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L aw 10 8: N egotiable Instruments

First Semester

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O F P A R T IE S 1 st



ISSUE WON the failure of a payee in a negotiable promissory note to comply with sections 199b and 571,

Kentucky Statutes (sorry Campos did not reproduce the statutes themselves but I think the content doesn’t matter) without which it could not do business in the state,

before the execution of the note,

renders it uncollectible in the hands of an owner in due course


In Kentucky statutes

) says in plain language that the maker of an instrument,

admits the payee’s capacity to indorse it

that the maker admits the payee’s capacity to make the contract for which the note was executed,

and hence he may have the right to urge such defense against the original payee

BUT again,

reiterate the point that the act DOES take from the maker the right to deny the capacity of the payee to indorse and negotiate the note free from defenses available against the payee,

as between the original parties,

the note was void and unenforceable for any reason

without which it would not do business in the state,

is valid against the maker in the hands of a holder in due course

Disposition The judgment overruling the demurrer to the amended answer is reversed for proceedings consistent herewith

WON a bank is liable for its refusal to pay a check on account of insufficient funds but wherein a deposit may be made later in the day


By virtue of the contract of deposit between the banker and its depositor,

the banker agrees to pay checks drawn by the depositor provided that said depositor has money in the hands of the bank

where the bank possesses funds of a depositor,

it is bound to honor his checks to the extent of the amount of his deposits

The failure of a bank to pay the check of a merchant or a trader,

when the deposit is sufficient,

entitles the drawer to substantial damages without any proof of actual damages


a bank is not liable for its refusal to pay a check on account of insufficient funds,

notwithstanding the fact that a deposit may be made later in the day

Before a bank depositor may maintain a suit to recover a specific amount from his bank,

he must first show that he had on deposit sufficient funds to meet his demand

although what was stamped on the dorsal side of the two checks in question was "DAIF/12-15-83," since 15 December 1983 was the actual date when the checks were processed

When the Morans' checks were dishonored due to insufficiency of funds,

the available balance of Savings Account which was the subject of the PAT agreement,

was not enough to cover either of the two checks

On 14 December 1983,

Pandacan branch presented the checks for collection,

the available balance for Savings Account 1037001372 was only P26,104

It was only on 15 December 1983 at around 10:00 a

that the necessary funds were deposited,

which unfortunately was too late to prevent the dishonor of the checks

If ever the spouses Moran on previous occasions were given notices every time a check was presented for clearing and payment and there were no adequate funds in their accounts,

mere accommodations on the part of CityTrust


the bank had all the right to dishonor the checks because there were no sufficient funds to speak of in the first place

He must personally keep track of his available balance in the bank and not rely on the bank to notify him of the necessity to fund certain checks he previously issued

A check,

as distinguished from an ordinary bill of exchange,

is supposed to be drawn against a previous deposit of funds for it is ordinarily intended for immediate payment

In the present case,

between the time of issuance of the checks on Dec 12 and 13 and presentment on Dec 14,

Morans had,

CityTrust Banking

GR 105836


They regularly purchased bulk fuel and other related products from Petrophil Corporation on a cash on delivery (COD) basis

Orders were made by telephone and payments were effected by personal checks upon delivery

As a special privilege to the Morans,

the bank allowed them to maintain a zero balance in their current account

Transfers from one of the savings account to the current account could only be made with prior authorization,

while transfers from the other savings account can be made be the bank automatically through a Pre-Authorized Transfer agreement or PAT

The next day,

the Moran issued another check in the amount of P56,090

The totalling to P106,666

Petrophil deposited the two checks to its account with the Pandacan branch of PNB,

In turn,

PNB presented them for clearing with the Philippine Clearing House Corporation in the afternoon of the same day

The records show that on 14 Dec 1983,

Moran’s Current Account had a zero balance,

while Savings Account covered by the PAT had an available balance of P26,104

George Moran went to the bank,

to personally oversee their daily transactions with the bank

He deposited money to the 2 savings account

He then withdrew P40k from Savings Account A and deposited the amount to the current account

P66,666 was also transferred from the other Savings Account to the current account through the PAT agreement

Non-delivery of gasoline forced Morans to temporarily stop business operations

In addition,

Petrophil cancelled their credit accommodation

Furious and upset,

George Moran demanded an explanation from the bank

He was told that Amy Belen Ragodo,

The Morans filed a complaint for damages


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L-25414 July 30,

DRAWEE: San Francisco main office of the Bank of America SUBJECT 1: Check for $500 payable to cash

Dishonored and stamped “Account Closed” despite sufficiency of drawer’s deposit balance

Upon inquiry,

Bank acknowledged error and sent a letter of apology to payee Harry Gregory of Hongkong and requesting that no adverse reflection be made on drawer

Matter considered closed


SUBJECT 2: Check for $500 payable to cash drawn against the same bank

Stamped “Account Closed” and returned to clearing bank despite sufficiency of drawer’s deposit balance

SUBSEQUENT INDORSEMENT: To Rufina Saldaña who deposited it to her account with First National City Bank of New York which in turn cleared it through the Federal Reserve Bank

It was actually paid by the drawee to First National City Bank but later claimed it was inadvertently made and requested the amount be credited back

First National in turn wrote Saldaña but before her reply was received,

drawee recalled the check from First National and honored it

!) SUBJECT 3: Check for $150 payable to cash drawn against the same bank

Stamped “Account Closed” and returned to clearing bank (Wells Fargo Bank) despite sufficiency of drawer’s deposit balance

Araneta filed suit for the recovery of the ff: (1) Actual damages P30,000

and (5) Attorney’s fees P10,000

TC awarded all items

CA eliminated actual and temperate (for failure to prove an alleged purchase of jewels for profit) and reduced moral damages to P8,000,

exemplary to P1,000 and attorney’s fees to P1,000


WON the CA erred in eliminating temperate damages

WON the CA erred in not granting moral damages for mental anguish,

separate and distinct from the damages recoverable for injury to business reputation

Ratio The financial credit of a businessman is a prized and valuable asset,

it being a significant part of the foundation of his business

Any adverse reflection thereon constitutes some material loss to him

Reasoning The Bank cites Art 2224 which provides that “temperate or moderate damages,

which are more than nominal but less that compensatory damages may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot,

be proved with certainty,” and contends that Araneta failed to show such loss in

The question is WON there is reason to conclude that Araneta did sustain some pecuniary loss although no sufficient proof of the amount has been adduced

(citing the Code Commission) definite proof of pecuniary loss cannot be offered although the court is convinced that there has been such loss

For instance,

injury to one’s commercial credit or to the goodwill of a business firm is often hard to show with certainty in terms of money

The judge should be allowed to calculate moderate damages in such cases,

rather than the plaintiff should suffer,

without redress from the defendant’s wrongful act

His claim for temperate damages is legally justified


the small size of Araneta’s account with the Bank,

the amounts of the checks involved & the fact that the Bank tried to rectify the error,

an award of P5T by way of temperate damages is sufficient

Reasoning Araneta contends that moral damages should have been granted for the injury to his business standing or commercial credit,

separately from his wounded feelings and mental anguish

It is true that under Art 2217,

besmirched reputation is a ground upon which moral damages may be claimed but the CA did take this element into consideration in adjudging the sum of P8T in his favor

The CA considered his reputation as an established and well known international trader as well as his wounded feelings and the mental anguish he suffered which caused his blood pressure to rise beyond unusual limits necessitating medical attendance for an extended period

Disposition Judgment of the CA MODIFIED by awarding temperate damages of P5,000 and increasing attorney’s fees to P4,000



Hollingworth INDORSEE: Kingston Garage

Drawer was arrested and tried on the charge of having given a worthless check

He was acquitted

Demurrer sustained in TC

ISSUE WON drawer may recover compensatory and punitive damages from drawee HELD: YES

the bank is liable for a breach of its contract

The depositor may recover of the bank the amount of his check,

the recovery is limited to the amount of the check,

with interest from date of demand and refusal,

a bank may be held liable in tort to its depositor whose check it has wrongfully refused or failed to pay

whose check has been wrongfully dishonored by the refusal or failure of the bank on which it was drawn to pay the same,

may maintain an action against the bank,

not only in contract but also in tort,

to recover the damages which he has sustained,

when the plaintiff is a merchant or trader,

assess not only nominal but also substantial damages

when the plaintiff is not a merchant or trader,

he may recover such sum as special damages as the jury shall find,

will compensate him for the injury resulting from the wrong done him by the defendant

yet more than nominal damages may be given

It can hardly be possible that a customer’s check can be wrongfully refused payment without some impeachment of his credit,

which must in fact be an actual injury,

though he cannot from the nature of the case furnish independent,

Disposition Judgment reversed




Singson and Lobregat appealed,

Writ of garnishment was served upon BPI in w/c Singson had account,

insofar as Villa-Abrille’s credit against the bank were concerned

upon reading name of plaintiff and w/o informing himself that garnishment was merely for deposits of Villa-Abrillle and Bona,

prepared letter for Bank President’s signature,

informing Singson of the garnishment of

L aw 10 8: N egotiable Instruments

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Believing that Singson had no more control over his deposits,

CFI dismissed complaint

ISSUE WON damages may be awarded HELD: YES




he sues FCTC to recover the amount of said check


it interposed the defense that Speroff signed a document stating that Speroff agreed to indemnify FCTC against any loss resulting from the nonpayment of said check and that it is expressly understood that it will not be held responsible if it paid the check through inadvertency or oversight

CA reversed saying that said statement of release was void as it was contrary to public policy and void for want of consideration

ISSUE WON the statement of release signed by Speroff constitutes a valid defense HELD: NO

The Court upheld the CA’s two grounds for avoiding the statement of release

On want of consideration

it was the duty of FCTC NOT to pay after it had received the order of Speroff


when Speroff was asked to sign a statement or release to the effect that the bank wouldn’t be held responsible if it would pay the check,

this was a new element in the relationship

What consideration or benefit was received by Speroff as promisor and what detriment was suffered by FCTC as promise as a result of this statement

? NONE so clearly there was no compliance with either of the fundamental requirements as to consideration

On contrary to public policy

the obtaining from Speroff of a purported release from liability for inadvertency or oversight as a condition of the order to stop payment of the check was contrary to public policy and did not relieve FCTC from its duty to act in good faith and exercise reasonable care


the FCTC’s defense of exercising good faith and reasonable care (which it interposed in its amended answer) is a valid defense so the Court remanded the case back to the Court of Common Pleas for trial on that issue

Disposition Judgment was modified and cause remanded

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OF NY V BATTAT Ny Court of Appeals

FACTS SUBJECT: a check for $25,000 as payment for the purchase of sugar DRAWER: Arbeedee PAYEE: Caracanda Bros

Co & Ltd

DRAWEE: Chase National Bank of City of New York Arbeedee and defendant Caracanda entered into an agreement for the purchase of sugar which provided that Arbeedee and should deliver a check for $25,000 to Caracanda to bind the transaction and that an amount would be returned upon receipt by Caracanda of a letter of credit to obtained by Arbeedee

Arbeedee drew such a check on its account in the plaintiff bank and delivered it to Caracanda

Thereafter Arbeedee requested plaintiff to stop payment on the check

Caracanda presented the check for certification and it was certified by plaintiff through mistake

The following day,

Caracanda presented it for payment and plaintiff paid it

When advised of the payment of the check Arbeedee insisted that plaintiff make no debit against it account asserting that Caracanda has no legal right to the money

Plaintiff thereupon demanded payment of the $25,000 from Caracanda

That was refused

The complaint alleges due demand upon both defendants and nonpayment and prays for judgment in the sum of $25,000 against Arbeedee “and/or” Caracanda

ISSUE WON the complaint fails to state a cause of action against Arbeedee HELD: YES

Our courts have never permitted a bank in a commercial transaction to such as this,

after breaching its depositor's instructions to involve him against his will in litigation with a third party in order that the bank may recoup a potential loss resulting from its own error

The doctrine of subrogation or equitable assignment is not properly applicable under such circumstances

A bank may protect itself by contract with its depositor so as to limit liability on a stop payment order

When that has not been done,

the common law liability is absolute in the absence of ratification

Judgment affirmed

LAW LESS V TEM PLE 254 Mass 395,

Temple DRAWEE: Maurice E

ISSUE WON the signature of the drawee is sufficient acceptance HELD: YES

The common practice before the NIL was to write the word "accepted" + the signature on the face of the bill

the signature is both a writing and signing

The name alone is constantly holden to satisfy the requirement



LUM BER 102 SW 2d 200 (1937) ~chrislao~ FACTS

a firm engaged in the lumber business

As payment for the lumber he purchased,

Waddell drew 2 checks wroth $350 drawn against Kilgore National Bank

A few days later,

Grand Saline notified G

Moore that the checks had been returned by Kilgore Bank unpaid

Moore brought Waddell to Kilgore Bank where Waddell,

Moore and the cashier of Kilgore Bank had an ORAL agreement

Waddell instructed Kilgore bank to pay Moore

The cashier promised Moore the payment of said checks once presented again

On the ledger of the bank in connection with Waddell's account,

the cashier made the unsigned notation: "Hold for Moore Brothers $350

Moore ordered Grand Saline to forward the checks to Kilgore again

One of the checks was paid

The other,

This prompted Moore to file suit against Kilgore Bank to recover amount of the last mentioned unpaid check

ISSUE WON Kilgore is liable for the other check HELD: NO

Section 132 governs

Campos enumerates the ff requisites: 1)it must be in writing 2)it must be signed by the drawee,

and 3) it must not change the implied promise of acceptor to pay only in money

Acceptance is usually made by writing "accepted" and signing immediately below


the drawee's signature alone is NOT sufficient

In the present case,

the liability of Kilgore Bank to Moore Brothers depends entirely on the BARE ORAL PROMISE of the drawee bank to pay

As we have said,

this should have been in writing (and of course,

complying as well with the other two requities)

This statement (as opposed to the oral promise to pay) does NOT EVEN make any contract,




FACTS SUBJECT: 6 checks DRAWER: Samuel R

Bullock DRAWEE: First National Bank of Gallitzin

L aw 10 8: N egotiable Instruments

PAYEE: Charles W


forwarded by said banks to drawee bank for payment

saying that mere retention of the checks unaccompanied by its refusal to return them,

was not acceptance ISSUE WON failure to return the checks to the holder or the collecting bank within 24 hrs amounts to acceptance HELD: YES

where he refuses within 24 hrs after delivery to return the bill accepted or non-accepted to the holder

where he refuses within such other period as the holder may allow to return the bill accepted or non-accepted to the holder

WON a demand from the holder for the return of the bill,

and a refusal on the part of the drawee,

are conditions precedent to an acceptance

then it was evidently the intention of the legislature that the non-return of the bill within the specified time,

will make the drawee an acceptor

having failed to return the 5 checks to the collecting bank within 24 hrs after delivery,

is deemed to have accepted the checks,

liable for their amount *After the decision,

Pennsylvania amended Section 137,

to destroy the effect of the decision

The following proviso was added: "Provided,

that the mere retention of such bill by the drawee,

unless its return has been demanded,

will not amount to an acceptance

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L aw 10 8: N egotiable Instruments

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Q ueved



holder would be left to his common law rights,

for either breach of contract or for tortious breach of duty,

by drawee bank which had refused payment on grounds of insufficiency of funds in drawer's account

’ Disposition Trial court was correct in dismissing his petition

We affirm

ISSUE WON retention of a check by a drawee bank for more than 24 hours after it is presented to it for payment constitutes an acceptance of the instrument so that the drawee bank is bound to pay it HELD: NO Ratio 'Presentment for payment and presentment for acceptance are two different acts well known to the law of negotiable instruments

The difference between the object and effect of presentation for these respective purposes is very marked

Payment extinguishes the debt and puts an end to the paper evidencing the same,

while acceptance has the very opposite effect

It creates a new liability upon the part of the acceptor,

and gives new life to the instrument


WON PNB constructively accepted to assume the obligation 2

WON PNB is solidarily liable HELD 1

it voluntarily assumed the obligation of holding so much of the deposit of the province of Samar as would be sufficient to cover the amount of the check,

or before allowing the withdrawal that exhausted said deposit,

of making the necessary inquiry on the matter

It would be an empty gesture if the appellant did not mean to assume the obligation of paying the check and holding sufficient deposit of the drawer for the purpose


Decision affirmed

FACTS SUBJECT: Holder's action against drawee bank,

which had returned check on account of insufficiency of funds on deposit in drawer's account

Lower court dismissed such action

DRAWER: Ira McCord who had an account in defendant bank DRAWEE: Defendant Platte Vlley State Bank PAYEE: Plaintiff Norton Urwiller

McCord issued to Urwiller his check for the sum of $2,491

The next day,

Urwiller’s wife deposited this to his account in the Ravenna Bank

The bank then forwarded the check for collection in the usual course of business through regular channels: Ravenna Bank

Dec 12,

The check was proofed on the day it was received and posted for action on the following business day,

On Mon it was decided not to pay the check,

but mark it for 'return,' because the drawer thereof did not have sufficient funds on deposit in his account with appellee

This delay was caused by the fact that bank examiners came and assumed control of all the records of the bank,

Urwiller was advised by the Ravenna bank late Thurs afternoon,

of the fact that payment of the check had been refused although the check was not actually returned to him until Saturday

The check has never been paid

-Sumcad et al were not able to encash check so they sued Province of Samar and PNB

PNB was held solidarily liable with Province of Samar




dissenting: PNB should not be liable at all

When it requested the Bureau of Posts to furnish it with photostatic copies of the check,

it only means that the original check was not presented to it for payment

! The act of requesting did not create an obligation on the part of PNB

cannot be paid because of insufficient funds DRAWER: Province of Samar DRAWEE: PNB,

Cebu Branch PAYEE: Paulino Santos SUBSEQUENT INDORSEMENTS: Paulino Santos indorsed to James McGuire then transferred to Sumcad et

the latter did not pay or did not choose to pay

McGuire wrote letters to the Bureau of Posts seeking payment for check

Director of the Bureau of Posts referred to PNB

(Note: McGuire did not present check directly to PNB

(Province of Samar by this time still had P84,287

Province of Samar already withdrew from their PNB account P83,504


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PAYEE: John Randall INDORSEE: Payson & Co

Corthwaite executed bonds of indembity an executed srolls and drew on them for $2,700,

Coolidge wrote to Corthwaite stating that,

since there is no seal to any of the signatures,

it is necessary to ascertain the legality of the scrolls

Coolidge wrote to its friend,


who was to determine whether the draft was to be honored

William replied,

Williams stated the substance of the letter he had written,

Payson also called on him to make the same inquiry,

to whom he gave the same information and also read the letter he had written

a bill was drawn by Cornthwaite and paid to Payson in part of the protested bill of $2,700

ISSUE WON Coolidge is deemed to have accepted the bill,

hence liable to Payson HELD: YES

although the promise was made before the existence of the bill,

and although it is drawn in favor of a person who takes it for a pre-existing debt

the court holds that a letter written within a reasonable time before or after the bill of exchange,

describing it in terms not to be mistaken,

is if shown to the person who afterwards takes the bill on the credit of the letter,

a virtual acceptance binding the person who makes the promise




security and other evidence of indebtedness of any kind + interest) in favor of persons not heard from for 10 years or more,

with the increase and proceeds thereof,

shall be deposited with the Insular Treasurer to the credit of the Phil


Among these banks was the First National City Bank of New York who argued that some of its credits didn’t fall within the purview of the Act

The court held that cashier’s checks and demand drafts fall under the Act but upon MFR changed its view and excluded drafts,

ISSUE WON demand drafts create a creditor-debtor relationship between drawee and payee,

thus falling within the meaning of “credits” in Act

In banking terminology,

the term bank draft is used interchangeably with a bill of exchange

A bill of exchange under the NIL (sec

In fact,

the law requires presentment w/in a reasonable time or else the drawer is discharged from liability

Since it is admitted in this case that the drafts in question were never presented either for acceptance or payment,

appellee bank never became a debtor of the payees,

hence the drafts never became “credits” under the Act

which is simply a bill of exchange drawn by the bank on itself

it is equivalent to a certified check and its deposit passes to the credit of the holder who then becomes a depositor of that amount

Disposition TC decision modified

telegraphic transfer payment orders should be escheated to RP (see case for telegraphic orders)




The CFI of Manila rendered judgment in favor of Tan and against PAL

PAL appealed and the amount of damages was lowered to a total of P30,

The judgment became final and executory there being no further appeal taken

Judge Galano issued its order of execution and it was duly referred to Deputy Sheriff Emilio Z

Tan moved for the issuance of an alias writ of execution stating that the judgment remained unsatisfied

-PAL filed an opposition stating that it had already fully paid its obligation to Tan through the deputy sheriff Reyes as evidenced by cash vouchers properly signed and receipted by Sheriff Reyes (PAL issued a check amounting to P30,000


Sherriff Reyes encashed the check but failed to surrender the amount to Tan


Del Rosario served a notice of garnishment on the depository bank of PAL

Because of this,

PAL filed this instant petition ISSUES 1

WON an alias writ of execution be issued without a prior return of the original writ by the implementing officer 2

WON payment of judgment to the implementing officer as directed in the writ of execution constitutes satisfaction of judgment HELD 1

Ratio Technicality cannot be countenanced to defeat the execution of a judgment for execution is the fruit and end of the suit and is very aptly called the life of the law

A judgment cannot be rendered nugatory by the unreasonable application of a strict rule of procedure

Vested rights were never intended to rest on the requirement of a return,

the office of which is merely to inform the court and the parties,

of any and all actions taken under the writ of execution

Where such information can be established in some other manner,

the absence of an executing officer's return will not preclude a judgment from being treated as discharged or being executed through an alias writ of execution as the case may be

General Rule (under ordinary circumstances): YES Article 1240,

"Payment shall be made to the person in whose favor the obligation has been constituted,

or any person authorized to receive it

" Exception (under peculiar circumstances like in this case): NO a

Unless authorized to do so by law or by consent of the obligee,

a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed

Strictly speaking,

the acceptance by the sheriff of the petitioner's checks,

operate as a discharge of the judgment debt

Since a negotiable instrument is only a substitute for money and not money,

the delivery of such an instrument does not,

Act 2031 on Negs

Civil Code) A check,

whether a manager's check or ordinary check,

and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor

Mere delivery of checks does not discharge the obligation under a judgment

The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized (Art

Civil Code,

It is argued that if PAL had paid in cash to Sheriff Reyes,

there would have been payment in full legal contemplation

The reasoning is logical but is it valid and proper

? Logic has its limits in decision making

We should not follow rulings to their logical extremes if in doing so we arrive at unjust or absurd results

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PAL was negligent

Making the checks payable to the judgment creditor would have prevented the encashment or the taking of undue advantage by the sheriff,

or any person into whose hands the checks may have fallen,

whether wrongfully or in behalf of the creditor

The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn

Disposition Petition dismissed


Dissenting Opinion

Rule 39)

a court functionary whose competence involves both discretion and personal liability

Being an officer of the court and acting within the scope of his authorized functions,

the sheriff's receipt of the checks in payment of the judgment execution,

as received by the court itself

no question about its validity or of the authority and duty of the sheriff to accept it in settlement of PAL's judgment obligation would even have arisen

Simply because it was made by checks issued in the sheriff's name does not warrant reaching any different conclusion


Dissenting Opinion

nor upon those members of the general public who are compelled to deal with him,

The judgment creditor,

in circumstances like those of the instant case,

could be allowed to execute upon the absconding sheriff’s bond


Dissenting Opinion

imposed upon him by the nature of his office and the law,

to turn over such legal tender,

checks and proceeds of execution sales to the judgment creditor

The failure of a sheriff to effect such turnover and his conversion of the funds (or goods) held by him to his own uses,

do not have the effect of frustrating payment by and consequent discharge of the judgment debtor

his only remedy is against the officer

the latter was accompanied by the counsel of Tan

Prudence dictates that the counsel of Tan should have insisted on their immediate encashment by the Sheriff with the drawee bank in order to promptly get hold of the amount belonging to his client




Register of Deeds,

and National Steel Corporation

GR 78556

April 21,

the RTC rendered judgment ordering Angel Bautista to pay damages to Alfero Fortunado

Pursuant to said judgment,

the Sheriff levied upon 2 parcels of land registered in the name of Bautista,

but 1 of the said parcels of land was already sold to the National Steel Corporation (NSC)

The properties were sold to the petitioner as the only bidder in a public auction

The sheriff suggested as the 2 lots were sold together that both of them should be redeemed

NSC filed with the TC an urgent motion to redeem,

which was opposed by the petitioners on the ground that the movant did not have the personality to intervene

the NSC issued to the sheriff a PNB check for the properties

Bautista sent the sheriff a letter bearing NSC's conformity in which he availed himself of SC's check to redeem the properties

His letter contained the ff reservation: This redemption is made solely for the purpose of effecting the execution and delivery to me of the necessary certificate of redemption and the same shall not be taen to mean my accknowledgment of the validity of the said writ of execution and sale,

both of which I shall continue to contest,

nor shall this be taken to mean as a waiverr on my part of the legal reights and remedies available to me under the circumstances

Bautista later on wrote to the sheriff that he would no longer effect the redemption because there was nothing to redeem,

the auction sale being null and void


prayed that the sum covered by the PNB check be delivered to and kept by the clerk of court until such time as all incidents relative to the validity of the auction sale were finally resolved

Sheriff notified the petitioners' counsel of the deposit of the PN check

Counsel told the check that he was rejecting the check as it was not legal tender


the validity of the redemption was dependent on the validity of the certificate of sale,

which still has to be resolved by the TC

Motion for partial reconsideration by petitioner was denied

ISSUE WON there was valid redemption


Although the private respondents in the case did not file a redemption case against the petitioners,

NSC filed an urgent motion for redemption within the redemption period

In the US,

it has been held and recognized that a payment by check or draft or bank bill or currency which is not legal tender is effective if the officer accepts such payment

If in good faith,

and the officer receives before the expiration of the time of redemption,

the payment is regarded as sufficient

The Court does not,

sanction the use of check for the payment of obligations over the objection of the creditor

It is just that a check may be used for the exercise of the right of redemption,

the same being a right and not an obligation

The tender of a check is sufficient to compel redemption but it is not in itself a payment that relieves the redemption bt is not in itself a payment that relieves the redemtioner from his liiability t pay the redemption price

While the private respondents have properly exercised their right of redemption,

they remain liable for the payment of the redemption price



Uy] L-70145

Paras ~ajang~ FACTS


he left the check on top of the desk of the bank manager when he left the bank

The bank manager entrusted the check for safekeeping to bank official,

Albert Uy,

Alexander Lim

Uy had to answer a telephone call,

then he went t the men’s room

When he returned to the desk,

his visitor Lim was already gone and so was the check

When Jose Go returned to the bank,

the check was nowhere to be found

Go also executed an affidavit of loss

Uy also went to the police station to report the loss,

pointing to Alexander Lim as the one who could shed light on it

The check was immediately dishonored by Associated Bank and returned to Prudential with the words,

” The check was again returned to Associated Bank and for the 2nd time,

Associated Bank received a letter from Atty

Lorenzo Navarro demanding payment for the check and threatened to sue

He refuses to reveal who his client is

Unsure with what to do with the matter,

Associated Bank filed for an Interpleader

The client turned out to be one named Mesina

L aw 10 8: N egotiable Instruments

First Semester

A Y 2 0 0 8-0 9

R ogelio V

Q ueved

He said the check was paid to him by Alexander Lim in a certain transaction but refused to elucidate further

Mesina filed a complaint for damages

Mesina’s complaint on the other hand was dismissed

The issue in that case is who between Mesina and Go are entitled for the payment of the check

Since this issue had been resolved in the other case,

it has become moot and academic

ISSUE: WON the lower court’s ruling in the interpleader case should be set aside


Mesina invokes theories on causes and effects of a cashier’s checks such as 1) it cannot be countermanded in the hands of a holder in due course and 2) a cashier’s check is a bill of exchange drawn by the bank against itself

But these are general principles which cannot be aptly applied to the case at bar without considering other things

He refused to say how and why the check was passed to him

He therefore had notice of the defect of his title over the check from the start

the check was bought by Jose Go from the bank for purposes of transferring his bank from Associated Bank to a nearby bank,

thinking that carrying a check would be safer than carrying cash

it was not issued in payment of an obligation

The check was Jose Go’s property when it was misplaced or stolen

Bank was therefore liable to no one else but Jose Go

it was not the bank who did it but Jose Go

The bank could not be the drawer and drawee for clearly,

Jose Go owns the money it represents and he is therefore the drawer and drawee in the same manner as if he has a current account and he issued a check against it

No one outside Jose Go can be termed a holder in due course because Go had not indorsed it in due course

NOTE: Clear implication from the case is that if Mesina had been a holder in due course,

the court would have granted recovery

President demanded payment of the amount of P184,000

After some negotiations and computation,

the amount was lowered to P154,000


as a result of the non-payment of the reduced amount,

the car was detained inside the bank’s compound

Gueco went to the bank and talked with its Administrative Support,

Auto Loans/Credit Card Collection Head,

Jefferson Rivera

The negotiations resulted in the further reduction of the outstanding loan to P150,000

Gueco delivered a manager’s check in the amount of P150,000

It is their contention that Dr

Gueco need not sign the motion for joint dismissal considering that they had not yet filed their Answer


the Bank insisted that the joint motion to dismiss is standard operating procedure in their bank to effect a compromise and to preclude future filing of claims,

counterclaims or suits for damages

After several demand letters and meetings with bank representatives,

the Spouses initiated a civil action for damages before MTC Quezon City

the Bank is ordered to return the car to the Spouses

the Bank may deposit the Manager’s check – the proceeds of which have long been under the control of the issuing bank in favor of the Bank since its issuance,

whereas the funds have long been paid by the Spouses to secure said Manager’s Check,

over which the Spouses have no control


the Bank is ordered to pay the Spouses the P50,000




WON there was no agreement with respect to the execution of the joint motion to dismiss as a condition for the compromise agreement 2

WON granting moral and exemplary damages and attorney’s fees in favor of Sps Gueco is proper 3

WON the Bank must return the subject car to the Sps

without making any provision for the issuance of the new manager’s/cashier’s check by the Spouses in favor of the Bank in lieu of the original cashier’s check that already became stale

1989 Model

In consideration,

the Spouses executed promissory notes which were payable in monthly installments and chattel mortgage over the car to serve as security for the notes

The Spouses defaulted in payment of installments

The Bank filed a civil action for “Sum of Money with Prayer for a Writ of Replevin” before MTC Pasay City

Francis Gueco was served summons and was fetched by the sheriff and representative of the bank for a meeting in the bank premises

Desi Tomas,

The Bank presented the testimony of Mr

Jefferson Rivera who related that Dr

Gueco was aware that the signing of the draft of the Joint Motion to Dismiss was one of the conditions set by the bank for the acceptance of the reduced amount of indebtedness and the release of the car

The Spouses,

maintained that no such condition was ever discussed during said meeting

If it is true that the signing of the joint motion was a condition sine qua non for the reduction of the Spouses’ obligation,

it is only reasonable and logical to assume that the joint motion should have been



Gueco in the said meeting

Gueco was not given a copy of the joint motion on the day of the meeting,

for his family or legal counsel to see to be brought signed,

whereby the original claim of the bank of P184,985

plaintiff was informed that the subject motor vehicle would be released to him’ happened during that said meeting

It is the voluntary execution of a wrongful act,

knowing and intending the effects which naturally and necessarily arise from such act or omission

the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation

We fail to see how the act of the bank in requiring the Spouses to sign the joint motion to dismiss could constitute as fraud

the Bank may have been remiss in informing Dr

Gueco that the signing of a joint motion to dismiss is a standard operating procedure of the bank


this can not in anyway have prejudiced Dr

It should,

be noted that in cases of breach of contract,

moral damages may only be awarded when the breach was attended by fraud or bad faith

The law presumes good faith

because of its own negligence,

should suffer the loss occasioned by the fact that the check had become stale

It is their position that delivery of the manager’s check produced the effect of payment and,

the Bank was negligent in opting not to deposit or use said check

Rudimentary sense of justice and fair play would not countenance the Spouses’ position

It is valueless and,

Under the negotiable instruments law,

an instrument not payable on demand must be presented for payment on the day it falls due

When the instrument is payable on demand,

presentment must be made within a reasonable time after its issue

In the case of a bill of exchange,

presentment is sufficient if made within a reasonable time after the last negotiation thereof

and in determining what is a “reasonable time,” regard is to be had to the nature of the instrument,

the usage of trade or business with respect to such instruments,

and the facts of the particular case

The test is whether the payee employed such diligence as a prudent man exercises in his own affairs

This is because the nature and theory behind the use of a check points to its immediate use and payability

In a case,

a check payable on demand which was long overdue by about two and a half (2-1/2) years was considered a stale check

Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the check becoming stale

even a delay of one (1) week[27] or two (2) days,

under the specific circumstances of the cited cases constituted unreasonable time as a matter of law

the check involved is not an ordinary bill of exchange but a manager’s check

A manager’s check is one drawn by the bank’s manager upon the bank itself

It is similar to a cashier’s check both as to effect and use

A cashier’s check is a check of the bank’s cashier on his own or another check

In effect,

it is a bill of exchange drawn by the cashier

L aw 10 8: N egotiable Instruments

First Semester

A Y 2 0 0 8-0 9

R ogelio V

Q ueved

of a bank upon the bank itself,

and accepted in advance by the act of its issuance

It is really the bank’s own check and may be treated as a promissory note with the bank as a maker

The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand

The mere issuance of it is considered an acceptance thereof

If treated as promissory note,

the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance<

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