Burgos vs Esperon GR No. 178497, February 04, 2014

Doctrine:

The Court emphasize that the Court’s role in a writ of Amparo proceeding is merely to determine whether an enforced disappearance has taken place; to determine who is responsible or accountable; and to define and impose the appropriate remedies to address the disappearance.

Facts:

          Jeffrey Cabintoy and Elsa Agasang have witnessed on that fateful day of April 28, 2007 the forcible abduction of Jonas Burgos by a group of about seven (7) men and a woman from the extension portion of Hapag Kainan Restaurant located in Quezon City.

The Commission on Human Rights (CHR) submitted to the Court its Investigation Report on the Enforced Disappearance of Jonas Burgos. The CHR finds that the enforced disappearance of Jonas Burgos had transpired and that his constitutional rights to life, liberty and security were violated by the Government have been fully determined. The CHR demonstrated in its investigations resulted in the criminal prosecution of Lt. Baliaga. Regional Trial Court found probable cause for arbitrary detention against Lt. Baliaga and ordered his arrest in connection with Jonas’ disappearance.

Based on the finding that Jonas was a victim of enforced disappearance, the Court of Appeals concluded that the present case falls within the ambit of the Writ of Amparo. The respondents have not appealed to the court, as provided under Section 19 of the Rule on the Writ of Amparo. Hence, the petitioner filed an Urgent Ex Parte Motion Ex Abundanti Cautela.

Issue:

          Whether or not the petitioner’s motion should be granted.

Ruling:

          No.

After reviewing the newly discovered evidence submitted by the petitioner and considering all the developments of the case, including the Court of Appeal’s decision that confirmed the validity of the issuance of the Writ of Amparo in the present case, the Court resolve to deny the petitioner’s Urgent Ex Parte Motion Ex Abundanti Cautela.

The Court note and conclude, based on the developments highlighted above, that the beneficial purpose of the Writ of Amparo has been served in the present case. As the Court held in Razon, Jr. v. Tagitis the writ merely embodies the Court’s directives to police agencies to undertake specified courses of action to address the enforced disappearance of an individual. The Writ of Amparo serves both a preventive and a curative role. It is curative as it facilitates the subsequent punishment of perpetrators through the investigation and remedial action that it directs. The focus is on procedural curative remedies rather than on the tracking of a specific criminal or the resolution of administrative liabilities. The unique nature of Amparo proceedings has led us to define terms or concepts specific to what the proceedings seek to achieve. In Razon Jr., v. Tagitis, the Court defined what the terms “responsibility” and “accountability” signify in an Amparo case. The Court said: Responsibility refers to the extent the actors have been established by substantial evidence to have participated in whatever way, by action or omission, in an enforced disappearance, as a measure of the remedies this Court shall craft, among them, the directive to file the appropriate criminal and civil cases against the responsible parties in the proper courts. Accountability, on the other hand, refers to the measure of remedies that should be addressed to those who exhibited involvement in the enforced disappearance without bringing the level of their complicity to the level of responsibility defined above; or who are imputed with knowledge relating to the enforced disappearance and who carry the burden of disclosure; or those who carry, but have failed to discharge, the burden of extraordinary diligence in the investigation of the enforced disappearance.

In the present case, while Jonas remains missing, the series of calculated directives issued by the Court outlined above and the extraordinary diligence the CHR demonstrated in its investigations resulted in the criminal prosecution of Lt. Baliaga. The Court take judicial notice of the fact that the Regional Trial Court has already found probable cause for arbitrary detention against Lt. Baliaga and has ordered his arrest in connection with Jonas’ disappearance.

The Court emphasize that the Court’s role in a writ of Amparo proceeding is merely to determine whether an enforced disappearance has taken place; to determine who is responsible or accountable; and to define and impose the appropriate remedies to address the disappearance.

As shown above, the beneficial purpose of the Writ of Amparo has been served in the present case with the CA’s final determination of the persons responsible and accountable for the enforced disappearance of Jonas and the commencement of criminal action against Lt. Baliaga. At this stage, criminal, investigation and prosecution proceedings are already beyond the reach of the Writ of Amparo proceeding now before us.

Siegfred Mison vs Gallegos GR Nos. 210759, 211403 & 211590

Doctrine:

          The privilege of the writ of amparo is an extraordinary remedy adopted to address the special concerns of extra-legal killings and enforced disappearances. Accordingly, the remedy ought to be resorted to and granted judiciously, lest the ideal sought by the Amparo Rule be diluted and undermined by the indiscriminate filing of amparo petitions for purposes less than the desire to secure amparo reliefs and protection and/or on the basis of unsubstantial allegations.

         

Facts:

          The Embassy of the Republic of Korea wrote a Letter-Request to petitioner, Hon. Siegfried Mison, Chairperson of the Bureau of Immigation (BI) for the immediate arrest and deportation of respondent Ja Hoon Ku (Ku) to Korea for being an undesirable alien. Pursuant to Summary Deportation Order, Ku was arrested and detained at the BI detention center.

          Ku filed a Petition for the Issuance of a Writ of Amparo with Interim Remedies. Judge Gallegos granted the petition.

Issue:

Whether or not the privilege of the writ of amparo was properly granted.

Ruling:

          No.

          The Supreme Court ruled in negative. Section 1 of the Rule in the Writ of Amparo (Amparo Rule) provides:

Section 1. Petition. – The petition for a writ of amparo is a remedy available to any person whose right to life, liberty and security is violated or threatened with violation by an unlawful act or omission of a public official or employee, or of a private individual or entity.

The writ shall cover extralegal killings and enforced disappearances or threats thereof.

          The Amparo rule was intended to address the intractable problem of the “extralegal killings” and “enforced disappearances,” its coverage, in its present form, is confined to these two instances or to threats thereof. “Extralegal killings” are killings committed without due process of law, i.e., without legal safeguards or judicial proceedings. On the other hand, “enforced disappearances” are attended by the following characteristics: an arrest, detention or abduction of a person by a government official or organized groups or private individuals acting with the direct or indirect acquiescence of the government; the refusal of the State to disclose the fate or whereabouts of the person concerned or a refusal to acknowledge the deprivation of liberty which places such persons outside the protection of law.

          As to what constitutes enforced disappearance, the Court in Navia v. Pardico enumerated the elements constituting enforced disappearances as the term is statutorily defined in Section 3(g) of the RA 9851, to wit:

(a) That there be an arrest, detention, abduction or any form of deprivation of liberty;

(b) That it be carried out by, or with the authorization, support or acquiescence of, the State or political organization;

(c) That it be followed by the State or political organization’s refusal to acknowledge or give information on the fate or whereabouts of the person subject of the amparo petition; and

(d)That the intention for such refusal is to remove the subject person from the protection of the law for a prolonged period of time.

In probing enforced disappearance cases, courts should read A.M. No. 07-9-12-SC in relation to RA 9851.

Guided by the parameters of RA 9851, we can readily discern that Ku’s circumstance does not come under the statutory definition of an enforced disappearance. Indeed, Ku was arrested by agents of the BI, but there was no refusal on the part of the BI to acknowledge such arrest nor was there any refusal to give information to remove Ku from the protection of the law for a prolonged time. More importantly, there was no attempt on the part of the BI to conceal Ku or his whereabouts. Within the Bureau, Ku’s arrest and the fact that he was in their custody was not obscured as, in fact, these were well-documented as evidenced by the Return of Warrant of Deportation.

The RTC’s grant of the privilege of the writ of amparo was improper in this case as Ku and his whereabouts were never concealed, and as the alleged threats to his life, liberty and security were unfounded and unsubstantiated. It is to be emphasized that the fundamental function of the writ of amparo is to cause the disclosure of details concerning the extrajudicial killing or the enforced disappearance of an aggrieved party. As Ku and his whereabouts were never hidden, there was no need for the issuance of the privilege of the writ of amparo in the case at bar.

Wherefore, premises considered, the Court hereby resolves to deny the privilege of the Writ of Amparo.

Salazar vs JY Brothers Marketing Corporation 634 SCRA 95. October 20, 2010

Facts:

                J.Y. Brothers Marketing (J.Y. Bros., for short) is a corporation engaged in the business of selling sugar,  rice  and  other  commodities.  On October  15,  1996,  Anamer  Salazar,  a  freelance  sales  agent,  was approached  by  Isagani  Calleja  and Jess  Kallos.Salazar  with  Calleja  and  Kallos  procured from  J.  Y.  Bros.  300  cavans  of  rice  worth P214,000.00.  As  payment,  Salazar  negotiated  and  indorsed  to J.Y. Bros. Prudential Bank Check No. 067481 dated October 15, 1996 issued by Nena Jaucian Timario in the  amount  of P214,000.00  with  the  assurance  that  the  check  is  good  as  cash.  On that assurance,  J.Y. Bros.  parted with  300  cavans  of  rice  to  Salazar.  However, upon presentment,  the  check  was  dishonored due to closed account.

 

 Informed  of  the  dishonor  of  the  check,  Calleja,  Kallos  and  Salazar  delivered  to  J.Y.  Bros.  a replacement cross Solid Bank Check No. PA365704 dated October 29, 1996 again issued by Nena Jaucian Timario in the amount of P214,000.00 but which, just the same, bounced due to insufficient funds. When despite the demand letter dated February 27, 1997, Salazar failed to settle the amount due J.Y. Bros., the latter  charged  Salazar  and  Timario  with  the  crime  of  estafa  before  the RTC.

Issue:

1.       Whether or not there is novation

2.       Whether or not petitioner is liable as an accommodation indorser for the payment of the dishonored Prudential Bank Check

Ruling:

1.       No.

Section 119 of the Negotiable Instrument Law provides, thus:

SECTION 119. Instrument; how discharged. A negotiable instrument is discharged:

                                (a)    By payment in due course by or on behalf of the principal debtor;

(b)   By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation;

(c)    By the intentional cancellation thereof by the holder;

(d)   By any other act which will discharge a simple contract for the payment of money;

(e)    When the principal debtor becomes the holder of the instrument at or after maturity in his own right.

There are only two ways which indicate the presence of novation and thereby produce the effect of  extinguishing  an  obligation  by  another  which  substitutes  the  same.  First,  novation  must  be  explicitly stated  and  declared  in  unequivocal  terms  as  novation  is  never  presumed.  Secondly, the  old  and  the  new obligations  must  be  incompatible  on  every  point.  The  test  of  incompatibility  is  whether  or  not  the  two obligations  can  stand  together,  each  one  having  its  independent  existence.  If  they  cannot,  they  are incompatible  and  the  latter  obligation  novates  the  first. 

                In  this  case,  respondents  acceptance  of  the  Solid  Bank  check,  which  replaced  the  dishonored  Prudential  Bank check,  did  not  result  to  novation  as  there  was  no  express  agreement  to  establish  that  petitioner  was  already  discharged from his liability to pay respondent the amount of P214,000.00 as payment for the 300 bags of rice. As we said, novation is  never  presumed,  there  must  be  an  express  intention  to  novate.  In  fact,  when  the  Solid  Bank  check  was  delivered  to respondent,  the  same  was  also  indorsed  by  petitioner  which  shows  petitioners  recognition  of  the  existing  obligation  to respondent to pay P214,000.00 subject of the replaced Prudential Bank check. Moreover,  respondents  acceptance  of  the  Solid  Bank  check  did  not  result  to  any  incompatibility,  since  the  two checks − Prudential and Solid Bank checks − were precisely for the purpose of paying the amount of P214,000.00, i.e., the credit obtained from the purchase of the 300 bags of rice from respondent. Indeed, there was no substantial change in the object or principal condition of the obligation of petitioner as the indorser of the check to pay the amount of P214,000.00. It would appear that respondent accepted the Solid Bank check to give petitioner the chance to pay her obligation.

2.       Yes.

Among the different types of checks issued  by a drawer is the crossed check. The Negotiable Instruments Law is silent with respect to crossed checks, although the Code of Commerce makes reference to such instruments. We have taken judicial  cognizance  of  the  practice  that  a  check  with  two  parallel lines  in  the  upper  left  hand  corner  means  that  it  could only  be  deposited  and  could  not  be  converted  into  cash.  Thus,  the  effect  of  crossing  a  check  relates  to  the  mode  of payment,  meaning that  the  drawer  had  intended  the  check  for  deposit  only  by  the rightful  person, i.e.,  the  payee  named therein. The change in the mode of paying the obligation was not a change in any of the objects or principal condition of the contract for novation to take place. Considering  that  when  the  Solid  Bank  check,  which  replaced  the  Prudential  Bank  check,  was  presented  for payment,  the  same  was  again  dishonored;  thus,  the  obligation  which  was  secured  by  the  Prudential  Bank  check  was  not extinguished and the Prudential Bank check was not discharged. Thus, the court held petitioner liable as an accommodation indorser for the payment of the dishonored Prudential Bank check.

Arceo Jr. vs People of the Philippines 495 SCRA 204. July 17, 2006

Facts:

                Pacifico Arceo obtained a loan amounting to P100,000 from private complainant Josefino Cenizal. Several weeks thereafter, he obtained an additional loan of P50,000 then issued in favor of Cenizal, BPI Check, postdated August 4, 1991, for P150,000. When August 4 came, Cenizal did not deposit the check immediately because Arceo promised that he would replace the check with cash. Such promise was made verbally seven times. When his patience ran out, Cenizal brought the check to the bank for encashment, however, the check bounced because of insufficient funds.

                Thereafter, Cenizal went to the house of Arceo but found out that he had left the place. So Cenizal referred the matter to a lawyer who wrote a letter giving Arceo three days from receipt thereof to pay the amount of check. Arceo still failed to make good the amount of the check. As a consequence, Cenizal executed on January 20, 1992 his affidavit and submitted documents in support of his complaint for estafa and violation of BP 22 agaisnt Arceo. The check in question and the return slip were however lost by Ceniza as a result of a fire that occurred near his residence. He executed an Affidavit of Loss.

                After trial, petitioner was found guilty as charged. The Court of Appeals affirmed the trial court’s decision in toto.

Issue:

1.       Whether or not petitioner should not be held for the dishonor of the check.

2.       Whether or not petitioner was deprived of the period of five banking days from receipt of notice of dishonor within which to pay the amount of check.

3.       Whether or not the presentation of the check in evidence is a condition is a condition for conviction under BP 22.

Ruling:

1.       No.

The Court ruled that the 90-day period provided in the law is not an element of the offense. Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a reasonable time from the date indicated  in  the  check.  According  to  current  banking  practice,  the  reasonable  period  within  which  to present a check to the drawee bank is six months. Thereafter, the check becomes stale and the drawer is discharged from liability thereon to the extent of the loss caused by the delay.

                Thus, Cenizals presentment of the check to the drawee bank 120 days (four months) after its issue was still within the allowable period.  Petitioner  was  freed  neither  from  the  obligation  to  keep  sufficient  funds  in  his  account  nor  from liability resulting from the dishonor of the check.

2.       No.

Petitioner cannot claim that he was deprived of the period of five banking days from receipt of notice of dishonor within which to pay the amount of the check. While petitioner may have been given only three days to pay the value of the check, the trial court found that the amount due thereon remained unpaid even after five banking days from his receipt of the notice of dishonor.  This  negated  his  claim  that  he  had  already  paid Cenizal and  should  therefore  be  relieved  of  any liability.

Moreover,  petitioners  claim  of  payment  was  nothing  more  than  a  mere  allegation.  He presented no proof to support it. If indeed there was payment, petitioner should have redeemed or taken the check back in the ordinary course of business. Instead,  the  check  remained  in  the  possession  of  the  payee  who  demanded  the  satisfaction  of  petitioners obligation when the check became due as well as when the check was dishonored by the drawee bank. 

3.       No.

Petitioner’s insistence on the presentation of the check in evidence as a condition sine qua non for conviction under BP 22 is wrong. Rule 130, Section 3, of the Rules of Court, otherwise known as the best evidence rule, applies only where the content of the document is the subject of the inquiry. Where the issue is the execution or existence of the document or the circumstances surrounding its execution, the best evidence rule does not apply and testimonial evidence is admissible.

The fact in issue is the act of drawing and issuing a worthless check. Hence, the subject of the inquiry is the fact of issuance or execution of the check, not its content. Although the check and the return slip were among the documents lost, Cenizal was nevertheless able to adequately establish the due execution, existence and loss of the check and the return slip in an affidavit of loss as well as in his testimony during the trial of the case.

Moreover, Arceo himself admitted that he issued the check. He never denied that the check was presented for payment to the drawee bank and was dishonored for having been drawn against insufficient funds.

BPI vs Roxas 536 SCRA 168. October 15, 2016

Facts:

                Gregorio C. Roxas, respondent, is a trader. He delivered stocks of vegetable oil to spouses Rodrigo and Marissa Cawili. As payment therefor, spouses Cawili issued a personal check in the amount of P348,805.50. However, when respondent tried to encash the check, it was dishonored by the drawee bank. Spouses Cawili then assured him that they would replace the bounced check with a cashier’s check from the Bank of the Philippine Islands (BPI), petitioner.

Respondent and Rodrigo Cawili went to petitioner’s branch at Shaw Boulevard, Mandaluyong City where Elma Capistrano, the branch manager, personally attended to them. Upon Elma’s instructions, Lita Sagun, the bank teller, prepared BPI Cashier’s Check No. 14428 in the amount of P348,805.50, drawn against the account of Marissa Cawili, payable to respondent. Rodrigo then handed the check to respondent in the presence of Elma.

The following day, respondent returned to petitioner’s branch at Shaw Boulevard to encash the cashier’s check but it was dishonored. Elma informed him that Marissa’s account was closed on that date. Despite respondent’s insistence, the bank officers refused to encash the check and tried to retrieve it from respondent. He then called his lawyer who advised him to deposit the check in his (respondent’s) account at Citytrust, Ortigas Avenue. However, the check was dishonored on the ground "Account Closed."

                Respondent filed with the RTC complaint for sum of money against petitioner. The RTC renders judgment ordering BPI to pay Roxas.

                Court of Appeals affirmed the trial court’s judgment.

Issue:

1.       Whether or not respondent is a holder in due course.

2.       Whether or not BPI is liable to respondent for the amount of the cashier’s check.

Ruling:

1.       Yes.

Section 52 of the Negotiable Instruments Law provides:

SEC. 52. What constitutes a holder in due course. – 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;

(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 person negotiating it.

As a general rule, under the above provision, every holder is presumed prima facie to be a holder in due course. One who claims otherwise has the onus probandi to prove that one or more of the conditions required to constitute a holder in due course are lacking. In this case, petitioner contends that the element of "value" is not present, therefore, respondent could not be a holder in due course. Petitioner’s contention lacks merit. Section 25 of the same law states:

SEC. 25. Value, what constitutes. – Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed as such whether the instrument is payable on demand or at a future time. There is no dispute that respondent received Rodrigo Cawili’s cashier’s check as payment for the former’s vegetable oil. The fact that it was Rodrigo who purchased the cashier’s check from petitioner will not affect respondent’s status as a holder for value since the check was delivered to him as payment for the vegetable oil he sold to spouses Cawili. Verily, the Court of Appeals did not err in concluding that respondent is a holder in due course of the cashier’s check.

2.       Yes.

It bears emphasis that the disputed check is a cashier’s check. The Court held that a cashier’s check is really the bank’s own check and may be treated as a promissory note with the bank as the maker. The check becomes the primary obligation of the bank which issues it and constitutes a written promise to pay upon demand. The Court took judicial notice of the "well-known and accepted practice in the business sector that a cashier’s check is deemed as cash." This is because the mere issuance of a cashier’s check is considered acceptance thereof.

In view of the above pronouncements, petitioner bank became liable to respondent from the moment it issued the cashier’s check. Having been accepted by respondent, subject to no condition whatsoever, petitioner should have paid the same upon presentment by the former.

PNB vs Rodriguez 566 SCRA 513. September 26, 2008

Facts:

                Spouses Rodriguez maintained a savings and demand/checking accounts with petitioners Philippines National Bank (PNB). They 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, which likewise maintained current and savings accounts with petitioner bank. 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 PEMSLA checks issued for these loans were then given to the spouses for rediscounting. The officers carried this out by forging the indorsement of the named payees in the checks. In return, the spouses issued their personal checks (Rodriguez checks) in the name of the members and delivered the checks to an officer of PEMSLA. The PEMSLA checks, on the other hand, were deposited by the spouses to their account. Meanwhile, the Rodriguez checks were deposited directly by PEMSLA to its savings account without any indorsement from the named payees. This usual irregular procedure is made possible through the facilitation of Edmundo Palermo, Jr., treasurer of PEMSLA and bank teller in the PNB Branch.

                The spouses issued 69 checks, in the total amount of P2,345,804.00, payable to 47 members of PEMSLA. After finding out such fraudulent act, PNB closed the current account of PEMSLA. As a result, the PEMSLA checks deposited by the spouses were returned or dishonored for the reason “Account Closed.” The corresponding Rodriguez checks, however, were deposited as usual to the PEMSLA savings account. The amounts were duly debited from the Rodriguez account. Thus, because the PEMSLA checks given as payment were returned, spouses Rodriguez incurred losses from the rediscounting transactions. Spouses Rodriguez sued PEMSLA and PNB. They contended that because PNB credited the checks to the PEMSLA account even without indorsements, PNB violated its contractual obligation to them as depositors. PNB paid the wrong payees; hence, it should bear the loss. Trial court ruled in favor of spouses and ordered PNB to pay. CA affirmed the decision. Hence this petition

Issue:

1.       Whether or not the 69 checks are payable to order.

2.       Whether or not PNB is liable.

Ruling:

1.       Yes.

As a rule, when the payee is fictitious or not intended to be the true recipient of the proceeds, the check is considered as bearer instrument. A check is a bill of exchange drawn on a bank payable on demand. It is either an order or bearer instrument (Section 8 and 9 of the NIL).

                The distinction between bearer and order instruments lies in their manner of negotiation. Under Section 30 of the NIL, an order instrument requires an indorsement from the payee or holder before it may be validly negotiated. A bearer instrument, on the other hand, does not require an indorsement to be validly negotiated. It is negotiable by mere delivery.

                A check that is payable to a specified payee is an order instrument. However, under Section 9(c) of the NIL, a check payable to a specified payee may nevertheless be considered as a bearer instrument if it is payable to the order of a fictitious or non-existing person, and such fact is known to the person making it so payable.

                US jurisprudence yields that an actual, existing, and living payee may also be fictitious if the maker of the check did not intend for the payee to in fact receive the proceeds of the check and the check is a bearer instrument. The bank, as drawee, was authorized to make payment to the bearer of the check, regardless of whether prior indorsements were genuine or not.

                In a fictitious-payee situation, the drawee bank is absolved from liability and the drawer bears the loss. The underlying theory is that one cannot expect a fictitious payee to negotiate the check by placing his indorsement thereon.

2.       Yes.

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. Commercial bad faith is present if the transferee of the check acts dishonestly, and is a party to the fraudulent scheme.

For  the  fictitious-payee  rule  to  be  available  as  a  defense,  PNB  must show  that  the  makers  did  not  intend  for  the named payees to be part of the transaction involving the checks. At most, the banks thesis shows that the payees did not have knowledge of the existence of the checks. This lack 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.  Considering that  respondents-spouses  were  transacting  with  PEMSLA  and  not  the individual payees, it is understandable that they relied on the information given by the officers of PEMSLA that the payees would be receiving the checks.

Respondents-spouses were the banks depositors. The checks were drawn against respondents-spouses accounts. PNB, as the drawee bank, had the responsibility to ascertain the regularity of the indorsements, and the genuineness of the signatures on the checks before accepting them for deposit. Lastly, PNB was obligated to pay the checks in strict accordance with the instructions of the drawers. Petitioner miserably failed to discharge this burden.

               

Bank  that  has  been  remiss  in  its  duty  must  suffer  the  consequences  of  its  negligence.  Being issued  to  named payees, PNB was duty-bound by law and by banking rules and procedure to require that the checks be properly indorsed before accepting them for deposit and payment. In fine, PNB should be held liable for the amounts of the checks.

Caltex (Philippines), Inc. vs Court of Appeals 212 SCRA 448. August 10, 1992

Facts:

                The defendant, Security Bank and Trust Company, a commercial banking institution issued 280 Certificate of time deposit (CTDs) in favor of Angel Dela Cruz who deposited with the Security Bank the total amount of P1.2 Million. Angel delivered the CTDs to Caltex, in connection with his purchased of fuel products from the latter.

                Subsequently, Angel informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance of the replacement CTDs. Angel negotiated and obtained a loan from Security Bank in the amount of P875, 000 and executed a notarized Deed of Assignment of Time Deposit.

                When Caltex presented said CTDs for verification with the bank and formally informed the bank of its decision to pre-terminate the same, the bank rejected Caltex’ claim and demand as Caltex failed to furnish copies of certain requested documents.  In 1983, dela Cruz’ loan matured and the bank set-off and applied the time deposits as payment for the loan. Caltex filed a complaint which was dismissed on the ground that the subject certificates of deposit are non-negotiable.

Issue:

1.       Whether or not the subject CTDs are negotiable.

2.       Whether or not petitioner is a holder in due course of the CTDs.

Ruling:

1.       Yes.

The CTDs in question are negotiable instruments as they meet the requirements of the law for negotiability as provided for in Section 1 of the Negotiable Instruments Law.  The documents provide that the amounts deposited shall be repayable to the depositor. And according to the document, the depositor 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.  However, petitioner cannot recover on the CTDs.   Although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and dela Cruz, as ultimately ascertained, requires both delivery and indorsement.  In this case, there was no indorsement as  the CTDs were delivered not as payment but only as a security for dela Cruz' fuel purchases.

Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the requisites for an instrument to become negotiable, viz:

(a) It must be in writing and signed by the maker or drawer;

(b) Must contain an unconditional promise or order to pay a sum certain in money;

(c) Must be payable on demand, or at a fixed or determinable future time;

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

2.       No.

The records reveal that Angel de la Cruz, whom petitioner chose not to implead in this suit for reasons of its own, delivered the CTDs amounting to P1,120,000.00 to petitioner without informing respondent bank thereof at any time. Unfortunately for petitioner, although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between it and De la Cruz, as ultimately ascertained, requires both delivery and indorsement. For, although petitioner seeks to deflect this fact, the CTDs were in reality delivered to it as a security for De la Cruz' purchases of its fuel products.

Any doubt as to whether the CTDs were delivered as payment for the fuel products or as a security has been dissipated and resolved in favor of the latter by petitioner's own authorized and responsible representative himself.