.BPI vs.
Court of Appeals and Napiza RULING:
G.R. No. 112392. February 29, 2000, 326 scra 641
*accommodation party
**liability of general indorser
FACTS:
A certain Henry Chan owned a Continental Bank Manager’s Check payable
to "cash" in the amount of Two Thousand Five Hundred Dollars
($2,500.00). Chan went to the office of Benjamin Napiza and requested him
to deposit the check in his dollar account by way of accommodation and for
the purpose of clearing the same. Private respondent acceded, and agreed to
deliver to Chan a signed blank withdrawal slip, with the understanding that
as soon as the check is cleared, both of them would go to the bank to withdraw
the amount of the check upon private respondent’s presentation to the bank
of his passbook. Napiza thus endorsed the check and deposited it in a Foreign
Currency Deposit Unit (FCDU) Savings Account he maintained with
BPI. Using the blank withdrawal slip given by private respondent to Chan,
one Ruben Gayon, Jr. was able to withdraw the amount of $2,541.67 from
Napiza's FCDU account. It turned out that said check deposited by private
respondent was a counterfeit check.
*When BPI demanded the return of $2,500.00, private respondent claimed
that he deposited the check "for clearing purposes" only to accommodate
Chan.
**Petitioner claims that private respondent, having affixed his signature at
the dorsal side of the check, should be liable for the amount stated therein in
accordance with the provision of the Negotiable Instruments Law on the
liability of a general indorser (Sec. 66).
ISSUE:*
Whether private respondent is obliged to return the money paid out by BPI
on a counterfeit check even if he deposited the check "for clearing purposes"
only to accommodate Chan.
ISSUE:**
Whether or not respondent Napiza is liable under his warranties as a general
indorser.
Ordinarily private respondent may be held liable as an indorser of the check
or even as an accommodation party. However, petitioner BPI, in allowing
the withdrawal of private respondent’s deposit, failed to exercise the
diligence of a good father of a family. BPI violated its own rules by allowing
the withdrawal of an amount that is definitely over and above the aggregate
amount of private respondent’s dollar deposits that had yet to be cleared. The
proximate cause of the eventual loss of the amount of $2,500.00 on BPI's part
was its personnel’s negligence in allowing such withdrawal in disregard of
its own rules and the clearing requirement in the banking system. In so doing,
BPI assumed the risk of incurring a loss on account of a forged or counterfeit
foreign check and hence, it should suffer the resulting damage.
Negotiable Instruments Case Digest: Gonzales V. RCBC (2006)
G.R. No. 156294 November 29, 2006
Lessons Applicable: Right of the holder (Negotiable Instruments Law)
FACTS:
 Gonzales, New Accounts Clerk in the Retail Banking Department
at RCBC Head Office
 Dr. Don Zapanta of the Ade Medical Group drew a foreign check of
$7,500 against the drawee bank Wilshire Center Bank, LA, California
payable to Eva Alviar (Alviar), Gonzales mother.
 Alviar then endorsed this check.
 Since RCBC gives special accommodations to its employees to receive
the check’s value w/o awaiting the clearing period, Gonzales presented
the foreign check to Olivia Gomez, the RCBC’s Head of Retail Banking
 Olivia Gomez requested Gonzales to endorse it which she did. Olivia
Gomez then acquiesced to the early encashment of the check and signed
the check but indicated thereon her authority of "up to P17,500.00 only".
 Carlos Ramos signed it with an "ok" annotation.
 Presented the check to Rolando Zornosa, Supervisor of the Remittance
section of the Foreign Department of the RCBC Head Office, who after
scrutinizing the entries and signatures authorized its encashment.
 Gonzales received its peso equivalent P155,270.85
 RCBC tried to collect through its correspondent bank, the First Interstate
Bank of California but it was dishonored the check because:
 "END. IRREG" or irregular indorsemen
 "account closed"
 Unable to collect, RCBC demanded from Gonzales
 November 27, 1987: Through letter Gonzales agreed that the payment
be made thru salary deduction.
 October 1987: deductions started
 March 7, 1988: RCBC sent a demand letter to Alviar for the payment
but she did not respond
 June 16, 1988: a letter was sent to Gonzales reminding her of her liability
as an indorser
 July 1988: Gonzales resigned from RCBC paying only P12,822.20
covering 10 months
 RCBC filed a complaint for a sum of money against Eva Alviar, Melva
Theresa Alviar-Gonzales and the latter’s husband Gino Gonzales
 CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva
Theresa Alviar-Gonzales as guarantor
ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable
as general endorsers
HELD: NO. CA REVERSED. RCBC reimburse Gonzales
 Sec. 66. Liability of general indorser. - Every indorser who indorses
without qualification, warrants to all subsequent holders in due course
1. The matters and things mentioned in subdivisions (a), (b), and (c) of
the next preceding section;
(a) That the instrument is genuine and in all respects what it purports
to be
(b) That he has a good title to
(c) That all prior parties had capacity to contract
 Under Section 66, the warranties for which Alviar and Gonzales are
liable as general endorsers in favor of subsequent endorsers extend only
to the state of the instrument at the time of their endorsements,
 This provision cannot be used by the party which introduced a defect on
the instrument (RCBC) w/c qualifiedly endorsed it
 Had it not been for the qualified endorsement "up to P17,500.00 only"
of Olivia Gomez, who is the employee of RCBC, there would have been
no reason for the dishonor of the check
 The holder or subsequent endorser who tries to claim under the
instrument which had been dishonored for "irregular endorsement" must
not be the irregular endorser himself who gave cause for the dishonor.
 Otherwise, a clear injustice results when any subsequent party to the
instrument may simply make the instrument defective and later claim
from prior endorsers who have no knowledge or participation in causing
or introducing said defect to the instrument, which thereby caused its
dishonor.
it

2. That the instrument is, at the time of his indorsement, valid and
subsisting
 In addition, he engages that, on due presentment, it shall be accepted or
paid, or both, as the case may be, according to its tenor, and that if
it be dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent
indorser who may be compelled to pay it
Negotiable Instruments Case Digest: Hi-Cement Corp. V. Insular Bank
(2007)
G.R. No. 132403 - G.R. No. 132419 September 28, 2007
Lessons Applicable: Rights of Holder against general indorser (Negotiable
Instrument Law)
FACTS:
 Enrique Tan and Lilia Tan (spouses Tan) were the controlling
stockholders of E.T. Henry & Co., Inc. (E.T. Henry), a company engaged
in the business of processing and distributing bunker fuel.
 E.T. Henry's customers were Hi-Cement Corporation (Hi-
Cement), Riverside Mills Corporation (Riverside) and Kanebo
Cosmetics Philippines, Inc. (Kanebo) who issued postdated checks for
their purchases
 Sometime in 1979: Insular Bank of Asia and America (turned PCIB then
Equitable PCI-Bank) granted E.T. Henry a credit facility known as
“Purchase of Short Term Receivables.” (re-discounting arrangement)
 Through this, E.T. Henry was able to encash, with pre-deducted interest,
the postdated checks of its clients.
 For every transaction, E.T. Henry had to execute a promissory note and
a deed of assignment
 1979-1981: E.T. Henry was able to re-discount its clients' checks
 February 1981: 20 checks of Hi-Cement (which were crossed and which
bore the restriction “deposit to payee’s account only”) were dishonored.
So were the checks of Riverside and Kanebo.
 Bank filed a complaint for sum of money in CFI against E.T. Henry, the
spouses Tan, Hi-Cement (including its general manager and its
treasurer as signatories of the postdated crossed checks), Riverside and
Kanebo
 CA Affirmed RTC: Ordering E.T. Henry, spouses Tan, Hi-Cement,
Riverside and Kanebo, jointly and severally, to pay bank damages
represented by the face value of the postdated checks plus interests,
services, charges and penalties until fully paid
 G.R. 132403: RTC & CA
 Hi-Cement authorized its general manager and treasurer to issue the
subject postdated crossed checks
 Hi-Cement was already estopped from denying such authority since it
never objected to the signatories' issuance of all previous checks to E.T.
Henry
ISSUE:
1. W/N bank was a holder in due course - NO
2. W/N Hi-Cement can still be made liable for the checks - NO
HELD: CA AFFIRMED with MODIFICATION remanded to RTC for
recomputation
1. NO.
 Section 191
 Section 52
 Bank was all too aware that subject checks were crossed and bore
restrictions that they were for deposit to payee's account only; hence,
they could not be further negotiated to it
 irregularity - only the treasurer's signature appeared on the deed of
assignment
 As a banking institution, it behooved respondent to act with
extraordinary diligence in every transaction
 Its business is impressed with public interest, thus, it was not expected
to be careless and negligent, specially so where the checks it dealt with
were crossed.
 It is then settled that crossing of checks should put the holder on inquiry
and upon him devolves the duty to ascertain the indorser’s title to the
check or the nature of his possession. - failure: guilty of gross negligence
amounting to legal absence of good faith
2. NO.
 the drawer of the postdated crossed checks was not liable to the holder
who was deemed not a holder in due course
 may recover from the party who indorsed/encashed the checks “if the
latter has no valid excuse for refusing payment - E.T. Henry had no
justification to refuse payment, it should pay