G.R. No. L-26767 February 22, 1968

Lessons Applicable: General Indorser (Negotiable Instrurments)

Laws Applicable: Section 63 of the Negotiable Instruments Law

FACTS: August 15, 1960:Lorenzo Ting issued Philippine Bank of Communications check K-81618, w/ sum of P4,000, payable to "cash or bearer" With Felipe Ang's signature (indorsement in blank) at the back thereof, the instrument was received by the Ang Tiong who presented it to the drawee bank for payment but it was dishonored Ting made a written demand to both Ting and Ang to no avail March 6, 1962: Municipal Court of Manila favored Tiong against Ting and Ang CA: ordered Ang to pay with interest Ang contends that he is an accomodating indorserISSUE: W/N Ang is an accomodating indorser and not a general indorser a

HELD: NO. Affirmed Section 63 of the Negotiable Instruments Law:a person placing his signature upon an instrument otherwise than as maker, drawer or acceptor = a general indorser, unless he clearly indicates plaintiff appropriate words his intention to be bound in some other capacity warrants: (a) that the instrument is genuine and in all respects what it purports to be; (b) that he has a good title to it; (c) that all prior parties have capacity to contract; and (d) that the instrument is at the time of his indorsement valid and subsisting Even on the assumption that the appellant is a mere accommodation party, as he professes to be, he is by the clear mandate of section 29 of the Negotiable Instruments Law, "liable on the instrument to a holder for value, notwithstanding that such holder at the time of taking the instrument knew him to be only an accommodation party." It is not a valid defense that the accommodation party did not receive any valuable consideration when he executed the instrument. Nor is it correct to say that the holder for value is not a holder in due course merely because at the time he acquired the instrument, he knew that the indorser was only an accommodation party. assuming him to be an accommodation indorser, may obtain security from the maker to protect himself against the danger of insolvency of the latter, cannot in any manner affect his liability to the Tiong, as the said remedy is a matter of concern exclusively between accommodation indorser and accommodated party. The liability of the appellant remains primary and unconditional.MBTC v. PBCOM (2007)

FACTS: Pipe Master Corp (Pipe Master) represented by Yu Kio, its president, applied for check discounting with Filipinas Orient Finance Corp (Filipinas Orient).The latter approved and granted the same. BoD of Pipe Master issued a Board Resolution authorizing Yu Kio, in his capacity as president, and/or Tan Juan Lian, in his capacity as vice-president, to execute, indorse, make, sign, deliver or negotiate instruments, documents and such other papers necessary in connection with any transaction coursed through Filipinas Orient for and in behalf of the corporation. Tan Juan Lian then executed in favor of Filipinas Orient a continuing guaranty that he shall pay at maturity any and all promissory notes, drafts, checks, or other instruments or evidence of indebtedness for which Pipe Master may become liable; that the extent of his liability shall not at any one time exceed the sum ofP1,000,000.00; and that in the event of default by Pipe Master, Filipinas Orient may proceed directly against him. Under the check discounting agreement between Pipe Master and Filipinas Orient, Yu Kio sold to Filipinas Orient four MBTC checks amounting toP1,000,000.00.In exchange for the four MBTC checks, Filipinas Orient issued to Yu Kio four PBCom crossed checks totalingP964,303.62, payable to Pipe Master with the statement for payees account only. Upon his receipt of the four PBCom checks, Yu Kio indorsed and deposited in the MBTC, in his personal account, three of the checks valued atP721,596.95.As to the remaining check amounting toP242,706.67, he deposited it inthe Solid Bank Corp (Solid Bank), also in his personal account.Eventually, PBCom paid MBTC and Solid Bank the amounts of the checks.In turn, MBTC and Solid Bank credited the value of the checks to the personal accounts of Yu Kio. Subsequently, when Filipinas Orient presented the four MBTC checks equivalent toP1,000,000.00 it received from Yu Kio, they were dishonored by the drawee bank.Pipe Master, the drawer, refused to pay the amounts of the checks, claiming that it never received the proceeds of the PBCom checks as they were delivered and paid to the wrong party, Yu Kio, who was not the named payee. Filipinas Orient then demanded that PBCom restore to its (Orients) account the value of the PBCom checks.In turn, PBCom sought reimbursement from MBTC and Solid Bank, being the collecting banks, but they refused.Thus, Filipinas Orient filed with the RTC, a complaint for a sum of money against Pipe Master, Tan Juan Lian and/or PBCom. RTC rendered a Decision against MBTC and Solid Bank. CA affirmedin totothe Decision of the trial court.Hence, the instant consolidated petitions filed by MBTC and Solid Bank.

ISSUE: WON Metro Bank and Solid Bank, petitioners, are liable to respondent Filipinas Orient for accepting the PBCom crossed checks payable to Pipe Master

Petitioner banks contend that Pipe Master, Tan Juan Lian and/or PBCom should be made liable to respondent Filipinas Orient for the value of the checks.Pipe Master and Tan Juan Lian counter that although Yu Kio was expressly authorized to indorse Pipe Masters checks, such authority extended only to acts done in the ordinary course of business, not in his personal capacity.For its part, respondent Filipinas Orient contends that petitioner banks were negligent in allowing Yu Kio to deposit the PBCom checks in his account.Respondent PBCom, as the drawee bank, maintains that it has no liability because in clearing the checks, it relied on the express guarantee made by petitioner banks that the checks were validly indorsed.

DECISION: Petitions DENIED. Decision AFFIRMED.

HELD: A check is defined by law as a bill of exchange drawn on a bank payable on demandThe NIL is silent with respect to crossed checks.Nonetheless,this Court has taken judicial cognizance of the practice that acheck with two parallel lines on the upper left hand corner means that it could only be deposited and not converted into cash.The crossing of a check with the phrase Payees Account Only is a warning that the check should be deposited in the account of the payee.It is the collecting bank which is bound to scrutinize the check and to know its depositors before it can make the clearing indorsement, all prior indorsements and/or lack of indorsement guaranteed. Here, petitioner banks havethe obligation to ensure that the PBCom checks were deposited in accordance with the instructions stated in the checks.The four PBCom checks in question had been crossed and issued for payees account only.This could only mean that the drawer, Filipinas Orient, intended the same for deposit only by the payee, Pipe Master.The effect of crossing a check means that the drawer had intended the check for deposit only by the rightful person,i.e., the payee named therein Pipe Master. The banks accommodated Yu Kio, being a valued client and the president of Pipe Master, and accepted the crossed checks.They stamped at the back thereof that all prior indorsements and/or lack of indorsements are guaranteed.In so doing, they became general endorsers.Under Section 66 of the Negotiable Instruments Law, an endorser warrants that the instrument is genuine and in all respects what it purports to be; that he has a good title to it; that all prior parties had capacity to contract; and that the instrument is at the time of his indorsement valid and subsisting. Clearly, petitioner banks, being endorsers, cannot deny liability. InAssociated Bank v. Court of Appeals,the Court held that the collecting bank or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior indorsements and is privy to the depositor who negotiated the check. PBCom, as the drawee bank, cannot be held liable since it mainly relied on the express guarantee made by petitioners, the collecting banks, of all prior indorsements. Evidently, petitioner banks disregarded established banking rules and procedures.They were negligent in accepting the checks and allowing the transaction to push through. Therefore, petitioner banks are liable to respondent Filipinas Orient. In fine, it must be emphasized that the law imposes on the collecting bank the duty to diligently scrutinize the checks deposited with it for the purpose of determining their genuineness and regularity.The collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field, and the law thus holds it to a high standard of conduct.Since petitioner banks negligence was the direct cause of the misappropriation of the checks, they should bear and answer for respondent Filipinas Orients loss, without prejudice to their filing of an appropriate action against Yu Kio.

Far East Realty Investment Inc. vs. Court of Appeals [GR L-36549, 5 October 1988]

Second Division, Paras (J): 4 concur

See case entry 38

Facts: In its complaint dated May 9, 1968, filed with the City Court of Manila, (Civil Case 170859) against Dy Hian Tat, Siy Chee and Gaw Suy An for the collection and payment of P4,500.00 representing the face value of an unpaid and dishonored check, Far East Realty Investment Inc. (FERII) alleged, among others, that on 13 September 1960, Dy et al. approached FERII at its office in Manila and asked the latter to extend to them an accommodation loan in the sum of P4,500.00, which they needed in their business, and which they promised to pay, jointly and severally, in one month time; that they proposed to pay FERII interest thereon at the rate of 14% per annum, as in fact they delivered to FERII the China Banking Corporation (ChinaBank) Check VN-915564, dated 13 September 1960, for P4,500.00, drawn by Dy, and signed by them at the back of said check, with the assurance that after one month from 13 September 1960, the said check would be redeemed by them by paying cash in the sum of P4,500.00, or the said check can be presented for payment on or immediately after one month and said bank would honor the same; that, in order to accommodate Dy et al., FERII agreed and actually extended to Dy et al. an accommodation loan in the sum of P4,500.00 under the aforesaid conditions proposed by Dy et al., which amount was delivered to the later; that on 5 March 1964, the aforesaid check was presented for payment to the ChinaBank, but said check bounced and was not cashed by said bank, for the reason that the current account of the drawer thereof had already been closed; and that subsequently, FERII demanded from Dy et al. the payment of their aforesaid loan obligation, but the latter failed and refused to pay notwithstanding repeated demands therefor. Gaw and Dy filed their answers, while on 31 March 1970, Siy was declared in default. After hearing, the City Court of Manila rendered its decision in favor of FERII, ordering Dy et al. to pay FERII, jointly and severally, the sum of P4,500.00 with interest thereon at the legal rate from 13 September 1960 until the said amount is fully paid; plus the sum of P500.00 by way of attorney's fees, plus the costs of suit. The decision of the city court was appealed by Dy et al. to the Court of First Instance of Manila, where the case was heard de novo for lack of transcript of stenographic notes taken in the city court. After trial, the Court of First Instance of Manila, Branch IX, rendered a decision in Civil Case 80583, dated 15 October 1971, affirming the decision of the city court, ordering Dy et al. to pay, jointly and severally, FERII the sum of P4,500.00, plus interest at the rate of 14% per annum, from 13 September 1960, until fully paid, plus the sum of P1,000.00 in the concept of attorney's fees; and costs of suit. Dy et al. filed a petition for review with the Court of Appeals. On 12 February 1973, the appellate court, finding that the questioned check was not given as collateral to guarantee a loan secured by Dy et al. who allegedly came as a group to FERII on 13 September 1960, but passed through other hands before reaching FERII and the said check was not presented within a reasonable time and after its issuance, reversed the decision of the Court of First Instance. Its motion for reconsideration having been denied, FERII filed the petition for review.

Issue: Whether presentment for payment and notice of dishonor of the questioned check were made within reasonable time.

Held: NO. Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after issue, except that in

the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof. Notice may be given as soon as the is dishonored; and unless delay is excused must be given within the time fixed by the law. No hard and fast demarcation line can be drawn between what may be considered as a reasonable or an unreasonable time, because "reasonable time" depends upon the peculiar facts and circumstances in each case. "Reasonable time" has been defined as so much time as is necessary under the circumstances for a reasonable prudent and diligent man to do, conveniently, what the contract or duty requires should be done, having a regard for the rights and possibility of loss, if any, to the other party Herein, it is obvious that presentment and notice of dishonor were not made within a reasonable time. The check in question was issued on 13 September 1960, but was presented to the drawee bank only on 5 March 1964, and dishonored on the same date. After dishonor by the drawee bank, a formal notice of dishonor was made by FERII through a letter dated 27 April 1968. Under these circumstances, FERII undoubtedly failed to exercise prudence and diligence on what he ought to do as required by law. FERII likewise failed to show any justification for the unreasonable delay.

I nternational Corporate Bank vs. Gueco (351 SCRA516) 10 Dec FACTS:The respondents obtained a loan from the petitioner to purchase a motor vehicle (car). The respondents defaulted in payment of installments. A civil case was filed by the petitioner which resulted later into negotiations in lowering the remaining unpaid balance from P184,000.00 to P150,000.00, detaining the car until payment thereof. Respondent delivered a managers check but petitioner insisted on the signing of Joint Motion to Dismiss, still holding the motor vehicle. Respondent initiated civil action for damages before MTC but the case was dismissed for lack of merit. On appeal to RTC, the decision of MTC was reversed ordering herein petitioners to indemnify the respondents. The Court of Appeals likewise affirmed the decision of the RTC.ISSUE:Whether or not the respondents are entitled of indemnification for damages.RULING:NO. Petitioners act of requiring respondents to signthe Joint Motion to Dismiss can not be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. The law presumes good faith. In fact, the act of petitioner bank in lowering the debt of respondent fromP184,000.00 toP150,000.00 is indicative of its good faith and sincere desire to settle the case.The decision of the Court of Appeals affirming the decision of the RTC was set aside.Respondents were ordered to pay the original obligation amounting to P150,000.00 to the petitioner upon surrender or cancellation of the managers check in the latters possession, afterwhich, petitioner is to return the subject motor vehicle in good working condition.