the right to take a man's property only
after a day in court and after due process of law, contemplate that all
defendants shall have opportunity to be heard.
However, the note is still negotiable if all the
requisites in Section 1 of the NIL are present. It is only the stipulation is
avoided.
Judgment appealed was set aside. The case was remanded
to lower court for further proceeding.
SECTION 9
6) ANG TEK LIAN VS. C.A
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 endorsement,
Ang Tek Lian, petitioner vs. Court of Appeal,
respondent
87 Phil 383. September 25, 1950
FACTS:
For having issued a rubber check, Ang Tek Lian was convicted
of estafa, in the Court of First Instance of Manila. CA affirmed the verdict of
CFI.
It appears that knowing he had no funds therefore, Ang Tek
Lian on Nov. 16, 1946, drew the check upon the China Banking Corporation for
the sum of P4000.00 payable to the order of Cash. He delivered it to Lee Hua
Hong in exchange for money which the latter handed in the act, alleging that he
needed badly the sum of P4000.00 represented by the check but could not withdraw it from the bank, it being then already closed. On Nov. 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 Ang Tek Lian on both dates being P335 only. Despite of repeated
efforts to notify the petitioner that the check had been dishonored by the
bank, appellant could not be located anywhere until he was summoned in view of
the complaint for estafa filed in connection therewith, and that the appellant
has not paid as yet the amount of the check or any part thereof.
Ang Tek Lian argued that he shall not be held liable as he
did not endorsed the check to Lee Hua and that when the latter accepted the
check without Ang Tek Lian's endorsement, he had done so fully aware of the
risk running thereby and that he Ang Tek Lian cannot be said to have acted
fraudulently.
ISSUE:
Whether estafa had been accomplished.
HELD:
Yes. Estafa is committed by issuing either postdated
or ordinary check in payment of an obligation the offender knowing that at the
time he had no funds in the bank, or the funds deposited by him in the bank
were not sufficient to cover the amount of the check, and without informing the
payee of such circumstances (in short done to accomplish the deceit).
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 endorsement, As the word "cash" does not purport to be
the name of any person, hence the instrument is payable to bearer.
If the bank is not sure of the identity or financial
insolvency of the bearer and the check is payable to bearer, it has the right
to demand for its protection, the endorsement of the drawer or some other
person known to it. But if the bank is satisfied to the identity of the bearer
who tenders the check, it will pay the instrument without asking for
endorsement. In this case, the bank dishonored the check not because the
drawer's endorsement was lacking but because of insufficient funds.
Writ of Certiorari is denied, CA decision affirmed.
(Cause of Action
related to the topic) The sixth to ninth causes of action are anchored on the
promissory notes issued by petitioners allegedly to secure certain advances
from the Bank in connection with the exportation of logs as reflected above.
The notes were payable 30 days after date and provided for the solidary
liability of petitioners as well as attorney’s fees at ten percent of the total
amount due in the event of their non-payment at maturity.
As affirmative defenses, petitioners assert that the complaint states no cause of action, and assuming that it does, the same is/are barred by prescription of 10 years from the time the right of action accrues as provided in Art. 1144 of the Civil Code for written contract or null and void for want of consideration.
RTC favored the petitioners. CA reversed.
Petitioners seek to evade liability under the Banks seventh to ninth causes of action by claiming that petitioners Quirino and Eufemia Gonzales signed the promissory notes in blank; that they had not received the value of said notes, and that the credit line thereon was unnecessary in view of their money deposits.
The genuineness and due execution of the notes had, however, been deemed admitted by petitioners, they having failed to deny the same under oath. Their claim that they signed the notes in blank does not thus lie.
Exhibits 2 to 2-B to which petitioners advert in support of their claim that the credit line on the notes was unnecessary because they had deposits in, and remittances due from, the Bank deserve scant consideration. Said exhibits are merely claims by petitioners under their then proposals for a possible settlement of the case dated February 3, 1978. Parenthetically, the proposals were not even signed by petitioners but by certain Attorneys Osmundo R. Victoriano and Rogelio P. Madriaga.
In any case, it is no defense that the promissory notes were signed in blank as Section 14 of the Negotiable Instruments Law concedes the prima facie authority of the person in possession of negotiable instruments, such as the notes herein, to fill in the blanks.
C.A decision affirmed with modification.
In consideration for a loan extended by petitioner Bank to respondent Sima Wei the latter executed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount of P 1,820,000.00 on or before June 24, 1983 with the interest at 32% per annum. Sima Wei made a partial payment on the note, leaving a balance of P 1032,450.02.
November 18, 1983, Sima Wei issued 2 crossed checks payable to petitioner Bank drawn against China Banking Corporation, one for the amount of P 550,000.00 and the other for 500,000.00. The said checks were allegedly issued in full settlement of the drawer’s account evidenced by the promissory note.
These 2 checks were not delivered to the petitioner-payee or to any of its authorized representatives.
On July 6, 1986,
the Development Bank of Rizal filed a complaint for a sum of money against
respondents on 2 causes of action:
Defendants filed
their Motions to dismiss alleging that the complaint states no cause of action.
Trial Court granted the motions to dismiss. CA affirmed.
Courts have long recognized the business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount payable and the drawer's signature. All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and unless the check is delivered to the payee or his representative and for the payee to acquire interest thereto. 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 evidence its existence as a binding contract. and even granting, the delivery of checks in payment of an obligation does not constitute payment unless they are cashed or their value is impaired through the fault of the creditor, none of these exceptions were alleged by respondents Sima Wei therefore petitioner bank has caused of action.
A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another. The essential elements are:
The normal parties
to a check are the drawer, the payee and the drawee bank.
However, insofar as the other respondents are concerned, petitioner Bank has no privity with them, Since the petitioner Bank never received the checks on which it based its action against said respondents, it never owned the checks nor did acquire any interest therein. It had no right or interest in the checks which could have been violated by said respondents.. petitioner Bank has therefore no cause of action against said respondents, in the alternative or otherwise.
Note.—A check whether a manager's check or ordinary check is not a 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 (Roman Catholic Bishop of Malolos lnc. vs. Intermediate Appellate Court, 191 SCRA 411).
7) GONZALES VS. CA
Quirino Gonzales Logging Concessionaire, Spouses Quirino Gonzales and Eufema Gonzales, petitioners, vs. The Court of Appeals and Republic Planters Bank, respondents. G.R.NO. 126568. April 30, 2003
FACTS:
In the expansion of its logging business, petitioner
QGLC through its general manager Quirino Gonzales, applied for credit
accommodations with respondent Republic Bank, later as Republic Planters Bank.
The Bank approved QGLC’s application on December 1962, granting credit line of
P900,000.00 broken into overdraft line of P500,000.00 which was later reduced to
P 450,000.00 and a letter of Credit (LC) line of P 400,000.00.
Pursuant to the grant, spouses Gonzales executed 10
documents:
2 denominated “Agreement for Credit in Current Account
4 denominated “Application and Agreement for
Commercial Letter of Credit”, and
4 denominated “Trust Receipt”
Petitioners’ obligations under the credit line were
secured by a real estate mortgage on 4 parcels of land: 2 in Manila, 1 in
Quezon City, and 1 in Manila.
In separate transactions, petitioners, to secure
certain advances from the Bank in connection with QGLC’s exportation of logs,
executed a promissory note in 1964 in favor of the Bank. They were to execute 3
more promissory notes in 1967.
In 1965, petitioners having long defaulted in the
payment of their obligations under the credit line, the Bank foreclosed the
mortgage and bought the properties covered thereby, it being the highest bidder
in the auction sale held in the same year. Ownership over the properties was
later consolidated in the Bank on account of which new titles thereto were
issued to it.
In 1977, alleging non payment of the balance of QGLC’s
obligation after the proceeds of the foreclosure sale were applied thereto and
non payment of the promissory notes despite repeated demand, the Bank filed a
complaint for “sum of money” against petitioners before the RTC of Manila.
As affirmative defenses, petitioners assert that the complaint states no cause of action, and assuming that it does, the same is/are barred by prescription of 10 years from the time the right of action accrues as provided in Art. 1144 of the Civil Code for written contract or null and void for want of consideration.
RTC favored the petitioners. CA reversed.
Petitioners seek to evade liability under the Banks seventh to ninth causes of action by claiming that petitioners Quirino and Eufemia Gonzales signed the promissory notes in blank; that they had not received the value of said notes, and that the credit line thereon was unnecessary in view of their money deposits.
The genuineness and due execution of the notes had, however, been deemed admitted by petitioners, they having failed to deny the same under oath. Their claim that they signed the notes in blank does not thus lie.
Issue: Whether or not the promissory notes are not valid for want of consideration? Valid.
Held:
Petitioners admission of the genuineness and due execution of the promissory notes notwithstanding, they raise want of consideration thereof. The promissory notes, however, appear to be negotiable as they meet the requirements of Section 1 of the Negotiable Instruments Law. Such being the case, the notes are prima facie deemed to have been issued for consideration. It bears noting that no sufficient evidence was adduced by petitioners to show otherwise.Exhibits 2 to 2-B to which petitioners advert in support of their claim that the credit line on the notes was unnecessary because they had deposits in, and remittances due from, the Bank deserve scant consideration. Said exhibits are merely claims by petitioners under their then proposals for a possible settlement of the case dated February 3, 1978. Parenthetically, the proposals were not even signed by petitioners but by certain Attorneys Osmundo R. Victoriano and Rogelio P. Madriaga.
In any case, it is no defense that the promissory notes were signed in blank as Section 14 of the Negotiable Instruments Law concedes the prima facie authority of the person in possession of negotiable instruments, such as the notes herein, to fill in the blanks.
C.A decision affirmed with modification.
8) DEVELOPMENT BANK OF RIZAL VS. SIMA WEI
Development Bank of Rizal, plaintiff-petitioner, vs. Sima Wei and /oor Lee Kian Huat, Mary Cheng Uy, Samson Tung, Asian Industrial Plastic Corporation and Producers Bank of the PhilippinesG.R. No. 85419. March 9, 1993
FACTS:
Petition for review by certiorari of the decision of the Court of Appeals.In consideration for a loan extended by petitioner Bank to respondent Sima Wei the latter executed and delivered to the former a promissory note, engaging to pay the petitioner Bank or order the amount of P 1,820,000.00 on or before June 24, 1983 with the interest at 32% per annum. Sima Wei made a partial payment on the note, leaving a balance of P 1032,450.02.
November 18, 1983, Sima Wei issued 2 crossed checks payable to petitioner Bank drawn against China Banking Corporation, one for the amount of P 550,000.00 and the other for 500,000.00. The said checks were allegedly issued in full settlement of the drawer’s account evidenced by the promissory note.
These 2 checks were not delivered to the petitioner-payee or to any of its authorized representatives.
1) For reasons not shown, these checks came into
possession of respondent Lee Kian Huat, who deposited the checks without the
petitioner-payee’s indorsement to the account of respondent Plastic Plastic Corporation
of the Producer’s Bank, relying on the assurance of respondent Samson Tung,
President of Plastic Corporation, that the transaction was legal and regular,
instructed the cashier of Producer’s Bank to accept the checks for deposit and
to credit the to the account of said Plastic Corporation, in spite the fact
that the checks were crossed and payable to petitioner Bank and core no
endorsement of the latter. Hence, Petitioner filed the complaint as
aforestated.
1) To enforce payment of the balance of P 1,032,450.02 on
a promissory note executed by respondent Sima Wei on June 1983
2) To enforce payment of 2 checks executed by Sima Wei,
payable to petitioner, and drawn against the China Banking Corporation, to pay
the balance due on the promissory note.
ISSUE:
Whether petitioner Bank has a cause of action against any or all of the defendants, in the alternative or otherwise.HELD:
Yes. Notwithstanding the reason below, Drawer Sima Wei is not freed from her liability to the respondent Bank.Courts have long recognized the business custom of using printed checks where blanks are provided for the date of issuance, the name of the payee, the amount payable and the drawer's signature. All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and sign it. However, the mere fact that he has done these does not give rise to any liability on his part, until and unless the check is delivered to the payee or his representative and for the payee to acquire interest thereto. 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 evidence its existence as a binding contract. and even granting, the delivery of checks in payment of an obligation does not constitute payment unless they are cashed or their value is impaired through the fault of the creditor, none of these exceptions were alleged by respondents Sima Wei therefore petitioner bank has caused of action.
A cause of action is defined as an act or omission of one party in violation of the legal right or rights of another. The essential elements are:
1) Legal right of the plaintiff,
2) Correlative obligation of the defendant, and
3) An act or omission of the defendant in violation of
said legal right.
However, insofar as the other respondents are concerned, petitioner Bank has no privity with them, Since the petitioner Bank never received the checks on which it based its action against said respondents, it never owned the checks nor did acquire any interest therein. It had no right or interest in the checks which could have been violated by said respondents.. petitioner Bank has therefore no cause of action against said respondents, in the alternative or otherwise.
Note.—A check whether a manager's check or ordinary check is not a 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 (Roman Catholic Bishop of Malolos lnc. vs. Intermediate Appellate Court, 191 SCRA 411).
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