CERTIFICATION AND ITS EFFECTS Effects of certification

● 187: ​Equivalent to acceptance

Sec. 187. Certification of check; effect of ● 188: ​drawer and indorsers (at time of certification) are
When a check is certified by the drawee bank, it is discharged from liability
equivalent to acceptance ○ Why: certification operates as an assignment of
funds, and so funds are taken out of control of drawer
Sec. 188. Effect where H of a check procures it to be and ​appropriated​ for purpose of paying the check
accepted or certified ● 189: ​check operates as an assignment of funds of the
Where a holder of a check procures it to be accepted or drawer in the hands of acceptor-bank
certified, the drawer and all indorsers are discharged from ○ assignment in favor of P or H
liability thereon ■ Transfer of money from drawer to credit of
P/H
Sec. 189.When check operates as an assignment
● A check of itself does not operate as an assignment
of any part of the funds to the credit of the drawer with New Pacific Timber v Seneris
Applied Arts. 187, 189
the bank
● The bank is not liable to H unless and until it A certified check is considered accepted and deemed as
○ Accepts or cash
○ certifies
In a collection for sum of money case, New Pacific Timber
the check
was ordered to pay PLA
● NPT issued a cashier’s check + cash
Sec. 187 ​“Certification”
- bank stamps “certified” on the face of the check + name PLA refused to accept check: payment should be in cash
of the bank, date, and signature of officer making the
certification SUPREME COURT
- Agreement by the bank that the check will be paid upon ● Check in this case is not an ordinary check but a
presentment check which has been certified by the bank
○ deemed as cash
Refusal to certify is not equal to dishonor ○ Funds represented by the check are transferred
Refusal to accept = dishonor from credit of maker to that of P/H
● JJ: checks are only presented for ​payment​, not ■ P/H becomes depositor
certification
Wachtel v Rosen
Refusal to certify is not equal to dishonor

Bank refused to certify the check when it was presented for

certification. Holder considered this as dishonor, went after
the drawer. Nite issued ABC check to Villanueva
● Check dishonored bc of material alteration
SUPREME COURT ○ Date was changed, with consent of parties tho
Refusal to certify is not amount to dishonor ● Villanueva(P) filed action for sum of money against
● The right pertains only to presentment for payment and ABC
not for certification
● In certification of a check, the bank replaces SUPREME COURT
secondarily liable parties (​188​) - ​substitute ​obligation ABC not liable to P.
● ABC has not yet accepted the check
● Legislative intent does not show that refusal to certify = ○ So not a party to the instrument
dishonor ○ There is no privity of contract between
○ If they intended to, they would have written the drawee-bank and payee
law that way ● P should have sued Drawer

Roman Catholic Archbishop of Malolos Inc v IAC JJ: ​Sec. 18​: persons whose signatures do not appear on the
instrument can’t be held liable thereon (unless signing in
Parties entered into an installment-basis sale of land. trade name)
● Agreement was that payment be done through money ***: ​189: ​drawee bank not liable on the check until they
and that legal currency is PHP accept (or certify)
● Buyer paid through a certified personal check
○ Refused by Seller Miranda v PDIC
There can be no assignment of funds if there are no funds
SUPREME COURT in the first place
Payment by check is not valid tender of payment in this
case Miranda withdrew her deposits with PSB in the form of
● The certified personal check is not the legal tender crossed checks
nor the currency stipulated in the agreement (​1249​) ● Deposited them in another bank
○ Therefore not valid tender of payment ○ Checks weren’t cleared bc BSP suspended
PSB’s clearing privileges
1249: ​payment of debts in money shall be made in the ■ PSB was placed under receivership
currency stipulated, and if it is not possible to deliver such (probs insolvent)
currency, then in the currency which is legal tender in the Miranda wanted to claim her money
Philippines. ● The cashier’s checks operated as an assignment of
the funds of PSB to her
Villanueva v Nite
A drawee-bank is not a party to the instrument until they SUPREME COURT
accept; no privity of contract between bank and P There was no assignment of funds since there are no funds
to speak of in the first place RCBC v Hi-Tri Dev’t Corporation
● Bank was financially insolvent even before checks Mere issuance of manager’s check is not auto-transfer of
were issued funds to payee, check has to be ​delivered ​first to the payee
Bank is liable to Miranda
● Acted fraudulently, they knew they were insolvent but A failed sale of land resulted in Hi-Tri Devt Corp. wanting to
still issued the checks rescind the sale and return the downpayment paid by Millan
● Issued RCBC manager’s checks
EPCIB v Ong ○ Millan rejected
Manager’s check is a certified check; bank assumes liability
as acceptor Hi-Tri kept the checks but filed a case against Millan

Sarande deposited PCI Gen San checks to PCI Davao. RCBC reported the amounts as “unclaimed balances”
● Davao confirmed the clearing of checks subject to escheat by the government
Sarande issued two checks from Davao account ● Hi-Tri objected, saying they still have a legal claim
● One check went to Ong over the checks (are the owners), pending the case
Ong deposited the check and asked bank to convert it to a filed against Millan
manager’s check
● Davao issued a manager’s check RCBC: upon issuance of manager’s checks, funds were
● Subsequently, Davao refused to pay the check bc there assigned to payee (Millan) who did not claim them and so,
was a stop payment order (irregular issuance) they’re “unclaimed balances” (​around 13 years​)
Ong filed a case against Davao
SUPREME COURT
SUPREME COURT Mere issuance of manager’s check is not automatic transfer
PCI Davao is liable to Ong of funds in favor of payee
● Manager’s check is drawn by bank on itself = already ● There has to be effective delivery to payee
accepted by the bank; good as money ○ No delivery in this case
● Manager’s check = certified check ■ Sec. 16: ​incomplete and revocable until
○ Bank assumes liability as acceptor delivery
● This check is different from Sarande’s check which Ong ○ Hi-Tri retained custody over the checks
deposited ● Can’t be subject of escheat
○ Ong was not privy to Sarande’s check
■ So any defect in regard to that check does Bulliet v Allegheny Trust Co
not involve Ong as a party (failure of Certification (as requested by holder) by the bank constitutes
consideration) an absolute obligation to honor the check; bank cannot refuse
to pay by virtue of stop payment order (no defenses avail)

Mitchell issued check to Bulliet, for an oil agreement

 ● Bulliet inquired to the bank if they would honor the ○ Brother: notice of defect in instrument
checks
○ Bank said yes (amounted to a certification of the
check) DISTINCTION BETWEEN

The deal fell through Surrender of check upon negotiation/ deposit by H

● Mitchell ordered a stop payment order payment of check with another bank
● Bulliet went to encash but bank refused (not drawee bank)

SUPREME COURT Delivery of check by H to H is negotiating the check to

Bank may not refuse payment by virtue of stop payment order drawee bank is not the depositary bank
● Upon certification, its undertaking to pay the checks is negotiation
absolute and unconditional Depositary bank collects
○ Could not use the defense that a stop payment Holder is not transferring from drawee bank
order was issued title;
■ Stop payment order is only between bank they are demanding that
and depositor bank fulfill its contractual
obligation to the H
Sutter v Security
By paying, the NI is
Certification obtained by drawer
extinguished
Sutter issued a check and asked STC (drawee) to certify it
● Delivered check to wife CLEARING OF CHECKS
○ Consideration: not move furniture from his Check collection process whereby collecting banks forward
house checks to drawee banks for payment
■ Wife still removed the furniture, violating ● If drawee banks find that there are sufficient funds to
the agreement cover the checks and they are not defective, they are
cleared
Sutter issues stop payment order
● But bank still paid the check when wife’s brother defective/ISF checks are returned to collecting bank
presented it for payment ● Must be returned within a definite period, otherwise
considered cleared
SUPREME COURT
When there is a certification at request of drawer, the Kinds of defects and effects
drawer may still recall the check if the payee is not a HDC
● Wife was not HDC, neither is the brother Forged drawer’s signature Drawee cannot recover from
○ Wife: failure of consideration, not for value (S23) drawer nor collecting bank
 Forged indorsement Cannot recover from drawer 1. Presentment
2. Dishonor
Can recover from collecting 3. Taking of necessary proceedings of dishonor
bank → giving of notice of dishonor
→ protest is made followed by a notice of protest
Material alteration (S124) Cannot recover from drawer (foreign bills) S152

Can recover from collecting PNB v Picornell

bank within period (clearing
house rule) Drawer: Picornell
Drawee: HTV
Payee/Holder: PNB
LIABILITY OF SECONDARY PARTIES
Picornell, as agent of HTV, paid for tobacco by issuing 39k bill
Sec. 70. Presentment for payment. Effect on parties. of exchange to PNB
Presentment for payment is necessary in order to charge ● It was his signature on the BoE
drawer and indorsers.
Their liability is contingent on presentment and notice of HTV accepted the BoE
dishonor ● When payment was due, bill was not paid by HTV bc
tobacco was of inferior quality
Sec. 61. Liability of drawer. PNB sued for payment
By drawing the instrument, drawer:
● Amidst existence and then capacity to indorse of SUPREME COURT
payee Picornell, as drawer, warranted that the BoE would be
● Engages that on due presentment, the instrument will accepted and paid
be accepted or paid or both ● Nonpayment meant that he became liable on it
○ Accdg to its tenor ● Cannot use being an agent as a defense bc such was
● That if dishonored and if necessary proceedings on not reflected in the bill
dishonor are duly taken, will pay to ● Cannot use the failure of consideration (inferior quality)
○ H or as a defense??????
○ any subsequent indorser who may be ○ PNB is a HDC
compelled to pay it
HTV as acceptor also liable.
Drawer may insert express stipulation limiting or negativing
their liability to H

Liability is conditional:
 Bank Atlantico v Auditor General McCornack v Central State Bank
non-HDC cannot use S61 to hold drawer liable in case of
dishonor Check was obtained thru fraud from McCornacks.
● Fictitious payee
Drawer: Gonzales (PH Embassy Ambassador) ● Bank paid the check
Drawee: PNB ○ Debited the McCornacks’ account
Holder: BA
McCornacks want to recover
3 checks were drawn eventually indorsed to Boncan
● Boncan altered the amounts SUPREME COURT
● BA received the checks without clearing if amounts Bank is liable, cannot recover from drawer
were correct Case is remanded to determine if drawers were negligent
○ Boncan told them to not present collection (of
the demand note) until later CRIMINAL LIABILITY FOR BOUNCING CHECKS
PNB refused to pay bc amounts were altered.
BP 22 Estafa
BA is now demanding payment, citing S61
1) the making, drawing, and 1. Postdating or issuance of
SUPREME COURT issuance of any check a check in payment of an
BA not entitled to payment obligation contracted at the
● Not a HDC (2) the knowledge at the time time the check was issued
○ Shouldve known something was wrong when of issue of insufficient funds
told not to present a demand note ● Sufficient funds must 2. Insufficiency of funds to
● Cannot avail of S61 be maintained within cover the check, and
○ Cannot hold Drawer liable for nonpayment by 90 days from date on
drawee check 3. Damage to the payee
● Remember rule on S124 thereof
○ HDC may enforce payment on OG tenor (3) the subsequent dishonor
○ Otherwise, parties prior to alteration (did not (nonpayment within 5 days
consent) cant be held liable from notice of dishonor)
whether or not it is for an with fraudulent intent in
obligation you contracted consideration of something
prior to the issuance of the of value you received.
check or not.
Mala in se; Good faith/lack of
Malum prohibitum malice is a defense
 Lozano v Martinez
PETs question constitutionality of BP22
● Creates a prima facie presumption that debtor knows
they don’t have enough funds
● Violate “nonimprisonment for debt”

SUPREME COURT
Constitutional
● It is not the nonpayment of debt which is punished but
the issuance of a worthless check
● As a matter of public policy, making and issuance of
worthless checks is public nuisance
○ Pollutes channels of trade and commerce

JJ: creditor knows you dont have money

***: actually???? Why would i take out a loan if i have money
lmao

People v Nitafan
Lim asserts that a memorandum check is not covered by
BP 22— that it’s a PN
● Memo check: a check given as an acknowledgment
of indebtedness, but with the understanding that it will
not be presented at bank unless the maker fails to
take it up on the day the debt becomes due

SUPREME COURT
Memo is a check
● It’s still drawn on a bank
● Not a mere promise to pay