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PACHECO vs.

COURT OF APPEALS (John Benedict Ty)


Facts The spouses Pacheco are engaged in the construction business. They obtained a loan of P10,000 from Mrs
Vicencio, who owns a pawnshop in Samar. Mr Vicencio, who is a former judge, required the spouses Pacheco to issue
an undated check as evidence of the loan which will not be presented to the bank. Despite being informed that the
spouses no longer had any funds in their account, Mrs Vicencio insisted they issue the check.
Virginia Pacheco only received P9,000 as the 10% interest on the loan was already deducted. Mrs Vicencio also
required Pacheco to sign the check which, not to be encashed, was merely an evidence of indebtedness which
cannot be negotiated. Pacheco obtained another loan of P50,000 from Mrs Vicencio, but only received P35,000. She
was required to issue three more checks in various amounts two checks for P20,000 and a third check for
P10,000. Virginia subsequently incurred two more loans for the amounts of P10,000 and P15,000.
The total sum of Pachecos indebtedness amounted to P85,000. However, since the loan of P10,000 under the first
check was already paid when the amount was deducted from the proceeds of the second loan, the remaining
account was only P75,000. Pacheco was able to pay P60,000 in cash. But despite demands, Pacheco failed to pay
the remaining P15,000 on the loans.
Vicencio persuaded Pacheco to place the date on the checks, although the latter informed that the account had no
funds. Pacheco received a demand letter from Mrs Vicencio that the checks were dishonored due to Account
Closed. Vicencio filed a case of estafa against Pacheco.
The RTC sentenced the spouses Pacheco to suffer imprisonment and ordered to infemnify Vicencio the amount of
P25,000. The CA affirmed the decision.
Issues (1) Whether the spouses Pacheco are guilty of estafa.
(2) Whether the undated, antedated or postdated checks issued by the spouses Pacheco are negotiable
instruments.
Held (1) The spouses Pacheco are not guilty of estafa.
The first and third elements of estafa under paragraph (2), Art 315 of the Revised Penal Code. A check has the
character of negotiability and at the same time it constitutes an evidence of
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indebtedness. By mutual agreement of the parties, the negotiable character of a check may be waived and the
instrument may be treated simply as proof of an obligation. There cannot be deceit on the part of the spouses
Pacheco because they agreed with Vicencio at the time of the issuance and postdating of the checks that the same
shall not be encashed or presented to the banks. It has been ruled that a drawer who issues a check as security or
evidence of investment is not liable for estafa.
(2) The checks are negotiable instruments.
Mr Vicencio should have known, then, that he need not even ask the spouses Pacheco to place a date on the check,
because as holder of the check, he could have inserted the date pursuant to Sec 13 of the Negotiable Instruments
Law. Moreover, as stated in Sec 14, complainant, as the person in possession of the check, has prima facie authority
to complete it by filling up the blanks therein. Besides, pursuant to Sec 12, a negotiable instrument is not rendered
invalid by reason only that it is antedated or postdated. Moreover, a check must be presented within a reasonable
time from issue. Also, the checks were not intended by the parties to be modes of payment but only as promissory
notes.
The Court acquitted the spouses Pacheco but ordered them to pay Vicencio the amount of P15,000.

PNB v Concepcion Mining (7/31/62) D: When a promissory note was jointly and severally executed by two or more
persons, the payee of the promissory note has the right to hold one, several or all of them to pay the value of the
promissory note
Facts:
1.
PNB instituted this case to recover from Concepcion Mining the face of a promissory note
2.
The note contained the phrase NINETY DAYS after date, for value received, I promise to pay to the order of
Philippine National Bank
3.

The promissory note was executed by, Concepcion Mining, Vicente Legarda (President of Conception Mining) and
Jose S. Sarte
4.
Both Legarda (both acting as president of Conception Mining and in his private capacity) and Sarte signed the
instrument
5.
Although Vicente Legarda died, the defendants prayed for the inclusion of the Legardas estate as party-defendant
and his liability should be determined in pursuance of the provisions of the promissory note
6.
The defendants motion to reconsider and motion for relief by the defendants were denied Issue: WON Legardas
estate should be liable for payment on the note. Held: No Ratio: 1. According to Sec 17 (g) of the NIL, where an
instrument containing words I promise to pay is signed by 2 or more persons, they are deemed jointly and
severally liable. 2. Art. 1216 of the Civil Code also states that [t]he creditor may proceed against any one of the
solidary debtors or some of them simultaneously. The demand made against one of them shall not be an obstacle to
those which may subsequently directed against the others, so long as the debt has not been fully collected. 3.
Given that the note executed by Concepcion Mining, Legarda and Sarte, PNB (payee) has the right to hold any one
or any two of the signers responsible for payment on the note

Republic Planters Bank v CA (12/21/1992) D: Paragraph (g) of Sec. 17 of the Negotiable Instruments Law provides,
Where an instrument containing the word I promise to pay is signed by two or more persons, they are deemed to
be jointly and severally liable thereon.
Facts:
1.
Shozo Yamaguchi and Fermin Canlas were President/CEO and Treasurer respectively, of Worldwide Garment
Manufacturing, Inc (The Company). They were authorized to apply credit facilities with Republic Planters Bank (the
Bank) in the forms of export advances and letters of credit or trust receipts accommodations. The Bank issued nine

promissory notes wherein Yamaguchi and Canlas were signatories. The said promissory notes contained the words
I/we, jointly and severally promise to pay to ORDER of REPUBLIC PLANTERS BANK
2.
Worldwide Garment Manufacturing, Inc subsequently changed its corporate name to Pinch Manufacturing
Corporation
3.
The Bank filed a complaint against the Company, Yamaguchi, and Canlas for the recovery of sums of money covered
by the nine promissory notes with interest, plus attorneys fees and penalty charges
4.
The RTC decided in favor the Bank and ordered the Compay, Yamaguchi, and Canlas to pay, jointly and severally, the
Bank
5.
The CA modified the decision of the RTC absolving Canlas Issues: WON Fermin Canlas is solidarily liable with the
company and Shozo Yamaguchi, on the nine promissory notes WON the said promissory notes are negotiable
instruments Held: Yeeeeees to both Ratio: 1. The Supreme Court held that Fermin Canlas is solidarily liable on each
of the promissory notes bearing his signature. Paragraph (g) of Sec. 17 of the Negotiable Instruments Law provides,
Where an instrument containing the words "I promise to pay" is signed by two or more persons, they are deemed to
be jointly and severally liable thereon. 2. The promissory notes are negotiable instruments and must be governed
by the Negotiable Instruments Law. Under the Negotiable Instruments Law, persons who write their names on the
face of promissory notes are makers and are liable as such. By
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signing the notes, the maker promises to pay to the order of the payee or any holder according to the tenor of such
notes

3.
Where an instrument containing the words I promise to pay is signed by two or more persons, they are deemed to
be jointly and severally liable for such instrument. An instrument which begins with I, We, or Either of us
promise to pay, when signed by the two or more persons, makes them solidarily liable
4.
A joint and several note is one in which the makers bind themselves both jointly and individually to the payee so
that all may be sued together for its enforcement, or the creditor may select one or more as the object of the suit
5.
By making a joint and several promise to pay to the order of the Bank, Canlas assumed the solidary liability of a
debtor and the payee may choose to enforce the notes against him alone or jointly with Yamguchi and Pinch
Manufacturing Corporation as solidary debtors

Asto Electronics Crop. Vs. Philippine Export and Foreign Loan Guarantee Corporation (9/23/2003) D: Under the NIL,
persons who write their names on the face of promissory notes are makers, promising that they will pay to the order
of the payee or any holder according to its tenor.
Facts: 1.
Astro was guaranteed by Philippine Trust Company (Philtrust) several loans amounting to PHP 3,000,000 with
interest. They are secured by 3 promissory notes: (1) December 14 1981 for 600K (2) December 14 1981 for 400K
(3) August 27 1981 for 2M.
2.
In each of the promissory notes, Roxas signed twice as President of Astro and in his personal capacity.
3.
Roxas also signed a Continuing Surety Agreement in favor of Philtrust as President of Astro and as surety.
4.

Philguarantee guaranteed in favor of Philltrust the payment of 70% of Astros loan.


5.
Condition: upon payment by Philguarantee of said amount, it shall be subrogated to the rights of Philtrust against
Astro
6.
Astro defaulted. Philguarantee paid 70% of the guaranteed loan to Philtrust. Philguarantee then filed a case against
Astro and Roxas a complaint for sum of money with the RTC.
7.
Roxas: Signed papers in blank and phrases in personal capacity was inserted without his knowledge.
8.
RTC: In favor of Philguarantee. Ordered Astro and Roxas to pay 3,621,187.51 pesos with interest at 16% per annum
and penalty charges of 16% per annum computed from January 1985.
a.
If Roxas really intended to sign only in his capacity as President of Astro, he should have signed the promissory note
only ONCE.
9.
CA: Affirmed RTC decision. Roxas failed to explain why he had to sign twice.
Issue: WON Roxas should be jointly and severally liable with Astro for the sum awarded by RTC Held: Yeeeeeees
Ratio: 1. Roxas signed twice when he issued the promissory notes. First, in his capacity as President of Astro.
Second, in his PERSONAL capacity. Hence, he became a co-maker in the promissory notes and has thus become
liable. 2. Under the NIL: a. Persons who write their names on the face of promissory notes are makers, promising
that they will pay to the order of the payee or any holder according to its tenor. 3. Thus, Roxas is still PRIMARILY
liable as a joint and several debtor under the notes because of his intention to be liable, which was manifested by
the fact that he affixed his signature on each of the promissory notes TWICE. 4. It then gave rise to two different
capacities: official and personal. 5. Promissory note contained the words I/We jointly, severally, and solidarily An
instrument which begins with such words when signed by two or more persons makes them solidarily liable. 6. As

such, Roxas assumed the solidary liability of a debtor and Philtrust may choose to enforce the notes against him
alone or jointly with Astro. 7. In addition, he also entered and signed twice a Continuing Surety Agreement wherein
he guaranteed JOINTLY AND SEVERALLY with Astro the repayment oh PHP 3,000,000 due to Philtrust. 8.
Philguarantee has all the right to proceed against Roxas because of a subrogation of rights with Philtrust. Instant
case is of LEGAL SUBROGATION that occurs by operation of law and without the need of the debtors knowledge (and
so Roxas acquiescence is not necessary for subrogation to take place).

State Investment House v. CA (1/11/1993) D: Withdrawal of money from drawee bank to avoid liability in the checks
cannot prejudice the rights of a holder in due course.
Facts:
1.
As security for the pieces of jewelry to be sold on commission by Nora Moulic, she issued 2post dated checks in the
amount of 50k each to Corazon Victoriano
2.
Victoriano further negotiated the checks to State Investment House Inc. (SIHI)
3.
Since, Moulic failed to sell the jewelry, she returned the same to Victoriano before the sate of maturity of the checks.
Since the checks, were already negotiated, Moulic couldnt retrieve the same so she withdrew her funds from
drawee bank.
4.
When SIHI presented checks, these were dishonored for insufficiency of fund. SIHI consequently, informed Moulic
and requested that checks be paid in cash instead.
5.
Moulic denied any notice

6.
SIHI filed a suit to recover the value of the checks
7.
RTC: dismissed case
8.
C.A. : affirmed
Issue: WON drawer is liable to pay the amount of the checks, which checks were merely issued as security Held: Yes
Ratio: 1. Pursuant to SEC. 52 of NIL, there is exists a presumption that a holder of a negotiable instrument is a holder
in due course. Hence, the burden of proving otherwise is on the one who disputes the presumption 2. CASE: Moulic
failed to overcome presumption A. Evidence clearly shows that: i. Post-dated checks were regular and complete on
its face ii. SIHI bought said checks from the payee iii. SIHI took checks in GF iv. SIHI was never informed that these
checks were merely issued as security and not for value. B. SIHI is a holder in due course and hence can enforce full
payment on the checks. C. Fact that checks are issued as security is not a ground for the discharge of the
instrument as against a holder in due course. This is not one among grounds listed in SEC 119 of NIL 3. Moulic
cannot unilaterally discharge herself from liability by mere withdrawing of funds as she has no legal basis to excuse
herself from liability to a holder in due course.
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4.
Fact that SIHI failed to give notice of dishonor to Moulic is immaterial. The need for such notice lends itself to
exceptions provided in SEC 114 of NIL: i. Where drawer and drawee are the same person ii. Drawee is a fictitious
person or not having the capacity to contract iii. When the drawer is the person to who, the instrument is presented
for payment iv. Where the drawer has no right to expect or require that the drawee or acceptor will honor the
instrument v. Where the drawer has counterdemanded payment
5.

CASE: after withdrawing funds, Moulic could not have expected checks to be honored. She was the one responsible
for the dishonor of her checks hence, no notice of dishonor needed.

Equitable Banking Corporation v IAC (5/25/1988)


FACTS: 1.
Casals (one of the defendants/petitioners) represented himself as a majority stockholder of Casville Enterprises, Inc.
(Casville) and bought two units of garret skidders (P970,000) from NELL, Co. (NELL)
2.
It was agreed that the payment for the sale will be made through a credit line that Casville Ent. Will open with
petitioner Equitable Banking Corp. (bank)
3.
After NELL shipped the garret skidders to the buyer, Casville handed a postdated check to NELL worth P300,000,
which was
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followed by another check on the same day (amount was either for partial payment or for reimbursement of
marginal deposit)
4.
Casville through Casals informed NELL that the credit line has been approved by the bank but that they (Casville)
need money (P400,000) for collateral in favor of the bank to clear the title of a property that they will use to secure
the trust receipts that the bank will issue
5.

Contrary to ordinary/regular sale transactions, NELL agreed to pay for the amount to facilitate the transaction so it
issued a check payable to the order of the bank with a notation (which states the purpose of the said check)
6.
The bank, before finally opening the credit line for Casville, required a payment of certain sum of money (30% cash
margin deposit plus another P100,000 for the clearing of title of the property mentioned earlier) so Casville informed
NELL about this through a letter that included three postdated checks (intended to replace the checks that Casville
previously issued to NELL because NELL would be the one to advance this other payment again in favor of the bank
for the account of Casville)
7.
NELL issued a check worth P427,300 (covering the requirements of the bank), which bore the following (without any
notation unlike the first check they issued in item no. 5 above): payable to the order of EQUITABLE BANKING
CORPORATION A/C CASVILLE ENTERPRISES, INC.
8.
Casals was the one who delivered the check to the bank because NELL believed that only Casals could encash it
9.
Casals deposited the check to the bank and the bank teller accepted it and deposited it to Casvilles checking
account after which, Casals withdrew the money
10.
Later, when NELL tried to encash the postdated checks that Casville issued in item no. 6 above, they were
dishonored for having been drawn against a closed account and the properties whose titles Casville supposedly
delivered to NELL earlier were foreclosed by the bank because Casville failed to pay its obligation to it; also, NELL
found out that no letters of credit were opened by the bank to its favor
11.
Obviously, NELL was left hanging so it filed the complaint and the RTC had to determine w/n the bank is liable to
NELL; the RTC and IAC ruled in favor of NELL
12.

RTC: Casals, Casville, and the bank are solidarily liable to NELL (P427,300 with 12% legal interest) a) The amount of
the second check was mistakenly credited to the account of Casville b) The bank is liable for the mistake of its
employees because the check was payable to the bank only and no one else (regardless of the wording in item no. 7
above) so the teller should have been more careful c) The teller was aware that the check was nonnegotiable
because he/she stamped NONNEGOTIABLE For payees account only on the check upon receipt
13.
IAC: The bank was supposed to apply the value of the check as payment for the letter of credit, which Casville
applied for in favor of NELL
ISSUE: W/n the bank is liable to NELL for the value of the second check, which was made payable to the order of
EQUITABLE BANKING CORPORATION A/C OF CASVILLE ENTERPRISES, INC. and which the bank teller credited to
Casvilles account
HELD: No. RATIO: 1. The check was ambiguous and contrary to section 8 of the Negotiable Instruments Law, the
payee was not indicated with reasonable certainty by the wording to the order of EQUITABLE BANKING
CORPORATION A/C OF CASVILLE ENTERPRISES, INC. 2. The check was initially NOT non-negotiable (stamp
Nonnegotiable on the check was only for the banks customary practice and not by NELL); the check was also not
crossed checked 3. NELL caused the ambiguity of the instrument so it should be construed against it (Art. 1377 of
the CC) 4. It was NELLs own acts (too much trust on Casals/Casville, elimination of the notation when it issued the
ambiguous
9
check, acts/omissions in the drawing of the check, etc.) that caused the unfortunate outcome of the transaction
(where Casals/Casville was able to defraud NELL) so it must bear the loss
Bataan Cigar and Cigarette Factory, Inc vs. Court of Appeals (3/3/1994) D: Section 59 of the NIL further states that
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
D: It is then settled that crossing of checks should put the holder on inquiry and upon him devolves the duty to
ascertain the indorsers title to the check or to the nature of his possession. Failing in this respect, the holder is
declared guilty of negligence amounting to legal absence of good faith, contrary to Sec.52 ( C ) of the NIL, which in
effect makes the holder of the check not a holder in due course

FACTS: 1.
Bataan Cigar and Cigarette Factory, Inc (BATAAN) engaged one of its suppliers, King Tim Pua George (aka George
King or GEORGE for short) to deliver 2,000 bales of tobacco leaf starting October 1978
2.
July 13 1978 In consideration for the said agreement, BATAAN issued crossed checks post dated (March 1979) in
the amount of PHP 820,000
3.
Relying on GEORGEs representation that he would complete delivery within 3 months from December 1978, BATAAN
agreed to purchase additional 2,500 bales of tobacco leaves. However, GEORGE failed to deliver in accordance to
their agreement
4.
Despite this, BATAAN issued post dated crossed checks in the total amount of PHP 1,100,000 payable in September
1979.
5.
GEORGE, however, was also dealing with the State Investment House Inc (SIHI)
6.
July 19 1978 GEORGE sold at a discounted check TCBT 551826 bearing the amount of PHP 164,000 post dated
March 1979 (same check BATAAN issued in July 13 1978 in favor of George). Said check was drawn by BATAAN
naming GEORGE as payee
7.
December 19 & 26 1978 GEORGE again sold to SIHI 2 checks in the amount of PHP 100,000 each (post dated
September 15 & 30 197). Again, it was drawn against BATAAN and in favor of GEORGE
8.
By virtue of GEORGEs failure to deliver the bales of tobacco lead as agreed upon, BATAAN issued on March 1979 a
stop payment order on all checks payable to GEORGE including the checks that were sold to SIHI

9.
SIHI tried to collect from BATAAN but failed, this it instituted the present case.
10.
RTC ruled in favor of SIHI and held that it is a holder in due course
ISSUE: WON SIHI is a holder in due course and is thus entitled to collect from BATAAN HELD: No
RATIO: 1. Sec. 52 of the NIL enumerates the requisites of a holder in due course7 and Sec.59 of the NIL further states
that a 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 a holder in due course 2. Crossed check one where two parallel lines
are drawn across its face or across a corner thereof
7 Sec 52 A holder in due
course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular
upon its face; (b) That he became the holder of it before it was overdue, and without notice that it had been
previously dishonoured, if such was the fact; (c) That he took it in good faith and for value; (d) That at the same
time it was negotiated to him and he had no notice of any infirmity in the instrument or defect in the title of the
person negotiating it
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3.
In order to preserve the credit worthiness of checks, jurisprudence has pronounced that crossing of a check should
have the following effects: (a) the check may NOT be encashed but only deposited in the bank; (b) the check may be
negotiated only onceto one who has an account with a bank; (c) and the act of crossing the check serves as a
warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has
received the check pursuant to that purpose, else, he is NOT a holder in due course
4.

It is then settled that crossing of checks should put the holder on inquiry and upon him devolves the duty to
ascertain the indorsers title to the check or to the nature of his possession. Failing in this respect, the holder is
declared guilty of negligence amounting to legal absence of good faith, contrary to Sec.52 ( C ) of the NIL, which in
effect makes the holder of the check not a holder in due course.
5.
The stopping of payment is as good as to SIHI as it is to GEORGE since the checks were issued with the intention
that GEORGE would supply BATAAN with the bales of tobacco leaf. There being a failure of consideration, SIHI is not
a holder in due course. BATAAN is not obliged to pay the checks

FACTS:

Nite loaned from Villanueva P409,000

as a sceurity he issued an Asian Bank Corporation (ABC) check of P325,500 dated February 8, 1994
it was consented to be changed to June 8, 1994
check was dishonored due to a material alteration
August 24, 1994: Nite while abroad partially paid P235K through her representative Emily P. Abojada
The balance of P174K was due on or before December 8, 1994.
August 24, 1994: Villanueva filed an action for a sum of money and damages against ABC for the full amount of the
dishonored check (despite the loan not being due and Nite away)
RTC: favored Villanueva
June 30, 1997: Nite went to ABC to withdraw but she was not able to because of the RTC order
August 25, 1997: ABC remitted to the sheriff a managers check amounting to P325,500 drawn on Nite's account
CA: favored Nite's appeal
ISSUE: W/N ABC should be liable to Villanueva
HELD: NO. DENIED

Negotiable Instruments Law

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
SEC. 189. When check operates as an assignment. A check of itself does not operate as an assignment of any part of
the funds to the credit of the drawer with the bank, and the bank is not liable to the holder, unless and until it accepts or certifies the
check
Rule 3, Sec. 7 of the Rules of Court states:
Sec. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants.
The contract of loan was between Villanueva and Nite. No collection suit could prosper without Nite who was
an indispensable party

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