a collections of case digests and laws that can help aspiring law students to become a lawyer
PNB vs CA (25 SCRA 693, 29 Oct 1968)
A GSIS check with petitioner PNB as the drawee bank was deposited by a payee in his current account with the private respondent PCIB. PNB paid PCIB the amount in the check without returning the same in the course of clearing. The check was later discovered to have forged signatures.
Whether or not PNB may recover from PCIB.
YES. By not returning the check to the PCIB, by thereby indicating that the PNB had found nothing wrong with the check and would honor the same, and by actually paying its amount to the PCIB, the PNB induced the latter, not only to believe that the check was genuine and good in every respect, but, also, to pay its amount to payee. In other words, the PNB was the primary or proximate cause of the loss, and, hence, may not recover from the PCIB.
Clark vs Sellner (GR No. 16477, 22 Nov 1921)
Defendant, was acquitted on the crime of malversation of public fund due to reasonable doubt. The judgement however still found the defendant civilly liable for the amount malversed. Defendant appealed the said judgement, contending that she was just a mere indorser of the said checks issued against the funds of the government. The CA certified the this said case to the sc as it was purely a question of law.
Whether the Petitioner is civilly liable for being a mere indorser on account of the dishonor of the checks indorsed by her.
Yes, the holder or last indorsee of a negotiable instrument has the right to “enforce payment of the instrument for the full amount thereof against all parties liable thereon.” Among the “parties liable thereon” is an indorser of the instrument i.e., “a person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor ** unless he clearly indicates by appropriate words his intention to be bound in some other capacity. “Such an indorser “who indorses without qualification,” inter alia “engages that on due presentment, ** (the instrument) shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.” Maniego may also be deemed an “accommodation party” in the light of the facts, i.e., a person “who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.”
Crisologo vs CA (177 SCRA 594, 15 Sept 1989)
Respondent was the vice-president of Mover Enterprises, Inc. in-charge of marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation of his clients, issued Check payable to petitioner. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check as an alternate signatory. When petitioner deposited this check it was dishonored for insufficiency of funds. Hence, petitioner filed a criminal complaint against Respondent. Respondent tendered cashier’s check to the petitioner who refused to receive the cashier’s check in payment of the dishonoured. Hence, plaintiff deposited said amount with the Clerk of Court. After trial, the court a quo, holding that it was “not persuaded to believe that consignation referred to in Article 1256 of the Civil Code is applicable to this case,” rendered judgment dismissing respondent complaint and petitioner’s counterclaim. CA reversed and set aside said judgment of dismissal and revived the complaint for consignation, directing the trial court to give due course thereto. Hence, the instant petition.
Whether the corporation is liable to the petitioner as an accommodation party when the corporate officer issued a corporation’s check in their personal capacity.
No, The provision of the Negotiable Instruments Law which holds an accommodation party liable on the instrument to a holder for value, although such holder at the time of taking the instrument knew him to be only an accommodation party, does not include nor apply to corporations which are accommodation parties. This is because the issue or indorsement of negotiable paper by a corporation without consideration and for the accommodation of another is ultra vires. Hence, one who has taken the instrument with knowledge of the accommodation nature thereof cannot recover against a corporation where it is only an accommodation party. If the form of the instrument, or the nature of the transaction, is such as to charge the indorsee with knowledge that the issue or indorsement of the instrument by the corporation is for the accommodation of another, he cannot recover against the corporation thereon.
People vs Maniego
Maniego was an indorser of several checks drawn by her sister, which were dishonored after they had been exchanged with cash belonging to the Government, then in the official custody of Lt. Ubay. She was also found by court as an "accommodation party"who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.
Later, Maniego, was acquitted on the crime of malversation of public fund due to reasonable doubt. The judgement however still found the Maniego civilly liable for the amount malversed. Maniego appealed the said judgement, contending that she was just a mere indorser of the said checks issued against the funds of the government. The CA certified the this said case to the SC as it was purely a question of law.
Whether the indorser who is merely an accommodation party is liable for the negotiable instrument.
Yes, the indorser who is merely an accommodation party is liable for the negotiable instrument.
Under the NIL, among the "parties liable thereon" is an indorser "who indorses without qualification," inter alia "engages that on due presentment, the instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it." Here, Maniego is "liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew her to be only an accommodation party,". After paying the holder, Maniego has the right to obtain reimbursement from the party accommodated, "since the relation between them is in effect that of principal and surety, the accommodation party being the surety."
Atrium Management Corp. vs CA (GR No. 109491, 28 Feb 2001)
Hi-Cement Corporation through its corporate signatories, Lourdes M. de Leon, treasurer, and Antonio de las Alas, Chairman, issued checks in favor of E.T. Henry and Co. Inc., as payee. E.T. Henry and Co., Inc. endorsed the four checks to petitioner Atrium Management Corporation for valuable consideration. Upon presentment for payment, the drawee bank dishonored all four checks for the common reason "payment stopped". Atrium instituted this action after its demand for payment of the value of the checks was denied. The trial court rendered a decision ordering Lourdes M. de Leon, her husband Rafael de Leon, E.T. Henry and Co., Inc. and Hi-Cement Corporation to pay petitioner Atrium, jointly and severally, the amount of P2 million corresponding to the value of the four checks, plus interest and attorney's fees. The Court of Appeals modified the decision of the trial court, absolving Hi-Cement Corporation from liability and dismissing the complaint as against it on the grounds that: (1) Lourdes M. de Leon was not authorized to issue the subject checks in favor of E.T. Henry, Inc.; (2) The issuance of the subject checks by Lourdes M. de Leon and the late Antonio de las Alas constituted ultra vires acts.. Hence, this petition.
Whether or not the issuance of the questioned checks was an ultra vires act.
No. Lourdes M. de Leon is the treasurer of the corporation and is authorized to sign checks for the corporation. At the time of the issuance of the checks, there were sufficient funds in the bank to cover payment of the amount of P2 million pesos. The act of issuing the checks was well within the ambit of a valid corporate act, for it was for securing a loan to finance the activities of the corporation, hence, not an ultra vires act.
"An ultra vires act is one committed outside the object for which a corporation is created as defined by the law of its organization and therefore beyond the power conferred upon it by law" The term "ultra vires" is "distinguished from an illegal act for the former is merely voidable which may be enforced by performance, ratification, or estoppel, while the latter is void and cannot be validated."
Salas vs CA (GR No. 76788, 22 January 1990)
Juanita Salas (Petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS) as evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (private respondent) which financed the purchase. Petitioner defaulted in her installments allegedly due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice, certificate of registration and deed of chattel mortgage, which fact she discovered when the vehicle figured in an accident. This failure to pay prompted private respondent to initiate an action for a sum of money against petitioner before the Regional Trial Court.
Whether or not private respondent is a holder in due course.
Yes. The Promissory Note was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation and it is an indorsement of the entire instrument. Under the circumstances, there appears to be no question that Filinvest is a holder in due course, having taken the instrument under the following conditions: [a] it is complete and regular upon its face; [b] it became the holder thereof before it was overdue, and without notice that it had previously been dishonored; [c] it took the same in good faith and for value; and [d] when it was negotiated to Filinvest, the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation.
Accordingly, respondent corporation holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof. This being so, petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS.
MWSS vs. CA, (GR L62943, 14 July 1986)
PNB is the depository bank of MWSS. Among the several accounts of NWSA with PNB is NWSA Account No. 6. The authorized signature for said Account No. 6 were those of MWSS treasurer Jose Sanchez, its auditor Pedro Aguilar, and its acting General Manager Victor L. Recio. Their respective specimen signatures were submitted by the MWSS to and on file with the PNB. By special arrangement with the PNB, the MWSS used personalized checks in drawing from this account.
During the months of March, April and May 1969, two (2) sets of twenty-three (23) checks bearing same numbers as the other checks were paid and cleared by PNB and debited against NWSA Account No. 6.
The 1 set of these 23 checks were deposited by the payees Raul Dizon, Arturo Sison and Antonio Mendoza in their respective current accounts with the Philippine Commercial and Industrial Bank (PCIB) and Philippine Bank of Commerce (PBC) in the months of March, April and May 1969. Thru the Central Bank Clearing, these checks were presented for payment by PBC and PCIB to the defendant PNB, and paid, also in the months of March, April and May 1969. At the time of their presentation to PNB these checks bear the standard indorsement which reads 'all prior indorsement and/or lack of endorsement guaranteed.'
Subsequent investigation however, conducted by the NBI showed that Raul Dizon, Arturo Sison and Antonio Mendoza were all fictitious persons.
NWSA addressed a letter to PNB requesting the immediate restoration to its Account No. 6, of the total sum of P3,457,903.00 corresponding to the total amount of these twenty-three (23) checks and sets up the defense of forgery against PNB.
The CFI of Manila resolved the complaint in favor of the plaintiff MWSS. The CA reversed the decision of the CFI of Manila.
Whether or not petitioner is barred from setting up the defense of forgery on the ground of gross negligence
Forgery cannot be presumed. It must be established by clear, positive, and convincing evidence. This was not done in the present case.
Considering the absence of sufficient security in the printing of the checks coupled with the very close similarities between the genuine signatures and the alleged forgeries, the twenty-three (23) checks in question could have been presented to the petitioner's signatories without their knowing that they were bogus checks. Indeed, the cashier of the petitioner whose signatures were allegedly forged was unable to ten the difference between the allegedly forged signature and his own genuine signature. On the other hand, the MWSS officials admitted that these checks could easily be passed on as genuine.
Moreover, the petitioner is barred from setting up the defense of forgery under Section 23 of the Negotiable Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto can be acquired through or under such signature unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
because it was guilty of negligence not only before the questioned checks were negotiated but even after the same had already been negotiated.. The records show that at the time the twenty-three (23) checks were prepared, negotiated, and encashed, the petitioner was using its own personalized checks, instead of the official PNB Commercial blank checks. In the exercise of this special privilege, however, the petitioner failed to provide the needed security measures. That there was gross negligence in the printing of its personalized checks. And failure of the petitioner to reconcile the bank statements with its own records.
Montinola vs PNB (88 Phil 178, 26 Feb 1951)
Laya, provincial treasurer of Misamis Oriental, issued a check to Ramos. Montinola in exchange of the check paid 45K Japanese notes, instead of 85K Japanese notes, to Ramos. On the back of the check, Ramos wrote:
“Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine National Bank to the credit of M. V. Ramos.”
Montinola sought to have the check encashed but PNB dishonored the check. It appears that there was an insertion made. Under the signature of Laya, the words “Agent, Philippine National Bank” was inserted, thus making it appear that Laya disbursed the check as an agent of PNB and not as provincial treasurer of Misamis Oriental.
Whether the insertion of "Agent, Phil. National Bank" is a material alteration.
Yes, it is material alteration.
The insertion of the words "Agent, Phil. National Bank" which converts the bank from a mere drawee to a drawer and therefore changes its liability, constitutes a material alteration of the instrument without the consent of the parties liable thereon, and so discharges the instrument. (Section 124 of the Negotiable Instruments Law). The check was not legally negotiated within the meaning of the Negotiable Instruments Law. Section 32 of the NIL provides that "the indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable does not operate as a negotiation of the instrument." Montinola at most he may be regarded as a mere assignee of the P30,000 sold to him by Ramos, in which case, as such assignee, he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.
PCIB vs CA (350 SCRA 446)
This case is composed of three consolidated petitions involving several checks, payable to the Bureau of Internal Revenue, but was embezzled allegedly by an organized syndicate.
G.R. Nos. 121413 and 121479
Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41 in favor of the Commissioner of Internal Revenue (BIR/CIR) for payment of manufacturer’s taxes. The Check was deposited to PCIB and was subsequently cleared at the Central Bank.
The check was presented to Citibank, the proceeds of the check was paid to PCIB as collecting or depository bank. However, the proceeds never reached BIR, so plaintiff was compelled to make a second payment. Ford demanded for reimbursement from PCIB
Defendant refused to reimburse plaintiff, and so the latter filed a complaint. An investigation of NBI revealed that the check was recalled by Godofredo Rivera, the general ledger accountant of Ford. He purportedly needed to hold back the check because there was an error in the computation of the tax due to the Bureau of Internal Revenue (BIR). PCIBank replaced the check with two of its own Managers check. Alleged members of a syndicate deposited the two manager’s checks with Pacific Banking Corporation (PBC).
Ford filed a third party complaint against Rivera and PBC. The case against PBC was dismissed. The case against Rivera was likewise dismissed because summons could not be served. The trial court held Citibank and PCIB jointly and severally liable to Ford.
The Court of Appeals modified the decision of RTC and only held PCIB liable.
G.R. No. 128604
On another case, Ford drew two checks in favor of the Commissioner of Internal Revenue, amounting to P5,851,706.37 and P6,311,591.73. Both are crossed checks payable to payee’s account only. The checks never reached BIR, so plaintiff was compelled to make second payments. Plaintiff instituted an action for recovery against PCIB and Citibank. On investigation of NBI, the modus operandi of the syndicate was discovered.
Gorofredo Rivera made the checks but instead of delivering them to BIR, passed it to Remberto Castro, who was the manager of PCIB San Andres. Castro opened a checking account in the name of a fictitious person “Reynaldo Reyes”. Castro deposited a worthless Bank of America check with the same amount as that issued by Ford. While being routed to the Central Bank for clearing, the worthless check was replaced by the genuine one from Ford.
Whether or not petitioner Ford the right to recover from the collecting bank (PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue?
G.R. Nos. 121413 and 121479
Since the questioned crossed check was deposited with PCIBank, which claimed to be a depository/collecting bank of the BIR, it had the responsibility to make sure that the check in question is deposited in Payee’s account only.
Indeed, the crossing of the check with the phrase “Payee’s Account Only,” is a warning that the check should be deposited only in the account of the CIR. Thus, it is the duty of the collecting bank PCIBank to ascertain that the check be deposited in payee’s account only. Therefore, it is the collecting bank (PCIBank) which is bound to scrutinize the check and to know its depositors before it could make the clearing indorsement “all prior indorsements and/or lack of indorsement guaranteed.”
G.R. No. 128604
PCIB and Citibank are both negligent in the performance of their duties.
Citibank must likewise answer for the damages incurred by Ford on Citibank Checks Numbers SN-10597 and 16508, because of the contractual relationship existing between the two. Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed to the damage caused to the latter. On this score, we agree with the respondent court’s ruling.
thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN-10597 and 16508. Banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence.A bank’s liability as obligor is not merely vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment.
Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and diligence find therein, serves to mitigate the banks’ liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As
In the case, there is a defect on the title of the person negotiating the instrument because it was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. The direct perpetrators of the offense, namely the embezzlers belonging to a syndicate, are now fugitives from justice.
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances.
Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its principal regarding the unwarranted instructions given by the payor or its agent.
It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an agreement to the contrary, that of principal and agent. A bank which receives such paper for collection is the agent of the payee or holder.
Papa vs AU Valencia (284 SCRA 643, 23 Jan 1998)
Myron C. Papa, acting as attorney-in-fact of Angela M. Butte, sold to Peñarroyo through Valencia, a parcel of land, which was mortgaged to the Associated Banking Corporation, together with several other parcels of land. The bank refused to release it unless and until all the mortgaged properties were also redeemed. Respondents discovered that petitioner had been collecting monthly rentals from the tenants of the property, knowing that said property had already been sold to Peñarroyo.On appeal, the petitioner argued that alleged sale of the subject property had not been consummated because he did not encash the check (in the amount of P40,000.00), which did not produce the effect of payment as in Art. 1249 of the Civil Code.
Whether the sale was not consummated due to alleged non encashment of check for over ten years.
No, Valencia and Peñarroyo had given petitioner Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15 June 1973, in payment of the purchase price of the subject lot. Petitioner himself admits having received said amounts, and having issued receipts therefor. Petitioner's assertion that he never encashed the aforesaid check is not substantiated and is at odds with his statement in his answer that "he can no longer recall the transaction which is supposed to have happened 10 years ago." After more than ten (10) years from the payment in party by cash and in part by check, the presumption is that the check had been encashed. As already stated, he even waived the presentation of oral evidence. Granting that petitioner had never encashed the check, his failure to do so for more than ten (10) years undoubtedly resulted in the impairment of the check through his unreasonable and unexplained delay.
While it is true that the delivery of a check produces the effect of payment only when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if the debtor is prejudiced by the creditor's unreasonable delay in presentment. Art. 1249 of the Civil Code provides, in part, that payment by checks shall produce the effect of payment only when they have been cashed or when through the fault of the creditor they have been impaired. In this case, the acceptance of a check implies an undertaking of due diligence in presenting it for payment, and if he from whom it is received sustains loss by want of such diligence, it will be held to operate as actual payment of the debt or obligation for which it was given. It has, likewise, been held that if no presentment is made at all, the drawer cannot be held liable irrespective of loss or injury unless presentment is otherwise excused.
Great Eastern Insurance vs Hongkong Shanghai Bank Corp. (GR No 18657, 23 Aug 1922)
The plaintiff is an insurance corporation, which drew a check in favor of Melicor. This was stolen by Maasim, forged the signature of Melicor and deposited the check to his account in PNB. Thereafter, PNB endorsed the check to HSBC who later debited the account of plaintiff. Plaintiff believed all along that Melicor received the payment. Upon knowledge of the debit HSBC did on its account, it demanded that the same amount be credited.
May 3, 1920: Great Eastern Life Ins. Co. (Eastern) drew its check for P2,000 on the Hongkong and Shanghai Banking Corporation (HSBC) payable to the order of Lazaro Melicor.
E. M. Maasim fraudulently obtained possession of the check, forged Melicor's signature, as an endorser, and then personally endorsed and presented it to the Philippine National Bank (PNB) and it was placed to his credit.
Next day, PNB endorsed the check to the HSBC who paid it HSBC sent a bank statement to the Eastern showing the amount of the check was charged to its account, and no objection was made 4 months after the check was charged, it developed that Lazaro Melicor, to whom the check was made payable, had never received it, and that his signature, as an endorser, was forged by Maasim, Eastern promptly made a demand upon the HSBC to credit the amount of the forged check Eastern filed against HSBC and PNB
RTC: dismissed the case
Whether the delivery of a check produces the effect of payment only when it is cashed.
Yes, Lower court is reversed. Eastern against HSBC who can claim against PNB forgery was that of Melicor (payees and NOT the maker) Eastern received it banks statement, it had a right to assume that Melicor had personally endorsed the check, and that, otherwise, the bank would not have paid it Section 23 of Negotiable Instruments Law:
When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
The Philippine National Bank had no license or authority to pay the money to Maasim or anyone else upon a forge signature.
Its remedy is against Maasim to whom it paid the money.
Nyco Sales vs BA Finance (200 SCRA 637, 1991)
Nyco Sales Corporation (Nyco) whose president and general manager is Rufino Yao (Yao), is engaged in the business of selling construction materials. The Fernandez brothers, acting in behalf of Sanshell Corporation (Sanshell), approached Rufino Yao for credit accommodation.
Fernandez Brothers went to Yao for the purpose of discounting Sanshell's post-dated check payable to Nyco. Following the discounting process agreed upon, Nyco, thru Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance issued a check payable to Nyco which endorsed it in favor of Sanshell. Sanshell then made use of and/or negotiated the check. Accompanying the exchange of checks was a Deed of Assignment executed by Nyco in favor of BA Finance with the conformity of Sanshell with Sanshell Corporation as the debtor-obligor. The BPI check, however, was dishonored by the drawee bank upon presentment for payment. Nyco contended that they are not notified of the fact of dishonor.
Whether the assignor is liable to its assignee for its dishonored checks.
Yes, the assignor-vendor is liable for the invalidity of whatever he as signed to the assignee-vendee
An assignment of credit is the process of transferring the right of the assignor to the assignee, who would then be allowed to proceed against the debtor. It may be done either gratuitously or generously, in which case, the assignment has an effect similar to that of a sale.
According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit itself (its existence and legality) and the person of the debtor (his solvency), if so stipulated, as in the case at bar. Consequently, if there be any breach of the above warranties, the assignor-vendor should be held answerable therefor. The dishonor of an assigned check simply stresses its liability and the failure to give a notice of dishonor will not discharge it from such liability. This is because the cause of action stems from the breach of the warranties embodied in the Deed of Assignment, and not from the dishonoring of the check alone (See Art. 1628, Civil Code).
Here, it is beyond dispute that Nyco executed a deed of assignment in favor of BA Finance with Sanshell Corporation as the debtor-obligor. Nyco is liable to pay the amount represented in the said checks.
Great Asian Sales vs CA (GR No 105774, 25 April 2002)
March 17, 1981: Great Asian BOD approved a resolution authorizing its Treasurer and General Manager, Arsenio Lim Piat, Jr. (Arsenio) to secure a loan, not exceeding 1M, from Bancasia
February 10, 1982: Great Asian BOD approved a resolution authorizing Great Asian to secure a discounting line with Bancasia in an amount not exceeding P2M
also designated Arsenio as the authorized signatory to sign all instruments, documents and checks necessary to secure the discounting line
Tan Chong Lin signed 2 surety agreements in favor of Bancasia
Great Asian, through its Treasurer and General Manager Arsenio, signed 4 Deeds of Assignment of Receivables (Deeds of Assignment), assigning to Bancasia 15 postdated checks:
9 checks were payable to Great Asian
3 were payable to "New Asian Emp."
3 were payable to cash
various customers of Great Asian issued these postdated checks in payment for appliances and other merchandise.
Deed of Assignments of assignment:
January 12, 1982: 4 post-dated checks of P244,225.82 maturing March 17, 1982, 2 were dishonored
January 12, 1982: 4 post-dated checks of P312,819 maturing April 1, 1982, all 4 were dishonored
February 11, 1982: 8 postdated checks of P344,475 maturing April 30, 1982, all 8 checks were dishonored
March 5, 1982: 1 postdated checks of P200K maturing March 18, 1982 also dishonored
Great Asian assigned the postdated checks to Bancasia at a discount rate of less than 24% of the face value of the checks
Arsenio endorsed all the 15 dishonored checks by signing his name at the back of the checks
8 dishonored checks bore the endorsement of Arsenio below the stamped name of "Great Asian Sales Center"
7 dishonored checks just bore the signature of Arsenio
The drawee banks dishonored the 15 checks on maturity when deposited for collection by Bancasia, with any of the following as reason for the dishonor:
"account under garnishment"
"insufficiency of funds
March 18, 1982: Bancasia's lawyer,Atty. Eladia Reyes, sent by registered mail to Tan Chong Lin a letter notifying him of the dishonor and demanding payment from him
June 16, 1982: Bancasia sent by personal delivery a letter to Tan Chong Lin
May 21, 1982: Great Asian filed a case before the CFI for insolvency listing Bancasia as one of the creditors of Great Asian in the amount of P1,243,632.00
June 23, 1982: Bancasia filed a complaint for collection of a sum of money against Great Asian and Tan Chong Lin
CFI: favored Bancasia ordering Great Asian and Tan Chong Lin to pay jointly and severally
CA: deleted atty. fees
Whether or not Bancasia and Tang Chon Lin should be held liable under the Civil Code because it was a separate and distinct deed of assignment
Yes. Affirmed with Modification. There is nothing in the Negotiable Instruments Law or in the Financing Company Act (old or new), that prohibits Great Asian and Bancasia parties from adopting the with recourse stipulation uniformly found in the Deeds of Assignment. Instead of being negotiated, a negotiable instrument may be assigned.
the endorsement does not operate to make the finance company a holder in due course. For its own protection, therefore, the finance company usually requires the assignor, in a separate and distinct contract, to pay the finance company in the event of dishonor of the notes or checks. (only security)
Otherwise, consumers who purchase appliances on installment, giving their promissory notes or checks to the seller, will have no defense against the finance company should the appliances later turn out to be defective. As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian under the Negotiable Instruments Law. Had it so proceeded, the Negotiable Instruments Law would have governed Bancasia’s cause of action. Bancasia, however, did not choose this route.
Instead, Bancasia decided to sue Great Asian for breach of contract under the Civil Code, a right that Bancasia had under the express with recourse stipulation in the Deeds of Assignment. Great Asian, after paying Bancasia, is subrogated back as creditor of the receivables. Great Asian can then proceed against the drawers who issued the checks. Even if Bancasia failed to give timely notice of dishonor, still there would be no prejudice whatever to Great Asian.
Luis Wong vs CA (GR No. 117857, 2 Feb 2001)
Luis Wong was an agent of Limtong Press. Inc. (LPI), a manufacturer of calendars. After printing the calendars, LPI would ship the calendars directly to the customers. Thereafter, the agents would come around to collect the payments. Wong, however, had a history of unremitted collections. Hence, petitioner’s customers were required to issue post-dated checks before LPI would accept their purchase orders.In early December 1985, Wong issued six (6) postdated checks totaling P18,025.00, intended to guarantee the calendar orders of customers who failed to issue post-dated checks. However, following company policy, LPI refused to accept the checks as guarantees. Instead, the parties agreed to apply the checks to the payment of Wong’s unremitted collections. Before the maturity of the checks, petitioner prevailed upon LPI not to deposit the checks and promised to replace them within 30 days. However, Wong reneged on his promise. Hence, on June 5, 1986, LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC). The checks were returned for the reason "account closed." Wong failed to make arrangements for payment within five (5) bankingdays. Wong was charged with three (3) counts of violation of B.P. Blg. 22 and was found guilty by the trial court, to which the CA affirmed. Wong contends that checks were issued as guarantee and the obligations they were supposed to guarantee were already paid and not as payment for unremitted collection
Whether Wong is guilty for the violation of BP 22.
Yes. Wong’s argument is flawed and has no factual basis, the RTC and CA having both ruled that the checks were in payment for unremitted collections, and not as guarantee. Likewise, the argument has no legal basis, for what B.P. Blg. 22 punishes the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance.There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is not sufficiently funded; and (2) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein or credit with said bank to cover the full amount of the check when presented to the drawee bank within a period of ninety (90) days.
As to the second element, B.P. Blg. 22 creates a presumption juris tantum that the second element prima facie exists when the first and third elements of the offense are present.20 Thus, the maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds.21
Petitioner avers that since the complainant deposited the checks on June 5, 1986, or 157 days after the December 30, 1985 maturity date, the presumption of knowledge of lack of funds under Section 2 of B.P. Blg. 22 should not apply to him. He further claims that he should not be expected to keep his bank account active and funded beyond the ninety-day period.
Associated Bank vs CA (208 SCRA 468, 1992)
Reyes was engaged in the RTW business and held transactions with different department stores. She was about to collect payments from the department stores when she was informed that the payments had already been made, through crossed checks issued in her business’ name and the same were deposited with the bank. The bank consequently allowed its transfer to Sayson who later encashed the checks. This prompted Reyes to sue the bank and its manager for the return of the money. The trial and appellate court ruled in her favor.
Whether or not crossed checks can be encashed.
There is no doubt that the checks were crossed checks and for payee’s account only. Reyes was able to show that she has never authorized Sayson to deposit the checks nor to encash the same; that the bank had allowed all checks to be deposited, cleared and paid to one Sayson in
violation of the instructions in the said crossed checks that the same were for payee’s account only; and that Reyes maintained a savings account with the bank which never cleared the said checks.
Under accepted banking practice, crossing a check is done by writing two parallel lines diagonally on the top left portion of the checks. The crossing is special where the name of a bank or a business institution is written between the two parallel lines, which means that the drawee should pay
only with the intervention of the company. The crossing is general where the words written in between are “And Co.” and “for payee’s account only”, as in the case at bar. This means that the drawee bank should not encash the check but merely accept it for deposit.
The effects of crossing a check are as follows:
1. That the check may not be encashed but only deposited in the bank
2. That the check may be negotiated only once—to one who has an account with a bank
3. That the act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to the
The subject checks were accepted for deposit by the bank for the account of Sayson although they were crossed checks and the payee wasn't Sayson but Reyes. The bank stamped thereon its guarantee that all prior endorsements and/or lack of endorsements guaranteed. By such deliberate and positive act, the bank had for all legal intents and purposes treated the said checks as negotiable instruments and accordingly assumed the warranty of the endorser.
When the bank paid the checks so indorsed notwithstanding that title has not passed to the endorser, it did so at its peril and became liable to the payee for the value of the checks.