ABUBAKAR V.

AUDITOR GENERAL  

81 PHIL. 359

 FACTS: The  auditor  general  refuses  to  authorize  the  payment  of  the  treasury warrant  issued  in  the  name  of 
Placido  Urbanes,  now  in  the  hands  of Benjamin  Abubakar.    The  auditor general  refuses  to  do  so  because, 
first, the money available for redemption of treasury warrants was appropriated by law and the subject warrant
doesn’t fall within the purview of the law; second, one of the requirements was not complied with, which is it must
be sworn that the holders of the warrant covering payment or replenishment of  cash  advances  for  official 
expenditures  received  them  in  payment  of definite government obligations.   
 

HELD: Petitioner  holds  that  he  is  a  holder  in  good  faith  and  for  value  of  a negotiable instrument and is
entitled to the rights and privileges of a holder in due course, free from defenses.  But this treasury warrant is within
the scope  of  the  Negotiable Instruments Law.    For  one  thing,  the  document  bearing  on  its  face  the words
“payable from the appropriation for food administration”, is actually an order for payment out of a particular fund,
and is not unconditional, and doesn’t fulfill one of the essential requirements of a negotiable instrument. 

ANG TEK LIAN V. CA 87 PHIL 383

FACTS: Knowing he had insufficient funds, Ang Tek Lian issued a check for P4000, payable to cash. This was given to
Lee Hua Hong in exchange for cash. Upon presentment of the check, it was dishonored for having insufficient funds.
It is argued that the check, being payable to cash, wasn’t indorsed by the defendant, and thus, isn’t guilty of the
crime charged.

HELD: A check drawn to the order of “cash” is payable to bearer, and the bank may pay it to the person presenting it
for payment without the drawer’s indorsement. Of course, if the bank is not sure of the bearer’s identity or financial
solvency, it has the right to demand for identification and/or assurance against possible complications—for instance,
forgery of the drawer’s signature, loss of the check by the rightful owner, raising the amount payable, etc. The bank
therefore, requires for its protection that the indorsement of the drawer—or some other persons known to it—be
obtained. A check payable to bearer is authority for payment to the holder. Where a check is in the ordinary form
and is payable to bearer so that no indorsement is required, a bank to which it is presented for payment need not
have the holder identified, and is not negligent in failing to do so.

A check that is payable to the order of cash is payable to bearer. Reason: The name of the payee does not purport
to be the name of any person. (Ang Tek Lian vs. CA, 87 Phil. 383

Check payable to bearer.

(1) Indorsement of drawer not necessary.—By uniform practice, banks require the indorsement of the drawer before
honoring a check payable to bearer (e.g., to "cash"). But there are cases too where no such requirement had been
made. It depends upon the circumstances of each transaction. Under Section 9 (d), a check drawn payable to the
order of "cash" is a check payable to bearer, and a bank may pay it to the person presenting it for payment without
the drawer's indorsement. (Ang Tek Lian vs. Court of Appeals, 87 Phil. 383 [1950].)

EQUITABLE BANKING V. IAC

 161 SCRA 518
 FACTS:

Nell Company issued a check to help Casals and Casville Enterprises obtain a  letter  of  credit  from 
Equitable  Banking  in  connection  with  equipment,  a garrett  skidder,  which  Casals  and  Casville  were 
buying  from  Nell.    Nell indicated  the  payee  as  follows  “EQUITABLE  BANKING  CORPORATION  A/C
CASVILLE ENTERPRISES INC.”
 Casals deposited the check with the bank and the bank teller accepted the same  and  in  accordance 
with  customary  bank  practice,  stamped  in  the check  the  words  “non-negotiable”.    The  amount  was 
withdrawn  after  the deposit.
 This  prompted  Nell  to  file  a  case  against  the  bank,  Casals  and  Casville.  While  the  instant  case 
was  being  tried,  Casals  and  Casville  assigned  the garrett skidder to plaintiff which credited in favor of
defendants the amount of P450,000, as partial satisfaction of its claim against them.   
 HELD:

Equitable is not liable to Nell.  Nell should bear the loss as it was through its own acts, which put it into the
power of Casals and Casville Enterprises to perpetuate the fraud against it.  
 The  check  wasn’t  initially  non-negotiable.    Neither  was  it  cross-checked.  The rubber-stamping
transversally on the face of the check was only made the bank teller in accordance with customary bank
practice, and not by Nell as  the  drawer  of  the  check,  and  simply  meant  that  thereafter  the  same
check could no longer be negotiated.
 The payee was not indicated with reasonable certainty in contravention of Section 8.  As worded, it could
be accepted as deposit to the account of the party named therein after the symbols  of A/C, or payable to
the bank as trustee,  or  as  an  agent,  for  Casville  with  the  latter  being  the  ultimate beneficiary. 

STATE INVESTMENT HOUSE V. CA 217 SCRA 32

FACTS: Moulic issued checks as security to Victoriano, for pieces of jewelry to be sold on commission. Moulic failed
to sell the pieces of jewelry, so she returned them to Victoriano. The checks however could not be recovered by
Moulic as these have been discounted already in favor of petitioner. Consequently, before the maturity dates,
Moulic withdrew her funds fromher account. Thereafter, petitioner presented the checks for payment but these
were dishonored. This prompted the petitioner to initiate an action against Moulic.

HELD: A prima facie presumption exists that a holder of a negotiable instrument is a holder in due course. The
burden of proving that State is not a holder in due course is upon Moulic. In this regard, she failed to do so. The
evidence shows that the dated checks were complete and regular; petitioner bought the checks from Victoriano
before their due dates; it took the checks in good faith and for value; and it was never informed nor made aware
that these checks were merely issued to payee as security. Consequently, State is a holder in due course. Moulic
cannot set up the defense that there was failure or want of consideration. It can only invoke the defense if State was
a privy to the purpose for which they were issued and therefore is not a holder in due course. Furthermore, the
mere fact that the checks were issued as security is not sufficient ground to discharge the instrument as against a
holder in due course. And also, Moulic was responsible for the dishonor of her checks. She withdrew her funds from
her account and could not have expected her checks to be honored by then.

(3) Presumption. — A prima facie presumption exists that the holder of a negotiable instrument is a holder in due
course. Consequently, the burden of proving otherwise lies in the person who disputes the presumption. (State
Investment House, Inc. vs. Court of Appeals, 217 SCRA 32 [1993].)

Liability of a drawer of a check. — The drawer may not unilaterally discharge himself from liability on checks issued
by him merely as security and not for value to a payee who negotiated the same without his knowledge and consent
to a holder in due course, by the mere expediency of withdrawing his funds from the drawee bank. By issuing a
check, the drawer impliedly represents that funds or credit are available for its payment in the drawee bank. (State
Investment House, Inc. vs. Court of Appeals,

The drawer of a check issued to another merely as a security (for jewelry to be sold on commission) is liable to a
holder in due course. He cannot simply withdraw his funds from the drawee-bank to excuse himself from liability
after the check has beeen negotiated without his knowledge to a holder in due course and there is no need to serve
him notice of dishonor. (State Investment House, Inc. vs. Court of Appeals, 217 SCRA 32 [1993].)

PNB V. CONCEPCION MINING 115 PHIL 723

A case for collection of a sum of money was filed against defendants in connection with a promissory note they
issued with others. The defendants move that since their co-makers have died, claim should be also against the
estates of such. This was denied by the court.

HELD: 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. By virtue of this provision found in Section 17, and as the
promissory note was executed jointly and severally by the parties, the payee of the promissory note had the right to
hold any one of the them responsible for the payment of the amount of the note

REPUBLIC PLANTERS BANK V. COURT OF APPEALS 216 SCRA 738

FACTS: Yamaguchi and Canlas are officers of the Worldwide Garment Manufacturing, which later changed its name
to Pinch Manufacturing. They were authorized to apply for credit facilities with the petitioner bank. The two officers
signed the promissory notes issued to secure the payment of the obligations. Later, the bank instituted an action for
collection of money, impleading also the two officers. The trial court held the two officers personally liable also.

HELD: Canlass is solidarily liable on each of the promissory notes to which his signature appears. The promissory
notes in question are negotiable instruments and thus, governed by the NIL. Under the NIL, persons who write their
names in the instrument are makers are liable as such. By signing the note, the maker promises to pay to the order
of the payee or any holder the tenor of the obligation. Based on the above provisions of the law, there is no denying
that Canlass is one of the co-makers of the promissory note.

Similarly a note reading: "I, we, or either or us promise to pay." (Powell v. Mobley, 142 S.E. 678.) or "I or we promise
to pay" (Churchill v. Miller, 156 Pac. 851.) signed by two or more persons creates a joint and several (or solidary)
liability. The fact that the singular pronoun is used indicates that the promise is individual as to each other, that is,
each of the co-signers is deemed to have made an independent " sinjgular promise to pay the instrument in full.
(Republic Planters Bank v. Court of Appeals, 216 SCRA 738 [1992]

SESBRENO V. CA 222 SCRA 466

FACTS: Petitioner made a placement with Philfinance. The latter delivered to him documents, some of which was a
promissory note from Delta Motors and a post-dated check. The post-dated checks were dishonored. This prompted
petitioner to ask for the promissory note from DMC and it was discovered that the note issued by DMC was marked
as non-negotiable. As Sesbreno failed to recover his money, he filed case against DMC and Philfinance.

HELD: The non-negotiability of the instrument doesn’t mean that it is nonassignable or transferable. It may still be
assigned or transferred in whole or in part, even without the consent of the promissory note, since consent is not
necessary for the validity of the assignment. In assignment, the assignee is merely placed in the position of the
assignors and acquires the instrument subject to all the defenses that might have been set up against the original
payee.

MODES OF TRANSFER

a. Negotiation – the transfer of the instrument from one person to another so as to constitute the transferee as
holder thereof. (Sec.30)

b. Assignment – The transferee does not become a holder and he merely steps into the shoes of the transferor. Any
defense available against the transferor is available against the transferee. (Notes and Cases on Banks, Negotiable
Instruments and other Commercial Documents, Timoteo B. Aquino)

Assignment may be effected whether the instrument is negotiable or nonnegotiable. (Sesbreño vs. CA, 222 SCRA
466)

A non-negotiable instrument may not be negotiated but it may be assigned or transferred (see Sec. 30.), absent an
express prohibition against assignment or transfer written on the face of the instrument. The legal consequences of
negotiation, as distinguished from assignment of a negotiable instrument, are different. (Sesbreno vs. Court of
Appeals, 222 SCRA 466 [1993].) Persons who transfer or assign contractual or non-negotiable rights pass only the
rights that they had.

CONSOLIDATED PLYWOOD V. IFC 149 SCRA 448

FACTS: Petitioner bought from Atlantic Gulf and Pacific Company, through its sister company Industrial Products
Marketing, two used tractors. Petitioner was issued a sales invoice for the two used tractors. At the same time, the
deed of sale with chattel mortgage with promissory note was issued. Simultaneously, the seller assigned the deed of
sale with chattel mortgage and promissory note to respondent. The used tractors were then delivered but barely 14
days after, the tractors broke down. The seller sent mechanics but the tractors were not repaired accordingly as they
were no longer serviceable. Petitioner would delay the payments on the promissory notes until the seller completes
its obligation under the warranty. Thereafter, a collection suit was filed against petitioner for the payment of the
promissory note.

HELD: It is patent that the seller is liable for the breach in warranty against the petitioner. This liability as a general
rule extends to the corporation to whom it assigned its rights and interests unless the assignee is a holder in due
course of the promissory note in question, assuming the note is negotiable, in which case, the latter’s rights are
based on a negotiable instrument and assuming further that the petitioner’s defense may not prevail against it. The
promissory note in question is not a negotiable instrument. The promissory note in question lacks the so-called
words of negotiability. And as such, it follows that the respondent can never be a holder in due course but remains
merely an assignee of the note in question. Thus, the petitioner may raise against the respondents all defenses
available to it against the seller.

When instrument payable to order. The words "to the order of/' "or order/' "or bearer/' and "to bearer" (see Sec. 9.)
are standardized words of negotiability of an instrument. These words serve as an expression of consent that the
instrument may be transferred, to whoever the payee orders, allowing further negotiation of the instrument. This
consent is indispensable since a maker or drawer assumes greater risks under a negotiable instrument than under a
non-negotiable one. (see Consolidated Plywood Industries, Inc. vs. IFC Leasing & Acceptance Corp., 149 SCRA 448
[1987].) Any other words may be used indicating the intention on the part of the maker or drawer to make the
Instruments freely transferable to some person or persons other than the one to whom it was originally issued.

MANUEL LIM V. COURT OF APPEALS 251 SCRA 408

 FACTS: Spouses Lim were charged with estafa and violations of BP22 for allegedly purchasing goods from
Linton Commercial Corporation and issuing checks as payment thereof. The checks when presented to the
bank were dishonored for insufficiency of funds or the payment for the checks has been stopped.
HELD: It is settled that venue in criminal cases is a vital ingredient of jurisdiction. It shall be where the
crime or offense was committed or any one of the essential ingredients thereof took place. In determining
the proper venue for these cases, the following are material facts—the checks were issued at the place of
business of Linton; they were delivered to Linton at the same place; they were dishonored in Kalookan City;
petitioners had knowledge of the insufficiency of funds in their account. Under Section 191 of the NIL, issue
means the first delivery of the instrument complete in its form to a person who takes it as holder. The term
holder on the other hand refers to the payee or indorsee of a bill or note who is in possession of it or the
bearer thereof. The important place to consider in the consummation of a negotiable instrument is the place
of delivery. Delivery is the final act essential to its consummation as an obligation.

DELA VICTORIA V. BURGOS 245 SCRA 374

FACTS: Sesbreno filed a case against Mabanto Jr. among other people wherein the court decided in favor of
the plaintiff, ordering the defendants to pay former a definite amount of cash. The decision had become final
and executory and a writ of execution was issued. This was questioned in the CA by the defendants. In the
meanwhile, a notice of garnishment was issued to petitioner who was then the City Fiscal. She was asked to
withhold any check or whatnot in favor of Mabanto Jr. The CA then dismissed the defendant’s petition and
the garnishment was commenced only to find out that petitioner didn't follow instructions of sheriff. She is
now being held liable.
HELD: Garnishment is considered as the species of attachment for reaching credits belonging to the
judgment debtor owing to him from a stranger in litigation. Emphasis is laid on the phrase belonging to the
judgment debtor since it is the focal point of resolving the issues raised. As Assistant City Fiscal, the source
of Mabanto’s salary is public funds. Under Section 16 of the NIL, every contract on a negotiable instrument
is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As
ordinarily understood, delivery means the transfer of the possession of the instrument by the maker or
drawer with intent to transfer title to the payee and recognize him as the holder thereof. The petitioner is the
custodian of the checks. Inasmuch as said checks were in the custody of the petitioner and not yet delivered
to Mabanto, they didn't belong to him and still had the character of public funds. The salary check of a
government officer or employee doesn't belong to him before it has been physically delivered to him. Until
that time the check belongs to the government. Accordingly, before there is actual delivery of the check, the
payee has no power over it, he cannot assign it without the consent of the government. *If public funds
would be allowed to be garnished, then basic services of the government may be hampered.

SAN MIGUEL CORPORATION v. BARTOLOME PUZON, GR No. 167567, 2010-09-22

Facts:
Respondent Bartolome V. Puzon, Jr., (Puzon) owner of Bartenmyk Enterprises, was a dealer of beer
products of petitioner San Miguel Corporation (SMC) for Parañaque City.  Puzon purchased SMC
products on credit.  To ensure payment and as a business practice, SMC required... him to issue
postdated checks equivalent to the value of the products purchased on credit
Said checks were returned to Puzon when the transactions covered by these checks were paid or
settled in full.
On December 31, 2000, Puzon purchased products on credit amounting to P11,820,327 for which he
issued, and gave to SMC, Bank of the Philippine Islands (BPI) Check Nos. 27904 (for P309,500.00)
and 27903 (for P11,510,827.00) to cover the said transaction.
On January 23, 2001, Puzon, together with his accountant, visited the SMC Sales Office in Parañaque
City to reconcile his account with SMC.  During that visit Puzon allegedly requested to see BPI Check
No. 17657. However, when he got hold of BPI Check No. 27903 which was... attached to a bond paper
together with BPI Check No. 17657 he allegedly immediately left the office with his accountant,
bringing the checks with them.
SMC sent a letter to Puzon on March 6, 2001 demanding the return of the said checks.  Puzon ignored
the demand hence SMC filed a complaint against him for theft... investigating prosecutor, Elizabeth Yu
Guray... she recommended the dismissal of... the case for lack of evidence.
The CA found that the postdated checks were issued by Puzon merely as a security for the payment of
his purchases and that these were not intended to be encashed.
It thus concluded that SMC did not acquire ownership of the checks as it was duty bound to return the
same... checks to Puzon after the transactions covering them were settled.  The CA agreed with the
prosecutor that there was no theft, considering that a person cannot be charged with theft for taking
personal property that belongs to himself
Issues:
WHETHER X X X THE POSTDATED CHECKS ISSUED BY PUZON
WERE ISSUED IN PAYMENT OF HIS BEER PURCHASES OR WERE
USED MERELY AS SECURITY TO ENSURE PAYMENT OF PUZON'S OBLIGATION.
WHETHER X X X THE PRACTICE OF SMC IN RETURNING THE POSTDATED CHECKS ISSUED
IN PAYMENT OF BEER PRODUCTS PURCHASED ON CREDIT SHOULD THE TRANSACTIONS
COVERED BY THESE CHECKS [BE] SETTLED ON [THE] MATURITY DATES THEREOF COULD
BE LIKENED TO A CONTRACT OF PLEDGE.
Ruling:
The petition has no merit.
At the outset we find that as pointed out by Puzon, SMC raises questions of fact.  The resolution of the
first issue raised by SMC of whether respondent stole the subject check, which calls for the Court to
determine whether respondent is guilty of a felony,... This issue cannot be resolved based on mere
allegations of facts and affidavits.  The same is true with the second issue raised by petitioner,...
whether the checks... issued by Puzon were payments for his purchases or were intended merely as
security to ensure payment.
These issues cannot be properly resolved in the present petition for review on certiorari which is rooted
merely on the resolution of the prosecutor finding no... probable cause for the filing of an information
for theft.
The third issue raised by petitioner, on the other hand, would entail venturing into constitutional
matters for a complete resolution.  This route is unnecessary in the present case considering that the
main matter for resolution here only concerns grave abuse of discretion... and the existence of
probable cause for theft, which at this point is more properly resolved through another more clear cut
route.
"Probable cause is defined as such facts and circumstances that will engender a well-founded belief
that a crime has been committed and that the respondent is probably guilty thereof and should be held
for trial."
In the present case, we are also not sufficiently convinced to deviate from the general rule of non-
interference.  Indeed the CA did not err in dismissing the petition for certiorari before it, absent grave
abuse of discretion on the part of the DOJ Secretary in not... finding probable cause against Puzon for
theft.
The Revised Penal Code provides:
Art. 308.  Who are liable for theft. - Theft is committed by any person who, with intent to gain but
without violence against, or intimidation of persons nor force upon things, shall take personal property
of another without the latter's consent.
Considering that the second element is that the thing taken belongs to another, it is relevant to
determine whether ownership of the subject check was transferred to petitioner. On this point the
Negotiable Instruments Law provides:
Sec. 12.  Antedated and postdated - The instrument is not invalid for the reason only that it is
antedated or postdated, provided this is not done for an illegal or fraudulent purpose.  The person to
whom an instrument so dated is delivered acquires... the title thereto as of the date of delivery.
(Underscoring supplied.)
Note however that delivery as the term is used in the aforementioned provision means that the party
delivering did so for the purpose of giving effect thereto.[12] Otherwise, it cannot be said that there has
been delivery of the negotiable instrument. Once... there is delivery, the person to whom the
instrument is delivered gets the title to the instrument completely and irrevocably.
If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving
effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. 
However, if the check was not given as payment, there being no... intent to give effect to the
instrument, then ownership of the check was not transferred to SMC.
The evidence of SMC failed to establish that the check was given in payment of the obligation of
Puzon.  There was no provisional receipt or official receipt issued for the amount of the check.  What
was issued was a receipt for the document, a "POSTDATED CHECK
SLIP."
Consequently, the CA did not err in finding no grave abuse of discretion committed by the DOJ in
sustaining the dismissal of the case for theft for lack of probable cause.
DEVELOPMENT BANK OF RIZAL V. SIMA WEI 219 SCRA 736

FACTS: Sima Wei executed a promissory note in consideration of a loan secured from petitioner bank. She was able
to pay partially for the loan but failed to pay for the balance. She then issued two checks to pay the unpaid balance
but for some unexplainable reason, the checks were not received by the bank but ended up in the hands of someone
else. The bank instituted actions against Sima Wei and other people. The trial court dismissed the case and the CA
affirmed this decision.

HELD: A negotiable instrument, of which a check is, is not only a written evidence of a contract right but is also a
species of property. Just as a deed to a piece of land must be delivered in order to convey title to the grantee, so
must a negotiable instrument be delivered to the payee in order to evidence its existence as a binding contract.
Section 16 provides that every contract on a negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. Thus, the payee of the negotiable instrument acquires no
interest with respect thereto until its delivery to him. Delivery of an instrument from the drawer to the payee, there
can be no liability on the instrument. Moreover, such delivery must be intended to give effect to the instrument.

b. Subsequent Negotiation 1. If payable to bearer, a negotiable instrument may be negotiated by mere delivery. 2. If
payable to order, a NI may be negotiated by indorsement completed by delivery Note: In both cases, delivery must
be intended to give effect to the transfer of instrument. (Development Bank vs. Sima Wei, 219 SCRA 736)
METROPOL (BACOLOD) FINANCING & INVESTMENT
CORPORATION vs. SAMBOK MOTORS COMPANY
Posted on March 26, 2013 by winnieclaire
Standard
FACTS: Sambok Motors Company 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: RODOLFO G. NONILLO Asst. General Manager”
The maker, Dr. Villaruel defaulted in the payment. Plaintiff notified Sambok as indorsee of said note of the fact that the same has
been dishonored and demanded payment. Sambok failed to pay. Trial court rendered its decision in favour of Plaintiff. Appellant
Sambok argues that by adding the words “with recourse” in the indorsement of the note, it becomes a qualified indorser; that being
a qualified indorser, it does not warrant that if said note is dishonored by the maker on presentment, it will pay the amount to the
holder.

ISSUE: Whether or not Sambok is a qualified indorser.

HELD: 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, plaintiff-appellee 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. 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 all waived. The words
added by said appellant do not limit his liability, but rather confirm his obligations as a general indorser.