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1. From a judgment in favor of the plaintiff for the sum of P8461, as principal, Petitioner: Benjamin Abubakar
with interest, and for the further sum of P2,115.25, as a stipulated attorney's Respondent: The Auditor Genereal
fee, the defendant has appealed. Ponencia: Bengzon, J.
2. The note represents the purchase price of a truck which the plaintiff sold to
the defendant. FACTS:
3. The note provides that, in the event it becoming necessary to employ 1. Auditor General refused to authorize the payment of Treasury warrant for
counsel to enforce its collection, the maker is to pay an additional twenty- P1,000 issued in favor of Placido S. Urbanes, but is now in the hands of
five per cent "as fees for the attorney collecting the same." petitioner Benjamin Abubakar (petitioner-holder).
4. As security for the payment of said indebtedness, the plaintiff took a chattel 2. AG’s reasons:
mortgage on the truck; and after the note had matured this chattel mortgage a. FIRST: The money available for the redemption of treasury
was foreclosed. warrants issued is appropriated by RA no. 80 and this warrant does
5. At the foreclosure sale the plaintiff himself became the purchaser for the not come within the purview of said appropriation
sum of P539, which amount was credited upon the indebtedness. b. SECOND: One of the requirements of his office had not been
complied with:
ISSUE: W/N the agreement for 25 per cent as an attorney's fee for collection is i. That is must be shown that the holders of warrants
valid covering payment or replenishment of cash advances for
official expenditures received them in payment of definite
RULING + RATIO: govt obligations
YES, the agreement for 25 per cent as an attorney's fee for collection is valid. 3. Petitioner Abubakar argues that he is a holder in good faith and for value of
a negotiable instrument and is entitled to the rights and privileges of a
• The legality of such a stipulation, when annexed to a negotiate instrument is holder in due course, free from defenses.
expressly recognized by the Negotiable Instruments Law ((Act No. 2031,
sec. 2, par. E) ISSUE: W/N the Auditor General erred in refusing to permit payment out of the
particular appropriation in Item F-IV-8 of Republic Act No. 80.
1) Manila Oil executed and delivered a promissory note to PNB. In it was a
RULING: We think that he did not. promise to pay to PNB or order. It stated moreover, that in case they are unable to
pay when the note becomes due, any lawyer from the Philippines may appear and
1. The warrant was originally made payable to Placido S. Urbanes in his confess judgement for all the costs: principal, interests, attorney’s fees, etc.
capacity as disbursing officer of the Food Administration for "additional 2) And since everyone defaults like those people in property cases, Manila Oil
cash advance for Food Production Campaign in La Union". was unable to pay and Atty. Rector, who was associated with PNB confessed
2. It is thus apparent that this is a treasury warrant issued in favor of a public judgement on behalf of Manila Oil.
officer or employee and held in possession by a private individual 3) Manila Oil protested such confession (even though they said any lawyer of
(petitioner Abubakar). the Philippines can confess judgement).
3. The Auditor General can hardly be blamed for not authorizing its 4) PNB argued that Section 5 of the NI Law expressly states that such
redemption out of an appropriation specifically for "treasury warrants issued provision on confession of judgement does not affect the negotiability of an
... in favor of and held in possession by private individuals." instrument.
4. This warrant was not issued in favor of a private individual. It was
issued in favor of a government employee. ISSUES:
5. The petitioner argues that he is a holder in good faith and for value of a 1. WoN confession of judgement is an allowable provision in a Negotiable
negotiable instrument and is entitled to the rights and privileges of a holder Instrument.
in due course, free from defenses. But this treasury warrant is not within
the scope of the negotiable instruments law. PROVISION:
6. The document bearing on its face the words "payable from the • Subsection (b), Section 5, RA 2031. “The negotiable character of an
appropriation for food administration," instrument otherwise negotiable is not affected by a provision which…
a. is actually an order for payment out of "a particular fund," (b) authorizes confession of judgement if the instrument is not paid at
b. and is not unconditional, maturity.”
c. and does not fulfill one of the essential requirements of a
negotiable instrument. RULING + RATIO:
7. In the United States, government warrants for the payment of money are not 1. No. Such a provision is not allowable in our jurisdiction.
negotiable instruments nor commercial proper 1. Absent any implementing laws, such common law principle may open the
way for fraud, and/or deny a person’s day in court, and/or run counter to the statutory
right to appeal a person’s case.
DISPOSITION: Petition dismissed, with costs
DISPOSITION: Decision is set aside and case is remanded to the lwer court for
Philippine National Bank vs. Manila Oil Refining & By-Products Company,
further proceedings.
Inc. (1922)
FACTS:
SALAS vs CA (1990) (d) Two or more payees jointly; or
(e) One or some of several payees; or
Petitioner: JUANITA SALAS (f) The holder of an office for the time being.
Respondent: COURT OF APPEALS and FIRST FINANCE & LEASING
CORPORATION Where the instrument is payable to order, the payee must be named or otherwise
Ponencia: FERNAN, C.J. indicated therein with reasonable certainty.
PROVISION:
• Sec. 8. , Negotiable Instruments Law. When payable to order. - The
instrument is payable to order where it is drawn payable to the order of a
specified person or to him or his order. It may be drawn payable to the order
of:
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
(c) The drawee; or
CONSOLIDATED PLYWOOD v. IFC LEASING 1987 PROVISION:
Petitioner: Consolidated Plywood Industries, et al. Sec. 8. When payable to order. - The instrument is payable to order
Respondent: IFC Leasing, et. al. where it is drawn payable to the order of a specified person or to him
Ponencia: Gutierrez, Jr. or his order. It may be drawn payable to the order of:
DOCTRINE: When an instrument is payable to order - There are only two ways (a) A payee who is not maker, drawer, or drawee; or
to make an instrument payable to order. There must always be a specified person
named. Without the words ‘or order’ or ‘to the order of’, the instrument is payable (b) The drawer or maker; or
only to the person designated therein and therefore, is non-negotiable. Any
subsequent purchaser will not enjoy the advantages of being a holder of a negotiable (c) The drawee; or
instrument, but will merely ‘step into the shoes’ of the person designated in the
instruments and will thus be open to all defenses available against the latter. (d) Two or more payees jointly; or
ISSUES:
WoN the promissory note is a negotiable instrument so as to bar completely all the
available defenses of petitioner against respondents
Philippine Education Co. v. Mauricio Soriano (1971) - The weight of authority in the United States is that postal money orders
are not negotiable, the reason behind this rule being that, in establishing
Petition: Appeal and operating a postal money order system, the government is not
Petitioner: PHILIPPINE EDUCATION CO., plaintiff-appellant, engaging in commercial transactions but merely exercises a
Respondent: MAURICIO A. SORIANO, ET AL., defendants-appellees governmental power for the public benefit.
Ponencia: Dizon
DOCTRINE: Postal money order is not a negotiable instrument, the reason DISPOSITION: Petition denied.
behind this rule being that, in establishing and operating a postal money order - Appealed decision being in accordance with law, the same is hereby
system, the government is not engaging in commercial transactions but merely affirmed with costs
exercises a governmental power for the public benefit.
Equitable Banking Corp vs IAC (1988)
ISSUES:
1. W/N Equitable Banking Corporation is liable to Edward J. Nell Co. for the
value of the second check issued by NELL which was made payable to the
order of EQUITABLE Ashville BANIUNG CORPORATION A/C OF
CASVILLE ENTERPRISES INC.
PROVISION:
SEC 8 NIL
RULING + RATIO:
3. NO.
- The subject check was equivocal and patently ambiguous. By making
the check read:
PNB v. Rodriguez and Rodriguez checks to PEMSLA without indorsement from the payees. The CA ruled in favor of
the spouses Rodriguez. Hence, this petition.
Petition: Petition for Review on Certiorari
Petitioner: Philippine National Bank ISSUES:
Respondent: Erlando Rodriguez and Norma Rodriguez
Ponente: Reyes Whether the subject checks are payable to order or to bearer, and who bears the loss
PROVISION:
DOCTRINE:
Negotiable Instrument Law: SEC. 30. What constitutes negotiation. – An instrument
The rule protects the depositary bank and assigns the loss to the drawer of the check is negotiated when it is transferred from one person to another in such manner as to
who was in a better position to prevent the loss in the first place. constitute the transferee the holder thereof. If payable to bearer, it is negotiated by
delivery; if payable to order, it is negotiated by the indorsement of the holder
FACTS: completed by delivery.
1. Spouses Rodriguez were engaged in the informal lending business and had a
discounting arrangement with Philnabank Employees Savings and Loan Association RULING + RATIO:
(PEMSLA), an association of PNB employees.
The checks are payable to order given the inability of PNB to prove that it is a
2. PEMSLA would grant loans to its members and have the spouses Rodriguez fictitious-payee check, PNB bears the loss.
rediscount the postdated checks issued to the members whenever PEMSLA was
short of funds. Spouses Rodriguez did this by replacing such checks with their own • A check payable to a specified payee may nevertheless be considered as a
checks issued in the name of the members. 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.
3. PEMSLA had a policy not to approve applications for loans of members with • A review of US jurisprudence yields that an actual, existing, and living
outstanding debts. PEMSLA officers then devised a scheme by obtaining loans under payee may also be “fictitious” if the maker of the check did not intend for
fictitious names where the spouses would rediscount such. the payee to in fact receive the proceeds of the check.
• In a fictitious-payee situation, the drawee bank is absolved from liability
4. PNB found out about this scheme and closed the bank account of PEMSLA. This and the drawer bears the loss. When faced with a check payable to a
resulted to the PEMSLA checks in full value being dishonored when the spouses fictitious payee, it is treated as a bearer instrument that can be negotiated by
presented them. On the other hand, PEMSLA was able to have the discounted checks delivery. The underlying theory is that one cannot expect a fictitious payee
issued by the spouses without any indorsement from the named payees credited to to negotiate the check by placing his indorsement thereon. And since the
its account. maker knew this limitation, he must have intended for the instrument to be
negotiated by mere delivery. Thus, in case of controversy, the drawer of the
5. Spouses filed a civil complaint against PNB seeking to recover the amount of check will bear the loss. (Exception: A showing of commercial bad faith on
P2,345,804.00 that was deposited to the PEMSLA savings account because they the part of the drawee bank, or any transferee of the check for that matter,
credited the checks even without indorsements. will work to strip it of this defense. The exception will cause it to bear the
loss.)
6. PNB contends that the spouses' had no intention for the named payees to receive • In the case herein, the Rodriguez checks are undisputedly payable to
the proceeds of the checks deemed as "fictitious payees" hence it was a check specified payees and are actual, existing, and living persons who are
payable to bearer. The issued checks being payable to order, PNB was not at fault members of PEMSLA that had rediscounting arrangement with the spouses
crediting these checks to the PEMSLA account even without the indorsement of the Rodriguez. The question here is whether the payees were "fictitious" in a
named payees. broader sense, or the checks were not really intended for them.
• PNB failed to show that the makers did not intend for the named payees to
7. Spouses argued that the checks on their faces were unquestionably payable to
be part of the transaction involving the checks. The bank showing that the
order and that PNB committed a breach of contract when it paid the value of the
payees did not have knowledge of these checks does not reveal the intention
of the spouses Rodriguez's intention of the payees to not be the receivers. ISSUE:
• Because of a failure to show that the payees were “fictitious” in its broader Whether or not petitioner was correctly held liable for issuing a bouncing check even
sense, the fictitious-payee rule does not apply. Checks are to be deemed if it does not have his indorsement;
payable to order where drawee bank bears the loss for their gross
negligence. HELD:
Under sec. 9 (d) of the Negotiable Instruments Law, a check drawn payable to the
DISPOSITION: order of "cash" is a check payable to bearer and the bank may pay it to the person
presenting it for payment without the drawer's indorsement.
The decision in favor of the spouses Rodriguez is AFFIRMED WITH
MODIFICATION, the moral damages are reduced given that PNB's actions were to A check payable to bearer is authority for payment to the holder. Where a check is in
stop the actions of its employees. 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
ANG TEK LIAN vs. COURT OF APPEALS (GR No. L-2516, September 25, not negligent in failing to do so. If the bank has no reasonable cause for suspecting
1950) any irregularity, it will be protected in paying a bearer check no matter what facts
unknown to it may have occurred prior to its presentment.
Petition: Review on Certiorari
Petitioner: Ang Tek Lian Besides, the form of the check was totally unconnected with its dishonor. The Court
Respondent: The Court of Appeals of Appeals correctly declared that it was returned unsatisfied because the drawer had
Ponencia: Bengzon insufficient funds and not because the drawer's indorsement was lacking.
Doctrine: (Check drawn payable to the order of “Cash”; Indorsement) – A check Jimenez v Bucoy (1958)
payable to the order of “cash” is a check payable to bearer, and the bank may pay it
to the person presenting it for payment without the drawer’s indorsement. Petition: Petition for Relief
Petitioners: INTESTATE OF LUTHER YOUNG AND PACITA YOUNG, spouses.
FACTS PACIFICA JIMENEZ, petitioner-appellee
Respondents: DR. JOSE BUCOY, administrator-appellant
1) On November 16, 1946, petitioner Ang Tek Lian went to the office of his Ponencia: Bengzon
friend Lee Hua Hong to ask for P4,000.00 in cash because he allegedly could not
withdraw from his bank. DOCTRINE: No precise words stating an express promise to pay are needed to make
2) In exchange, petitioner would give him his China Banking Corporation it a good promissory note.
Check in the amount of P4,000.00 payable to the order of “cash”.
3) Relying upon petitioner's assurance that he had sufficient funds in the bank FACTS:
to meet his obligations, Lee Huang Hong agreed and delivered to him, on the same 1. Intestate of Luther and Pacita Young, died in 1954 and 1952 respectively.
date, the sum of P4,000.00 in cash. Pacifica Jimenez presented 4 promissory notes signed by Pacita for different
4) On November 18, 1946, Lee Huang Hong presented the check to the drawee amounts totaling 21,000.00 pesos.
bank for payment, but it was dishonored for insufficiency of funds. It was later found
out that the balance of petitioner's deposit on both dates was only P335. Despite 2. Acknowledging receipt by Pacita during the Japanese occupation in the
repeated efforts to notify him that the check had been dishonored by the bank, currency then prevailing, the administrator manifested WILLINGNESS TO PAY
petitioner could not be located anywhere. provided it be adjusted with the Ballantyne schedule.
5) He was eventually summoned in the City Fiscal's Office in view of the
complaint for estafa filed against him. Thereafter, petitioner was convicted of estafa 3. Bucoy also calls attention to the fact that the notes contained no express
in the Court of First Instance of Manila. The Court of Appeals affirmed the verdict. promise to pay a specified amount.
6) Petitioner now argues before the Supreme Court that since the check was 4. Jimenez objected to the adjustment insisting on full payment in accordance
made payable to "cash" and was not endorsed by him, he should not be made guilty with the notes.
of the offense charged.
5. Judge of the trial court held that notes should be paid in the currency after
the war, entitling plaintiff to recover 21k, and atty. Fees for 2,000. Hence this appeal.
ISSUE:
PROVISIONS:
Section 10 of the Negotiable Instruments Law
SEC. 10. The instrument need not follow the language of this Act, but any terms are
sufficient which clearly indicate an intention to conform to the requirements hereof.
RULING + RATIO:
3. NO, Buyco should not have been ordered to pay Atty. Fees. There are only
2 reasons for one to be ordered to pay Atty. Fees, either the situation of the case falls
under cerain exceptions (like cases about Legal Support), or the defendant acted in
gross and evident bad faith. The court ruled that Buyco did not act in bad faith, but
merely that his attitude was a consequence of his line of defense.