Compile-nego.docx

Asian Bank Corporation vs Juan Javier Facts: 

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2 PNB checks was drew by Salvador Chavez in favor of La Insular. The checks were indorsed by the limited partner of La Insular, and then the checks were deposited by Chavez in his account with the plaintiff, Asian Bank. The amount represented by both checks was used by Salvador B. Chaves after they were deposited in the plaintiff bank, by drawing checks on the plaintiff. The checks were presented by plaintiff to PNB but the latter dishonored it on the ground of no funds. Plaintiff filed a case against Defendant, as indorser, for the payment of the value of the checks.

RTC – ruled in favor of plaintiff. Issue: W/N the liability of the defendant as indorser arise. Held: No Law: Section 89 of the Negotiable Instruments Law (Act No.2031) provides that, when a negotiable instrument is dishonored for non-acceptance or non-payment, notice thereof must be given to the drawer and each of the indorsers, and those who are not notified shall be discharged from liability, except where this act provides otherwise. According to this, the indorsers are not liable unless they are notified that the document was dishonored. Then, under the general principle of the law of -procedure, it will be incumbent upon the plaintiff, who seeks to enforce the defendant's liability upon these checks as indorser, to establish said liability by proving that notice was given to the defendant within the time, and in the manner, required by the law that the checks in question had been dishonored. If these facts are not proven, the plaintiff has not sufficiently established the defendant's liability. There is no proof in the record tending to show that plaintiff gave any notice whatsoever to the defendant that the checks in question had been dishonored, and therefore it has not established its cause of action.

Montinola vs. PNB

But when an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce payment thereof according to its original tenor.

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Held: YES. Ubaldo Laya, Provincial Treasurer of Misamis Oriental, an ex officio agent of PNB and his assistant is Mariano Ramos Laya inducted his assistant, Ramos, as a distributing officer of USAFFE (United states Armed Forces in the Far East). Ramos went to Lanao to get P800K from Pedro Encarnation, Provincial Treasure of Lanao. Pedro gave Ramos an emergency notes amounting to P300K and a check amounting to 500K. After that, Ramos went to Laya to encashed the check. Laya gave Ramos a check amounting to P100K (Instrument in dispute) and an emergency notes amounting to P400K. Ramos did not encashed the check because he was captured by the Japanese. He was only released on Feb 12, 1943. About Dec. of 1944 Ramos allegedly indorsed the check to Montinola.

Montinola’s Version   

Ramos needs money to buy food and medicine. Ramos offered the check to him. Ramos also guarantee that the check was genuine. They also went to verify the said check, and the check was verified that the check is genuine. They agreed that Montinola will pay Ramos the amount of P850K which the former will pay in installment. The check was indorsed to him by Ramos. At the back of the check it appears: o The endorsement now appearing at the back of the check (see Exhibit A-1) may be described as follows: The woods, "pay to the order of" — in rubber stamp and in violet color are placed about one inch from the top. This is followed by the words "Enrique P. Montinola" in typewriting which is approximately 5/8 an inch below the stamped words "pay to the order of". Below "Enrique P. Montinola", in typewriting are words and figures also in typewriting, "517 Isabel Street" and about ¹/8 of an inch therefrom, the edges of the check appear to have been burned, but there are words stamped apparently in rubber stamp which, according to Montinola, are a facsimile of the signature of Ramos. There is a signature which apparently reads "M. V. Ramos" also in green ink but made in handwriting."

Ramos’ defense that he only sell P30K of the check to Montinola. At the back of the check : Pay to the order of Enrique P. Montinola P30,000 only. The balance to be deposited in the Philippine National Bank to the credit of M. V. Ramos. Montinola filed a complaint. He alleged that the check was lost and he only presented a photocopy of it. However, during trial Montinola present the said check in dispute. The check was in bad condition because it was mutilated, burn, bottled, and partly burned. Montinola explained why the check was in a bad condition. Ramos threatened Montinola, and the former want the check to be returned. As a result of it, Montinola mutilate the check. Trial Court dismissed the complaint. Issue: W/N there is material alteration which discharge the instrument. Sec. 124 of NIL: Alteration of instrument; effect of. - Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration and subsequent indorsers.

Laya, testifying in court, stated that he issued the check only as Provincial Treasurer, and that the words in parenthesis "Agent, Phil. National Bank" now appearing under his signature did not appear on the check when he issued the same. In this he was corroborated by the payee M. V. Ramos who equally assured the court that when he received the check and then delivered it to Montinola, those words did not appear under the signature of Ubaldo D. Laya. according to Laya, when he issued check in his capacity as agent of the Misamis Oriental agency of the Philippine National Bank the said check must be countersigned by the cashier of the said agency — not by the provincial auditor. He also testified that the said check was issued by him in his capacity as provincial treasurer of Misamis Oriental and that is why the same was countersigned by Provincial Auditor Flores. The Provincial Auditor at that time had no connection in any capacity with the Misamis Oriental agency of the Philippine National Bank. Plaintiff Montinola on the other hand testified that when he received the check it already bore the words "Agent, Phil. National Bank" below the signature of Laya and the printed words "Provincial Treasurer" From all the foregoing, we may safely conclude as we do that the words "Agent, Phil. National Bank" now appearing on the face of the check were added or placed in the instrument after it was issued by Provincial Treasurer Laya to M. V. Ramos. There is no reason known to us why Provincial Treasurer Laya should issue the check as agent of the Philippine National Bank. Said check for P100,000 was issued to complete the payment of the other check for P500,000 issued by the Provincial Treasurer of Lanao to Ramos, as part of the advance funds for the USAFFE in Cagayan de Misamis. The balance of P400,000 in cash was paid to Ramos by Laya from the funds, not of the bank but of the Provincial Treasury. Said USAFFE were being financed not by the Bank but by the Government and, presumably, one of the reasons for the issuance of the emergency notes in Mindanao was for this purpose. As already stated, according to Provincial Treasurer Laya, upon receiving a relatively considerable amount of these emergency notes for his office, he deposited P500,000 of said currency in the Philippine National Bank branch in Cebu, and that in issuing the check he expected to have it cashed at said Cebu bank branch against his deposit of P500,000. The court concluded that the check was issued by Laya as an Provincial Treasurer of Misamis Oriental for the advance funds of USAFFE and PNB has no obligation to do so.

METROPOL v. SAMBOK MOTORS G.R. NO. L-39641

February 28, 1983

FACTS: Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd., in the amount of P15,939.00 payable in twelve (12) equal monthly installments. On the same date, Sambok Motors Company (hereinafter referred to as Sambok), a sister company of Ng Sambok Sons Motors Co., Ltd., and under the same management as the former, negotiated and indorsed the note in favor of plaintiff Metropol Financing & Investment Corporation with the following indorsement: Pay to the order of Metropol Bacolod Financing & Investment Corporation with recourse. Notice of Demand; Dishonor; Protest; and Presentment are hereby waived. SAMBOK MOTORS CO. (BACOLOD) By:

note "with recourse" and even waived the notice of demand, dishonor, protest and presentment. "Recourse" means resort to a person who is secondarily liable after the default of the person who is primarily liable. 3 Appellant, by indorsing the note "with recourse" does not make itself a qualified indorser but a general indorser who is secondarily liable, because by such indorsement, it agreed that if Dr. Villaruel fails to pay the note, plaintiffappellee can go after said appellant. The effect of such indorsement is that the note was indorsed without qualification. A person who indorses without qualification engages that on due presentment, the note 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. 4 Appellant Sambok's intention of indorsing the note without qualification is made even more apparent by the fact that the notice of demand, dishonor, protest and presentment were an waived. The words added by said appellant do not limit his liability, but rather confirm his obligation as a general indorser. Lastly, the lower court did not err in not declaring appellant as only secondarily liable because after an instrument is dishonored by non-payment, the person secondarily liable thereon ceases to be such and becomes a principal debtor. His liabiliy becomes the same as that of the original obligor. Consequently, the holder need not even proceed against the maker before suing the indorser.

RODOLFO G. NONILLO Asst. General Manager Dr. Villaruel defaulted in the payment of the obligation when it became due so the plaintiff formally presented the promissory notes for payment to the maker. Dr. Villaruel failed to pay the promissory note as demanded, hence plaintiff notified Sambok as indorsee of said note of the fact that the same has been dishonored and demanded payment.

2) YES. As earlier noted, the plaintiff notified Sambok as indorsee of said note of the fact that the same has been dishonored and demanded payment but Sambok failed to pay. After an instrument is dishonored by non-payment, the person secondarily liable thereon ceases to be such and becomes a principal debtor. His liability becomes the same as that of the original obligor. RELEVANT PROVISIONS:

ISSUES: 1) 2)

WON Sambok is liable for the dishonored note and that by adding the words “with recourse” in the indorsement, it became a general indorser? WON the respondent’s notice of dishonor was sufficient in the case?

PARTIES: Dr. Villaruel – maker (deceased) Metropol – Payee Sambok Motors – Indorser INSTRUMENT: Promissory Note HELD: 1) YES. A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. 2 Such an indorsement relieves the indorser of the general obligation to pay if the instrument is dishonored but not of the liability arising from warranties on the instrument as provided in Section 65 of the Negotiable Instruments Law already mentioned herein. However, appellant Sambok indorsed the

Sec. 96 of NIL. Form of notice. - The notice may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument, and indicate that it has been dishonored by non-acceptance or non-payment. It may in all cases be given by delivering it personally or through the mails.

AMERICAN BANK v. MACONDRAY & CO. G.R. NO. 1808 August 23, 1905

exchange, and all the expenses, damages, and interest sustained, or that will be sustained, by reason of the nonpayment an dishonor of said bill of exchange.

FACTS:

ISSUES:

This was an action by the plaintiff against the defendant Macondray & Co. as indorser and V. S. Wolff as drawer of a certain bill of exchange, which, as set out in the complaint of the plaintiff, is as follows:

The question presented in this case is whether or not Macondray & Co. is liable upon said bill of exchange as an indorser after it was duly protested for nonpayment.

MANILA, P. I., August 12, 1902.

PARTIES: American Bank - Drawee V.S. Wolff - Drawer Macondray & Co. – Indorser

$300.00 At sight pay to my order three hundred dollars, value received, and charge to my account.

INSTRUMENT: Bill of Exchange V. S. WOLFF. RULING: To F. H. TAYLOR & Co., Louisville, Kentucky. No ................................ [Indorsements.] V. S. Wolff. The signature is O. K. payment guaranteed. Protest, demand, and notice of nonpayment waived. Macondray & Company. Pay to First National Bank of San Francisco, or order. American Bank, Manila, P. I. H. B. Mulford, cashier. Pay to 3rd National Bank or order. The First National Bank of San Francisco. James K. Lynch, cashier. This alleged bill of exchange, in the alleged form as it appears above was sent to the correspondent of the said American Bank in the United States for payment, which payment was not made for the reasons which appear in the protest made by a notary public in the United States, and which is as follows: State of Kentucky, City of Louisville, Jefferson County } ss. On this 25th day of September, 1902, I. C. W. Dieruff, notary public, duly authorized and appointed as such, and residing in the city of Louisville, at the petition of the Third National Bank of Louisville, Kentucky, went with the original bill of exchange, a true copy of which is hereto annexed, and made a diligent search for said F. H. Taylor & Company, in order to demand payment of the same, but I was unable to find said F. H. Taylor & Company, nor a representative of said company with authority to pay the same. I went also to various banks and demanded payment, which was denied. Therefore, I, the said notary public, have protested and for these reasons do solemnly protest against the drawer, indorser, and against all other persons, for the exchange, re-

NO. An examination of the alleged indorsement of Macondray & Co. which appeared upon the said bill of exchange at the time of the trial, and the indorsement of said company at the time of the trial, and the indorsement of said company at the time of the protest of said bill of exchange, shows beyond peradventure of doubt that the contention of the defendant is true, and that part of the indorsement which says "Payment guaranteed. Protest, demand, and notice of nonpayment waived" was added by some person after the signature of the defendant, Macondray & Co., and after the protest of said bill. We therefore hold that the indorsement made by Macondray & Co. was changed, after said indorsement by said company, by adding thereto the statement "Payment guaranteed. Protest, demand, and notice of nonpayment waived," and that the indorsement actually made by Macondray & Co. was in the following form: V. S. Wolff. The signature is O. K. Macondray & Co. The liability of an indorser of a bill of exchange, after due protest and notice of nonpayment and dishonor, is the same as that of the original obligors on such a contract, and any material alteration in the terms of this contract by the holder of the same, without the consent of the obligor, will relieve such obligor from all liability thereon. Notwithstanding that the defendant is relieved from liability by reason of this material alteration in his indorsement, we hold that his original indorsement created no liability whatever. The original indorsement by the defendant was for the purpose only of assuring the plaintiff that the signature of V. S. Wolff, as attached to the original bill of exchange, was genuine — that is to say, that the person who signed the said bill of exchange was in fact V. S. Wolff, the person whom he represented himself to be. It was an indorsement for identification of the person only, and not for the purpose of incurring any liability as to the payment of such bill of exchange.

PNB v. CA G.R. NO. 107508

April 25, 1996

HELD: 1)

FACTS: A check with serial number 7-3666-223-3 in the amount of P97,650.00 was issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports [DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank (herein petitioner). On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol), deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the check to petitioner for clearing.

The case at bench is unique in the sense that what was altered is the serial number of the check in question, an item which, it can readily be observed, is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. The aforementioned alteration did not change the relations between the parties. The name of the drawer and the drawee were not altered. The intended payee was the same. The sum of money due to the payee remained the same.

Petitioner cleared the check as good and, thereafter, PBCom credited Capitol's account for the amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom and debited PBCom's account for the amount covered by the check, the reason being that there was a "material alteration" of the check number.

The check's serial number is not the sole indication of its origin. As succinctly found by the Court of Appeals, the name of the government agency which issued the subject check was prominently printed therein. The check's issuer was therefore sufficiently identified, rendering the referral to the serial number redundant and inconsequential.

On the other hand, Capitol could not, in turn, debit F. Abante Marketing's account since the latter had already withdrawn the amount of the check as of October 15, 1981. Capitol sought clarification from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an explanation and re-crediting from petitioner. RTC Decision – Abante Marketing to reimburse PNB; PNB to reimburse PBCom; PBCom to reimburse Capitol CA – PBCom was exempted from liabilities and ordered PNB to honor the check. After the check shall have been honored by PNB, PBCom shall re-credit Capitol’s (Bank) account with the amount. ISSUES: 1) 2)

WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS A MATERIAL ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW. WHETHER OR NOT THE DRAWEE BANK MAY STILL RECOVER THE VALUE OF THE CHECK FROM THE COLLECTING BANK EVEN IF IT FAILED TO RETURN THE CHECK WITHIN THE 24-HOUR CLEARING PERIOD BECAUSE THE CHECK WAS TAMPERED.

PARTIES: DECS – Drawer Abante Marketing – Payee Capitol – Collecting Bank PBCom – Collecting Agent (of the collecting Bank) PNB – Drawee Bank INSTRUMENT: Promissory Note ACTION: Reimbursement/Indemnity

NO. An alteration is said to be material if it alters the effect of the instrument. It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party.8 In other words, a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law.

Petitioner, thus cannot refuse to accept the check in question on the ground that the serial number was altered, the same being an immaterial or innocent one. 2)

NO. Suffice it to state that since there is no material alteration in the check, petitioner has no right to dishonor it and return it to PBCom, the same being in all respects negotiable.

RELEVANT PROVISIONS: Sec. 125. What constitutes material alteration. Any alteration which changes: (a) The date; (b) The sum payable, either for principal or interest; (c) The time or place of payment; (d) The number or the relations of the parties; (e) The medium or currency in which payment is to be made; (f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

LIM LAO V PEOPLE OF THE PHILIPPINES

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GR NO 119178

FACTS:

Petitioner Lina Lim Lao was not in any way involved in the completion, and the subsequent delivery of the check to private complainant Palijo.

PROSECUTION  

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Lim Lao is a junior officer of Premiere Investment House in Binondo o As such officer, she was authorized to sign checks for and in behalf of the corporation In the course of the business, she met complainant Father Artelijo Pelijo, the provincial treasurer of the Society of the Divine Word

Father Palijo was authorized to invest donations to the society and had been investing the societys money with Premiere o Father Palijo had invested a total of P514,484.04, as evidenced by the Confirmation of Sale No. 82-6994 Father Palijo was also issued Traders Royal Bank (TRB) checks in payment of interest All the checks were issued in favor of Artelijo A. Palijo and signed by appellant and Teodulo Asprec, who was the head of operations. o Further evidence of the transaction was the acknowledgment of postdated checks dated July 8, 1983 (Exh . D) and the cash disbursement voucher

When Father Palijo presented the checks for encashment, the same were dishonored for the reason Drawn Against Insufficient Funds 

When the checks were co-signed by petitioner, they were signed in advance and in blank, delivered to the Head of Operations, Mr. Teodulo Asprec, who subsequently filled in the names of the payee, the amounts and the corresponding dates of maturity. After Mr. Asprec signed the checks, they were delivered to private complainant Palijo

Father Palijo immediately made demands on premiere to pay him the necessary amounts o For his efforts he was paid P5,000.00. o Since no other payments followed, Father Palijo wrote Premiere a formal letter of demand.

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At the time petitioner signed the checks, she had no knowledge of the sufficiency or insufficiency of the funds of the corporate account. It was not within her powers, duties or responsibilities to monitor and assess the balances against the issuance; much less was it within her to make sure that the checks were funded. Premiere Financing Corporation had a Treasury Department headed by a Treasurer, Ms. Veronilyn Ocampo, which alone had access to information as to account balances and which alone was responsible for funding the issued checks

When the checks were subsequently dishonored, private complainant sent a notice of said dishonor to Premier Financing Corporation at its head office in Cubao, Quezon City not to petitioner.  

Never contacted, never informed, and never talked with, petitioner after the checks had bounced The dishonor of the check came in the wake of the assassination of the late Sen. Benigno Aquino, as a consequence of which event a majority of the corporations clients pre-terminated their investments

Despite the Treasury Departments and (Ms. Ocampos) knowledge of the dishonor of the checks, however, the main office in Cubao, Quezon City never informed petitioner Lina Lim Lao or anybody in the Binondo office for that matter. 

In her testimony, she justified her omission by saying that the checks were actually the responsibility of the main office

ISSUE: Private Complainant Palijo filed an affidavit-complaint against Petitioner Lina Lim Lao and Teodulo Asprec for violation of B.P. 22 

Three Information charging Lao and Asprec with the offense defined in the first paragraph of Section 1, B.P. 22 were filed by Assistant Fiscal Felix S. Caballes before the trial court on May 11, 1984

(1) (2)

WON lack of actual knowledge of insufficiency of funds was not a defense in a prosecution for violation of B.P. 22. WON the notice of dishonor sent to the main office not to the petitioner herself who holds office in that corporations branch office, does not constitute the notice mandated in Section 2 of BP 22

DEFENSE 

The checks were issued to guarantee payment of investments placed by private complainant Palijo with Premiere Financing Corporation

In his transactions with the corporation, private complainant dealt exclusively with one Rosemarie Lachenal, a trader connected with the corporation, and he never knew nor in any way dealt with petitioner Lina Lim Lao

HELD:

This Court listed the elements of the offense penalized under B.P. 22, as follows: (1) the making, drawing and issuance of any check to apply to account or for value;

(2) the knowledge of the maker, drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment; and (3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment

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The fact alone that petitioner was a signatory to the checks that were subsequently dishonored merely engenders the prima facie presumption that she knew of the insufficiency of funds, but it does not render her automatically guilty under B.P. 22. o However, the prosecution has the duty to prove all the elements of the crime

After a thorough review of the case at bar, the Court finds that Petitioner Lina Lim Lao did not have actual knowledge of the insufficiency of funds in the corporate accounts at the time she affixed her signature to the checks involved in this case, o at the time the same were issued, and o even at the time the checks were subsequently dishonored by the drawee bank The scope of petitioners duties and responsibilities did not encompass the funding of the corporations checks; her duties were limited to the marketing department of the Binondo branch Funding of checks was the sole responsibility of the Treasury Department. Veronilyn Ocampo, former Treasurer of Premiere Petitioner Lina Lim Lao was often out in the field taking charge of the marketing department of the Binondo branch, she signed the checks in blank as to name of the payee and the amount to be drawn, and without knowledge of the transaction for which they were issued. Petitioner did not have any knowledge either of the identity of the payee or the transaction which gave rise to the issuance of the checks It was her co-signatory, Teodulo Asprec, who alone filled in the blanks, completed and issued the checks.

AS TO THE NOTICE OF DISHONOR

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There can be no prima facie evidence of knowledge of insufficiency of funds in the instant case because no notice of dishonor was actually sent to or received by the petitioner.

The notice of dishonor may be sent by the offended party or the drawee bank.

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The records show that the notice of dishonor was addressed to Premiere Financing Corporation and sent to its main office in Cubao, Quezon City. The same had not been transmitted to Premieres Binondo Office where petitioner had been holding office. Likewise no notice of dishonor from the offended party was actually sent to or received by Petitioner Lao.

Because no notice of dishonor was actually sent to and received by the petitioner, the prima facie presumption that she knew about the insufficiency of funds cannot apply.

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Section 2 of B.P. 22 clearly provides that this presumption arises not from the mere fact of drawing, making and issuing a bum check; There must also be a showing that, within five banking days from receipt of the notice of dishonor, such maker or drawer failed to pay the holder of the check the amount due thereon or to make arrangement for its payment in full by the drawee of such check

Premiere has no obligation to forward the notice addressed to it to the employee concerned, especially because the corporation itself incurs no criminal liability under B.P. 22 for the issuance of a bouncing check.  

Responsibility under B.P. 22 is personal to the accused; hence, personal knowledge of the notice of dishonor is necessary Constructive notice to the corporation is not enough to satisfy due process.

Moreover, it is petitioner, as an officer of the corporation, who is the latters agent for purposes of receiving notices and other documents, and not the other way around.

It is but axiomatic that notice to the corporation, which has a personality distinct and separate from the petitioner, does not constitute notice to the latter