1. PNB v. Picornell

Facts: Picornell bought bales of tobacco from PNB for an

amount of 39K and issued a bill payable 30 days after sight. The

tobacco was shipped and consigned. The bill was delivered with

the condition that the tobacco should not be delivered to HTV

except upon payment. The consigner of the tobacco delivered

directly to HTV without the knowledge of PNB which retained

the bill of lading of the tobacco. HTV communicated to Picornell

of the receipt of the tobacco that it is of no use and damaged.

Picornell replied and also communicated with PNB that the

payment of the bill be extended for another 30 days because of

the predicament, and the bank granted and HTV reaccepted the

terms of the payment herein. Two days after maturity, the

drawee, HTV, absolutely refused to pay the amount in the bill

for noncompliance of the contract by the drawer.

Issue: (1) Whether Picornell should pay alleging that he is an

agent of HTV YES (2) Whether the defense of want/partial

consideration is a proper defense to PNB NO

(1) The fact that Picornell was a commission agent of Hyndman,

Tavera & Ventura, in the purchase of the tobacco, does not

necessarily make him an agent of the company in its obligations

arising from the drawing of the bill by him. His acts in

negotiating the bill constitute a different contract from that

made by his having purchased the tobacco on behalf of

Hyndman, Tavera & Ventura. Furthermore, he cannot exempt

himself from responsibility by the fact of his having been a mere

agent of this company, because nothing to this effect was

indicated or added to his signature on signing the bill.

(2) Partial want of consideration, if it was, does not exist with

respect to the bank which paid to Picornell the full value of said

bill of exchange. The bank was a holder in due course, and was

such for value full and complete. The Hyndman, Tavera &

Ventura company cannot escape liability in view of section 28 of

the Negotiable Instruments Law. The drawee by acceptance

becomes liable to the payee or his indorsee, and also to the

drawer himself. But the drawer and acceptor are the immediate

parties to the consideration, and if the acceptance be without

consideration, the drawer cannot recover of the acceptor. The

payee holds a different relation; he is a stranger to the

transaction between the drawer and the acceptor, and is,

therefore, in a legal sense a remote party. In a suit by him

against the acceptor, the question as to the consideration

between the drawer and the acceptor cannot be inquired into.

The payee or holder gives value to the drawer, and if he is

ignorant of the equities between the drawer and the acceptor,

he is in the position on a bona fide indorsee. Hence, it is no

defense to a suit against the acceptor of a draft which has been

discounted, and upon which money has been advance by the

plaintiff, that the draft was accepted or the accommodation of

the drawer. Picornell, he warranted, as drawer of the bill, that it

would be accepted upon proper presentment and paid in due

course, and as it was not paid, he became liable to the payment

of its value to the holder PNB. Therefore, being secondarily

liable to HTV, Picornell should pay the bank.

2. People v. Maniego

Facts: CFI indicted Rizalino Ubay, Milagros Pamintuan, and Julia

Maniego. Rizalino Ubay is a disbursing officer of AFP, who has

the custody and control of public funds. He conspired with

Milagros Pamintuan and Julia Maniego. Pamintuan drawn a

check where Maniego was the indorser, encashed the check

with Ubay, they all fully know that said checks are worthless and

are not covered by funds in the aforementioned banks, for

which reason the same were dishonored and rejected by the

said banks when presented for encashment. Because of failure

to prove beyond reasonable doubt their crime of malversation,

they were just held civilly liable for the checks issued, which

herine appealed by Maniego.

Issue: Whether Maniego should be held civilly liable, after being

acquitted, and being merely an indorser of the check. YES, civilly

liable

Held: Appellant's contention that as mere indorser, she may not

be made liable on account of the dishonor of the checks

indorsed by her, is likewise untenable. Under the law, the

holder or last indorsee of a negotiable instrument has the right

to "enforce payment of the instrument for the full amount

thereof against all parties liable thereon." Among the "parties

liable thereon" is an indorser of the instrument i.e., "a person

placing his signature upon an instrument otherwise than as

maker, drawer, or acceptor ** unless he clearly indicates by

appropriate words his intention to be bound in some other

capacity. " Such an indorser "who indorses without

qualification," inter alia "engages that on due presentment, **

(the instrument) 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." Maniego may also be

deemed an "accommodation party" in the light of the facts, i.e.,

a person "who has signed the instrument as maker, drawer,

acceptor, or indorser, without receiving value therefor, and for

the purpose of lending his name to some other person." As

such, she is under the law "liable on the instrument to a holder

for value, notwithstanding such holder at the time of taking the

instrument knew ** (her) to be only an accommodation party,"

although she has the right, after paying the holder, to obtain

reimbursement from the party accommodated, "since the

relation between them is in effect that of principal and surety,

the accommodation party being the surety."

3. Ang Tiong v. Lorenzo Ting

Facts: Lorenzo Ting issued a PBCom check amounting to P4K,

payable to cash or bearer, with Felipe Angs signature

(indorsement in blank) at the back. It was received later on by

Ang Tiong, who presented it to the bank which was

subsequently dishonored. Ang Tiong made a written demand

with Felipe Ang and Ang Tiong to make good on the check, MTC

adjuged, and only Felipe Ang appealed.

Issue: Whether Felipe is liable being a general indorser and

guarantor should first go to the person primarily liable. Yes

Held: Art 2071 of the new Civil Code where "The guarantor,

even before been paid, may proceed against the principal

debtor; (1) when he is sued for the payment; . . . the action of

the guarantor is to obtain release from the guaranty, to demand

a security that shall protect him from any proceedings by the

creditor . . .," is here completely irrelevant and can have no

application. Nothing in the check in question indicates that the

appellant is not a general indorser within the purview of section

63 of the Negotiable Instruments Law which makes "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," which he did not do. And

section 66 ordains that "every indorser who indorses without

qualification, warrants to all subsequent holders in due course"

(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. In addition,

"he engages that on due presentment, it shall be accepted or

paid, or both, as the case may be, and that if it be dishonored,

he will pay the amount thereof to the holder." Even on the

assumption that the appellant is a mere accommodation party,

as he professes to be, he is nevertheless, by the clear mandate

of section 29 of the Negotiable Instruments Law, yet "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."

That the appellant, again 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 appellee, as the

said remedy is a matter of concern exclusively between

accommodation indorser and accommodated party. So that the

fact that the appellant stands only as a surety in relation to the

maker, granting this to be true for the sake of argument, is

immaterial to the claim of the appellee, and does not a whit

diminish nor defeat the rights of the latter who is a holder for

value. The liability of the appellant remains primary and

unconditional. To sanction the appellant's theory is to give

unwarranted legal recognition to the patent absurdity of a

situation where an indorser, when sued on an instrument by a

holder in due course and for value, can escape liability on his

indorsement by the convenient expedient of interposing the

defense that he is a mere accomodation indorser.

4. BDO v. Equitable Banking Corporation

Doctrine: Where the drawee having endorsed and of having

stamped its guarantee of "all prior endorsements and/or lack of

endorsements" is not estopped by virtue of warranty on the

said non-payment of the checks. Apropos the matter of forgery

in endorsements, this Court has succinctly emphasized that the

collecting bank or last endorser generally suffers the loss

because it has the duty to ascertain the genuineness of all prior

endorsements considering that the act of presenting the check

for payment to the drawee is an assertion that the party making

the presentment has done its duty to ascertain the genuineness

of the endorsements.

Facts: Plaintiff (BDO) drew 6 crossed Managers check totaling

an amount of 45K payable to certain member establishments of

Visa Card. The checks were subsequently deposited with

defendant (Equitable) to credit its certain depositor, a certain

Aida Trencio. All prior and/or lack of endorsement guaranteed

the defendant sent the checks for clearing through the

Philippine Clearing House Corporation (PCHC). Accordingly,

plaintiff paid the Checks; its clearing account was debited for

the value of the Checks and defendant's clearing account was

credited for the same amount. Following normal procedures,

and after stamping at the back of the Checks the usual

endorsements. All prior and/or lack of endorsement guaranteed

the defendant sent the checks for clearing through the PCHC.

Accordingly, plaintiff paid the Checks; its clearing account was

debited for the value of the Checks and defendant's clearing

account was credited for the same amount.

Thereafter, plaintiff discovered that the endorsements

appearing at the back of the Checks and purporting to be that of

the payees were forged and/or unauthorized or otherwise

belong to persons other than the payees.

BDO presented the Checks directly to the defendant for the

purpose of claiming reimbursement from the latter. However,

defendant refused to accept such direct presentation and to

reimburse the plaintiff for the value of the Checks; hence, this

case. It was first put into arbitration, which sided with BDO.

Issue/Held:

1. Whether the crossed manager check is a non-negotiable

instrument (yes non-negotiable siya) and such should not be

under the jurisdiction of PCHC Arbitration law does not

qualify therefore courts should not qualify

Four kinds of checks in this jurisdiction; the regular check; the

cashier's check; the traveller's check; and the crossed check.

The Court, further elucidated, that while the Negotiable

Instruments Law does not contain any provision on crossed

checks, it is coon practice in commercial and banking operations

to issue checks of this character, obviously in accordance with

Article 541 of the Code of Commerce.

Sec. 185. Check defined. A check is a bill of exchange drawn

on a bank payable on demand. Except as herein otherwise

provided, the provisions of this act applicable to a bill of

exchange payable on demand apply to a check

Also under Arbitration Law, Sec. 21 says, Items which have been

the subject of material alteration or items bearing forged

endorsement when such endorsement is necessary for

negotiation shall be returned by direct presentation or demand

to the Presenting Bank and not through the regular clearing

house facilities within the period prescribed by law for the filing

of a legal action by the returning bank/branch, institution or

entity sending the same.

Viewing these provisions the conclusion is clear that the PCHC

Rules and Regulations should not be interpreted to be

applicable only to checks which are negotiable instruments but

also to non-negotiable instruments and that the PCHC has

jurisdiction over this case even as the checks subject of this

litigation are admittedly non-negotiable.

Moreover, petitioner is estopped from raising the defense of

non-negotiability of the checks in question. It stamped its

guarantee on the back of the checks and subsequently

presented these checks for clearing and it was on the basis of

these endorsements by the petitioner that the proceeds were

credited in its clearing account.

The petitioner by its own acts and representation can not now

deny liability because it assumed the liabilities of an endorser by

stamping its guarantee at the back of the checks.

2. Whether Equitable should be liable for being an endorser

and drawer of the check YES

In presenting the Checks for clearing and for payment, the

defendant made an express guarantee on the validity of "all

prior endorsements." Thus, stamped at the back of the checks

are the defendant's clear warranty; ALL PRIOR ENDORSEMENTS

AND/OR LACK OF ENDORSEMENTS GUARANTEED. Without such

warranty, plaintiff would not have paid on the checks.

No amount of legal jargon can reverse the clear meaning of

defendant's warranty. As the warranty has proven to be false

and inaccurate, the defendant is liable for any damage arising

out of the falsity of its representation.

The principle of estoppel, effectively prevents the defendant

from denying liability for any damage sustained by the plaintiff

which, relying upon an action or declaration of the defendant,

paid on the Checks. The same principle of estoppel effectively

prevents the defendant from denying the existence of the

Checks.

Where a check is accepted or certified by the bank on which it is

drawn, the bank is estopped to deny the genuineness of the

drawers signature and his capacity to issue the instrument.

If a drawee bank pays a forged check which was previously

accepted or certified by the said bank, it can not recover from a

holder who did not participate in the forgery and did not have

actual notice thereof.

The payment of a check does not include or imply its

acceptance in the sense that this word is used in Section 62 of

the Negotiable Instruments Act.

3. Whether Drawer (Trenecio) owes duty to BDO (collecting

bank) NONE

The real and underlying reasons why negligence of the drawer

constitutes no defense to the collecting bank are that there is

no privity between the drawer and the collecting bank and the

drawer owe to that bank no duty of vigilance and no act of the

collecting bank is induced by any act or representation or

admission of the drawer. And it follows that negligence on the

part of the drawer cannot create any liability from it to the

collecting bank, and the drawer thus is neither a necessary nor a

proper party to an action by the drawee bank against such bank.

It is quite true that depositors in banks are under the obligation

of examining their passbooks and returned vouchers as a

protection against the payment by the depository bank against

forged checks, and negligence in the performance of that

obligation may relieve that bank of liability for the repayment of

amounts paid out on forged checks, which but for such

negligence it would be bound to repay.

Thus Court holds that while the drawer generally owes no duty

of diligence to the collecting bank, the law imposes a duty of

diligence on the collecting bank to scrutinize 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 and the law

holds it to a high standard of conduct.

And although the subject checks are non-negotiable the

responsibility of petitioner as indorser thereof remains.

5. Associated Bank v. CA

Provincial Funds / duty of collecting bank / retired cashier The

Province of Tarlac maintained an account w/ PNB. It issued checks

in favor of Concepcion Emergency Hospital, or the Chief thereof.

Tarlac released the checks to Pangilinan, its retired cashier.

Pangilinan forged the indorsement of the hospital chief, deposited

the checks to his personal account w/ Associated Bank, w/c

guaranteed all prior endorsements. PNB cleared the checks; thus

Pangilinan was able to withdraw the amounts. Tarlac now seeks to

recover both from PNB, w/c then seeks to recover from Associated

Bank.

Tarlac must bear half the losses because it acted negligently in

allowing Pangilinan, a retired cashier for 3 years, to handle the

checks. The PNB must be held liable for breaching its obligation

to Tarlac to pay only the latters intended payees however, it may

recover from Associated Bank. The collecting bank, as last endorser,

generally suffers the loss because it is its duty to ascertain and

guarantee the genuineness of all prior indorsements. PNB is duty

bound only to ascertain the signature of its depositor, but it may

rely upon the guarantee of Associated Bank w/ regard to the

genuineness of the indorsements. The other half of the liability thus

devolves upon Associated Bank. PNB is also not guilty of

unreasonable delay. Even though it was unable to return the checks

w/in 24 hours as per CB Circular 580, it promptly informed

Associated Bank w/c was not prejudiced in going after Pangilinan.