CESAR V. AREZA AND LOLITA B. AREZA, PETITIONERS, VS.

EXPRESS
SAVINGS BANK, INC. AND MICHAEL POTENCIANO, RESPONDENTS.
G.R. No. 176697 / September 10, 2014 / J. Perez

Facts:
Petitioners Cesar V. Areza and Lolita B. Areza have two bank deposits with
respondent Express Savings Bank. They were engaged in the business of “buy and
sell” of brand new and second-hand motor vehicles. On May 2, 2000, they received
an order from a certain Gerry Mambuay for the purchase of a second-hand Mitsubishi
Pajero and a brand-new Honda CRV.

The buyer, Mambuay, paid petitioners with nine (9) Philippine Veterans Affairs
Office (PVAO) checks payable to different payees and drawn against the Philippine
Veterans Bank, each valued at Two Hundred Thousand Pesos (P200,000.00) for a
total of One Million Eight Hundred Thousand Pesos (P1,800,000.00).

Michael Potenciano, the branch manager of Express Savings Bank, was present
during the transaction and immediately offered the services of the bank for the
processing and eventual crediting of the checks to the account of the petitioners
because the Arezas were valued clients of the bank.

The petitioners then deposited the checks to Express Savings Bank which in
turn deposited the checks with its depository bank, Equitable-PCI Bank. Equitable-
PCI Bank then presented the checks to the drawee bank, Philippine Veterans Bank,
which honoured the checks.

Sometime in July 2000, the checks were returned by PVAO to the drawee on
the ground that the amount on the face of the checks was altered from the original
amount of P4,000.00 to P200,000.00. The drawee bank, in turn, returned the checks
to Equitable-PCI Bank. Equitable-PCI Bank then informed Express Savings Bank that
the drawee dishonored the checks on the ground of material alterations. It also
debited the deposit account of Express Savings Bank in the amount of P1,800,000.00.
Express Savings Bank insisted that it informed the petitioners of what happened to
the checks. On the other hand, the petitioners maintained that the said bank never
informed them of the said progress.

The petitioners then issued a check in the amount of P500,000.00 but it was
dishonored. They demanded the bank to honor the check but it refused. Instead, it
closed the Special Savings Account of the petitioners with a balance of P1,179,659.69
and transferred said amount to their savings account. Express Savings Bank then
withdrew the amount of P1,800,000.00 representing the returned checks from
petitioners’ savings account.

The petitioners filed a Complaint for Sum of Money with Damages against
Express Savings Bank and Potenciano for the alleged arbitrary and groundless
dishonouring of their checks and the unlawful and unilateral withdrawal from their
savings account.
 The RTC, through Judge Antonio S. Pozas, initially ruled in favor of the
petitioners but the same court, through Pairing Judge Romeo C. De Leon, eventually
granted the Motion for Reconsideration filed by the respondents and set aside the
Pozas Decision. On appeal, the Court of Appeals affirmed the ruling of the RTC.
Hence, this petition for review on certiorari.

Issues:
I. Whether or not the drawee bank is liable for the altered tenor of acceptance in
case the negotiable instrument is altered before acceptance.
II. Whether or not the respondent bank has the right to debit P1,800,000.00 from
the petitioners’ accounts.

Ruling:
I.
Section 63 of Act No. 2031 or the Negotiable Instruments Law provides that
the acceptor, by accepting the instrument, engages that he will pay it according to
the tenor of his acceptance. The acceptor is a drawee who accepts the bill. In
Philippine National Bank v. Court of Appeals, the payment of the amount of a check
implies not only acceptance but also compliance with the drawee’s obligation.

In case the negotiable instrument is altered before acceptance, is the drawee

liable for the original or the altered tenor of acceptance? There are two divergent
intepretations proffered by legal analysts. The first view is that the obligation of the
acceptor should be limited to the tenor of the instrument as drawn by the maker, as
was the rule at common law, but that it should be enforceable in favor of a holder in
due course against the acceptor according to its tenor at the time of its acceptance
or certification.

The second view is that the acceptor/drawee despite the tenor of his
acceptance is liable only to the extent of the bill prior to alteration. This view
appears to be in consonance with Section 124 of the Negotiable Instruments
Law which states that a material alteration avoids an instrument except as
against an assenting party and subsequent indorsers, but a holder in due
course may enforce payment according to its original tenor. Thus, when the
drawee bank pays a materially altered check, it violates the terms of the check, as
well as its duty to charge its client’s account only for bona fide disbursements he had
made. If the drawee did not pay according to the original tenor of the instrument, as
directed by the drawer, then it has no right to claim reimbursement from the drawer,
much less, the right to deduct the erroneous payment it made from the drawer’s
account which it was expected to treat with utmost fidelity. The drawee, however,
still has recourse to recover its loss. It may pass the liability back to the collecting
bank which is what the drawee bank exactly did in this case. It debited the account
of Equitable-PCI Bank for the altered amount of the checks.

II.
No. The Bank cannot debit the savings account of petitioners. A
depositary/collecting bank may resist or defend against a claim for breach of warranty
if the drawer, the payee, or either the drawee bank or depositary bank was negligent
and such negligence substantially contributed to the loss from alteration. In the
instant case, no negligence can be attributed to petitioners. We lend credence to their
claim that at the time of the sales transaction, the Bank’s branch manager was
present and even offered the Bank’s services for the processing and eventual
crediting of the checks. True to the branch manager’s words, the checks were cleared
three days later when deposited by petitioners and the entire amount of the checks
was credited to their savings account.

Moreover, the Bank cannot set-off the amount it paid to Equitable-PCI Bank
with petitioners’ savings account. Under Art. 1278 of the New Civil Code,
compensation shall take place when two persons, in their own right, are creditors and
debtors of each other. It is well-settled that the relationship of the depositors and the
Bank or similar institution is that of creditor-debtor. But as previously discussed,
petitioners are not liable for the deposit of the altered checks. The Bank, as the
depositary and collecting bank ultimately bears the loss. Thus, there being no
indebtedness to the Bank on the part of petitioners, legal compensation cannot take
place.

To recap, the drawee bank, Philippine Veterans Bank in this case, is only liable
to the extent of the check prior to alteration. Since Philippine Veterans Bank paid the
altered amount of the check, it may pass the liability back as it did, to Equitable-PCI
Bank, the collecting bank. The collecting banks, Equitable-PCI Bank and Express
Savings Bank, are ultimately liable for the amount of the materially altered check. It
cannot further pass the liability back to the petitioners absent any showing in the
negligence on the part of the petitioners which substantially contributed to the loss
from alteration.

Based on the foregoing, the SC granted the petition and affirmed the Pozas
decision only insofar as it ordered respondents to jointly and severally pay petitioners
P1,800,000.00, representing the amount withdrawn from the latter’s account.
 Alvin Patrimonio v. Napoleon Guttierez & OCTAVIO MARASIGAN III

FACTS:

Herein petitioner and respondent Guttierez entered into a business venture

under the name Slam Dunk Corporation. To start it up, petitioner pre-signed several
check for the expenses of the business. Although signed, however, there was no
payee’s name, date or amount indicated in the said checks. The blank checks were
entrusted to Guttierez with the instruction that he cannot fill them out without
petitioner’s approval.

In 1993, without petitioner’s knowledge and consent, Guttierez borrowed

money from co-respondent Marasigan in the amount of 200,000php. The latter
aceded to Guttierez’ request and gave him the amount. Simultaneously, Guttierez
deliverd to Marasigan one of the blank checks pre-signed by petitioner. However, the
same was dishonored by the bank on the reason of closed account.

Marasigan sought recovery from Guttierez, but to no avail. Hence, he sent

several demand letters to petitioner, but to no avail as well. Thus, he filed a criminal
case under BP 22 against petitioner. On the other hand, Petitioner filed with the
Regional Trial Court (RTC) a Complaint for Declaration of Nullity of Loan and Recovery
of Damages against Respondents, invoking that he never authorized the loan.

The trial court ruled in favor of Marasigan and found petitioner, in issuing the
pre-signed blank checks, had the intention of issuing the check even without his
approval. On appeal to the Court of Appeals (CA), the appellate court affirmed the
decision of the RTC. Hence, this present case.

ISSUE:

Whether or not petitioner is liable to the loan contracted by Guttierez to

Marasigan?

RULING:

The court held no.

That under Article 1878, paragraph 7 of the Civil Code, a written authority is
required when the loan is contracted through an agent.

In the present case, the petitioner is not bound by the contract of loan since
the records reveal that Guttierez did not have any authority to borrow money in
behalf of petitioner. Records do not show that the petitioner executed any special
power of attorney in favor of Guttierez to borrow in his behalf, hence, the act of
Guttierez is in violation of the said provision, and thus, he should be the only one
liable for the loan he was not able to settle.
 In the present case, the petitioner is not bound by the contract of loan since
the records reveal that Guttierez did not have any authority to borrow money in
behalf of petitioner. Records do not show that the petitioner executed any special
power of attorney in favor of Guttierez to borrow in his behalf, hence, the act of
Guttierez is in violation of the said provision, and thus, he should be the only one
liable for the loan he was not able to settle.
RCBC SAVINGS BANK v. NOEL M. ODRADA
Facts:
respondent Noel M. Odrada (Odrada) sold a secondhand Mitsubishi Montero
(Montero) to Teodoro L. Lim (Lim) for One Million Five Hundred Ten Thousand Pesos
(P1,510,000)
(P610,000) was initially paid by Lim and the balance of Nine Hundred Thousand Pesos
(P900,000) was financed by petitioner RCBC Savings Bank (RCBC) through a car loan
RCBC required Lim to submit the original copies of the Certificate of Registration (CR)
and Official Receipt (OR) in his name. Unable to produce the Montero's OR and CR,
Lim requested RCBC to execute a letter addressed to Odrada informing the latter that
his application for a car loan had been approved.
Odrada executed a Deed of Absolute Sale on 9 April 2002 in favor of Lim and the
latter took possession of the Montero.
When RCBC received the documents, RCBC issued two manager's checks... for Nine
Hundred Thousand Pesos (P900,000) and Thirteen Thousand Five Hundred Pesos
(P13,500).
After the issuance of the manager's checks and their turnover to Odrada but prior to
the checks' presentation, Lim notified Odrada in a letter dated 15 April 2002 that
there was an issue regarding the roadworthiness of the Montero.
when you open its engine cover there is a trace of a head-on collision
The 4-wheel drive shift is not functioning.
the odometer has still an original mileage data but found tampered.
represented the vehicle as model 1998 however; it is indicated in the front left A-
pillar inscribed at the identification plate [as] model 1997.
please show your sincerity by personally inspecting the said vehicle at RCBC, Pacific
Bldg. Pearl Drive, Ortigas Center, Pasig City.
Odrada... drada did not go to the slated meeting and instead deposited the manager's
checks... checks were dishonored both times apparently upon Lim's instruction to
RCBC.
Odrada filed a collection suit[9] against Lim and RCBC
Lim claimed that the cancellation was not done ex parte but through a letter[... the
letter was delivered to Odrada prior to the presentation of the manager's checks to
RCBC.
RCBC contended that the manager's checks were dishonored because Lim had
cancelled the loan.
prior to the presentation of the manager's checks.
RCBC also sent a formal notice of cancellation of the loan on 18 April 2002 to both
Odrada and Lim.
trial court ruled in favor of Odrada.
Odrada was the proper party to ask for rescission.
the right of rescission is implied in reciprocal obligations where one party fails to
perform what is incumbent upon him when the other is willing and ready to comply.
it was not proper for Lim to exercise the right of rescission since Odrada had already
complied with the contract of sale by delivering the Montero while Lim remained
delinquent in payment.
the defective condition of the Montero was not a supervening event that would justify
the dishonor of the manager's checks.
a manager's check is equivalent to cash and is really the bank's own check. It may
be treated as a promissory note with the bank as maker.
constitutes a written promise to pay on demand.
Being the party primarily liable, the trial court ruled that RCBC was liable to Odrada
for the value of the manager's checks.
Court of Appeals dismissed the appeal... when RCBC issued the manager's checks in
favor of Odrada, RCBC admitted the existence of the payee and his then capacity to
endorse, and undertook that on due presentment the checks which were negotiable
instruments would be accepted or paid, or both according to its tenor.
RCBC alone[28] filed this petition before the Court. Thus, the decision of the Court
of Appeals became final and executory as to Lim.
Issues:
Whether or not the court a quo erred in holding that Lim cannot cancel the auto loan
despite the failure in consideration due to the contested roadworthiness of the vehicle
delivered by Odrada to him.
Whether or not Lim can validly countermand the manager's checks in the hands of a
holder who does not hold the same in due course.

Ruling:
We grant the petition.

Principles:
A contract of sale is perfected the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price which is the consideration.
From that moment, the parties may reciprocally demand performance.
However, the obligations between the parties do not cease upon delivery of the
subject matter. The vendor and vendee remain concurrently bound by specific
obligations. The vendor, in particular, is responsible for an implied warranty against
hidden defects.
Article 1547 of the Civil Code... e states: "In a contract of sale, unless a contrary
intention appears, there is an implied warranty that the thing shall be free from any
hidden faults or defects."
Article 1566 of the Civil Code provides that "the vendor is responsible to the vendee
for any hidden faults or defects in the thing sold, even though he was not aware
thereof."... under the law, Odrada's warranties against hidden defects continued even
after the Montero's delivery. Consequently, a misrepresentation as to the Montero's
roadworthiness constitutes a breach of warranty against hidden defects.
Supercars Management & Development Corporation v. Flores... a breach of warranty
against hidden defects occurred when the vehicle, after it was delivered to
respondent, malfunctioned despite repairs by petitioner.
when Lim acquired possession, he discovered that the Montero was not roadworthy.
However, during the proceedings in the trial court, Lim's testimony was stricken off
the record because he failed to appear during cross-examination.
Jurisprudence defines a manager's check as a check drawn by the bank's manager
upon the bank itself and accepted in advance by the bank by the act of its issuance.
It is really the bank's own check and may be treated as a promissory note with the
bank as its maker.
upon its purchase, the check becomes the primary obligation of the bank and
constitutes its written promise to pay the holder upon demand
As a general rule, the drawee bank is not liable until it accepts.
Prior to a bill's acceptance, no contractual relation exists between the holder... and
the drawee.
Acceptance,... creates a privity of contract between the holder and the drawee so
much so that the latter, once it accepts, becomes the party primarily liable on the
instrument.
acceptance is the act which triggers the operation of the liabilities of the drawee
(acceptor) under Section 62... of the Negotiable Instruments Law... once he accepts,
the drawee admits the following: (a) existence of the drawer; (b) genuineness of the
drawer's signature; (c) capacity and authority of the drawer to draw the instrument;
and (d) existence of the payee and his then capacity to endorse.
a manager's check is accepted by the bank upon its issuance.
the distinct feature of a manager's check is that it is accepted in advance.
the mere issuance of a manager's check creates a privity of contract between the
holder and the drawee bank, the latter primarily binding itself to pay according to the
tenor of its acceptance.
The drawee bank, as a result, has the unconditional obligation to pay a manager's
check to a holder in due course irrespective of any available personal defenses.
However, while this Court has consistently held that a manager's check is
automatically accepted, a holder other than a holder in due course is still subject to
defenses.
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.
In order for the holder to acquire title to the instrument, there still must have been
effective delivery.
the doctrine that the deposit represented by a manager's check automatically passes
to the payee is inapplicable, because the instrument - although accepted in advance
remains undelivered."[57]... if the holder of a manager's check is not a holder in due
course, can the drawee bank interpose a personal defense of the purchaser?
"the holder of a cashier's check who is not a holder in due course cannot enforce such
check against the issuing bank which dishonors the same."[64]... the purchaser of a
manager's check may validly countermand payment to a holder who is not a holder
in due course. Accordingly, the drawee bank may refuse to pay the manager's check
by interposing a personal defense of the purchaser. Hence, the resolution of the
present case requires a determination of the status of Odrada as holder of the
manager's checks.
the Court of Appeals gravely erred when it considered Odrada as a holder in due
course. Section 52 of the Negotiable Instruments Law defines a holder in due course
as one 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 has 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.
To be a holder in due course, the law requires that a party must have acquired the
instrument in good faith and for value.
Good faith means that the person taking the instrument has acted with due honesty
with regard to the rights of the parties liable on the instrument and that at the time
he,took the instrument, the holder has no knowledge of any defect or infirmity of the
instrument
To constitute notice of an infirmity in the instrument or defect in the title of the person
negotiating the same, the person to whom it is negotiated must have had actual
knowledge of the infirmity or defect, or knowledge of such facts that his action in
taking the instrument would amount to bad faith.
Value, on the other hand, is defined as any consideration sufficient to support a
simple contract.
Odrada attempted to deposit the manager's checks on 16 April 2002, a day after Lim
had informed him that there was a serious problem with the Montero. Instead of
addressing the issue, Odrada decided to deposit the manager's checks. Odrada's
actions do not amount to good faith.
Odrada's action in depositing the manager's checks despite knowledge of the
Montero's defects amounted to bad faith.
Moreover, when Odrada redeposited the manager's checks on 19 April 2002, he was
already formally notified by RCBC the previous day of the cancellation of Lim's auto
loan transaction.
CBC may refuse payment by interposing a personal defense of Lim - that the title of
Odrada had become defective when there arose a partial failure or lack of
consideration.
RCBC acted in good faith in following the instructions of Lim. The records show that
Lim notified RCBC of the defective condition of the Montero before Odrada presented
the manager's checks.
RCBC also received a formal notice of cancellation of the auto loan from Lim and this
prompted RCBC to cancel the manager's checks since the auto loan was the
consideration for issuing the manager's checks. RCBC acted in good faith in stopping
the payment of the manager's checks.
Section 58 of the Negotiable Instruments Law provides: "In the hands of any holder
other than a holder in due course, a negotiable instrument is subject to the same
defenses as if it were non-negotiable, x x x." Since Odrada was not a holder in due
course, the instrument becomes subject to personal defenses under the Negotiable
Instruments Law.
Bank of America vs. Philippine Racing Club

Facts:

1. Plaintiff PRCI is a domestic corporation which maintains a current account

with petitioner Bank of America. Its authorized signatories are the company President
and Vice-President. By virtue of a travel abroad for these officers, they pre-signed
checks to accommodate any expenses that may come up while they were abroad for
a business trip. The said pre-signed checks were left for safekeeping by PRCs
accounting officer. Unfortunately, the two (2) of said checks came into the hands of
one of its employees who managed to encash it with petitioner bank. The said check
was filled in with the use of a check-writer, wherein in the blank for the 'Payee', the
amount in words was written, with the word 'Cash' written above it.

2. Clearly there was an irregularity with the filling up of the blank checks as
both showed similar infirmities and irregularities and yet, the petitioner bank did not
try to verify with the corporation and proceeded to encash the checks.

3. PRC filed an action for damages against the bank. The lower court awarded
actual and exemplary damages. On appeal, the CA affirmed the lower court's decision
and held that the bank was negligent. Hence this appeal. Petitioner contends that it
was merely doing its obligation under the law and contract in encashing the checks,
since the signatures in the checks are genuine.

Issue: Whether or not the petitioner can be held liable for negligence and thus
should pay damages to PRC

Ruling:

Both parties are held to be at fault but the bank has the last clear chance to
prevent the fraudulent encashment hence it is the one foremost liable .

1. There was no dispute that the signatures in the checks are genuine but the
presence of irregularities on the face of the check should have alerted the bank to
exercise caution before encashing them. It is well-settled that banks are in the
business impressed with public interest that they are duty bound to protect their
clients and their deposits at all times. They must treat the accounts of these clients
with meticulousness and a highest degree of care considering the fiduciary nature of
their relationship. The diligence required of banks are more than that of a good father
of a family.

2. The PRC officers' practice of pre-signing checks is a seriously negligent and

highly risky behavior which makes them also contributor to the loss. It's own
negligence must therefore mitigate the petitioner's liability. Moreover, the person
who stole the checks is also an employee of the plaintiff, a cleck in its accounting
department at that. As the employer, PRC supposedly should have control and
supervision over its own employees.
 3. The court held that the petitioner is liable for 60% of the total amount of
damages while PRC should shoulder 40% of the said amount.
 John Dy vs People

FACTS:
• Since 1990, John Dy under the business name Dyna MarketinG has been
the distributor of W.L. Food Products (W.L. Foods) • Dy would pay W.L. Foods in
either cash or check upon pick up of stocks of snack foods • At times, he would
entrust the payment to one of his drivers.
• June 24, 1992: Dy's driver went to the branch office of W.L. Foods to pick
up stocks of snack foods.
• He introduced himself to the checker, Mary Jane D. Maraca, who upon
confirming Dy's credit with the main office, gave him merchandise worth P106,579.60
• In return, the driver handed her a blank Far East Bank and Trust Company
(FEBTC) Check postdated July 22, 1992 signed by Dy • July 1, 1992: the driver
obtained snack foods worth P226,794.36 in exchange for a blank FEBTC Check
postdated July 31, 1992
• In both instances, the driver was issued an unsigned delivery receipt.
• When presented for payment, FEBTC dishonored the checks for insufficiency
of funds.
• Later, Gonzales sent Atty. Jimeno another letter advising her that FEBTC
Check for P106,579.60 was returned to the drawee bank for the reasons stop
payment order and drawn against uncollected deposit (DAUD), and not because it
was drawn against insufficient funds as stated in the first letter.
• Dy's savings deposit account ledger reflected a balance of P160,659.39 as of
July 22, 1992. This, however, included a regional clearing check for P55,000 which
he deposited on July 20, 1992, and which took 5 banking days to clear. • When
William Lim, owner of W.L. Foods, phoned Dy about the matter, the latter explained
that he could not pay since he had no funds yet. • This prompted the former to send
petitioner a demand letter, which the latter ignored.
• July 16, 1993: Lim charged Dy with 2 counts of estafa under Article 315,
paragraph 2(d) of RPC and 2 counts of violation of B.P. Blg. 22 • RTC convicted Dy
on two counts each of estafa and violation of B.P. Blg. 22.
• CA: affirmed • Dy contends that the checks were ineffectively issued
• W.L. Foods' accountant had no authority to fill the amounts

ISSUE: W/N Dy is liable for estafa and in violation of BP 22. Acquitted for the
criminal cases in relation to the first check.

HELD: YES but only for the 2nd check. •estafa under Article 315, paragraph
2(d) of the Revised Penal Code, as amended by Republic Act No. 4885 elements
1. Postdating or issuance of a check in payment of an obligation contracted at
the time the check was issued
2. Insufficiency of funds to cover the check - including the uncollected deposit
he had more than enough funds to cover the first check
3. Damage to the payee Section 191 of the Negotiable Instruments Law "issue"
- first delivery of an instrument, complete in form, to a person who takes it as a
holder Significantly, delivery is the final act essential to the negotiability of an
instrument.
 Delivery denotes physical transfer of the instrument by the maker or drawer
coupled with an intention to convey title to the payee and recognize him as a holder.
It means more than handing over to another; it imports such transfer of the
instrument to another as to enable the latter to hold it for himself Even if the checks
were given to W.L. Foods in blank, this alone did not make its issuance invalid. When
the checks were delivered to Lim, through his employee, he became a holder with
prima facie authority to fill the blanks

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 aprima facie authority to fill it up as such for any
amount.
Law merely requires that the instrument be in the possession of a person
other than the drawer or maker
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
Burden of proving want of authority or that the authority granted was
exceeded, is placed on the person questioning such authority - Dy didn't fulfill this
estafa punished under Article 315, paragraph 2(d) of the Revised Penal Code is
committed when a check is dishonored for being drawn against insufficient funds or
closed account, and not against uncollected deposit. Corollarily, the issuer of the
check is not liable for estafa if the remaining balance and the uncollected deposit,
which was duly collected, could satisfy the amount of the check when presented for
payment.
B.P. Blg. 22 elements = malum prohibitum
1. the making, drawing and issuance of any check to apply to account or for
value
2. the knowledge of the maker, drawer or issuer that at the time of issue he
does not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment
3. subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit or dishonor for the same reason had not the drawer, without any valid
cause, ordered the bank to stop payment - considered by the bank to retroactively
have had P160,659.39 in his account on July 22, 1992 which was more than enough
to cover the first check
Dy admitted that he issued the checks, and that the signatures appearing on
them were his Section 2 of B.P. Blg. 22, petitioner was prima facie presumed to know
of the inadequacy of his funds with the bank when he did not pay the value of the
goods or make arrangements for their payment in full within 5 banking days upon
notice
EMMA P. NUGUID vs. CLARITA S. NICDAO

FACTS: Accused Clarita S. Nicdao is charged with having committed the crime of
Violation of BP 22 in fourteen (14) counts. The criminal complaints allege that
respondent and her husband approached petitioner and asked her if they could
borrow money to settle some obligations. Having been convinced by them and
because of the close relationship of respondent to petitioner, the latter lent the former
her money. Thus, every month, she was persuaded to release P100,000.00 to the
accused until the total amount reached P1,150,000.00.

As security for the P1,150,000.00, respondent gave petitioner open dated checks
with the assurance that if the entire amount is not paid within one (1) year, petitioner
can deposit the checks.

Subsequently, petitioner demanded payment of the sums above-mentioned, but

respondent refused to acknowledge the indebtedness. Thereafter, petitioner
deposited all aforementioned checks in the bank totaling P1,150,000.00. The checks
were all returned for having been drawn against insufficient funds.

A verbal and written demand was made upon respondent to pay the amount
represented by the bounced checks, but to no avail. Hence, a complaint for violation
of BP 22 was filed against the respondent. The trial court convicted the defendant.
The CA reversed the decision, thus acquitting Nicdao. Petitioner now contends that
the civil liability of the defendant was not extinguished by the acquittal.

ISSUE: Whether respondent remains civilly liable to petitioner despite her acquittal.

HELD: No. From the standpoint of its effects, a crime has a dual character: (1) as an
offense against the State because of the disturbance of the social order and (2) as
an offense against the private person injured by the crime unless it involves the crime
of treason, rebellion, espionage, contempt and others (wherein no civil liability arises
on the part of the offender either because there are no damages to be compensated
or there is no private person injured by the crime.

What gives rise to the civil liability is really the obligation of everyone to repair or to
make whole the damage caused to another by reason of his act or omission, whether
done intentionally or negligently and whether or not punishable by law.

Extinction of penal action does not carry with it the eradication of civil liability, unless
the extinction proceeds from a declaration in the final judgment that the fact from
which the civil liability might arise did not exist.

The basic principle in civil liability ex delicto is that every person criminally liable is
also civilly liable, crime being one of the five sources of obligations under the Civil
Code. A person acquitted of a criminal charge, however, is not necessarily civilly free
because the quantum of proof required in criminal prosecution (proof beyond
reasonable doubt) is greater than that required for civil liability (mere preponderance
of evidence). In order to be completely free from civil liability, a person's acquittal
must be based on the fact that he did not commit the offense. If the acquittal is based
merely on reasonable doubt, the accused may still be held civilly liable since this does
not mean he did not commit the act complained of. It may only be that the facts
proved did not constitute the offense charged.

Acquittal will not bar a civil action in the following cases: (1) where the acquittal is
based on reasonable doubt as only preponderance of evidence is required in civil
cases; (2) where the court declared the accused's liability is not criminal but only civil
in nature and (3) where the civil liability does not arise from or is not based upon the
criminal act of which the accused was acquitted.

In this petition, we find no reason to ascribe any civil liability to respondent. As found
by the CA, her supposed civil liability had already been fully satisfied and extinguished
by payment. The statements of the appellate court leave no doubt that respondent,
who was acquitted from the charges against her, had already been completely
relieved of civil liability.
Allied Banking Corp. V. Lim Sio Wan

FACTS:

Lim Sio Wan (deposited 1st money market) > Allied Bank > (pre-terminated and
withdrawn) Santos > (through forged indorsement of Lim Sio Wan deposited in FCC
account) Metrobank > (release in exchange of undertaking of reimbursement) FCC
> (through Santos, as officer of Producers bank, deposited money market) Producers
Bank
 September 21, 1983: FCC had deposited a money market placement for P 2M
with Producers Bank

 Santos was the money market trader assigned to handle FCC’s account

 Such deposit is evidenced by Official Receipt and a Letter

 When the placement matured, FCC demanded the payment of the proceeds of the
placement

 November 14, 1983: Lim Sio Wan deposited with Allied Banking Corporation
(Allied) a money market placement of P 1,152,597.35 for a term of 31 days

 December 5, 1983: a person claiming to be Lim Sio Wan called up Cristina So, an
officer of Allied, and instructed the latter to pre-terminate Lim Sio Wan’s money
market placement, to issue a manager’s check representing the proceeds of the
placement, and to give the check to Deborah Dee Santos who would pick up the
check. Lim Sio Wan described the appearance of Santos

 Santos arrived at the bank and signed the application form for a manager’s check
to be issued

 The bank issued Manager’s Check representing the proceeds of Lim Sio Wan’s
money market placement in the name of Lim Sio Wan, as payee, cross-checked
"For Payee’s Account Only" and given to Santos

 Allied manager’s check was deposited in the account of Filipinas Cement

Corporation (FCC) at Metropolitan Bank and Trust Co. (Metrobank), with the
forged signature of Lim Sio Wan as indorser

 Metrobank stamped a guaranty on the check, which reads: "All prior

endorsements and/or lack of endorsement guaranteed."

 Upon the presentment of the check, Allied funded the check even without checking
the authenticity of Lim Sio Wan’s purported indorsement.

 amount on the face of the check was credited to the account of FCC
 December 9, 1983: Lim Sio Wan deposited with Allied a second money market
placement to mature on January 9, 1984

 December 14, 1983: upon the maturity date of the first money market placement,
Lim Sio Wan went to Allied to withdraw it. She was then informed that the
placement had been pre-terminated upon her instructions which she denied

 Lim Sio Wan filed with the RTC against Allied to recover the proceeds of her first
money market placement

 Allied filed a third party complaint against Metrobank and Santos

 Metrobank filed a fourth party complainagainst FCC

 FCC for its part filed a fifth party complaint against Producers Bank.

 Summonses were duly served upon all the parties except for Santos, who was no
longer connected with Producers Bank

 May 15, 1984: Allied informed Metrobank that the signature on the check was
forged

 Metrobank withheld the amount represented by the check from FCC.

 Metrobank agreed to release the amount to FCC after the FCC executed an
undertaking, promising to indemnify Metrobank in case it was made to reimburse
the amount

 Lim Sio Wan thereafter filed an amended complaint to include Metrobank as a

party-defendant, along with Allied.

 RTC : Allied Bank to pay Lim Sio Wan plus damages and atty. fees

 Allied Bank’s cross-claim against Metrobank is DISMISSED.

 Metrobank’s third-party complaint as against Filipinas Cement Corporation is

DISMISSED

 Filipinas Cement Corporation’s fourth-party complaint against Producer’s Bank is

DISMISSED

 CA: Modified. Allied Banking Corporation to pay 60% and Metropolitan Bank and
Trust Company 40%

ISSUE: W/N Allied should be solely liable to Lim Sio Wan.

HELD: YES. CA affirmed. Modified Porudcers Bank to reimburse Allied and
Metrobank.

 Articles 1953 and 1980 of the Civil Code

Art. 1953. A person who receives a loan of money or any other fungible thing acquires
the ownership thereof, and is bound to pay to the creditor an equal amount of the
same kind and quality.

Art. 1980. Fixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan.

 bank deposit is in the nature of a simple loan or mutuum

 money market is a market dealing in standardized short-term credit instruments

(involving large amounts) where lenders and borrowers do not deal directly with
each other but through a middle man or dealer in open market. In a money market
transaction, the investor is a lender who loans his money to a borrower through
a middleman or dealer.

 Lim Sio Wan, as creditor of the bank for her money market placement, is entitled
to payment upon her request, or upon maturity of the placement, or until the
bank is released from its obligation as debtor

 GR: collecting bank which indorses a check bearing a forged indorsement and
presents it to the drawee bank guarantees all prior indorsements, including the
forged indorsement itself, and ultimately should be held liable therefor

 EX: when the issuance of the check itself was attended with negligence.

 Allied negligent in issuing the manager’s check and in transmitting it to Santos

without even a written authorization

 Allied did not even ask for the certificate evidencing the money market placement
or call up Lim Sio Wan at her residence or office to confirm her instructions.

 Allied’s negligence must be considered as the proximate cause of the resulting

loss.

 When Metrobank indorsed the check without verifying the authenticity of Lim Sio
Wan’s indorsement and when it accepted the check despite the fact that it was
cross-checked payable to payee’s account only
 contributed to the easier release of Lim Sio Wan’s money and perpetuation of the
fraud

 Given the relative participation of Allied and Metrobank to the instant case, both
banks cannot be adjudged as equally liable. Hence, the 60:40 ratio of the liabilities
of Allied and Metrobank, as ruled by the CA, must be upheld.

 FCC, having no participation in the negotiation of the check and in the forgery of
Lim Sio Wan’s indorsement, can raise the real defense of forgery as against both
banks

 Producers Bank was unjustly enriched at the expense of Lim Sio Wan

 Producers Bank should reimburse Allied and Metrobank for the amounts ordered
to pay Lim Sio Wan
RCBC vs.Hi-Tri Development

FACTS:
Before the Court is a Rule 45 Petition for Review on Certiorari filed by petitioner Rizal
Commercial Banking Corporation (RCBC) against respondents Hi-Tri Development
Corporation (Hi-Tri) and Luz R. Bakunawa (Bakunawa). Petitioner seeks to appeal
from the 26 November
2009 Decision and 27 May 2010 Resolution of the Court of Appeals (CA), which
reversed and set aside the 19 May 2008 Decision and 3 November 2008 Order of the
Makati City Regional Trial Court (RTC) in Civil Case No. 06-244.

The case before the RTC involved the Complaint for Escheat filed by the Republic of
the Philippines (Republic) pursuant to Act No. 3936, as amended by Presidential
Decree No. 679 (P.D. 679), against certain deposits, credits, and unclaimed balances
held by the branches of various banks in the Philippines. The trial court declared the
amounts, subject of the special proceedings, escheated to the Republic and ordered
them deposited with the Treasurer of the Philippines (Treasurer) and credited in favor
of the Republic.

The assailed RTC judgments included an unclaimed balance in the

amount of P1,019,514.29, maintained by RCBC in its Ermita Business Center branch.

ISSUE:
Whether or not the allocated funds may be escheated in favor of the Republic?

HELD:

The Court held in the negative. An ordinary check refers to a bill of exchange drawn
by a depositor (drawer) on a bank (drawee), requesting the latter to pay a person
named therein (payee) or to the order of the payee or to the bearer, a named sum
of money.

The issuance of the check does not of itself operate as an assignment of any part of
the funds in the bank to the credit of the drawer.

Here, the bank becomes liable only after it accepts or certifies the check. After the
check is accepted for payment, the bank would then debit the amount to be paid to
the holder of the check from the account of the depositor-drawer.

There are checks of a special type called manager’s or cashier’s checks. These are
bills of exchange drawn by the bank’s manager or cashier, in the name of the bank,
against the bank itself. Typically, a manager’s or a cashier’s check is procured from
the bank by allocating a particular amount of funds to be debited from the depositor’s
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 manager’s check does not ipso facto work as
an automatic transfer of funds to the account of the payee. In case the procurer of
the manager’s or cashier’s 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.

Petitioner acknowledges that the Manager’s Check was procured by respondents, and
that the amount to be paid for the check would be sourced from the deposit account
of Hi-Tri.

When Rosmil did not accept the Manager’s Check offered by respondents, the latter
retained custody of the instrument instead of cancelling it. As the Manager’s Check
neither went to the hands of Rosmil nor was it further negotiated to other persons,
the instrument remained undelivered.

Petitioner does not dispute the fact that respondents retained custody of the
instrument. 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 Manager’s 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 Manager’s Check. The doctrine that the deposit
represented by a manager’s 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.

After a careful review of the RTC records, we find that it is no longer necessary to
remand the case for hearing to determine whether the claim of respondents was
valid. There was no contention that they were the procurers of the Manager’s Check.
It is undisputed that there was no effective delivery of the check, rendering the
instrument incomplete. In addition, we have already settled that respondents
retained ownership of the funds. As it is obvious from their foregoing actions that
they have not abandoned their claim over the fund, we rule that the allocated
deposit, subject of the Manager’s Check, should be excluded from the
escheat proceedings. We reiterate our pronouncement that the objective of escheat
proceedings is state forfeiture of unclaimed balances. We further note that there is
nothing in the records that would show that the OSG appealed the assailed CA
judgments. We take this failure to appeal as an indication of disinterest in pursuing
the escheat proceedings in favor of the Republic.