Nil - Pre-Week (Divina, 2017)
Nil - Pre-Week (Divina, 2017)
The weight of authority sustains the view that a payee may be a holder in due course. Hence, 2. Defenses Against the Holder
the presumption that he is a prima facie holder in due course applies in his favor. However,
said presumption may be rebutted and vital to the resolution of this issue is the concurrence H. Liabilities of Parties
of all the requisites provided for in Section 52 of the Negotiable Instruments Law. Cely Yang 1. Maker
vs. Hon. Court of Appeals, Philippine Commercial International Bank, Far East Bank & Trust 2. Drawer
Co., Equitable Banking Corporation, Prem Chandiramani and Fernando David, G.R. No. 3. Acceptor
138074, August 15, 2003
If a bank refuses to pay a check (notwithstanding sufficiency of funds), the payee holder
In order however that one who is not a holder in due course can enforce the instrument cannot sue the drawee bank - the payee should instead sue the drawer who might in turn sue
against a party prior to the instrument’s completion, two requisites must exist: (1) that the the drawee bank. Under Section 189 of the Negotiable Instruments law, a check by itself does
blank must be filled strictly in accordance with the authority given; and (2) it must be filled up not operate as an assignment of any part of the funds to the credit of the drawer with the
within a reasonable time. If it was proven that the instrument had not been filled up strictly bank, and the bank is not liable to the holder, unless and until it accepts or certifies the check.
in accordance with the authority given and within a reasonable time, the maker can set this Section 189 is sound law based on logic and established legal principles: no privity of contract
up as a personal defense and avoid liability. However, if the holder is a holder in due course, exists between the drawee – bank and the payee. Villanueva vs. Nite 496 SCRA 459 (2006)
there is a conclusive presumption that authority to fill it up had been given and that the same
was not in excess of authority. If instruments payable to named payees or to their order have not been indorsed in blank,
only such payees or their indorsees can be holders and entitled to receive payment in their
Yet, it does not follow that simply because he is not a holder in due course, he is already totally own right. The presumption that a negotiable instrument was given for a sufficient
barred from recovery. The NIL does not provide that a holder who is not a holder in due course consideration will not inure to the benefit of someone who is merely the transferee of the
may not in any case recover on the instrument. The only disadvantage of a holder who is not physical possession of the instrument. Thus, the collecting bank has the right to deduct from
in due course is that the negotiable instrument is subject to defenses as if it were non- such transferee’s account the amount it had previously paid upon certain unendorsed order
negotiable. Among such defenses is the filling up blank not within the authority.
When the drawee bank pays a person other than the payee named on the check despite the Where the beneficiary of the letter of credit negotiated the draft payable to its order in favor
latter’s lack of endorsement, it does not comply with the terms of the check and violates its of a bank which required the execution by certain corporate officers of the beneficiary of a
duty to charge the drawer’s account only for properly payable items and shall be liable for the surety agreement in favor of the negotiating bank, the dishonor of the draft makes the surety
amount charged to the drawer. However, the drawee bank may recover from the collecting liable despite the lack of notice of dishonor or protest to the surety. The liability of a guarantor
bank. A collecting bank where a check is deposited, and which endorses the check upon or surety is broader than that of an indorser. Unless the bill is promptly presented for payment
presentment with the drawee bank, is an endorser. Under Section 66 of the Negotiable at maturity and due notice of dishonor given to the indorser within a reasonable period, he
Instruments Law, an endorser warrants "that the instrument is genuine and in all respects will be discharged from liability thereon. On the other hand, except where required by the
what it purports to be; that he has good title to it; that all prior parties had capacity to provisions of the contract of suretyship, demand or notice of default is not required to fix the
contract; and that the instrument is at the time of his endorsement valid and subsisting." In surety’s liability. Allied Banking Corporation vs. Court of Appeals 494 SCRA 467 (2006)
check transactions, the collecting bank or last endorser generally suffers the loss because it
has the duty to ascertain the genuineness of all prior endorsements considering that the act A bank which paid the monetary value of a foreign check as a special accommodation to its
of presenting the check for payment to the drawee is an assertion that the party making the employee on the basis of the latter’s endorsement, as well as that of her mother who is the
presentment has done its duty to ascertain the genuineness of the endorsements. When the payee thereof, is considered an irregular indorser if one of its officers who approved the bills
collecting bank stamped the back of the check with the phrase “all prior and/or lack of purchase indicated at the back of the check “up to a certain amount only.” Where the drawee
endorsements guaranteed”, that bank had for all intents and purposes treated the check as a bank refused to honor the check because of the irregular endorsement, the collecting bank
negotiable instrument and accordingly assumed the warranty of an endorser. The collecting cannot pass the liability to its employee and her mother despite their endorsement. A
bank, on the other hand, can obtain reimbursement from the person who deposited the check subsequent party which caused the defect in the instrument cannot have any recourse against
and received the proceeds thereof, in line with the principle that no one should unjustly enrich any of the prior endorsers in good faith. Section 66 of the Negotiable Instruments Law which
himself at the expense of another. Bank of America, NT and SA vs. Associated Citizens bank states that the general indorser additionally engages that, on due presentment, the
588 SCRA 51 (2009). Please see also PNB vs. Rodriguez 566 SCRA 513 (2008), supra. instrument shall be accepted or paid, or both, as the case may be, according to its tenor, and
that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay
4. Indorser the amount thereof to the holder, or to any subsequent endorser who may be compelled to
pay it, must be read in the light of the rule in equity requiring that those who come to court
A corporation, which endorsed checks on a “with recourse” basis to secure a loan obtained should come with clean hands. The holder or subsequent indorser who tries to claim under
from a financing company, is liable in case the checks are dishonored despite the absence of the instrument which had been dishonored for “irregular indorsement” must not be the
notice of dishonor to the endorser. The “with recourse “ stipulation enlarges the liability of irregular indorser himself who gave cause for the dishonor. Otherwise, a clear injustice results
the endorser beyond that of a mere endorser under the Negotiable Instruments Law. The when any subsequent party to the instrument may simply make the instrument defective and
holder has the option to enforce it, under the Negotiable Instruments law or for breach of later claim from prior indorsers who have no knowledge or participation in causing or
contract under the Civil Code of the Philippines. Great Asian Sales Corporation vs. Court of introducing said defect to the instrument, which thereby caused its dishonor. Gonzales vs.
Appeals, 381 SCRA 557 (2002) Rizal Commercial Banking Corporation, 508 SCRA 459 (2006)
After an instrument is dishonored by non-payment, indorsers cease to be merely secondarily The collecting bank which accepted a post-dated check for deposit and sent it for clearing and
liable; they become principal debtors whose liability becomes identical to that of the original the drawee bank which cleared and honored the check are both liable to the drawer for the