Firestone Tire vs.

CA

Firestone Tire & rubber Co. vs. Court of Appeals

GR No. 113236

March 5, 2001

Quisumbing, J.:

Facts:
Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon
Development Bank, the latter authorized and allowed withdrawals of funds though the medium
of special withdrawal slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit
with FirestoneTire & Rubber Company, in payment Fojas-Arca delivered a 6 special withdrawal
slips. In turn, these were deposited by the Firsestone to its bank account in Citibank. With this,
relying on such confidence and belief Firestone extended to Fojas-Arca other purchase on
credit of its products but several withdrawal slips were dishonored and not paid. As a
consequence, Citibank debited the plaintiffs account representing the aggregate amount of the
two dishonored special withdrawal slips. Fojas-Arca averred that the pecuniary losses it suffered
are a caused by and directly attributes to defendants gross negligence as a result Fojas-Arca
filed a complaint.

Issue:
Whether or not the acceptance and payment of the special withdrawal slips without the
presentation of the depositors passbook thereby giving the impression that it is a negotiable
instrument like a check.

Held:
No. Withdrawal slips in question were non negotiable instrument. Hence, the rules
governing the giving immediate notice of dishonor of negotiable instrument do not apply. The
essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its
freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this
character.

PBCom vs Aruego

Philippine Bank of Commerce vs. Aruego

GR L-25836-37, 31 January 1981, 102 scra 530
--agents

FACTS:
To facilitate payment of the printing of a periodical called World Current Events., Aruego, its
publisher, obtained a credit accommodation from the Philippine Bank of Commerce. For every
printing of the periodical, the printer collected the cost of printing by drawing a draft against the
bank, said draft being sent later to Aruego for acceptance. As an added security for the payment
of the amounts advanced to the printer, the bank also required Aruego to execute a trust receipt
in favor of the bank wherein Aruego undertook to hold in trust for the bank the periodicals and to
sell the same with the promise to turn over to the bank the proceeds of the sale to answer for
the payment of all obligations arising from the draft. The bank instituted an action against
Aruego to recover the cost of printing of the latters 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.

ISSUES:
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.

RULING:
Aruego did not disclose in any of the drafts that he accepted that he was signing as
representative of the Philippine Education Foundation Company. For failure to disclose his
principal, Aruego is personally liable for the drafts he accepted, pursuant to Section 20 of the
NIL which provides that when 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.

METROPOLITAN BANK V. CA
194 SCRA 169

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.

HELD:
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 isnt 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

Samsung Construction v. Far East Bank (August 15, 2004)

Post under case digests, Commercial Law at Monday, February 20, 2012 Posted by
Schizophrenic Mind
Facts: Samsung Construction held an account with Far East Bank. One day a check worth
900,000, payable to cash, was presented by one Roberto Gonzaga in the Makati Branch of Far
East Bank. The check was certified to be true by Jose Sempio, the assistant accountant of
Samsung, who was also present during the time the check was cashed. Later however it was
discovered that no such check was ever approved by the Samsungs head accountant, the
president of the company also never signed any such check.

Issue: Whether or not Far East Bank is liable to reimburse Samsung for cashing out the forged
check, which was drawn from the account of Samsung

Held: Far East Bank is liable for reimbursement. Sec. 23 of the Negotiable Instrument Law
states that a forged signature makes the instrument wholly inoperative. If payment is made the
drawee (Far East) cannot charge it to the drawers account (Samsung). The fact that the forgery
is clever is immaterial. The forged signature may so closely resemble the genuine as to defy
detection by the depositor himself. And yet, if the bank pays the check, it is paying out with its
own money and not of the depositors. This rule of liability can be stated briefly in these words:
A bank is bound to know its depositors signature. The accusation of negligence on the part of
Samsung was not clearly proven. Absence of proof to the contrary, the presumption is that the
ordinary course of business was followed.

Negotiable Instruments Case Digest: Vicente R. De Ocampo V. Gatchalian (1961)

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

Lessons Applicable: Rights of the holder (Negotiable Instruments Law)

FACTS:

Sept 8 1953 evening: Anita C. Gatchalian was looking for a car for the use of her husband and
the family and Manuel Gonzales who was accompanied by Emil Fajardois (personally known to
Anita) offered her a car

Manuel Gonzales represented to defendant Anita that he was duly authorized by Ocampo
Clinic, the owner of the car, to look for a buyer and negotiate for and accomplish the sale, but
which facts were not known to Ocampo

September 9 1953

Anita requested Manuel to bring the car the day following together with the certificate of
registration of the car so that her husband would be able to see same

Manuel Gonzales told her that unless there is a showing that the party interested in the
purchase is ready he cannot bring the certificate of registration

Anita gave him a check which will be shown to the owner as evidence of buyer's GF in the
intention to purchase, it being for safekeeping only of Manuel and to be returned

For the hospitalization of the wife of Manuel, he paid the check to Ocampo clinic

P441.75 - payment of said fees and expenses

P158.25 -given to Manual as balance

Next Day: Manual did not appear so Anita issued a stop payment order

Anita filed with the Office of the City Fiscal of Manila, a complaint for estafa against Manuel

Appeal Manuel contends that:

the check is not a negotiable instrument, under the facts and circumstances stated in the
stipulation of facts - no delivery (Section 16, Negotiable Instruments Law) because only for
safekeeping (conditional delivery)

Ocampo is not a holder in due course

no negotiation prior to acquiring the check

check is not a personal check of Manuel

could have inquired why a person would use the check of another to pay his own debt,
Gatchalian being personally acquainted with V. R. de Ocampo

ISSUES:
W/N Ocampo is a holder in due course - NO

W/N prima facie holder in due course applies - NO

HELD:
NO

Sec. 191

holder - payee or indorsee of a bill or note, who is in possession of it, or the bearer

Sec. 52

holder in due course - holder who has taken the instrument under the ff conditions:

That it is complete and regular on its face

That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, it such was the fact.

That he took it in good faith and for value.

That at the time it was negotiated to him he had no notice of any infirmity in the instrument or
defect in the title of the person negotiating it

circumstances

the amount of the check did not correspond exactly with the obligation of Matilde Gonzales to
Dr. V. R. de Ocampo

check had two parallel lines in the upper left hand corner, which practice means that the check
could only be deposited but may not be converted into cash

It was payee's duty to ascertain from the holder Manuel what the nature of his title to the check
was or the nature of his possession. - failure: guilty of gross neglect and legal absence of GF

In order to show that the defendant had 'knowledge of such facts that his action in taking the
instrument amounted to BF it is not necessary to prove that the defendant knew the exact fraud

It is sufficient that the buyer of a note had notice or knowledge that the note was in some way
tainted with fraud

2. NO
Sec. 59

every holder is deemed prima facie to be a holder in due course

a possessor of the instrument is prima facie a holder in due course does not apply because
there was a defect in the title of the holder (Manuel Gonzales) because the instrument is not
payable to him or to bearer.

suspicious circumstance

Negotiable Instruments Case Digest: Bataan Cigar V. CA (1994)

G.R. No. 93048 March 3, 1994

Lessons Applicable: Rights of a holder (Negotiable Instruments Law)

FACTS:
Bataan Cigar & Cigarette Factory, Inc. (BCCFI), a corporation involved in the manufacturing of
cigarettes purchased from King Tim Pua George (George King) 2,000 bales of tobacco leaf to
be delivered starting October 1978.

July 13, 1978: it issued crossed checks post dated sometime in March 1979 in the total amount
of P820K
George represented that he would complete delivery w/in 3 months from Dec 5 1978 so BCCFI
agreed to purchase additional 2,500 bales of tobacco leaves, despite the previous failure in
delivery
It issued post dated crossed checks in the total amount of P1.1M payable sometime in
September 1979.
July 19, 1978: George sold to SIHI at a discount check amounting to P164K, post dated March
31, 1979, drawn by BCCFI w/ George as payee.
December 19 and 26, 1978: George sold 2 checks both in the amount of P100K, post dated
September 15 & 30, 1979 respectively, drawn by BCCFI w/ George as payee
Upon failure to deliver, BCCFI issued on March 30, 1979 and September 14 & 28, 1979 a stop
payment order for all checks
SIHI failing to claim, filed a claim against BCCFI
RTC: SIHI = holder in due course. Non-inclusion of Gearoge as party is immaterial to the case
ISSUE: W/N SIHI is a holder in due course beign a second indorser and a holder of crossed
checks

HELD: YES. GRANTED. RTC reversed.

Sec. 52
That it is complete and regular upon its face
That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, if such was the fact
That he took it in good faith and for value
That at the time it was negotiated to him he had no notice of any infirmity in the instrument or
defect in the title of the person negotiating it
Sec. 59
every holder is deemed prima facie a holder in due course
However, when it is shown that the title of any person who has negotiated the instrument was
defective, the burden is on the holder to prove that he or some person under whom he claims,
acquired the title as holder in due course.

effect of crossing of a check

check may not be encashed but only deposited in the bank

check may be negotiated only once to one who has an account with a bank
act of crossing the check serves as warning to the holder that the check has been issued for a
definite purpose - he must inquire if he has received the check pursuant to that purpose,
otherwise, he is not a holder in due course

crossing of checks should put the holder on inquiry and upon him devolves the duty to ascertain
the indorser's title to the check or the nature of his possession - failure = guilty of gross
negligence amounting to legal absence of good faith, contrary to Sec. 52(c) of the Negotiable
Instruments Law
SIHI is not a holder in due course. Consequently, BCCFI cannot be obliged to pay the checks.
However, that SIHI could not recover from the checks. The only disadvantage of a holder who is
not a holder in due course is that the instrument is subject to defenses as if it were nonnegotiable. Hence, SIHI can collect from the immediate indorser, George