PHILIPPINE EDUCATION CO., INC., vs. MAURICIO A.

amount represented by the money order in question had

SORIANO, ET AL., | G.R. No. L-22405, June 30, 1971 been deducted from its clearing account with the Manila
Post Office, it did not file any protest against such action.
FACTS:
On April 18, 1958, Enrique Montinola purchased 10 money
orders of P200 each payable to E.P. Montinola from the
Manila Post Office. For payment therefor, he offered a
private check. However, since a private check is not a
generally accepted payment for money orders, he was FIRESTONE TIRE & RUBBER COMPANY OF THE
advised to see the Chief of the M.O Division. However, he PHILIPPINES vs. COURT OF APPEALS AND LUZON
was able to leave the building instead with the 10 M.O. DEVELOPMENT BANK
without having paid. On the same date, an urgent G.R. No. 113236, March 05, 2001
message was sent informing postmasters as well as banks
not to pay anyone of the M.O. aforesaid if presented for FACTS:
payment. The Bank of America received a copy of the -Defendant Luzon Development Bank had as one of its
same. client-depositors the Fojas-Arca Enterprises Company.
Fojas-Arca maintained a special savings account with
On April 23, 1958, one of the money orders was received defendant and the latter authorized and allowed
by appellant as part of its sales receipts. It deposited the withdrawals of funds therefrom through special withdrawal
same the following day with the Bank of America, and one slips supplied by the bank itself. On January 1978, Fojas
day thereafter the latter cleared it with the Bureau of Arca entered into a Franchise Dealership Agreement
Posts and received from the latter its face value of P200. whereby it was given the privilege to purchase on credit
On September 27, 1961, Mauricio Soriano, chief of the and sell plaintiffs products.
M.O division, notified the bank of America that the M.O. -On January 14, 1978 up to May 15, 1978 Fojas Arca
had been found to have been irregularly issued and the purchased on credit Firestone products with the total
amount it represented had been deducted from the banks amount of P4,896,000. In payment thereof, he delivered to
clearing account. Thus, the bank debited the petitioners plaintiff 6 special withdrawal slips. The plaintiff deposited
account for the same amount. the slips with its current account with the CitiBank. The
defendant honored and paid the slips. Fojas-Arca
Hence, this suit. The lower court ruled in favor of subsequently made several purchases on credit, and in
petitioner and ordered that the defendants countermand payment thereof, it issued 4 withdrawal slips. CitiBank
the notice given to the bank or indemnify the petitioner however already credited the account of plaintiff the
the same amount with interest. On appeal, the decision amount for the slips. However, among the 4 withdrawal
was reversed. Hence, this petition. slips, only two were honored and paid by the defendant.
As a result, the Citibank debited plaintiffs account for the
ISSUE: W/n the money order is a NI. total sum of P2,078,092.80 representing the amount of
the two withdrawal slips.
RULING: -Plaintiff demanded payment from the bank but to no
NO. The weight of authority in the United States is that avail. Hence, a suit for damages was filed in court.
postal money orders are not negotiable instruments, the Defendant denied that special withdrawal slips were
reason behind this rule being that, in establishing and honored and treated as if it were checks, the truth being
operating a postal money order system, the government is that when the special withdrawal slips were received by
not engaging in commercial transactions but merely defendant, it only verified whether or not the signatures
exercises a governmental power for the public benefit. therein were authentic, and whether or not the deposit
level in the passbook concurred with the savings ledger,
It is to be noted in this connection that some of the and whether or not the deposit is sufficient to cover the
restrictions imposed upon money orders by postal laws withdrawal; If at first defendant had given notice to
and regulations are inconsistent with the character of plaintiff it is merely an extension of usual bank courtesy to
negotiable instruments. For instance, such laws and a prospective client; that defendant is only dealing with its
regulations usually provide for not more than one depositor Fojas-Arca and not the plaintiff. The lower court
endorsement; payment of money orders may be withheld dismissed the complaint, so did the appellate court.
under a variety of circumstances Hence, this petition.

Of particular application to the postal money order in ISSUE: W/n the withdrawals slips were NI if so
question are the conditions laid down in the letter of the respondent bank should be held liable for damages
Director of Posts of October 26, 1948 to the Bank of suffered by petitioner, due to its allegedly belated notice
America for the redemption of postal money orders of non-payment of the subject withdrawal slips.
received by it from its depositors. Among others, the
condition is imposed that "in cases of adverse claim, the RULING:
money order or money orders involved will be returned to NO. Petitioner admits that the withdrawal slips in question
you (the bank) and the corresponding amount will have to were non-negotiable. Hence, the rules governing the
be refunded to the Postmaster, Manila, who reserves the giving of immediate notice of dishonor of negotiable
right to deduct the value thereof from any amount due instruments do not apply in this case. Thus, respondent
you if such step is deemed necessary." The conditions bank was under no obligation to give immediate notice
thus imposed in order to enable the bank to continue that it would not make payment on the subject withdrawal
enjoying the facilities theretofore enjoyed by its slips. Citibank should have known that withdrawal slips
depositors, were accepted by the Bank of America. The were not negotiable instruments. It could not expect these
latter is therefore bound by them. That it is so is clearly slips to be treated as checks by other entities. Payment or
inferred from the fact that, upon receiving advice that the notice of dishonor from respondent bank could not be
expected immediately, in contrast to the situation later reversed its own decision stating that the
involving checks. checks were order instruments. Hence, this petition.
-In the ordinary and usual course of banking operations,
current account deposits are accepted by the bank on the ISSUE: W/n the subject checks are payable to order
basis of deposit slips prepared and signed by the
or to bearer and who bears the loss?
depositor, or the latter's agent or representative, who
indicates therein the current account number to which the
deposit is to be credited, the name of the depositor or RULING: Payable to order. Bank bears the loss.
current account holder, the date of the deposit, and the
amount of the deposit either in cash or in check. The distinction between bearer and order
-The withdrawal slips deposited with petitioner's current instruments lies in their manner of negotiation.
account with Citibank were not checks, as petitioner Under Section 30 of the NIL, an order instrument
admits. Citibank was not bound to accept the withdrawal requires an indorsement from the payee or holder
slips as a valid mode of deposit. But having erroneously before it may be validly negotiated. A bearer
accepted them as such, Citibank - and petitioner as
instrument, on the other hand, does not require an
account-holder - must bear the risks attendant to the
acceptance of these instruments. Petitioner and Citibank indorsement to be validly negotiated. It is
could not now shift the risk and hold private respondent negotiable by mere delivery.
liable for their admitted mistake.
PHILIPPINE NATIONAL BANK vs. ERLANDO T. A review of US jurisprudence yields that an actual,
RODRIGUEZ AND NORMA RODRIGUEZ existing, and living payee may also be "fictitious" if
G.R. No. 170325 | September 26, 2008 the maker of the check did not intend for the payee
to in fact receive the proceeds of the check. This
FACTS: usually occurs when the maker places a name of an
Respondent-spouses are engaged in the informal existing payee on the check for convenience or to
lending business. PEMSLA on the other hand, is an cover up an illegal activity.[14] Thus, a check made
associoation of PNB employees. Both parties are expressly payable to a non-fictitious and existing
clients of PNB Amelia Branch. PEMSLA granted loan person is not necessarily an order instrument. If the
to its members. Respondents would rediscount the payee is not the intended recipient of the proceeds
postdated checks issued to its members whenever of the check, the payee is considered a "fictitious"
PEMSLA was short of funds. The spouses would payee and the check is a bearer instrument.
replace the PEMSLA checks with their own checks
issued in the name of members. In a fictitious-payee situation, the drawee bank is
absolved from liability and the drawer bears the
It was PEMSLAs policy not to extend loans of loss. When faced with a check payable to a fictitious
members with outstanding debts. To subvert this payee, it is treated as a bearer instrument that can
policy, PEMSLA officers devised a scheme whereby be negotiated by delivery. The underlying theory is
they took out loans in the name of unsuspecting that one cannot expect a fictitious payee to
members, without their knowledge or consent. The negotiate the check by placing his indorsement
PEMSLA Checks then issued were given to the thereon. And since the maker knew this limitation,
spouses for rediscounting. The officers carried this he must have intended for the instrument to be
out by forging the indorsement of the named payees negotiated by mere delivery. Thus, in case of
in the checks. In return, the spouses issued their controversy, the drawer of the check will bear the
personal checks in the name of the members and loss. This rule is justified for otherwise, it will be
delivered them to PEMSLA. The PEMSLA checks were most convenient for the maker who desires to
then deposited by the spouses to their account. escape payment of the check to always deny the
validity of the indorsement. This despite the fact
The Rodriguez checks were deposited by PEMSLA it that the fictitious payee was purposely named
its savings account without any indorsement from without any intention that the payee should receive
the named payees. An irregular procedure carried the proceeds of the check.
out by one of the officer of PEMSLA who was also a
bank teller. From 1998-1999 the spouses issued 69 However, there is a commercial bad faith exception
checks amounting to P2,345,804. They were payable to the fictitious-payee rule. A showing of
to 47 individual payees. To put a stop to this commercial bad faith on the part of the drawee
scheme, PNB closed the current account of PEMSLA, bank, or any transferee of the check for that matter,
as a result, the PEMSLA checks were dishonored. will work to strip it of this defense. The exception
The corresponding checks were deposited to will cause it to bear the loss. Commercial bad faith
PEMSLA Savings account. is present if the transferee of the check acts
dishonestly, and is a party to the fraudulent scheme.
The spouses then filed suit for damages against
PNB, PEMSLA and MCP. They sought to recover the For the fictitious-payee rule to be available as a
value of the checks. The RTC ruled in their favor. On defense, PNB must show that the makers did not
appeal, the CA reversed the decision of the RTC, but intend for the named payees to be part of the
transaction involving the checks. At most, the
bank's thesis shows that the payees did not have
knowledge of the existence of the checks. This lack by a deposit certificate. In addition, its SAP is
of knowledge on the part of the payees, however, payable on demand and not on a fixed determinable
was not tantamount to a lack of intention on the future.
part of respondents-spouses that the payees would -DST is imposed on certificates of deposit bearing
not receive the checks' proceeds. Considering that interest pursuant to Section 180 of the old NIRC, as
respondents-spouses were transacting with PEMSLA amended, to wit:
and not the individual payees, it is understandable Sec. 180. Stamp tax on all loan agreements,
that they relied on the information given by the promissory notes, bills of exchange, drafts,
officers of PEMSLA that the payees would be instruments and securities issued by the
receiving the checks. government or any of its instrumentalities,
certificates of deposit bearing interest and
Verily, the subject checks are presumed order others not payable on sight or demand. Xxx
instruments. This is because, as found by both -In China Banking Corporation v. Commissioner of
lower courts, PNB failed to present sufficient Internal Revenue, we held that the Savings Plus
evidence to defeat the claim of respondents-spouses Deposit Account, which has the following features:
that the named payees were the intended recipients 1. Amount deposited is withdrawable anytime;
of the checks' proceeds. The bank failed to satisfy a 2. The same is evidenced by a passbook;
requisite condition of a fictitious-payee situation - 3. The rate of interest offered is the prevailing
that the maker of the check intended for the payee market rate, provided the depositor would maintain
to have no interest in the transaction. his minimum balance in thirty (30) days at the
minimum, and should he withdraw before the
Because of a failure to show that the payees were period, his deposit would earn the regular savings
"fictitious" in its broader sense, the fictitious-payee deposit rate;
rule does not apply. Thus, the checks are to be -is subject to DST as it is essentially the same as the
deemed payable to order. Consequently, the Special/Super Savings Deposit Account in Philippine
drawee bank bears the loss. Banking Corporation v. Commissioner of Internal
Revenue, and the Savings Account-Fixed Savings
Deposit in International Exchange Bank v.
Commissioner of Internal Revenue, which are
considered certificates of deposit drawing interests.
Similarly, in this case, although the money
deposited in a SAP is payable anytime, the
withdrawal of the money before the expiration of 30
days results in the reduction of the interest rate. In
PRUDENTIAL BANK vs. COMMISSIONER OF the same way, a time deposit withdrawn before its
INTERNAL REVENUE maturity results to a lower interest rate and
G.R. No. 180390, July 27, 2011 payment of bank charges or penalties.
FACTS:
On July 23, 1999, petitioner received from the The fact that the SAP is evidenced by a passbook
respondent Commissioner of Internal Revenue (CIR) likewise cannot remove its coverage from Section
a Final Assessment Notice and a Demand Letter for 180 of the old NIRC, as amended. A document to be
deficiency Documentary Stamp Tax (DST) for the considered a certificate of deposit need not be in a
taxable year 1995 on its Repurchase Agreement specific form. Thus, a passbook issued by a bank
with the Bangko Sentral ng Pilipinas, Purchase of qualifies as a certificate of deposit drawing interest
Treasury Bills from the BSP, and on its Savings because it is considered a written acknowledgement
Account Plus product, in the total amount of by a bank that it has accepted a deposit of a sum of
P18,982,734.38. Petitioner protested the money from a depositor.
assessment on the ground that the documents ROMEO C. GARCIA, PETITIONER, VS. DIONISIO
subject matter of the assessment are not subject to V. LLAMAS, RESPONDENT.
DST. However, it was denied. G.R. No. 154127, December 08, 2003
Thus, petitioner filed a Petition for Review before the
CTA. The CTA affirmed the assessment for deficiency FACTS:
DST insofar as the SAP is concerned. Petitioner On December 23, 1996, petitioner Garcia and de
moved for partial reconsideration but the same was Jesus borrowed P400,00 from respondent Llamas. On
denied. On appeal, the CTA En Banc denied the the same day, they issued a promissory note
same. wherein they bound themselves jointly and severally
ISSUE: W/n petitioners Savings Account Plus is to pay the loan on or before January 23, 1997 with
subject to DST. 5% interest per month. Since the loan has been long
RULING: YES. Petitioner contends that its SAP is not overdue, and despite repeated demands,
subject to DST because it is not included in the list respondent filed this suit.
of documents under Section 180 of the old NIRC, as
amended. Petitioner insists that unlike a time On the other hand, Garcia alleged that he assumed
deposit, its SAP is evidenced by a passbook and not no liability under the promissory note because he
signed it merely as an accommodation party for de Dela Cruz who deposited with it the aggregate
Jesus and, alternatively, that he is relieved from any amount of P1,120,000. Angel dela Cruz delivered
liability arising from the note inasmusch as the loan said certificates of time deposits to Caltex in
had been paid by de Jesus by means of a check date connection with his purchase of fuel products from
April 17, 1997, and that in any event, the issuance it. Sometime in 1982, dela Cruz informed the Bank
of the check novated or superseded the note. that he lost all certificates of deposits and was
Respondent replited that the loan remained unpaid advised to present a notarized affidavit of loss. Dela
as the check bounced. Cruz complied with the same and was thus issed
280 replacement CTDs.
The trial court ruled in favor of respondent and On March 25, 1982, dela Cruz obtained a loan from
ordered that petitioner and de Jesus and solidarily the bank in the amount of P875,00 and assigned his
liable evidenced by the promissory note. On appeal time deposit to the bank authorizing the bank to
to the CA, it remanded the case of de Jesus to the have full control of the same, preterminate, set-off
trial court and treated the judgment against Garcia and apply said time deposits to his loan upon
as summary judgment. Hence, this petition. maturity. Sometime in November 1982, Mr. Aranas,
credit manager of Caltex Inc went to defendant bank
ISSUE: Whether or not the PN is a NI. Whether or and presented for verification the CTD alleging that
not Garcia is liable being merely an accommodation the same were delivered to it as security for
party. purchases made with Caltex Philippines by said
depositors. On November 26, 1982, defendant
RULING: NO. By its terms, the note was made received a letter informing it of its possession of the
payable to a specific person rather than to bearer or CTD and payment of the same. . On December 8,
to order -- a requisite for negotiability under Act 1982, plaintiff was requested by herein defendant to
2031, the Negotiable Instruments Law (NIL). Hence, furnish the former a copy of the document
petitioner cannot avail himself of the NIL's provisions evidencing the guarantee agreement with Mr. Angel
on the liabilities and defenses of an accommodation dela Cruz as well as the details of Mr. Angel dela
party. Besides, a non-negotiable note is merely a Cruz' obligations against which plantiff proposed to
simple contract in writing and is evidence of such apply the time deposit but to no avail. Thus, the
intangible rights as may have been created by the bank rejected his claim of payment.
assent of the parties. The promissory note is thus Subsequently, the loan of dela Cruz matured
covered by the general provisions of the Civil Code, prompting the bank to set off his time deposits to his
not by the NIL. loan. Hence, this suit. The trial court dismissed the
complaint. The CA affirmed the same.
Even granting arguendo that the NIL was applicable,
still, petitioner would be liable for the promissory ISSUE: W/n the CTDs are NI. w/n the petitioner can
note. Under Article 29 of Act 2031, an recover the value of the same.
accommodation party is liable for the instrument to RULING: YES. The CTDs in question are negotiable
a holder for value even if, at the time of its taking, instruments. Section 1 of Act No. 2031, otherwise
the latter knew the former to be only an known as the Negotiable Instruments Law,
accommodation party. The relation between an enumerates the requisites for an instrument to
accommodation party and the party accommodated become negotiable, viz:
is, in effect, one of principal and surety -- the
accommodation party being the surety. It is a settled On this score, the accepted rule is that the
rule that a surety is bound equally and absolutely negotiability or non-negotiability of an instrument is
with the principal and is deemed an original determined from the writing, that is, from the face of
promissor and debtor from the beginning. The the instrument itself. In the construction of a bill or
liability is immediate and direct. 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
CALTEX (PHILIPPINES), INC.VS. COURT OF parties may have secretly intended as
APPEALS AND SECURITY BANK AND TRUST contradistinguished from what their words express,
COMPANY but what is the meaning of the words they have
G.R. No. 97753, August 10, 1992 used. What the parties meant must be determined
by what they said.
FACTS:
On various dates, defendant bank issued 280 Contrary to what respondent court held, the CTDs
certificate of time deposits (CTD) in favor of Angel are negotiable instruments. The documents provide
that the amounts deposited shall be repayable to event of non-payment of the principal obligation,
the depositor. And who, according to the document, must be contractually provided for.
is the depositor? It is the "bearer." The documents
do not say that the depositor is Angel de la Cruz and
that the amounts deposited are repayable
specifically to him. Rather, the amounts are to be
repayable to the bearer of the documents or, for
that matter, whosoever may be the bearer at the
time of presentment.
If it was really the intention of respondent bank to
pay the amount to Angel de la Cruz only, it could
have with facility so expressed that fact in clear and
categorical terms in the documents, instead of BANCO DE ORO SAVINGS AND MORTGAGE
having the word "BEARER" stamped on the space BANK VS. EQUITABLE BANKING
provided for the name of the depositor in each CTD. CORPORATION, et., al.
On the wordings of the documents, therefore, the G.R.No. L-74917, January 20, 1988
amounts deposited are repayable to whoever may
be the bearer thereof. Thus, petitioner's aforesaid
witness merely declared that Angel de la Cruz is the FACTS:
depositor "insofar as the bank is concerned," but Sometime in March, April, May and August of
obviously other parties not privy to the transaction 1983, plaintiff Equitable Banking Corporation
between them would not be in a position to know drew 6 crossed Managers check in the
that the depositor is not the bearer stated in the aggregate amount of P45,982.23 and payable
CTDs. Hence, the situation would require any party to certain member establishments of Visa Card.
dealing with the CTDs to go behind the plain import Subsequently, the checks were deposited with
of what is written thereon to unravel the agreement the defendant to the credit of its depositor, a
of the parties thereto through facts aliunde. This certain Aida Trencio.
need for resort to extrinsic evidence is what is
sought to be avoided by the Negotiable Instruments
Law and calls for the application of the elementary
Defendant Banco De Oro stamped at the back
rule that the interpretation of obscure words or of the check All prior and/or lack of
Stipulations in a contract shall not favor the party endorsement guaranteed. They then sent the
who caused the obscurity.[12] checks to PCHC for clearing. Accordingly,
plaintiff Equitable paid the checks; its clearing
NO. Unfortunately for petitioner, although the CTDs account was debited for value of the Checks
are bearer instruments, a valid negotiation thereof and defendants clearing account was credit for
for the true purpose and agreement between it and the same amount. However, plaintiff discovered
De la Cruz, as ultimately ascertained, requires both that the endorsements appearing at the back of
delivery and indorsement. For, although petitioner
the checks were forged and/or unauthorized or
seeks to deflect this fact, the CTDs were in reality
delivered to it as a security for De la Cruz purchases
otherwise belong to persons other than the
of its fuel products. payees.
Petitioner's insistence that the CTDs were
negotiated to it begs the question. Under the Thus, pursuant to PCHC rules, plaintiff
Negotiable Instruments Law, an instrument is presented the checks directly to BDO for
negotiated when it is transferred from one person to purposes of claiming reimbursement but to no
another in such a manner as to constitute the avail. Hence, plaintiff filed a complaint praying
transferee the holder thereof, and a holder may be that defendant be required to pay the amount
the payee or indorsee of a bill or note, who is in of the checks. The arbiter ruled in favor of
possession of it, or the bearer thereof. In the present plaintiff and ordered payment of the same
case, however, there was no negotiation in the
amount. Upon motion for reconsideration, the
sense of a transfer of the legal title to the CTDs in
favor of petitioner in which situation, for obvious Board of directors affirmed the arbiters
reasons, mere delivery of the bearer CTDs would decision. Hence, this petition.
have sufficed. Here, the delivery thereof only as
security for the purchases of Angel de la Cruz (and ISSUE:W/n PCHC has jurisdiction to adjudicate
we even disregard the fact that the amount involved the case. W/n not the subject checks are
was not disclosed) could at the most constitute negotiable instruments.
petitioner only as a holder for value by reason of his
lien. Accordingly, a negotiation for such purpose RULING: YES. The PCHC makes no distinction as
cannot be effected by mere delivery of the to the character or nature of the checks subject
instrument since, necessarily, the terms thereof and
of its jurisdiction. The pertinent provisions
the subsequent disposition of such security, in the
quoted in petitioners memorandum simply refer
to check(s). Where the law does not distinguish, The petitioner by its own acts and
we shall not distinguish. representation can not now deny liability
because it assumed the liabilities of an
In the case of Reyes vs. Chuanico (CA-G.R. No. endorser by stamping its guarantee at the back
208.13-R, Feb. 5, 1962) the Appellate Court of the checks.
categorically stated that there are four kinds of
checks in this jurisdiction; the regular check; The petitioner having stamped its guarantee of
the cashier's check; the travelers check; and all prior endorsements and/or lack of
the crossed check. The Court, further endorsements (Exh. A-2 to F- 2) is now
elucidated, that while the Negotiable estopped from claiming that the checks under
Instruments Law does not contain any provision consideration are not negotiable instruments.
on crossed checks, it is common practice in The checks were accepted for deposit by the
commercial and banking operations to issue petitioner stamping thereon its guarantee, in
checks of this character, obviously in order that it can clear the said checks with the
accordance with Article 541 of the Code of respondent bank. By such deliberate and
Commerce. Attention is likewise called to positive attitude of the petitioner it has for all
Section 185 of the Negotiable Instruments Law: legal intents and purposes treated the said
checks as negotiable instruments and
Sec. 185. Check defined. A check is a bill of accordingly assumed the warranty of the
exchange drawn on a bank payable on demand. endorser when it stamped its guarantee of prior
Except as herein otherwise provided, the endorsements at the back of the checks. It led
provisions of this act applicable to a bill of the said respondent to believe that it was
exchange payable on demand apply to a acting as endorser of the checks and on the
check. strength of this guarantee said respondent
and the provisions of Section 61 (supra) that cleared the checks in question and credited the
the drawer may insert in the instrument an account of the petitioner.
express stipulation negating or limiting his own
liability to the holder. Consequently, it appears
that the use of the-term check in the Articles
of Incorporation of PCHC is to be perceived as
not limited to negotiable checks only, but to
checks as is generally known in use in
commercial or business transactions.

The PCHC Rules and Regulations should not be

interpreted to be applicable only to checks
which are negotiable instruments but also to
non-negotiable instruments, and that the PCHC
has jurisdiction over this case even as the
checks subject of this litigation are admittedly
non-negotiable.

Moreover, petitioner is estopped from raising

the defense of non-negotiability of the checks
in question. It stamped its guarantee on the
back of the checks and subsequently presented
these checks for clearing and it was on the
basis of these endorsements by the petitioner
that the proceeds were credited in its clearing
account.