Assignment Case #2.docx

Caltex vs CA FACTS: Security Bank and Trust Co. issued 280 certificates of time deposit (CTD) in favor of one Mr. Angel dela Cruz who deposited with the bank P1.12 million. Dela Cruz delivered the CTDs to Caltex in connection with his purchase of fuel products from the latter. Subsequently, dela Cruz informed the bank that he lost all the CTDs, and thus executed an affidavit of loss to facilitate the issuance of the replacement CTDs. When Caltex presented said CTDs for verification with the bank and formally informed the bank of its decision to preterminate 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: Whether the Certificates of Time Deposit (CTDs) are negotiable instruments. RULING: 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. **The accepted rule is that the negotiability or non-negotiability of an instrument is determined from the writing, that is, from the face of the instrument itself. 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. Banco de Oro Savings and Mortgage Bank vs Equitable Banking Corporation Facts: Equitable Banking Corp. drew 6 crossed Manager’s Check payable to certain member of its establishment. Subsequently, the Checks were deposited with Banco de Oro to the credit of its depositor, a certain Aida Trencio. Following the normal procedures, and after stamping at the back of the of the Checks the usual endorsements: “All prior and/or lack of endorsement guaranteed,” Banco de Oro sent the checks

for clearing through PCHC. Accordingly, Equitable Banking Corp. paid the Checks. Its clearing account was debited for the value of the Checks and Banco de Oro’s clearing account was credited for the same amount. Thereafter, Equitable Banking Corp. discovered that the endorsements at the back of the Checks were forged or otherwise belong to the persons other than the payees. Pursuant to the PCHC Clearing Rules and Regulations, Equitable Bank presented the checks directly to the Banco de Oro to claim reimbursement. However, the latter refused. Issue: 1.) 2.)

3.)

Were the subject Checks non-negotiable? Is the Negotiable Instruments Law applicable in deciding controversies of this nature by the PCHC? Was Banco de Oro negligent and thus responsible for any undue payment? Ratio decidendi:

1.)

Banco de Oro by its own acts, stamped its guarantee is now estopped from claiming that the checks under consideration are not negotiable instruments. The Checks were accepted for deposit by Banco de Oro stamping thereon its guarantee, in order that it can clear said Checks with Equitable Banking Corp. By such deliberate and positive attitude of Banco de Oro, it has for all legal intents and purposes treated the said Checks as negotiable instruments and accordingly assumed the warranty of the endorser when it stamped its guarantee of prior endorsement at the back.

2.)

The participation of the two banks in the clearing operation of PCHC is a manifestation of their submission to its jurisdiction.

3.)

Although the subject Checks are non-negotiable, the responsibility of petitioner as endorser thereof remains. While the drawer generally owes no duty of diligence to the collecting banks, the law imposes a duty of diligence in 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. PHILIPPINE BANK OF COMMERCE vs. ARUEGO Facts: Jose Aruego obtained a credit accommodation from the Philippine Bank of Commerce to facilitate the payment of printing of “World Current Events”, the periodical he is publishing. Thus,

for every printing of the periodical, the printer, Encal Press and Photo Engraving, collected the cost of printing by drawing a draft against the plaintiff, said draft being sent later to the defendant for acceptance. As an added security for the payment of the amounts advanced to Encal Press and Photo-Engraving, the plaintiff bank also required defendant Aruego to execute a trust receipt in favor of said bank wherein said defendant undertook to hold in trust for plaintiff the periodicals and to sell the same with the promise to turn over to the plaintiff the proceeds of the sale of said publication to answer for the payment of all obligations arising from the draft. The Philippine Bank of Commerce instituted an action against Aruego to recover the cost of printing of the latter’s periodical. Aruego however argues that he signed the supposed bills of exchange only as an agent of the Philippine Education Foundation Company where he is president. Issue: Whether Aruego can be held liable by the petitioner although he signed the supposed bills of exchange only as an agent of Philippine Education Foundation Company. Held: Yes. Aruego did not disclose in any of the drafts that he accepted that he was signing as representative of the Philippine Education Foundation Company. Aruego contends that he signed the supposed bills of exchange as an agent of the Philippine Education Foundation Company where he is president. Section 20 of the Negotiable Instruments Law provides that "Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filing a representative character, without disclosing his principal, does not exempt him from personal liability." An inspection of the drafts accepted by the defendant shows that nowhere has he disclosed that he was signing as a representative of the Philippine Education Foundation Company. He merely signed as follows: "JOSE ARUEGO (Acceptor) (SGD) JOSE ARGUEGO For failure to disclose his principal, Aruego is personally liable for the drafts he accepted. METROPOLITAN BANK V. CA FACTS: Gomez opened an account with Golden Savings bank and deposited 38 treasury warrants. All these warrants were indorsed by the cashier of Golden Savings, and deposited it to the savings account in a Metrobank branch. They were sent later on for clearing by the branch office to the principal office of Metrobank, which forwarded them to the Bureau of Treasury for special clearing. On persistent inquiries on whether the warrants have been cleared, the branch manager allowed withdrawal of the warrants, only to find out later on that the treasury warrants have been dishonored. Issue: Whether the treasure warrants are negotiable instruments HELD: No, The treasury warrants were not negotiable instruments. Clearly, it is indicated that it was non-negotiable and of equal significance is the indication that they are payable from a particular fund, Fund 501. This indication as the source of payment to

be made on the treasury warrant makes the promise to pay conditional and the warrants themselves non-negotiable. Metrobank then cannot contend that by indorsing the warrants in general, GS assumed that they were genuine and in all respects what they purport it to be, in accordance to Section 66 of the NIL. The simple reason is that the law isn’t applicable to the non-negotiable treasury warrants. The indorsement was made for the purpose of merely depositing them with Metrobank for clearing. It was in fact Metrobank which stamped on the back of the warrants: “All prior indorsements and/or lack of endorsements guaranteed…” Palanca v. CA Facts: On January 22, 1977, petitioner, as vendor, and Jose S. Sanicas, as vendee, entered into a Contract to Sell on Installment of a parcel of land. Private respondent agreed to pay petitioner the amount of P9,851.00 as downpayment and the balance of P88,659.00 in 120 monthly installments with 14% interest per annum on the outstanding balance. Sanicas further agreed to pay the annual real property taxes, and that should he fail to pay the said taxes, he would have to pay a yearly surcharge or penalty of 50% of the taxes due plus 12% compounded interest per annum. Sanicas later assumed the account of his brother Jose and he designated the latter as his authorized representative in dealing with petitioner. Private respondent requested a detailed statement, but petitioner failed to furnish him with the statement. Private respondent hired an accountant to compute his obligations under the contract. Thereafter, he tendered the amount of P44,955.87 in cash upon petitioner, which amount included interest at 12% per annum. Petitioner, however, refused to receive the amount tendered, prompting private respondent to make a judicial consignment of the amount on May 29, 1987. Applying Article 1250 of the New Civil Code, the trial court ruled that for an agreement providing for the adjustment of the purchase price in case of a diminution of the value of the peso to come into effect, there should be an "extraordinary inflation or deflation." It was the position of the trial court that in as much as there was no extraordinary inflation or deflation, paragraph 11 of the contract should not be considered in the computation of the amount payable under the contract. Furthermore, the trial court ruled that it was unconscionable to peg the unpaid balance in the event of monetary fluctuation at 100.398% aside from the agreed interest rate of 14%. Petitioner appealed to the Court of Appeals wherein CA modified the judgment of the trial court. Issue:Whether or not petitioner is entitled to a proportionate increase in payment on the balance of the purchase price for a piece of real property bought on installment, pursuant to paragraph 11 of the subject Contract To Sell on Installment. Held: Petition is denied. In the case at bench, the clear understanding of the parties is that there should be an upward adjustment of the purchase price the moment there is a deterioration of the

Philippine peso vis-a-vis the U.S. dollar. This is the "monetary fluctuation" contemplated by them as would justify the adjustment. Under this scenario, it is an idle task to determine whether the contract has been visited by an "extraordinary inflation" as to trigger the operation of Article 1250. While the contract may contain an "escalator clause" providing that in the occurrence of certain events, the contract price shall be increased to a fixed percentage of the base price ("Escalator" price adjustment clauses, 63 ALR 2d 1337 [1959], still the autonomy of the parties to provide such escalator clauses may be limited by law. The stipulation of the parties is in violation of R.A. No. 529, as amended, entitled "An Act to Assure Uniform Value To Philippine Coin and Currency," otherwise as the Cuenco Law. Central Bank Circular cannot repeal a law. Only a law can repeal another law. Article 7 of the Civil Code of the Philippines provides: Laws are repealed only by subsequent ones and their violation or non-observance shall not be excused by disuse, or custom or practice to the contrary. Ang Tek Lian vs CA In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He said that he meant to withdraw from the bank but the bank is already closed. In exchange, he gave Lee Hua a check which is “payable to the order of ‘cash’”. The next day, Lee Hua presented the check for payment, but it was dishonored due to insufficiency of funds. Lee Hua eventually sued Ang Tek Lian. In his defense, Ang Tek Lian argued that he did not indorse the check to Lee Hua and that when the latter accepted the check without Ang tek Lian’s indorsement, he had done so fully aware of the risk he was running thereby. ISSUE: Whether or not Ang Tek Lian is correct. HELD: No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to the order of “cash” is a check payable to bearer hence a bearer instrument, and the bank may pay it to the person presenting it for payment without the drawer’s indorsement. Where a check is made payable to the order of ‘cash’, the word “cash” does not purport to be the name of any person, and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it to the person presenting it without any indorsement.