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    Dela Victoria v. Burgos

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    MoireeG
    The document discusses three cases related to negotiable instruments such as promissory notes and checks. In the first case, the court ruled that salary checks issued to a government employee but not yet delivered do not belong to the employee and cannot be garnished to satisfy a judgment. In the second case, the court found that the drawer of checks is not freed from liability on the underlying debt when the checks were never delivered to the payee. In the third case, the court determined that an indorsement of a promissory note "with recourse" constitutes a general indorsement making the indorser secondarily liable if the primary obligor defaults, rather than a qualified indorse

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    Dela Victoria v. Burgos

    Uploaded by

    MoireeG
    450 views4 pages
    The document discusses three cases related to negotiable instruments such as promissory notes and checks. In the first case, the court ruled that salary checks issued to a government employee but not yet delivered do not belong to the employee and cannot be garnished to satisfy a judgment. In the second case, the court found that the drawer of checks is not freed from liability on the underlying debt when the checks were never delivered to the payee. In the third case, the court determined that an indorsement of a promissory note "with recourse" constitutes a general indorsement making the indorser secondarily liable if the primary obligor defaults, rather than a qualified indorse

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    Negotiable Instruments Case digest

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    The document discusses three cases related to negotiable instruments such as promissory notes and checks. In the first case, the court ruled that salary checks issued to a government employee but not yet delivered do not belong to the employee and cannot be garnished to satisfy a judgment. In the second case, the court found that the drawer of checks is not freed from liability on the underlying debt when the checks were never delivered to the payee. In the third case, the court determined that an indorsement of a promissory note "with recourse" constitutes a general indorsement making the indorser secondarily liable if the primary obligor defaults, rather than a qualified indorse

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    450 views4 pages

    Dela Victoria v. Burgos

    Uploaded by

    MoireeG
    The document discusses three cases related to negotiable instruments such as promissory notes and checks. In the first case, the court ruled that salary checks issued to a government employee but not yet delivered do not belong to the employee and cannot be garnished to satisfy a judgment. In the second case, the court found that the drawer of checks is not freed from liability on the underlying debt when the checks were never delivered to the payee. In the third case, the court determined that an indorsement of a promissory note "with recourse" constitutes a general indorsement making the indorser secondarily liable if the primary obligor defaults, rather than a qualified indorse

    Copyright:

    © All Rights Reserved
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    Download as docx, pdf, or txt
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    The key takeaways are that a check does not belong to the payee until physically delivered, public funds like salaries cannot be garnished, and the liabilities of different types of indorsers.

    Some key elements of a negotiable instrument are the drawer, payee, drawee bank, delivery for the instrument to take effect, and completion upon acceptance or payment.

    The different types of indorsements are general/blank indorsement, special/qualified indorsement, restrictive indorsement, and qualified indorsement without recourse.

    LORETO D. DE LA VICTORIA vs. HON. JOSE P.

    BURGOS
    FACTS:
    Sesbreño filed a complaint for damages against Assistant City Fiscals Mabanto,
    Jr., and Rama, Jr., before the Regional Trial Court. Judgment was rendered
    ordering the defendants to pay P11,000.00 to the plaintiff, private respondent
    herein. The decision having become final and executory.

    A notice of garnishment was served on de la Victoria as City Fiscal of Mandaue


    City where defendant Mabanto, Jr., was then detailed.
    Dela Victoria moved to quash the notice of garnishment claiming that he was not in
    possession of any money, funds, credit, property or anything of value belonging to
    Mabanto, Jr., except his salary and RATA checks, but that said checks were not yet
    properties of Mabanto, Jr., until delivered to him. He further claimed that, as such, they
    were still public funds which could not be subject to garnishment.

    ISSUE: Whether a check still in the hands of the maker or its duly authorized
    representative is owned by the payee before physical delivery to the latter.

    RULING:
    As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He
    receives his compensation in the form of checks from the Department of Justice through
    petitioner as City Fiscal of Mandaue City and head of office. Under Sec. 16 of the
    Negotiable Instruments Law, every contract on a negotiable instrument is incomplete
    and revocable until delivery of the instrument for the purpose of giving effect thereto.
    As ordinarily understood, delivery means the transfer of the possession of the
    instrument by the maker or drawer with intent to transfer title to the payee and
    recognize him as the holder thereof.
    The salary check of a government officer or employee such as a teacher does not
    belong to him before it is physically delivered to him. Until that time the check belongs
    to the government. Accordingly, before there is actual delivery of the check, the payee
    has no power over it; he cannot assign it without the consent of the Government.
    As a necessary consequence of being public fund, the checks may not be garnished to
    satisfy the judgment. The rationale behind this doctrine is obvious consideration of
    public policy. The Court succinctly stated in Commissioner of Public Highways v. San
    Diego that —
    The functions and public services rendered by the State cannot be allowed to be
    paralyzed or disrupted by the diversion of public funds from their legitimate and specific
    objects, as appropriated by law.

    DEVELOPMENT OF RIZAL BANK vs. SIMA WEI


    FACTS:
    In consideration for a loan extended by petitioner Bank to respondent Sima Wei,
    the latter executed and delivered to the former a promissory note. Sima Wei
    issued two crossed checks payable to petitioner Bank drawn against China
    Banking Corporation for the payment of the balance.
    These two checks were not delivered to the petitioner-payee or to any of its
    authorized representatives. For reasons not shown, these checks came into the
    possession of respondent Lee Kian Huat, who deposited the checks without the
    petitioner-payee's indorsement (forged or otherwise) to the account of
    respondent Plastic Corporation of the Producer's Bank.
    Cheng Uy, Branch Manager of Producers Bank, relying on the assurance of
    respondent Samson Tung, President of Plastic Corporation, that the transaction
    was legal and regular, instructed the cashier of Producers Bank to accept the
    checks for deposit and to credit them to the account of said Plastic Corporation,
    inspite of the fact that the checks were crossed and payable to petitioner Bank
    and bore no indorsement of the latter. Hence, petitioner filed the complaint.
    ISSUE: Whether or not Sima Wei is freed from liability upon issuing the checks
    payable to the bank.
    RULING:
    Sima Wei is not freed from liability.
    The normal parties to a check are the drawer, the payee and the drawee bank.
    Courts have long recognized the business custom of using printed checks where
    blanks are provided for the date of issuance, the name of the payee, the amount
    payable and the drawer's signature. All the drawer has to do when he wishes to
    issue a check is to properly fill up the blanks and sign it. However, the mere fact
    that he has done these does not give rise to any liability on his part, until and
    unless the check is delivered to the payee or his representative.
    A negotiable instrument, of which a check is, is not only a written evidence of a
    contract right but is also a species of property. Just as a deed to a piece of land
    must be delivered in order to convey title to the grantee, so must a negotiable
    instrument be delivered to the payee in order to evidence its existence as a
    binding contract. Section 16 of the Negotiable Instruments Law which governs
    checks, provides in part:
    Every contract on a negotiable instrument is incomplete and revocable until
    delivery of the instrument for the purpose of giving effect thereto. . . .
    Thus, the payee of a negotiable instrument acquires no interest with respect
    thereto until its delivery to him. Delivery of an instrument means transfer of
    possession, actual or constructive, from one person to another. Without the
    initial delivery of the instrument from the drawer to the payee, there can be no
    liability on the instrument. Moreover, such delivery must be intended to give
    effect to the instrument.
    Notwithstanding the above, it does not necessarily follow that the drawer Sima
    Wei is freed from liability to petitioner Bank under the loan evidenced by the
    promissory note agreed to by her. Her allegation that she has paid the balance of
    her loan with the two checks payable to petitioner Bank has no merit for these
    checks were never delivered to petitioner Bank. And even granting, without
    admitting, that there was delivery to petitioner Bank, the delivery of checks in
    payment of an obligation does not constitute payment unless they are cashed or
    their value is impaired through the fault of the creditor. None of these exceptions
    were alleged by respondent Sima Wei.
    Therefore, unless respondent Sima Wei proves that she has been relieved from
    liability on the promissory note by some other cause, petitioner Bank has a right
    of action against her for the balance due thereon.
    However, insofar as the other respondents are concerned, petitioner Bank has no
    privity with them. Since petitioner Bank never received the checks on which it
    based its action against said respondents, it never owned them (the checks) nor
    did it acquire any interest therein. Thus, anything which the respondents may
    have done with respect to said checks could not have prejudiced petitioner
    Bank. It had no right or interest in the checks which could have been violated by
    said respondents. Petitioner Bank has therefore no cause of action against said
    respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer,
    who would have a cause of action against her co-respondents, if the allegations
    in the complaint are found to be true.

    METROPOL (BACOLOD) FINANCING & INVESTMENT CORPORATION vs. SAMBOK


    MOTORS COMPANY and NG SAMBOK SONS MOTORS CO., LTD.
    FACTS:
    Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co.,
    Ltd., payable in 12 equal monthly installments with interest at the rate of one
    percent per month.
    Sambok, a sister company of Ng Sambok Sons Motors Co., Ltd., and under the
    same management as the former, negotiated and indorsed the note in favor of
    plaintiff Metropol Financing & Investment Corporation with the following
    indorsement:
    Pay to the order of Metropol Bacolod Financing & Investment Corporation with
    recourse. Notice of Demand; Dishonor; Protest; and Presentment are hereby
    waived.
    SAMBOK MOTORS CO. (BACOLOD)
    By:
    RODOLFO G. NONILLO Asst. General Manager
    Dr. Villaruel failed to pay the promissory note as demanded, hence Metropol
    notified Sambok as indorsee of said note of the fact that the same has been
    dishonored and demanded payment.
    Sambok failed to pay, so Metropol filed a complaint for collection of a sum of
    money before the Court of First Instance.

    ISSUE: Whether or not the added word "with recourse" in the indorsement
    pertains a qualified indorsement.

    RULING:
    The indorsement does not pertain to a qualified indorsement.
    A qualified indorsement constitutes the indorser a mere assignor of the title to
    the instrument. It may be made by adding to the indorser's signature the words
    "without recourse" or any words of similar import. Such an indorsement relieves
    the indorser of the general obligation to pay if the instrument is dishonored but
    not of the liability arising from warranties on the instrument as provided in
    Section 65 of the Negotiable Instruments Law already mentioned herein.
    However, appellant Sambok indorsed the note "with recourse" and even waived
    the notice of demand, dishonor, protest and presentment.
    "Recourse" means resort to a person who is secondarily liable after the default
    of the person who is primarily liable. Appellant, by indorsing the note "with
    recourse" does not make itself a qualified indorser but a general indorser who is
    secondarily liable, because by such indorsement, it agreed that if Dr. Villaruel
    fails to pay the note, plaintiff-appellee can go after said appellant. The effect of
    such indorsement is that the note was indorsed without qualification. A person
    who indorses without qualification engages that on due presentment, the note
    shall be accepted or paid, or both as the case may be, and that if it be
    dishonored, he will pay the amount thereof to the holder. Appellant Sambok's
    intention of indorsing the note without qualification is made even more apparent
    by the fact that the notice of demand, dishonor, protest and presentment were an
    waived. The words added by said appellant do not limit his liability, but rather
    confirm his obligation as a general indorser.
    The appellant is only secondarily liable because after an instrument is
    dishonored by non-payment, the person secondarily liable thereon ceases to be
    such and becomes a principal debtor. His liability becomes the same as that of
    the original obligor. Consequently, the holder need not even proceed against the
    maker before suing the indorser.

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