Name: Refil, Karen A.

Subject: Negotiable Instrument

Topic: Negotiability how determined.

Caltex Philippines vs. CA
G.R. No. 97753, August 10, 1992

Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the
requisites for an instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.

Facts:
On various dates, Security Bank and Trust Company (Security Bank), a commercial banking
institution, through its Sucat Branch issued 280 certificates of time deposit (CTDs) in favor
of Angel dela Cruz who deposited with Security Bank the total amount of P1,120,000. Angel
delivered the CTDs to Caltex for his purchase of fuel products . On a later date, Dela Cruz
approached the bank manager,  communicated  the  loss  of  the  certificates  and 
requested  fora reissuance.

Upon compliance with some formal requirements, he was issued replacements. Thereafter,

he secured a loan from the bank where he assigned the certificates as security.

The petitioner, averred that the certificates were not actually lost but were given as
security for payment for fuel purchases.

The bank demanded some proof of the agreement but the petitioner failed to comply.   

The loan matured and the time deposits were terminated and then applied to the payment
of the loan.
Petitioner demands the payment of the certificates but the case was dismissed rationalizing
that CTD`s are non-negotiable.

Issue: Whether or not Certificate of Time Deposit (CTD) is a negotiable instrument.

Held: Yes, The Court held that the CTDs are negotiable instruments. The CTDs in question
undoubtedly meet the requirements of the law for negotiability.
The Negotiable Instruments Law provides, an instrument to be negotiable must conform to
certain requirements, hence,
1. It must be in writing and signed by the maker or drawer;
2. Must contain an unconditional promise or order to pay a sum certain in money;
3. Must be payable on demand, or at a fixed or determinable future time;
4. Must be payable to order or to bearer; and
5. Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
On this score, the accepted rule is that the negotiability or non-negotiability of an instrument is
determined from the writing, that is, from the face of the instrument itself. In the construction
of a bill or note, the intention of the parties is to control, if it can be legally ascertained.   While
the writing may be read in the light of surrounding circumstances in order to more perfectly
understand the intent and meaning of the parties, yet as they have constituted the writing to
be the only outward and visible expression of their meaning, no other words are to be added to
it or substituted in its stead. The duty of the court in such case is to ascertain, not what the
parties may have secretly intended as contradistinguished from what their words express, but
what is the meaning of the words they have used. What the parties meant must be determined
by what they said. 

Contrary to what respondent court held, the CTDs are negotiable instruments. The documents
provide that the amounts deposited shall be repayable to the depositor. And who, according to
the document, is the depositor? It is the "bearer." The documents do not say that the depositor
is Angel de la Cruz and that the amounts deposited are repayable specifically to him. Rather,
the amounts are to be repayable to the bearer of the documents or, for that matter, whosoever
may be the bearer at the time of presentment.

If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it
could have with facility so expressed that fact in clear and categorical terms in the documents,
instead of having the word "BEARER" stamped on the space provided for the name of the
depositor in each CTD. On the wordings of the documents, therefore, the amounts deposited
are repayable to whoever may be the bearer thereof. Thus, petitioner's aforesaid witness
merely declared that Angel de la Cruz is the depositor "insofar as the bank is concerned," but
obviously other parties not privy to the transaction between them would not be in a position to
know that the depositor is not the bearer stated in the CTDs. Hence, the situation would
require any party dealing with the CTDs to go behind the plain import of what is written
thereon to unravel the agreement of the parties thereto through facts aliunde. This need for
resort to extrinsic evidence is what is sought to be avoided by the Negotiable Instruments Law
and calls for the application of the elementary rule that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the obscurity. 

Topic: Requisites for Negotiability (Sec. 1 NIL)

Salas vs. CA, G.R. No. 76788, January 22, 1990

Section 1 Act No. 2031, otherwise known as the Negotiable Instruments Law, enumerates the
requisites for an instrument to become negotiable, viz:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.
Facts:
On February 6, 1980, Petitioner Juanita Salas (hereinafter referred to as petitioner) bought a
motor vehicle from the Violago Motor Sales Corporation (VMS for brevity) for P58,138.20 as
evidenced by a promissory note. This note was subsequently endorsed to Filinvest Finance &
Leasing Corporation (hereinafter referred to as private respondent) which financed the
purchase.
Petitioner defaulted in her instalments because VMS delivered a different vehicle to her. Due to
her failure to pay Filinvest filed a collection suit.
The RTC ordered petitioner to pay the defendant. Both parties appealed the decision to the
Court of Appeals. In her appeal, she did not implead VMS as a party to the case because she
already sued VMS for breach of contract with damages in another case.
The Court of Appeals modified the decision and ordered the petitioner to pay the defendant
sum of P54, 908.30 at 14% per annum. Her motion for reconsideration was denied.

Issue: Whether or not the promisory note is a negotiable instrument which will bar completely
all the available defences of the petitioner against private respondent.
Held:
Yes, it is a negotianle instrument. A careful study of the questioned promissory note shows that
it is a negotiable instrument, having complied with the requisites under the law as follows: [a] it
is in writing and signed by the maker Juanita Salas; [b] it contains an unconditional promise to
pay the amount of P58,138.20; [c] it is payable at a fixed or determinable future time which is
"P1,614.95 monthly for 36 months due and payable on the 21 st day of each month starting
March 21, 1980 thru and inclusive of Feb. 21, 1983;" [d] it is payable to Violago Motor Sales
Corporation, or order and as such, [e] the drawee is named or indicated with certainty. 
It was negotiated by indorsement in writing on the instrument itself payable to the Order of
Filinvest Finance and Leasing Corporation and it is an indorsement of the entire instrument.

Name: Refil, Karen A.

Subject: Negotiable Instrument

Topic: Forms and Interpretation of Negotiable Instrument

b. Must contain an unconditional promise or order to pay a sum certain in money.

Metropolitan Bank vs. CA , GR No. 888668, February 1991

Principle:
 Sec. 3. When promise is unconditional. — An unqualified order or promise to pay is
unconditional within the meaning of this Act though coupled with —
(a) An indication of a particular fund out of which reimbursement is to be made or a particular
account to be debited with the amount; or
(b) A statement of the transaction which gives rise to the instrument judgment.

An order or promise to pay out of a particular fund is not unconditional.

Facts:

Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants.
All warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and
deposited to its Savings account in Metrobank branch in Calapan, Mindoro. They were sent for
clearance. Meanwhile, Gomez is not allowed to withdraw from his account, later, however,
“exasperated” over Floria repeated inquiries and also as an accommodation for a “valued”
client Metrobank decided to allow Golden Savings to withdraw from proceeds of the warrants.
In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his own
account. Metrobank informed Golden Savings that 32 of the warrants had been dishonored by
the Bureau of Treasury and demanded the refund by Golden Savings of the amount it had
previously withdrawn, to make up the deficit in its account. The demand was rejected.
Metrobank then sued Golden Savings.

Issue:
Whether or not treasury warrants are negotiable instruments.

Held:
            No. The treasury warrants are not negotiable instruments. Clearly stamped on their face
is the word: non negotiable.” Moreover, and this is equal significance, it is indicated that they
are payable from a particular fund, to wit, Fund 501. An instrument to be negotiable instrument
must contain an unconditional promise or orders to pay a sum certain in money. As provided by
Sec 3 of NIL an unqualified order or promise to pay is unconditional though coupled with: 1 st, an
indication of a particular fund out of which reimbursement is to be made or a particular
account to be debited with the amount; or 2 nd, a statement of the transaction which give rise to
the instrument. But an order to promise to pay out of particular fund is not unconditional. The
indication of Fund 501 as the source of the payment to be made on the treasury warrants
makes the order or promise to pay “not conditional” and the warrants themselves non-
negotiable. There should be no question that the exception on Section 3 of NIL is applicable in
the case at bar.

Consolidated Plywood, et. al. vs. IFC Leasing , G.R. No. 72593, April 30, 1987
Doctrine:

When instrument is payable to order.

SEC. 8. WHEN PAYABLE TO ORDER. — The instrument is payable to order where it is drawn
payable to the order of a specified person or to him or his order. . . .
xxx xxx xxx
These are the only two ways by which an instrument may be made payable to order. There must
always be a specified person named in the instrument. It means that the bill or note is to be
paid to the person designated in the instrument or to any person to whom he has indorsed and
delivered the same. Without the words "or order" or"to the order of, "the instrument is payable
only to the person designated therein and is therefore non-negotiable. Any subsequent
purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument
but will merely "step into the shoes" of the person designated in the instrument and will thus be
open to all defenses available against the latter." (Campos and Campos, Notes and Selected
Cases on Negotiable Instruments Law, Third Edition, page 38).
Facts: Consolidated Plywood Industries Inc. (CPII) is a corporation engaged in the logging
business. It had for its program of logging activities for the year 1978 the opening of additional
roads, and simultaneous logging operations along the route of said roads, in its logging
concession area at Baganga, Manay, and Caraga, Davao Oriental.
For this purpose, it needed 2 additional units of tractors. Cognizant of CPII’s need and purpose,
Atlantic Gulf & Pacific Company of Manila, through its sister company and marketing arm,
Industrial Products Marketing (IPM), a corporation dealing in tractors and other heavy
equipment business, offered to sell to CPII 2 “Used” Allis Crawler Tractors, 1 an HD-21-B and
the other an HD-16-B. After conducting said inspection, IPM assured CPII that the “Used” Allis
Crawler Tractors which were being offered were fit for the job, and gave the corresponding
warranty of 90 days performance of the machines and availability of parts. With said assurance
and warranty, and relying on the IPM’s skill and judgment, CPII through Henry Wee and Rodolfo
T. Vergara, president and vice-president, respectively, agreed to purchase on installment said 2
units of “Used” Allis Crawler Tractors. It also paid the down payment of P210,000.00. On 5 April
1978, IPM issued the sales invoice for the 2 units of tractors. At the same time, the deed of sale
with chattel mortgage with promissory note was executed.
Barely 14 days had elapsed after their delivery when one of the tractors broke down and after
another 9 days, the other tractor likewise broke down. IPM sent to the jobsite its mechanics to
conduct the necessary repairs, but the tractors did not come out to be what they should be
after the repairs were undertaken because the units were no longer serviceable. Because of the
breaking down of the tractors, the road building and simultaneous logging operations of CPII
were delayed and Vergara advised IPM that the payments of the installments as listed in the
promissory note would likewise be delayed until IPM completely fulfills its obligation under its
warranty.
Since the tractors were no longer serviceable, on 7 April 1979, Wee asked IPM to pull out the
units and have them reconditioned, and thereafter to offer them for sale. The proceeds were to
be given to IFC Leasing and the excess, if any, to be divided between IPM and CPII which offered
to bear 1/2 of the reconditioning cost. No response to this letter was received by CPII and
despite several follow-up calls, IPM did nothing with regard to the request, until the complaint
in the case was filed by IFC Leasing against CPII, Wee, and Vergara. The complaint was filed by
IFC Leasing against CPII, et al. for the recovery of the principal sum of P1,093,789.71, accrued
interest of P151,618.86 as of 15 August 1979, accruing interest there after at the rate of 12%
per annum, attorney’s fees of P249,081.71 and costs of suit.
CPII, et al. filed their amended answer praying for the dismissal of the complaint. In a decision
dated 20 April 1981, the trial court rendered judgment, ordering CPII, et al. to pay jointly and
severally in their official and personal capacities
On 17 July 1985, the Intermediate Appellate Court issued the decision affirming in toto the
decision of the trial court.
Issue: Whether the promissory note in question is a negotiable instrument.
Held: No. The pertinent portion of the note provides that “”FOR VALUE RECEIVED, I/we jointly
and severally promise to pay to the INDUSTRIAL PRODUCTS MARKETING, the sum of
P1,093,789.71, Philippine Currency, the said principal sum, to be payable in 24 monthly
installments starting July 15, 1978 and every 15th of the month thereafter until fully paid.”
Considering that paragraph (d), Section 1 of the Negotiable Instruments Law requires that a
promissory note “must be payable to order or bearer,” it cannot be denied that the promissory
note in question is not a negotiable instrument.
The instrument in order to be considered negotiable must contain the so called “words of
negotiability” — i.e., must be payable to “order” or “bearer.” These words serve as an
expression of consent that the instrument may be transferred. This consent is indispensable
since a maker assumes greater risk under a negotiable instrument than under a non- negotiable
one. Without the words “or order” or “to the order of,” the instrument is payable only to the
person designated therein and is therefore non-negotiable. Any subsequent purchaser thereof
will not enjoy the advantages of being a holder of a negotiable instrument, but will merely “step
into the shoes” of the person designated in the instrument and will thus be open to all defenses
available against the latter.
Therefore, considering that the subject promissory note is not a negotiable instrument, it
follows that IFC Leasing can never be a holder in due course but remains a mere assignee of the
note in question. Thus, CPII may raise against IFC Leasing all defenses available to it as against
IPM. This being so, there was no need for CPII to implead IPM when it was sued by IFC Leasing
because CPII’s defenses apply to both or either of them.

Ang Tek Lian vs. CA Phil. 383

Doctrine:
Under the Negotiable Instruments Law (sec. 9 [d], a check drawn payable to the order of "cash"
is a check payable to bearer, and the bank may pay it to the person presenting it for payment
without the drawer's indorsement.

A check payable to the order of cash is a bearer instrument. Bacal vs. National City Bank of New
York (1933), 146 Misc., 732; 262 N. Y. S., 839; Cleary vs. De Beck Plate Glass Co. (1907), 54
Misc., 537; 104 N. Y. S., 831; Massachusetts Bonding & Insurance Co. vs. Pittsburgh Pipe &
Supply Co. (Tex. Civ. App., 1939), 135 S. W. (2d), 818. See also H. Cook & Son vs. Moody (1916),
17 Ga. App., 465; 87 S. E., 713.

Where a check is made payable to the order of "cash", the word cash "does not purport to be
the name of any person", and hence the instrument is payable to bearer. The drawee bank need
not obtain any indorsement of the check, but may pay it to the person presenting it without any
indorsement. . . . (Zollmann, Banks and Banking, Permanent Edition, Vol. 6, p. 494.)

Facts:
            Ang Tek Lian knowing that he had no funds therefor, drew a check upon China Banking
Corporation payable to the order of “cash”. He delivered it toLee Hua Hong in exchange for
money. The check was presented by Lee Hua hong to the drawee bank for payment, but it w3as
dishonored for insufficiency of funds. With this, Ang Tek Lian was convicted of estafa.

Issue:
            Whether or not the check issued by Ang Tek Lian that is payable to the order to “cash”
and not have been indorsed by Ang Tek Lian, making him not guilty for the crime of estafa.

Held:
            No. Under Sec. 9 of NIL a check drawn payable to the order of “cash” is a check payable
to bearer and the bank may pay it to the person presenting it for payment without the drawer’s
indorsement. However, if the bank is not sure of the bearer’s identity or financial solvency, it
has the right to demand identification or assurance against possible complication, such as
forgery of drawer’s signature, loss of the check by the rightful owner, raising of the amount
payable, etc. But where the bank is satisfied of the identity or economic standing of the bearer
who tenders the check for collection, it will pay the instrument without further question; and it
would incur no liability to the drawer in thus acting.

Name: Karen A. Refil

Subject: Negotiable Instrument Law- MW 7:30-9:00 PM

Topic: Ante-dated and post-dated (Sec. 12)

San Miguel Corp. vs. Puzon, Jr.,

G.R. No. 167567, September 22, 2010

Sec 12 of 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 deliver.

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. 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.

The evidence of SMC failed to establish that the check was given in payment of the obligation of
Puzon.

Facts:
Bartolome V. Puzon, Jr., was a dealer of beer products of petitioner San Miguel Corporation
(SMC). 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 before the same were released to him. Said checks were returned to Puzon when the
transactions covered by these checks were paid or settled in full.
On December 2000, Puzon purchased products on credit and issued two BPI checks. to cover
the said transaction. Check Nos. 27904 (for P309,500.00) and 27903 (forP11,510,827.00).
On January 23, 2001, Puzon, together with his accountant, visited the SMC Sales Office 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 demanding the return of the said checks. Puzon ignored the demand
hence SMC filed a complaint against him for theft with the City Prosecutor’s Office of
Parañaque City.

Issue: Whether or not the delivery of the checks to SMC vested the latter ownership over the
checks (so as to make Puzon liable for theft, an element of which consists the taking of personal
property belonging to another)
Held:
NO, the delivery of the checks did not make SMC the owner thereof. 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.

Sec 12 of 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

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. 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.

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." The petitioner's
demand letter sent to respondent states "As per company policies on receivables, all issuances
are to be covered by post-dated checks. However, you have deviated from this policy by
forcibly taking away the check you have issued to us to cover the December issuance." Notably,
the term "payment" was not used instead the terms "covered" and "cover" were used. The
affidavit of petitioner’s witness further reveals that the term "cover" was not meant to be used
interchangeably with "payment." In said affidavit paragraph 8 clearly shows that partial
payment is expected to be made by the return of beer empties, and not by the deposit or
encashment of the check.

When taken in conjunction with the counter-affidavit of Puzon – where he states that "As the
[liquid beer] contents are paid for, SMC return[s] to me the corresponding PDCs or request[s]
me to replace them with whatever was the unpaid balance." – it becomes clear that both
parties did not intend for the check to pay for the beer products. The evidence proves that the
check was accepted, not as payment, but in accordance with the long-standing policy of SMC to
require its dealers to issue postdated checks to cover its receivables. The check was only meant
to cover the transaction and in the meantime Puzon was to pay for the transaction by some
other means other than the check. This being so, title to the check did not transfer to SMC; it
remained with Puzon. The second element of the felony of theft was therefore not established.
Petitioner was not able to show that Puzon took a check that belonged to another.

Topic: Interpretation of Instruments

Republic Planters Bank vs. CA, 216 SCRA 738

Under the Negotiable Instruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. By signing the notes, the maker promises to
pay to the order of the payee or any holder according to the tenor thereof. Based on the above
provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-
makers of the promissory notes. As such, he cannot escape liability arising therefrom.
Facts:
Defendant Shozo Yamaguchi and private respondent Fermin Canlas were President/Chief
Operating Officer and Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By
virtue of Board Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and private
respondent Fermin Canlas were authorized to apply for credit facilities with the petitioner
Republic Planters Bank in the forms of export advances and letters of credit/trust receipts
accommodations. Petitioner bank issued nine promissory notes, marked as Exhibits A to I
inclusive, each of which were uniformly worded in the following manner:

___________, after date, for value received, I/we, jointly and severaIly promise to pay
to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(....) Philippine Currency...

On the right bottom margin of the promissory notes appeared the signatures of Shozo
Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his personal
capacity" typewritten below. At the bottom of the promissory notes appeared: "Please credit
proceeds of this note to:

_______ Savings Account ______XX Current

Account No. 1372-00257-6
of WORLDWIDE GARMENT MFG. CORP.

These entries were separated from the text of the notes with a bold line which ran horizontally
across the pages.

In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment
Manufacturing, Inc. was apparently rubber stamped above the signatures of defendant and
private respondent. On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to
change its corporate name to Pinch Manufacturing Corporation.

On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money
covered among others, by the nine promissory notes with interest thereon, plus attorney's fees
and penalty charges. The complainant was originally brought against Worldwide Garment
Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing, Inc.
as defendant and substitute Pinch Manufacturing Corporation it its place. Defendants Pinch
Manufacturing Corporation and Shozo Yamaguchi did not file an Amended Answer and failed to
appear at the scheduled pre-trial conference despite due notice. Only private respondent
Fermin Canlas filed an Amended Answer wherein he, denied having issued the promissory
notes in question since according to him, he was not an officer of Pinch Manufacturing
Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that when he issued
said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same were in
blank, the typewritten entries not appearing therein prior to the time he affixed his signature.

Issue: Whether private respondent Fermin Canlas is solidarily liable with the other defendants,
namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory notes?

Held:
Under the Negotiable Instruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. By signing the notes, the maker promises to
pay to the order of the payee or any holder according to the tenor thereof. Based on the above
provisions of law, there is no denying that private respondent Fermin Canlas is one of the co-
makers of the promissory notes. As such, he cannot escape liability arising therefrom.

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. An instrument which
begins with “I”, “We”, or “Either of us” promise to pay, when signed by two or more persons,
makes them solidarily liable. The fact that the singular pronoun is used indicates that the
promise is individual as to each other; meaning that each of the co-signers is deemed to have
made an independent singular promise to pay the notes in full.

In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer and
certain, without reason for ambiguity, by the presence of the phrase “joint and several” as
describing the unconditional promise to pay to the order of Republic Planters Bank. 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. A joint and several obligation in common law corresponds to a
civil law solidary obligation; that is, one of several debtors bound in such wise that each is liable
for the entire amount, and not merely for his proportionate share.

Sps. Evangelista vs. Mercator Finance Corp., et. al,

August 21, 2003
Section 17 of the Negotiable Instruments Law states that "Where the language of the
instrument is ambiguous or there are omissions therein, the following rules of construction
apply: (g) 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:
On February 16, 1982, the petitioners Spouses Evangelista executed amortgage in favour of
defendant Mercator Finance Corporation (MFC) for and in consideration of certain loans and/or
other forms of credit accommodation obtained from the mortgagee-defendant MFC to secure
the payment of the same and those others that the mortgagee might extend to the mortgagor,
Embassy farms, Inc. Petitioners, in their capacities and as officers of Embasst Farms Inc. Signed
the promissory note and the subsequent COntinuing Suretyship Agreement executed to
guaranteed the indebtedness of Embassy Farms, and the succeeding promissory notes
restructuring the loan. Due to their failure to pay the obligation, the properties were foreclosed
and sold. After 10 years, petitioners filed a complaint fr annulment of titles of the properties
sold.

Issue: Whether or not the spouses are solidarily liable with Embassy Farms, in light of the
promissory note signed by them.

Held:
The promissory note and the Continuing Suretyship Agreement prove that the spouses are
solidary obligors with Embassy Farms. The promissory notes subsequently executed by the
spouses and Embassy Farms, restructuring their loan, likewise prove that the spouses are
solidarily liable with Embassy Farms. The spouses allege that there is an ambiguity in the
wording of the promissory note and claim that since it was Mercator who provided the form,
then the ambiguity should be resolved against it. Courts can interpret a contract only if there is
doubt in its letter. But, an examination of the promissory note shows no such ambiguity.
Besides, assuming arguendo that there is an ambiguity, Section 17 of the Negotiable
Instruments Law states that "Where the language of the instrument is ambiguous or there are
omissions therein, the following rules of construction apply: (g) 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." Further, even if the spouses intended to sign the note
merely as officers of Embassy Farms, still this does not erase the fact that they subsequently
executed a continuing suretyship agreement. A surety is one who is solidarily liable with the
principal. The spouses cannot claim that they did not personally receive any consideration for
the contract for well-entrenched is the rule that the consideration necessary to support a
surety obligation need not pass directly to the surety, a consideration moving to the principal
alone being sufficient. A surety is bound by the same consideration that makes the contract
effective between the principal parties thereto. Having executed the suretyship agreement,
there can be no dispute on the personal liability of the spouses.

Ilano vs. Hon. Espanol, G.R. No. 161756, December 16, 2005

Section 6. Omission; seal; particular money.—The validity and negotiable character of

Section 6. Omission; seal; particular money.—The validity and negotiable character of an
instrument are not affected by the fact that—
a. It is not dated; or
b. Does not specify the value given, or that any value had been given therefor; or
c. Does not specify the place where it is drawn or the place where it is payable; or
d. bears a seal; or
e. Designates a particular kind of current money in which payment is to be made.

Facts:
    Amelia Alonzo is a trusted employee of Victoria Ilano. During those times that Ilano is in the
Unied States for medical check-up, Alonzo was entrusted with Ilano‘s Metrobank Check Book
which contains both signed and unsigned blank checks.
         A Complaint for Revocation/Cancellation of Promissory Notes and Bills of Exchange
(Checks) with Damages and Prayer for Preliminary Injunction or Temporary Restraining Order
(TRO) against Alonzo et al. before the Regional Trial Court of Cavite. Ilano contends that Alonzo,
by means of deceit and abuse of confidence succeeded in procuring Promissory Notes and
signed blank checks. Alonzo likewise succeeded in inducing Ilano to sign antedated Promissory
Notes. The RTC rendered a decision dismissing the complaint for lack of cause of action and
failure to allege the ultimate facts of the case. On appeal, the Court of Appeals affirmed the
dismissal of the complaint. Hence, this petition.
Issue: Whether or not the validity and negotiability of Check No. 0084078, drawn against
another account of petitioner and was dishonoured on January 12, 2000 due to Account Closed,
affected by the fact that its date of issue bears only the year 1999.

Held: No, Section 6 of Negotiable Instrument Law provides that the validity and negotiable
character of an instrument are not affected by the fact that:
a. It is not dated; or
b. Does not specify the value given, or that any value had been given therefor; or
c. Does not specify the place where it is drawn or the place where it is payable; or
d. bears a seal; or
e. Designates a particular kind of current money in which payment is to be made.

With respect to the checks subject of the complaint, it is gathered that, except for Check No.
0084078, they were drawn all against Ilano’s Metrobank Account No. 00703-955536-7 shows
that it was dishonored due to “Account Closed.” When Ilano then filed her complaint, all the
checks subject hereof which were drawn against the same closed account were already
rendered valueless or non-negotiable, hence, Ilano had, with respect to them, no cause of
action.
With respect to above-said Check No. 0084078, however, which was drawn against another
account of Ilano, albeit the date of issue bears only the year 1999, its validity and negotiable
character at the time the complaint was filed was not affected.
It is, however, with respect to the questioned promissory notes that the
present petition assumes merit. For, Ilano’s allegations in the complaint relative thereto, even if
lacking particularity, does not as priorly stated call for the dismissal of the complaint.

Name: Karen A. Refil

Subject: Negotiable Instrument Law- MW 7:30-9:00 PM

Topic: III- Issue, Transfer, and Negotiation of Instruments

Cases:

Patrimonio vs. Gutierrez

G.R. No. 187769, June 4, 2014

Section 14 of the Negotiable Instruments Law (NIL) which states:

Sec. 14. Blanks; when may be filled.- Where the instrument is wanting in any
material particular, the person in possession thereof has a prima facie authority to
complete it by filling up the blanks therein. And a signature on a blank paper
delivered by the person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie authority to fill it
up as such for any amount. In order, however, that any such instrument when
completed may be enforced against any person who became a party thereto prior to
its completion, it must be filled up strictly in accordance with the authority given
and within a reasonable time. But if any such instrument, after completion, is
negotiated to a holder in due course, it is valid and effectual for all purposes in his
hands, and he may enforce it as if it had been filled up strictly in accordance with
the authority given and within a reasonable time.

The Negotiable Instruments Law (NIL) defines a holder in due course, thus:
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 dishonored, if such was the fact;
(c) That he took it in good faith and for value;
 (d) 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.(emphasis supplied)

Facts:
The petitioner and the respondent Gutierrez entered into a business venture under the name of
Slam Dunk Corporation, a production outfit that produced mini-concerts and shows related to
basketball.

Patrimonio pre-signed several checks to answer for the expenses of Slam Dunk. Although
signed, these checks had no payee’s name, date or amount. The blank checks were entrusted to
Gutierrez with the specific instruction not to fill them out without previous notification to and
approval by the petitioner.

Without the petitioner’s knowledge and consent, Gutierrez went to Marasigan to secure a loan
in the amount of P200,000.00 on the excuse that the petitioner needed the money for the
construction of his house. In addition to the payment of the principal, Gutierrez assured
Marasigan that he would be paid an interest of 5% per month.

Marasigan acceded to Gutierrez’ request and gave him P200,000.00. Gutierrez simultaneously
delivered to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank
with the blank portions filled out with the words “Cash” “Two Hundred Thousand Pesos Only”,
and the amount of “P200,000.00.”

Marasigan deposited the check but it was dishonored for the reason “ACCOUNT CLOSED.” It
was later revealed that petitioner’s account with the bank had been closed.
Marasigan sought recovery from Gutierrez, to no avail. He thereafter sent several demand
letters to the petitioner asking for the payment of P200,000.00, but his demands likewise went
unheeded. Consequently, he filed a criminal case for violation of B.P. 22 against the petitioner.
RTC— in favor of Marasigan. It found that the petitioner, in issuing the pre-signed blank checks,
had the intention of issuing a negotiable instrument, albeit with specific instructions to
Gutierrez not to negotiate or issue the check without his approval. RTC declared Marasigan as a
holder in due course and accordingly dismissed the petitioner’s complaint for declaration of
nullity of the loan. It ordered the petitioner to pay Marasigan the face value of the check with a
right to claim reimbursement from Gutierrez. CA— affirmed the RTC ruling.

Issue: Whether or not Marasigan is a holder in due course thus may hold Patrimonio liable

Ruling:
No. Section 14 of the Negotiable Instruments Law provides for when blanks may be filled. This
provision applies to an incomplete but delivered instrument. Under this rule, if the maker or
drawer delivers a pre-signed blank paper to another person for the purpose of converting it into
a negotiable instrument, that person is deemed to have prima facie authority to fill it up. It
merely requires that the instrument be in the possession of a person other than the drawer or
maker and from such possession, together with the fact that the instrument is wanting in a
material particular, the law presumes agency to fill up the blanks.

In order however that one who is not a holder in due course can enforce the instrument against
a party prior to the instrument’s completion, two requisites must exist: (1) that the blank must
be filled strictly in accordance with the authority given; and (2) it must be filled up within a
reasonable time. If it was proven that the instrument had not been filled up strictly in
accordance with the authority given and within a reasonable time, the maker can set this up as
a personal defense and avoid liability.

Section 52(c) of the NIL states that a holder in due course is one who takes the instrument “in
good faith and for value.” It also provides in Section 52(d) that in order that one may be a
holder in due course, it is necessary 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.
Acquisition in good faith means taking without knowledge or notice of equities of any sort
which could beset up against a prior holder of the instrument. It means that he does not have
any knowledge of fact which would render it dishonest for him to take a negotiable paper. The
absence of the defense, when the instrument was taken, is the essential element of good faith.
In order to show that the defendant had “knowledge of such facts that his action in taking the
instrument amounted to bad faith,” it is not necessary to prove that the defendant knew the
exact fraud that was practiced upon the plaintiff by the defendant’s assignor, it being sufficient
to show that the defendant had notice that there was something wrong about his assignor’s
acquisition of title, although he did not have notice of the particular wrong that was committed.
In the present case, Marasigan’s knowledge that the petitioner is not a party or a privy to the
contract of loan, and correspondingly had no obligation or liability to him, renders him
dishonest, hence, in bad faith.
Yet, it does not follow that simply because he is not a holder in due course, Marasigan is
already totally barred from recovery.
Notably, Gutierrez was only authorized to use the check for business expenses; thus, he
exceeded the authority when he used the check to pay the loan he supposedly contracted for
the construction of petitioner’s house. This is a clear violation of the petitioner’s instruction to
use the checks for the expenses of Slam Dunk. It cannot therefore be validly concluded that the
check was completed strictly in accordance with the authority given by the petitioner.

De La Victoria vs. Judge Burgos

G.R. No. 111190, June 27, 1995

Doctrine: Under Sec. 16 of the Negotiable Instruments Law, 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. Inasmuch as said checks had not yet been delivered to Mabanto, Jr., they
did not belong to him and still had the character of public funds.

Facts:
Assistant City Fiscal Bienvenido N. Mabanto was ordered to pay herein private respondent Raul
Sesbreño P11,000.00 as damages. A notice of garnishment was served on herein petitioner
Loreto D. de la Victoria as City Fiscal of Mandaue City where Mabanto was detailed. Petitioner
was directed not to disburse, transfer, release or convey to any other person except to the
deputy sheriff concerned the salary checks or other checks, monies, or cash due or belonging to
Mabanto, Jr., under penalty of law. Later, he was directed to submit his report showing the
amount of the garnished salaries. He moved to quash the notice of garnishment claiming that
he was not in possession of any money, funds, credit, property or anything of value belonging
to Mabanto, Jr., except his salary and RATA checks, but that said checks were not yet properties
of Mabanto, Jr., until delivered to him. He further claimed that, as such, they were still public
funds which could not be subject to garnishment.

Issue: Whether or not a check still in the hands of the maker or its duly authorized
representative is owned by the payee before physical delivery to the latter.

Ruling:
No. As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives
his compensation in the form of checks from the DOJ through petitioner as City Fiscal of
Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments Law, 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. Inasmuch as said checks had not yet
been delivered to Mabanto, Jr., they did not belong to him and still had the character of public
funds. The salary check of a government officer or employee does not belong to him before it is
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. Being public fund, the checks may not be garnished to
satisfy the judgment in consideration of public policy.

Development Bank of Rizal vs. Sima Wei

G.R. No. 85419, March 9, 1993

The allegations of the petitioner in the original complaint show that the two (2) China Bank
checks, numbered 384934 and 384935, were not delivered to the payee, the petitioner herein.
Without the delivery of said checks to petitioner-payee, the former did not acquire any right or
interest therein and cannot therefore assert any cause of action, founded on said checks,
whether against the drawer Sima Wei or against the Producers Bank or any of the other
respondents.

Facts:
Sima Wei executed a promissory note in consideration of a loan secured from DBR in the
amount of P1,820,000. Sima Wei was able to pay partially for the loan but failed to pay the
balance. Subsequently, Sima Wei issued two crossed checks payable to DBR. These two checks
however were not delivered to the DBR but instead came into the possession of respondent
Lee Kian Huat, who deposited the checks without DBR's indorsement to the account of
respondent Plastic Corporation with Producers Bank. Inspite of the fact that the checks were
crossed and payable to DBR and bore no indorsement of the latter, the Branch Manager of
Producers Bank authorized the acceptance of the checks for deposit and credited them to the
account of said Plastic Corporation. DBR instituted actions against Sima Wei and the other
defendants. The trial court dismissed the case stating that DBR had no cause of action against
the defendants-respondents. CA affirmed this decision.

Issue: Whether petitioner Bank has a cause of action against any or all of the defendants-
respondents.
Ruling:
No. 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 of the Negotiable
Instruments Law, which governs checks, provides in part:
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 a negotiable instrument acquires no interest with respect thereto until its
delivery to him. Delivery of an instrument means transfer of possession, actual or constructive,
from one person to another. Without the initial delivery of the 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.

The allegations of the petitioner in the original complaint show that the two (2) China Bank
checks, numbered 384934 and 384935, were not delivered to the payee, the petitioner herein.
Without the delivery of said checks to petitioner-payee, the former did not acquire any right or
interest therein and cannot therefore assert any cause of action, founded on said checks,
whether against the drawer Sima Wei or against the Producers Bank or any of the other
respondents.

Since petitioner Bank never received the checks on which it based its action against said
respondents, it never owned them (the checks) nor did it acquire any interest therein. Thus,
anything which the respondents may have done with respect to said checks could not have
prejudiced petitioner Bank.

It had no right or interest in the checks which could have been violated by said respondents.
Petitioner Bank has therefore no cause of action against said respondents, in the alternative or
otherwise. If at all, it is Sima Wei, the drawer, who would have a cause of action against her
correspondents, if the allegations in the complaint are found to be true.
Topic: Delivery; when effectual; When presumed

Lim vs. Court of Appeals

G.R No.107898, December 19, 1995

Principle: “Under Sec. 191 of the Negotiable Instruments Law the term "issue" means the first
delivery of the instrument complete in form to a person who takes it as a holder.”

Manuel and Rosita Lim, spouses, and president and treasurer respectively of Rigi Bilt Industries,
Inc., allegedly issued 7 Solidbank checks as payment for goods purchased from and delivered
by Linton Commercial Company, Inc. When deposited with Rizal Commercial Banking
Corporation, said checks were dishonored for “insufficiency of funds” with the additional
notation “payment stopped” stamped thereon. Despite demand, spouses Lim refused to make
good the checks or pay the value of the deliveries. The RTC held spouses Lim guilty of estafa
and violation of BP22. On appeal, the CA acquitted accused-appellants of estafa on the ground
that the checks were not made in payment of an obligation contracted at the time of their
issuance but affirmed the finding that they were guilty of having violated B.P. Blg. 22. In the
present case, petitioners maintain that the prosecution failed to prove that any of the essential
elements of the crime punishable under B.P. Blg. 22 was committed within the jurisdiction of
RTC-Malabon claiming that what was proved was that all the elements of the offense were
committed in Kalookan City.
 
 Issue: Whether or not the place of issue should be the place where the checks are
dishonoured.
RULING:
No, Under Sec. 191 NIL, the term “issue” means the first delivery of the instrument complete in
form to a person who takes it as a holder. On the other hand, the term “holder” refers to the
payee or indorsee of a bill or note who is in possession of it or the bearer thereof. Although
LINTON sent a collector who received the checks from petitioners at their place of business in
Kalookan City, they were actually issued and delivered to LINTON at its place of business in
Balut, Navotas. The receipt of the checks by the collector of LINTON is not the issuance and
delivery to the payee in contemplation of law. The collector was not the person who could take
the checks as a holder, i.e., as a payee or indorsee thereof, with the intent to transfer title
thereto. Neither could the collector be deemed an agent of LINTON with respect to the checks
because he was a mere employee.
Section 2 of B.P. Blg. 22 establishes a prima facie evidence of knowledge of insufficient funds as
follows;
The making, drawing and issuance of a check payment of which is refused by the
bank because of insufficient funds in or credit with such bank, when presented
within ninety (90) days from the date of the check, shall be prima facie evidence
 of knowledge of such insufficiency of funds or credit unless such maker or
drawer pays the holder thereof the amount due thereon, or makes arrangement
for payment in full by the drawee of such check within five (5) banking days after
receiving notice that such check has not been paid by the drawee.
The prima facie evidence has not been overcome by petitioners in the cases before us because
they did not pay LINTON the amounts due on the checks; neither did they make arrangements
for payment in full by the drawee bank within five (5) banking days after receiving notices that
the checks had not been paid by the drawee bank. In People v. Grospe  citing People
v. Manzanilla we held that “. . . knowledge on the part of the maker or drawer of the check of
the insufficiency of his funds is by itself a continuing eventuality, whether the accused be within
one territory or another.” Consequently, venue or jurisdiction lies either in the RTC of Kalookan
City or Malabon. Moreover, we ruled in the same Grospe and Manzanilla cases as reiterated
in Lim v. Rodrigo that venue or jurisdiction is determined by the allegations in the Information.
The Informations in the cases under consideration allege that the offenses were committed in
the Municipality of Navotas which is controlling and sufficient to vest jurisdiction upon the
Regional Trial Court of Malabon. 

RCBC vs. Hi-Tri Dev. Corp., et, al

G.R. No. 192413, June 13, 2012

Principle:

Nevertheless, the mere issuance of a manager's check does not ipso facto work as an automatic
transfer of funds to the account of the payee.

Sec. 16. Delivery; when effectual; when presumed. — Every contract on a negotiable

instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. As between immediate parties and as regards a
remote party other than a holder in due course, the delivery, in order to be effectual,
must be made either by or under the authority of the party making, drawing,
accepting, or indorsing, as the case may be; and, in such case, the delivery may be
shown to have been conditional, or for a special purpose only, and not for the purpose
of transferring the property in the instrument. But where the instrument is in the hands
of a holder in due course, a valid delivery thereof by all parties prior to him so as to
make them liable to him is conclusively presumed. And where the instrument is no
longer in the possession of a party whose signature appears thereon, a valid and
intentional delivery by him is presumed until the contrary is proved.

Facts:

 Luz Bakunawa and her husband Manuel, now deceased (Spouses Bakunawa) are registered
owners of six (6) parcels of land in Quezon City. These lots were sequestered by the Presidential
Commission on Good Government [(PCGG)]. Sometime in 1990, a certain Teresita Millan
(Millan), through her representative, Jerry Montemayor, offered to buy said lots for
₱6,724,085.71, with the promise that she will take care of clearing whatever preliminary
obstacles there may be to effect a completion of the sale.

The Spouses Bakunawa gave to Millan the Owners Copies of said TCTs and in turn, Millan made
a downpayment of ₱1,019,514.29 for the intended purchase. However, for one reason or
another, Millan was not able to clear said obstacles. As a result, the Spouses Bakunawa
rescinded the sale and offered to return to Millan her downpayment of ₱1,019,514.29.
However, Millan refused to accept back the ₱1,019,514.29 down payment.

Consequently, the Spouses Bakunawa, through their company, the Hi-Tri Development
Corporation (Hi-Tri) took out on October 28, 1991, a Managers Check from RCBC-Ermita in the
amount of ₱1,019,514.29, payable to Millan’s company Rosmil Realty and Development
Corporation (Rosmil) c/o Teresita Millan and used this as one of their basis for a complaint
against Millan and Montemayor which they filed with the Regional Trial Court of Quezon City,
Branch 99.

On January 31, 2003, during the pendency of the above mentioned case and without the
knowledge of [Hi-Tri and Spouses Bakunawa], RCBC reported the ₱1,019,514.29-credit existing
in favor of Rosmil to the Bureau of Treasury as among its unclaimed balances as of January 31,
2003. Allegedly, a copy of the Sworn Statement executed by Florentino N. Mendoza, Manager
and Head of RCBCs Asset Management, Disbursement & Sundry Department (AMDSD) was
posted within the premises of RCBC-Ermita.

On December 14, 2006, x x x Republic, through the [Office of the Solicitor General (OSG)], filed
with the RTC the action below for Escheat [(Civil Case No. 06-244)].

On April 30, 2008, [Spouses Bakunawa] settled amicably their dispute with Rosmil and Millan.
Instead of only the amount of ₱1,019,514.29, [Spouses Bakunawa] agreed to pay Rosmil and
Millan the amount of ₱3,000,000.00, [which is] inclusive [of] the amount of []₱1,019,514.29.
But during negotiations and evidently prior to said settlement, [Manuel Bakunawa, through Hi-
Tri] inquired from RCBC-Ermita the availability of the ₱1,019,514.29 under RCBC Managers
Check No. ER 034469. [Hi-Tri and Spouses Bakunawa] were however dismayed when they were
informed that the amount was already subject of the escheat proceedings before the RTC.

Issue: Whether or not the escheat (the reversion of property to the state on the owner’s dying
without legal heirs) of the account in RCBC is proper.

Held:

No. There are checks of a special type called managers or cashiers checks. These are bills of
exchange drawn by the banks manager or cashier, in the name of the bank, against the bank
itself. Typically, a managers or a cashiers check is procured from the bank by allocating a
particular amount of funds to be debited from the depositors account or by directly paying or
depositing to the bank the value of the check to be drawn. Since the bank issues the check in its
name, with itself as the drawee, the check is deemed accepted in advance. Ordinarily, the check
becomes the primary obligation of the issuing bank and constitutes its written promise to pay
upon demand.

Nevertheless, the mere issuance of a managers check does not ipso facto work as an automatic
transfer of funds to the account of the payee. In case the procurer of the managers or cashiers
check retains custody of the instrument, does not tender it to the intended payee, or fails to
make an effective delivery, we find the following provision on undelivered instruments under
the Negotiable Instruments Law applicable:

Sec. 16. Delivery; when effectual; when presumed. Every contract on a negotiable instrument is
incomplete and revocable until delivery of the instrument for the purpose of giving effect
thereto. As between immediate parties and as regards a remote party other than a holder in
due course, the delivery, in order to be effectual, must be made either by or under the
authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such
case, the delivery may be shown to have been conditional, or for a special purpose only, and
not for the purpose of transferring the property in the instrument. But where the instrument is
in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to
make them liable to him is conclusively presumed. And where the instrument is no longer in the
possession of a party whose signature appears thereon, a valid and intentional delivery by him
is presumed until the contrary is proved.

Since there was no delivery, presentment of the check to the bank for payment did not occur.
An order to debit the account of respondents was never made. In fact, petitioner confirms that
the Managers Check was never negotiated or presented for payment to its Ermita Branch, and
that the allocated fund is still held by the bank. As a result, the assigned fund is deemed to
remain part of the account of Hi-Tri, which procured the Managers Check. The doctrine that the
deposit represented by a managers check automatically passes to the payee is inapplicable,
because the instrument although accepted in advance remains undelivered. Hence,
respondents should have been informed that the deposit had been left inactive for more than
10 years, and that it may be subjected to escheat proceedings if left unclaimed.

Topic: Modes of Transfer

Casabuena vs. Court of Appeals , G.R. No. 115410

Principle:
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause transfers his credit and its accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could have
enforced it against the debtor. Stated simply, it is the process of transferring the right of the
assignor to the assignee, who would then be allowed to proceed against the debtor. The
assignment involves no transfer of ownership but merely effects the transfer of rights which the
assignor has at the time, to the assignee.||| 

The act of assignment could not have operated to efface liens or restrictions burdening the
right assigned, because an assignee cannot acquire a greater right than that pertaining to the
assignor. At most, an assignee can only acquire rights duplicating those which his assignor is
entitled by law to exercise.||| 

Facts:
 Respondent Ciriaco Urdaneta was granted by the City of Manila a parcel of land through
its land reform program. Urdaneta assigned his rights and interests in one-half (1/2) of the lot
to Arsenia Benin to cover full payment of his indebtedness in the amount of Five Hundred Pesos
(P500.00). A deed of sale with mortgage was executed, with Urdaneta undertaking to pay the
City the amount of five thousand five hundred pesos (P5,500.00) for a period of forty years in
480 equal installments. After having incurred additional indebtedness, Urdaneta executed
another deed of assignment involving the whole lot, with Benin agreeing to shoulder all
obligations including the payment of amortization to the City. A Transfer Certificate of Title was
issued in the name of Urdaneta, married to Ofelia Ipil. Meanwhile, the administration of the
property was assigned to brothers Candido and Juan Casabuena, to whom Benin had
transferred her right, title and interest for a consideration of seven thousand five hundred
pesos (P7,500.00). Notwithstanding this assignment, Benin constructed a two-door apartment
on the lot separately occupied by Jose Abejero and Juan Casabuena, who collected rentals from
the former. After the lot was fully paid for by the Urdanetas, a Release of Mortgage was
executed on February 7, 1984 under which deed the period of non-realienation of the land was
extended from five (5) years to twenty (20) years. When the relationship of Casabuena and
Benin soured, Benin was compelled to name another administrator, Angel Tanjuakio, who filed
a complaint for ejectment against petitioner. Upon learning of the litigation between petitioner
and Benin, Urdaneta asked them to vacate the property and surrender to him the possession
thereof. The Urdaneta spouses filed a complaint for recovery of possession of property with
damages against petitioner and Thelma Casabuena, representing the heirs of Candido
Casabuena. Eventually, the Urdaneta spouses succeeded in having the court to declare them as
its true and lawful owner with the deed of assignment to Benin merely serving as evidence of
Urdaneta's indebtedness to her in view of the prohibition against the sale of the land imposed
by the City Government. On appeal, the appellate court affirmed the findings of the lower
court. Unfazed by the protracted litigious process, petitioner files a petition for review
on certiorari, arguing that the assignment by Benin was made in her capacity as creditor of the
spouses, thus allowing her to transfer ownership of the property to her assignees. H

Issue: Whether or not a deed of assignment transfer ownership of the property to the assignee.
Issue:
No. The act of assignment could not have operated to efface liens or restrictions
burdening the right assigned,  because an assignee cannot acquire a greater right than that
pertaining to the assignor. At most, an assignee can only acquire rights duplicating those which
his assignor is entitled by law to exercise. In the case at bar, the Casabuenas merely stepped
into Benin's shoes, who was not so much an owner as a mere assignee of the rights of her
debtors. Not having acquired any right over the land in question, it follows that Benin conveyed
nothing to defendants with respect to the property.|||The Supreme Court affirmed the
decision of the Court of Appeals. While it is true that Benin owns the duplex, the Casabuenas
mistakenly believed that the deed included cession of rights of ownership over the land as well.
The encumbrance of the property may be deemed as an exercise of their right of ownership
over the property considering that, under the law, owners of certain properties may mortgage
the same. By mortgaging a piece of property, a debtor merely subjects it to a lien but
ownership thereof is not parted with. As a result, notwithstanding the encumbrance of the lot
through a deed of assignment in favor of Benin, the spouses Urdaneta remain its owners, to the
exclusion of petitioner.
 Petition denied.

Sesbreno vs. Court of Appeals

G.R. No. 89252, May 24, 1993

Principle:
The negotiation of a negotiable instrument must be distinguished from
the assignment or transfer of an instrument whether that be negotiable or non-negotiable.
Only an instrument qualifying as a negotiable instrument under the relevant statute may
be negotiated either by indorsement thereof coupled with delivery, or by delivery alone where
the negotiable instrument is in bearer form. A negotiable instrument may, however, instead of
being negotiated, also be assigned or transferred. The legal consequences of negotiation as
distinguished from assignment of a negotiable instrument are, of course, different. A non-
negotiable instrument may, obviously, not be negotiated; but it may be assigned or transferred,
absent an express prohibition against assignment or transfer written in the face of the
instrument.

Facts:
Raul Sesbreno made a money market placement in the amount of P300,000 with PhilFinance,
with a term of 32 days. PhilFinance issued to Sesbreno the Certificate of Confirmation of Sale of
a Delta Motor Corporation Promissory Note (DMC PN No. 2731), the Certificate of Securities
Delivery Receipt indicating the sale of the Note with notation that said security was in the
custody of Pilipinas Bank, and postdated checks drawn against the Insular Bank of Asia and
America for P304,533.33 payable on 13 March 1981. The checks were dishonored for having
been drawn against insufficient funds.  Philfinance delivered to petitioner Denominated
Custodian Receipt (DCR).

Petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, and handed her a
demand letter informing the bank that his placement with Philfinance in the amount reflected
in the DCR had remained unpaid and outstanding, and that he in effect was asking for the
physical delivery of the underlying promissory note. Petitioner then examined the original of
the DMC PN No. 2731 and found: that the security had been issued on 10 April 1980; that it
would mature on 6 April 1981; that it had a face value of P2,300,833.33, with the Philfinance as
“payee” and private respondent Delta Motors Corporation (“Delta”) as “maker;” and that on
face of the promissory note was stamped “NON NEGOTIABLE.”  Pilipinas did not deliver the
Note, nor any certificate of participation in respect thereof, to petitioner.

Petitioner later made similar demand letters again asking private respondent Pilipinas for
physical delivery of the original of DMC PN No. 2731.

Petitioner also made a written demand upon private respondent Delta for the partial
satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee thereof, had assigned to
him said Note to the extent of P307,933.33. Delta, however, denied any liability to petitioner on
the promissory note.
As petitioner had failed to collect his investment and interest thereon, he filed an action for
damages against private respondents Delta and Pilipinas.

ISSUE: Whether or not the non-negotiability of a promissory note prevents its assignment.

HELD: YES. Only an instrument qualifying as a negotiable instrument under the relevant statute
may be negotiated either by indorsement thereof coupled with delivery, or by delivery alone
where the negotiable instrument is in bearer form. A negotiable instrument may, however,
instead of being negotiated, also be assigned or transferred. The legal consequences of
negotiation as distinguished from assignment of a negotiable instrument are, of course,
different. A non-negotiable instrument may, obviously, not be negotiated; but it may be
assigned or transferred, absent an express prohibition against assignment or transfer written in
the face of the instrument:
The words “not negotiable,” stamped on the face of the bill of lading, did not destroy its
assignability, but the sole effect was to exempt the bill from the statutory provisions relative
thereto, and a bill, though not negotiable, may be transferred by assignment; the assignee
taking subject to the equities between the original parties. 12 (Emphasis added)
DMC PN No. 2731, while marked “non-negotiable,” was not at the same time stamped “non-
transferable” or “non-assignable.” It contained no stipulation which prohibited Philfinance from
assigning or transferring, in whole or in part, that Note.