ANG TEK LIAN V.

CA 87 PHIL 383
87 Phil. 383 – Mercantile Law – Negotiable Instruments Law – Negotiable Instruments in General – Indorsement to “Cash” – Bearer
Instrument
In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He said that he meant to
withdraw from the bank but the bank’s already closed. In exchange, he gave Lee Hua a check which is “payable to the order of ‘cash’”.
The next day, Lee Hua presented the check for payment but it was dishonored due to insufficiency of funds. Lee Hua eventually sued
Ang Tek Lian. In his defense, Ang Tek Lian argued that he did not indorse the check to Lee Hua and that when the latter accepted the
check without Ang tek Lian’s indorsement, he had done so fully aware of the risk he was running thereby.
ISSUE: Whether or not Ang Tek Lian is correct.
FACTS:
Knowing he had insufficient funds, Ang Tek Lian issued a check for P4000, payable to cash. This was given to Lee Hua Hong in
exchange for cash. Upon presentment of the check, it was dishonored for having insufficient funds. It is argued that the check,
being payable to cash, wasn’t indorsed by the defendant, and thus, isn’t guilty of the crime charged.
HELD:
No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to the order of “cash” is a check payable to
bearer hence a bearer instrument, and the bank may pay it to the person presenting it for payment without the drawer’s indorsement.
Where a check is made payable to the order of ‘cash’, the word “cash” does not purport to be the name of any person, and hence the
instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it to the person
presenting it without any indorsement.
A check drawn to the order of “cash” is payable to bearer, and the bank may pay it to the person presenting it
for payment without the drawer’s indorsement. Of course, if the bank is not sure of the bearer’s identity or financial solvency, it
has the right to demand for identification and/or assurance against possible complications—for instance, forgery of the
drawer’s signature, loss of the check by the rightful owner, raising the amount payable, etc. The bank therefore, requires for its
protection that the indorsement of the drawer—or some other persons known to it—be obtained. A check payable to bearer
is authority for payment to the holder. Where a check is in the ordinary form and is payable to bearer so that no indorsement is
required, a bank to which it is presented for payment need not have the holder identified, and is not negligent in failing to do so.

Philippine National Bank V. Erlando Rodriguez (2008)

G.R. No. 170325 September 26, 2008
Lessons Applicable: Fictitious Persons (Negotiable Instruments Law)
FACTS:
 Spouses Erlando and Norma Rodriguez were engaged in the informal lending business and had a discounting arrangement
with the Philnabank Employees Savings and Loan Association (PEMSLA), an association of PNB employees
 The association maintained current and savings accounts with Philippine National Bank (PNB)
 PEMSLA regularly granted loans to its members. Spouses Rodriguez would rediscount the postdated checks issued to
members whenever the association was short of funds.
 As was customary, the spouses would replace the postdated checks with their own checks issued in the name of the members.
 It was PEMSLA’s policy not to approve applications for loans of members with outstanding debts.
 To subvert this policy, some PEMSLA officers devised a scheme to obtain additional loans despite their outstanding loan
accounts.
 They took out loans in the names of unknowing members, without the knowledge or consent of the latter.
 The officers carried this out by forging the indorsement of the named payees in the checks
 Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named
payees.
 This was an irregular procedure made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and
bank teller in the PNB Branch.
 this became the usual practice for the parties.
 November 1998-February 1999: spouses issued 69 checks totalling to P2,345,804. These were payable to 47 individual
payees who were all members of PEMSLA
 PNB eventually found out about these fraudulent acts
 To put a stop to this scheme, PNB closed the current account of PEMSLA.

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  As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason “Account Closed.”
 The amounts were duly debited from the Rodriguez account
 Spouses filed a civil complaint for damages against PEMSLA, the Multi-Purpose Cooperative of Philnabankers (MCP), and
PNB.
 PNB credited the checks to the PEMSLA account even without indorsements = PNB violated its contractual obligation to
them as depositors - so PNB should bear the losses
 RTC: favored Rodriguez
 makers, actually did not intend for the named payees to receive the proceeds of the checks = fictitious payees (under the
Negotiable Instruments Law) = negotiable by mere delivery
 CA: Affirmed - checks were obviously meant by the spouses to be really paid to PEMSLA = payable to order
 ISSUE: W/N the 69 checks are payable to order for not being issued to fictitious persons thereby dismissing PNB from
liability
HELD:
NO. CA Affirmed
 GR: when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as a bearer
instrument (Sections 8 and 9 of the NIL)
 EX: However, there is a commercial bad faith exception to the fictitious-payee rule. A showing of commercial bad faith on
the part of the drawee bank, or any transferee of the check for that matter, will work to strip it of this defense. The exception
will cause it to bear the loss.
The distinction between bearer and order instruments lies in their manner of negotiationorder instrument - requires an
indorsement from the payee or holder before it may be validly negotiatedbearer instrument - mere deliveryUS jurisprudence:
“fictitious” if the maker of the check did not intend for the payee to in fact receive the proceeds of the checkIn a fictitious-payee
situation, the drawee bank is absolved from liability and the drawer bears the loss. When faced with a check payable to a fictitious
payee, it is treated as a bearer instrument that can be negotiated by deliveryunderlying theory: one cannot expect a fictitious payee
to negotiate the check by placing his indorsement thereonlack of knowledge on the part of the payees, however, was not
tantamount to a lack of intention on the part of respondents-spouses that the payees would not receive the checks’ proceeds. PNB
did not obey the instructions of the drawers when it accepted absent indorsement, forged or otherwise. It was negligent in the
selection and supervision of its employees http://sc.judiciary.gov.ph/jurisprudence/2008/september2008/170325.htm

PNB v. Manila Oil Refining & Byproducts Co. (1922)

FACT:
The manager and treasurer of MORBC executed and delivered to PNB a promissory note which contained a provision authorizing any
attorney to appear in the maker’s name and confess judgment for theprincipal amount plus interest, in case the note is not paid upon
maturity. A case for collection of the said sum was filed and Atty. Recto appeared in behalf of MORBC and filed a motion confessing
judgment, to which MORBC objected.
HELD :
Sec 5 of the NIL merely provides that, in jurisdictions where judgment notes are recognized, such clauses shall not affect the
negotiable character of the instrument. In our jurisdiction, such warrants of attorney are void as against public policy, because they
enlarge the field for fraud, because under these instruments the promissor bargains away his right to a day in court, and because the
effect of the instrument is to strike down the right of appeal accorded by statute. Provisions in notes authorizing attorneys to appear
and confess judgments against makers should not be recognized in this jurisdiction by implication and should only be considered as
valid when given express legislative sanction. JJ: Why can’t you waive these rights when NCC Art. 6 says you can? You should be
able to, unless predatory practices are shown and proven. This case is saying that the Court has to protect you from your stupid self.

Evangelista v. Mercator Finance (2003)

FACT:
Petitioner spouses averred that the real estate mortgage in favor of Mercator was null and void because they did not sign in their
personal capacity but only as officers of Embassy Farms.
HELD:
According to the Court however, the documentary evidence is clear in that they signed as co-makers and are therefore solidarily liable
with Embassy Farms. Courts can interpret a contract only if there is doubt in its letter. An examination of the promissory note shows

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no such ambiguity. SEC. 17 of NIL provides that “where an instrument containing the word "I promise to pay" is signed by two or
more persons, they are deemed to be jointly and severally liable thereon.” Continental Illinois Bank & Trust Co. v. Clement

Republic Planters Bank vs Court of Appeals

In 1979, World Garment Manufacturing, through its board authorized Shozo Yamaguchi (president) and Fermin Canlas (treasurer) to
obtain credit facilities from Republic Planters Bank (RPB). For this, 9 promissory notes were executed. Each promissory note was
uniformly written in the following manner:

He note became due and no payment was made. RPB eventually sued
Yamaguchi and Canlas. Canlas, in his defense, averred that he should not
be held personally liable for such authorized corporate acts that he
performed inasmuch as he signed the promissory notes in his capacity as
officer of the defunct Worldwide Garment Manufacturing.

ISSUE: Whether or not Canlas should be held liable for the promissory notes.

HELD: Yes. The solidary liability of private respondent Fermin Canlas is made clearer and certain, without reason for ambiguity, by
the presence of the phrase “joint and several” as describing the unconditional promise to pay to the order of Republic Planters Bank.
Where an instrument containing the words “I promise to pay” is signed by two or more persons, they are deemed to be jointly and
severally liable thereon. Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons:
The promissory notes are negotiable instruments and must be governed by the Negotiable Instruments Law. Under the Negotiable
lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. By signing the
notes, the maker promises to pay to the order of the payee or any holder according to the tenor thereof.

SESBRENO V. CA (222 SCRA 466)

FACTS:
Petitioner made a placement with Philfinance. The latter delivered to him documents, some of which was a promissory note
from Delta Motors and a post-dated check. The post-dated checks were dishonored. This prompted petitioner to ask for the
promissory note from DMC and it was discovered that the note issued by DMC was marked as non-negotiable. As Sesbreno failed to
recover his money, he filed case against DMC and Philfinance.
HELD:
The non-negotiability of the instrument doesn’t mean that it is non-assignable or transferable. It may still be assigned
or transferred in whole or in part, even without the consent of the promissory note, since consent is not necessary for the validity of the
assignment.
In assignment, the assignee is merely placed in the position of the assignors and acquires the instrument subject to
all the defenses that might have been set up against the original payee.’
FACTS:
Fifty-two employees sued the Province of Cebu and Governor Rene Espina for reinstatement and backwages imploring Atty.
Pacquiao as counsel who was later replaced by Atty. Sesbreno. The employees and Atty. Sesbreno agreed that he is to be paid 30% as
attorney’s fees and 20% as expenses taken from their back salaries. Trial court decided in favor of the employees and ordered the
Province of Cebu to reinstate them and pay them back salaries. The same was affirmed in toto by the Court of Appeals and ultimately
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the Supreme Court. A compromise agreement was entered into by the parties in April 1979. The former employees waived their right
to reinstatement among others. The Province of Cebu released P2,300,000.00 to the petitioning employees through Atty. Sesbreno as
“Partial Satisfaction of Judgment.” The amount represented back salaries, terminal leave pay and gratuity pay due to the employees.
Ten employees filed manifestations before the trial court asserting that they agreed to pay Atty. Sesbreno 40% to be taken only from
their back salaries. The lower court issued two orders, with which petitioner complied, requiring him to release P10,000.00 to each of
the ten private respondents and to retain 40% of the back salaries pertaining to the latter out of the P2,300,000.00 released to him. On
March 28, 1980, the trial court fixed the attorney’s fees a total of 60% of all monies paid to the employees. However, trial court
modified the award after noting that petitioner’s attorney’s lien was inadvertently placed as 60% when it should have been only 50%.
Atty. Sesbreno appealed to the Court of Appeals claiming additional fees for legal services but was even further reduced to 20%.
ISSUE:
Whether the Court of Appeals had the authority to reduce the amount of attorney’s fees awarded to petitioner Atty. Raul H. Sesbreño,
notwithstanding the contract for professional services signed by private respondents
HELD:
Yes. The Supreme Court noted that the contract of professional services entered into by the parties 6 authorized petitioner to take a
total of 50% from the employees’ back salaries only. The trial court, however, fixed the lawyer’s fee on the basis of all monies to be
awarded to private respondents. Fifty per cent of all monies which private respondents may receive from the provincial government,
according to the Court of Appeals, is excessive and unconscionable, not to say, contrary to the contract of professional services. What
a lawyer may charge and receive as attorney’s fees is always subject to judicial control. A stipulation on a lawyer’s compensation in a
written contract for professional services ordinarily controls the amount of fees that the contracting lawyer may be allowed, unless the
court finds such stipulated amount unreasonable unconscionable. A contingent fee arrangement is valid in this jurisdiction and is
generally recognized as valid and binding but must be laid down in an express contract. if the attorney’s fees are found to be excessive,
what is reasonable under the circumstances. Quantum meruit, meaning “as much as he deserves,” is used as the basis for determining
the lawyer’s professional fees in the absence of a contract. The Supreme Court averred that in balancing the allocation of the
monetary award, 50% of all monies to the lawyer and the other 50% to be allocated among all his 52 clients, is too lop-sided in favor
of the lawyer. The ratio makes the practice of law a commercial venture, rather than a noble profession. It would, verily be ironic if the
counsel whom they had hired to help would appropriate for himself 50% or even 60% of the total amount collectible by these
employees. 20% is a fair settlement.

CONSOLIDATED PLYWOOD V. IFC (149 SCRA 448)

FACTS:
Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company Industrial Products Marketing, two
used tractors. Petitioner was issued a sales invoice for the two used tractors. At the same time, the deed of sale with
chattel mortgage with promissory note was issued. Simultaneously, the seller assigned the deed of sale with chattel mortgage and
promissory note to respondent. The used tractors were then delivered but barely 14 days after, the tractors broke down. The
seller sent mechanics but the tractors were not repaired accordingly as they were no longer serviceable. Petitioner would delay the
payments on the promissory notes until the seller completes its obligation under the warranty. Thereafter, a collection suit was filed
against petitioner for the payment of the promissory note.
HELD:
It is patent that the seller is liable for the breach in warranty against the petitioner. This liability as a general rule extends
to the corporation to whom it assigned its rights and interests unless the assignee is a holder in due course of the promissory note
in question, assuming the note is negotiable, in which case, the latter’s rights are based on a negotiable instrument and
assuming further that the petitioner’s defense may not prevail against it.
The promissory note in question is not a negotiable instrument. The promissory note in question lacks the so-called
words of negotiability. And as such, it follows that the respondent can never be a holder in due course but remains merely an
assignee of the note in question. Thus, the petitioner may raise against the respondents all defenses available to it against
the seller. http://www.philippinelegalguide.com/2011/08/negotiable-instruments-case-digest_5035.html

Loreto De La Victoria vs. Jose Burgos

245 SCRA 374 – Mercantile Law – Negotiable Instruments Law – Delivery of Negotiable Instruments – Paychecks of Public Officers
FACT:
Raul Sebreño filed a complaint for damages against Fiscal Bienvenido Mabanto Jr. of Cebu City. Sebreño won and he was awarded
the payment of damages. Judge Burgos ordered De La Victoria, custodian of the paychecks of Mabanto, to hold the checks and

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convey them to Sebreño instead. De La Victoria assailed the order as he said that the paychecks and the amount thereon are not yet the
property of Mabanto because they are not yet delivered to him; that since there is no delivery of the checks to Mabanto, the checks are
still part of the public funds; and the checks due to the foregoing cannot be the proper subject of garnishment.
ISSUE: Whether or not De La Victoria is correct.
HELD:
Yes. Under Section 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.

DEVELOPMENT BANK OF RIZAL vs. SIMA WEI, ET AL.G.R.

No. 85419 March 9, 1993
FACTS:
Respondent Sima Wei executed and delivered to petitioner Bank a promissory note engaging to pay the petitioner Bank or order the
amount of P1,820,000.00. Sima Wei subsequently issued two crossed checks payable to petitioner Bank drawn against China Banking
Corporation in full settlement of the drawer's account evidenced by the promissory note. These two checks however were not
delivered to the petitioner-payee or to any of its authorized representatives but instead came into the possession of respondent Lee
Kian Huat, who deposited the checks without the petitioner-payee's indorsement to the account of respondent Plastic Corporation with
Producers Bank. Inspite of the fact that the checks were crossed and payable to petitioner Bank and bore no indorsement of the latter,
the Branch Manager of Producers Bank authorized the acceptance of the checks for deposit and credited them to the account of said
Plastic Corporation.
ISSUE:
Whether petitioner Bank has a cause of action against Sima Wei for the undelivered checks.
RULING:
No. A negotiable instrument must be delivered to the payee in order to evidence its existence as a binding contract. Section 16 of the
NIL provides that 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. Without the initial delivery of the instrument from the drawer to the payee, there can be no liability on the instrument.
Petitioner however has a right of action against Sima Wei for the balance due on the promissory note.

Metropol vs. Sambok (February 28, 198)

FACTS:
Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd. Payable in 12 equal monthly
installments with interest. It is further provided that in case on non-payment of any of the installments, the total principal sum then
remaining unpaid shall become due and payable with an additional interest. Sambok Motors co., a sister company of Ng Sambok Sons
negotiated and indorsed the note in favor of Metropol Financing & investment Corporation. Villaruel defaulted in the payment, upon
presentment of the promissory note he failed to pay the promissory note as demanded, hence Ng Sambok Sons Motors Co., Ltd.
notified Sambok as indorsee that the promissory note has been dishonored and demanded payment. Sambok failed to pay. Ng Sambok
Sons filed a complaint for the collection of sum of money. During the pendency of the case Villaruel died. Sambok argues that by
adding the words “with recourse” in the indorsement of the note, it becomes a qualified indorser, thus, it does not warrant that in case
that the maker failed to pay upon presentment it will pay the amount to the holder.
ISSUE:Whether or not Sambok Motors Co is a qualified indorser, thus it is not liable upon the failure of payment of the maker.
HELD:
No. A qualified indorserment 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 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
by section 65 of NIL. However, 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. Sambok 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 Villaruel fails to pay the not the holder can go after it. The effect of such indorsement is that the
note was indorsed witout qualification. A person who indorses without qualification engages that on due presentment, the note shall be

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accepted or paid, or both as the case maybe, and that if it be dishonored, he will pay the amount thereof to the holder. The words
added by Sambok do not limit his liability, but rather confirm his obligation as general indorser.

Natividad Gempesaw vs Court of Appeals

218 SCRA 682 – Mercantile Law – Negotiable Instruments Law – Liabilities of Parties – Forgery – Forged Indorsements
FACT:
Natividad Gempesaw is a businesswoman who entrusted to her bookkeeper, Alicia Galang, the preparation of checks about to be
issued in the course of her business transactions. From 1984 to 1986, 82 checks amounting to P1,208,606.89, were prepared and were
supposed to be delivered to Gempesaw’s clients as payees named thereon. However, through Galang, these checks were never
delivered to the supposed payees. Instead, the checks were fraudulently indorsed to Alfredo Romero and Benito Lam.
ISSUE: Whether or not the bank should refund the money lost by reason of the forged indorsements.
HELD:
No. Gempesaw cannot set up the defense of forgery by reason of her negligence. As a rule, a drawee bank (in this case the
Philippine Bank of Communications) who has paid a check on which an indorsement has been forged cannot charge the drawer’s
(Gempesaw’s) account for the amount of said check. An exception to this rule is where the drawer is guilty of such negligence which
causes the bank to honor such a check or checks. If a check is stolen from the payee, it is quite obvious that the drawer cannot possibly
discover the forged indorsement by mere examination of his cancelled check. A different situation arises where the indorsement was
forged by an employee or agent of the drawer, or done with the active participation of the latter.
The negligence of a depositor which will prevent recovery of an unauthorized payment is based on failure of the depositor to
act as a prudent businessman would under the circumstances. In the case at bar, Gempesaw relied implicitly upon the honesty and
loyalty of Galang, and did not even verify the accuracy of amounts of the checks she signed against the invoices attached thereto.
Furthermore, although she regularly received her bank statements, she apparently did not carefully examine the same nor the check
stubs and the returned checks, and did not compare them with the same invoices. Otherwise, she could have easily discovered the
discrepancies between the checks and the documents serving as bases for the checks. With such discovery, the subsequent forgeries
would not have been accomplished. It was not until two years after Galang commenced her fraudulent scheme that Gempesaw
discovered that eighty-two (82) checks were wrongfully charged to her account, at which she notified the Philippine Bank of
Communications.

Vicente De Ocampo vs Anita Gatchalian

3 SCRA 596 – Mercantile Law – Negotiable Instruments Law – Rights of the Holder – What Constitutes a Holder in Due Course – Is
a payee a holder in due course?
FACT:
Matilde Gonzales was a patient of the De Ocampo Clinic owned by Vicente De Ocampo. She incurred a debt amounting to P441.75.
Her husband, Manuel Gonzales designed a scheme in order to pay off this debt: In 1953, Manuel went to a certain Anita Gatchalian.
Manuel purported himself to be selling the car of Vicente De Ocampo. Gatchalian was interested in buying said car but Manuel told
her that De Ocampo will only sell the car if Gatchalian shows her willingness to pay for it. Manuel advised Gatchalian to draw a check
of P600.00 payable to De Ocampo so that Manuel may show it to De Ocampo and that Manuel in the meantime will hold it for
safekeeping. Gatchalian agreed and gave Manuel the check. After that, Manuel never showed himself to Gatchalian.

Meanwhile, Manuel gave the check to his wife who in turn gave the check to De Ocampo as payment of her bills with the clinic. De
Ocampo received the check and even gave Matilde her change (sukli). On the other hand, since Gatchalian never saw Manuel again,
she placed a stop-payment on the P600.00 check so De Ocampo was not able to cash on the check. Eventually, the issue reached the
courts and the trial court ordered Gatchalian to pay De Ocampo the amount of the check.

Gatchalian argued that De Ocampo is not entitled to payment because there was no valid indorsement. De Ocampo argued tha he is a
holder in due course because he is the named payee.
ISSUE: Whether or not De Ocampo is a holder in due course.
HELD:
No. Section 52 of the Negotiable Instruments Law, defines holder in due course, thus:
A holder in due course is a holder who has taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;

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 (b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was
the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it.
The Supreme Court emphasized that if one is such a holder in due course, it is immaterial that he was the payee and an immediate
party to the instrument. The Supreme Court however ruled that De Ocampo is not a holder in due course for his lack of good faith.
De Ocampo should have inquired as to the legal title of Manuel to the said check. The fact that Gatchalian has no obligation to De
Ocampo and yet he’s named as the payee in the check hould have apprised De Ocampo; that the check did not correspond to Matilde
Gonzales’ obligation with the clinic because of the fact that it was for P600.00 – more than the indebtedness; that why was Manuel in
possession of the check – all these gave De Ocampo the duty to ascertain from the holder Manuel Gonzales what the nature of the
latter’s title to the check was or the nature of his possession

YANG V. COURT OF APPEALS

409 SCRA 159
FACTS:
Yang and Chandimari entered into an agreement that the latter would issue to the former a manager’s check in exchange for two
checks that Yang has payable to the order of David. The difference in amount would be the profit of the two of them. It
was further agreed upon that Yang would secure a dollar draft, which Chandimari would exchange with another dollar draft to be
secured from a Hong Kong bank. At the agreed time of rendezvous, it was reported by Yang’s messenger that Chandimari
didn't show up and the drafts and checks were allegedly stolen. This wasn't true however. Chandimari was able to get hold of the
drafts and checks. He was even able to deliver to David the two checks and was able to get money in return. Consequently,
Yang asked for the stoppage of payment of the checks she believe to be lost, relying on the report of her messenger. The
stoppage order was eventually lifted by the banks and the drafts and checks were able to be encashed. Yang then filed an action for
injunction and damages against the banks, Chandimari and David. The trial court and CA held in favor of David as a holder in
due course.
Add Facts:
Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking Corp. and Far
east Bank and Trust Company (FEBTC) two cashier’s checks in the amount of P2.087 million each, payable to Fernando
david and FEBTC dollar draft in the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang
gave the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet Chandiramani to turn
over the checks and the dollar draft, and the latter would in turn deliver to the former Phil.
Commercial International Bank (PCIB) manager’s check in the sum of P4.2 million and the dollar draft in the same amount
to be issued by Hang Seng Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and Ranigo
allegedly lost the two cashier’s checks and the dollar draft.
The loss was then reported to the police. It transpired, however that the checks and the dollar draft were never lost, for
Chandiramani was able to get hold of them without delivering the exchange consideration consisting of PCIB Manager’s
checks. Two hours after Chandiramani was able to meet Ranigo, the former delivered to David the two cashier’s checks of
Yang and, in exchange, got US $360,000 from David, who in turn deposited them. Chandiramani also deposited the dollar
draft in
Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both Banks
complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on
FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU Account No. 4194-0165-2 to received the amount of
US $ 200, 000.
ISSUE :
(1) Whether or not David may be considered a holder in due course.
(2) Whether or not the presumption that every party to an instrument acquired the same for a consideration is applicable in this case.
HELD:
Every holder of a negotiable instrument is presumed to be a holder in due course. This is specially true if one is a holder
because he is the payee or indorsee of the instrument. In the case at bar, it is evident that David was the payee of the checks. The
prima facie presumption of him being a holder in due course is in his favor. Nonetheless, this presumption is disputable.

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On whether he took the check under the conditions set forth in Section 52 must be proven. Petitioner relies on two arguments
on why David isn’t a holder in due course—first, because he took the checks without valuable consideration; and second, he
failed to inquire on Chandimari’s title to the checks given to him.
The law gives rise to the presumption of valuable consideration. Petitioner has the burden of debunking such presumption,
which it failed to do so. Her allegation that David received the checks without consideration is unsupported and devoid of
any evidence.
Furthermore, petitioner wasn't able to show any circumstance which should have placed David in inquiry as to why and
wherefore of the possession of the checks by Chandimari. David wasn't a privy to the transactions between Yang and
Chandimari. Instead, Chandimari and David had the agreement between themselves of the delivery of the checks. David even
inquired with the banks on the genuineness of the checks in issue. At that time, he wasn't aware of any request for the stoppage of
payment. Under these circumstances, David had no obligation to ascertain from Chandimari what the nature of the latter’s title to the
checks was, if any, or the nature of his possession.

(1) Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in
favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a “payee or indorsee of a bill
or note, who is in possession of it, or the bearer thereof.”
In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that
a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor.
(2) The presumption is that every party to an instrument acquired the same for a consideration. However, said presumption may be
rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions
provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in David’s
case, otherwise he cannot be deemed a holder in due course.

Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a
consideration or for value. Thus, the law itself creates a presumption in David’s favor that he gave valuable consideration for the
checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said
consideration. However, petitioner failed to discharge her burden of proof. The petitioner’s averment that David did not give valuable
consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial
court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$ 360,000 as
consideration for the said instruments.

Marcelo Mesina vs Intermediate Appellate Court

145 SCRA 497 – Mercantile Law – Negotiable Instruments Law – Rights of the Holder – What Constitutes a Holder in Due Course –
Stolen Check
FACT:
Jose Go maintains an account with Associated Bank. He needed to transfer P800,000.00 from Associated Bank to another
bank but he realized that he does not want to be carrying that cash so he bought a cashier’s check from Associated Bank worth
P800,000.00. Associated Bank then issued the check but Jose Go forgot to get the check so it was left on top of the desk of the bank
manager. The bank manager, when he found the check, entrusted it to Albert Uy for the later to safe keep it. The check was however
stolen from Uy by a certain Alexander Lim.
Jose Go learned that the check was stolen son he made a stop payment order against the check. Meanwhile, Associated Bank
received the subject check from Prudential Bank for clearing. Apparently, the check was presented by a certain Marcelo Mesina for
payment. Associated Bank dishonored the check.
When asked how Mesina got hold of the check, he merely stated that Alfredo Lim, who’s already at large, paid the check to
him for “a certain transaction”.

ISSUE: Whether or not Mesina is a holder in due course.

HELD:
No. Admittedly, Mesina became the holder of the cashier’s check as endorsed by Alexander Lim who stole the check. Mesina
however refused to say how and why it was passed to him. Mesina had therefore notice of the defect of his title over the check from
the start. The holder of a cashier’s check who is not a holder in due course cannot enforce such check against the issuing bank which

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dishonors the same. The check in question suffers from the infirmity of not having been properly negotiated and for value by Jose Go
who is the real owner of said instrument.

TIBAJIA vs CA Case Digest

SPOUSES TIBAJIA v. COURT OF APPEALS and EDEN TAN
G. R. No. 100290, June 4, 1993
FACTS:
A suit of collection of sum of money was filed by Eden Tan against the spouses. A writ of attachment was issued, the Deputy Sheriff
filed a return stating that a deposit made by Tibajia in the amount of P442,750 in another case, had been garnished by him. RTC ruled
in favor of Eden Tan and ordered the spouses to pay her an amount in excess of P3,000,000. Court of Appeals modified the decision
by reducing the amount for damages. Tibajia Spouses delivered to Sheriff Bolima the total money judgment of P398483.70. Tan
refused to accept the payment and insisted that the garnished funds be withdrawn to satisfy the judgment obligation.
ISSUE: Whether or not payment by means of check is considered payment in legal tender

RULING:
The ruling applies the statutory provisions which lay down the rule that a check is not legal tender and that a creditor may validly
refuse payment by check, whether it be a manager’s check, cashier’s or personal check. The decision of the court of Appeals is
affirmed.

Philippine Airlines v. Court of Appeals [G.R. No. L-49188. January 30, 1990]
FACTS:
Amelia Tan was found to have been wronged by Philippine Air Lines (PAL). She filed her complaint in 1967. After ten (10) years of
protracted litigation in the Court of First Instance and the Court of Appeals, Ms. Tan won her case. Almost twenty-two (22) years later,
Ms. Tan has not seen a centavo of what the courts have solemnly declared as rightfully hers. Through absolutely no fault of her own,
Ms. Tan has been deprived of what, technically, she should have been paid from the start, before 1967, without need of her going to
court to enforce her rights. And all because PAL did not issue the checks intended for her, in her name. Petitioner PAL filed a petition
for review on certiorari the decision of Court of Appeals dismissing the petition for certiorari against the order of the Court of First
Instance (CFI) which issued an alias writ of execution against them. Petitioner alleged that the payment in check had already been
effected to the absconding sheriff, satisfying the judgment.
ISSUE:
Whether or not payment by check to the sheriff extinguished the judgment debt.
RULING:
NO. The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in checks. The checks were not
payable to Amelia Tan or Able Printing Press but to the absconding sheriff.In the absence of an agreement, either express or implied,
payment means the discharge of a debt or obligation in money and unless the parties so agree, a debtor has no rights, except at his own
peril, to substitute something in lieu of cash as medium of payment of his debt. Strictly speaking, the acceptance by the sheriff of the
petitioner’s checks, in the case at bar, does not, per se, operate as a discharge of the judgment debt. The check as a negotiable

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instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. A
check, whether a manager’s check or ordinary cheek, is not legal tender, and an offer of a check in payment of a debt is not a valid
tender of payment and may be refused receipt by the obligee or creditor. 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. 1249, Civil Code, par. 3).

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