CELY YANG vs. HON.

COURT OF APPEALS
[G.R. No. 138074. August 15, 2003.]

Facts:

Cely Yang and Prem Chandiramani entered into an agreement whereby the latter was to give
Yang a PCIB manager's check in exchange for two (2) of Yang's manager's checks, both payable to the
order of private respondent Fernando David. They agreed that the former would secure from FEBTC a
dollar draft in the amount of US$200,000.00, payable to PCIB which Chandiramani would exchange for
another dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong Kong.
Yang gave the cashier's checks and dollar drafts to her business associate, Albert Liong, to be
delivered to Chandiramani by Liong's messenger, Danilo Ranigo. Ranigo was to meet Chandiramani at
Philippine Trust Bank where he would turn over Yang's cashier's checks and dollar draft to him and deliver
it to Ranigo the PCIB manager's check and a Hang Seng Bank dollar draft. Chandiramani did not appear
and Ranigo allegedly lost the two cashier's checks and the dollar draft bought by petitioner. Ranigo
reported the alleged loss of the checks and the dollar draft to Liong.
Liong, in turn, informed Yang, and the loss was then reported to the police. It turn out that the
checks and the dollar draft were not lost, for Chandiramani was able to get hold of said instruments,
without delivering the exchange consideration consisting of the PCIB manager's check and the Hang Seng
Bank dollar draft. Chandiramani delivered to respondent Fernando David at China Banking Corporation.
Chandiramani also deposited FEBTC Dollar Draft No. 4771, drawn upon the Chemical Bank, New York for
US$200,000.00 in PCIB.

ISSUE: Whether the Court of Appeals erred in holding herein respondent Fernando David to be a holder
in due course

RULING:

Every holder of a negotiable instrument is deemed prima facie a holder in due course. However,
this presumption arises only in favor of a person who is a holder as defined in Section 191 of the
Negotiable Instruments Law, meaning a "payee or indorsee of a bill or note, who is in possession of it, or
the bearer thereof.
It is not disputed that David was the payee of the checks in question. First, Section 24 18 of the
Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same
for a consideration 19 or for value. The law itself creates a presumption in David's favor that he gave
valuable consideration for the checks in question. In alleging otherwise, the petitioner has the burden to
prove that David got hold of the checks absent said consideration. It shows that the petitioner failed to
discharge her burden of proof. The petitioner's averment that David did not give valuable consideration
when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it.
Second, petitioner fails to point any circumstance which should have put David on inquiry as to
the why and wherefore of the possession of the checks by Chandiramani. David was not privy to the
transaction between petitioner and Chandiramani. Instead, Chandiramani and David had a separate
dealing in which it was precisely Chandiramani's duty to deliver the checks to David as payee. David thus
had no obligation to ascertain from Chandiramani what the nature of the latter's title to the checks was,
if any, or the nature of his possession. Thus, we cannot hold him guilty of gross neglect amounting to legal
absence of good faith, absent any showing that there was something amiss about Chandiramani's
acquisition or possession of the checks.
 LIABILITIES OF PARTIES

THE PHILIPPINE NATIONAL BANK vs. BARTOLOME PICORNELL

Facts:

Bartolome Picornell, following instruction Hyndman, Tavera & Ventura, bought in Cebu 1,735
bales of tobacco. Picornell obtained from the branch of the National Bank in Cebu the sum of P39,529,83,
the value of the tobacco, together with his commission of 1 real per quinta drawn through a bill of
exchange. This instrument was delivered to the branch of the National Bank in Cebu, together with the
invoice and bill of lading of the tobacco, which was shipped in the boat Don Ildefonso, consigned to
Hyndman, Tavera & Ventura at Manila.
The invoice and bill of lading were delivered to the National Bank with the understanding that
the bank should not deliver them to Hyndman, Tavera & Ventura except upon payment of the bill; which
condition was expressed by the well-known formula "D/P".The central office of the National bank in
Manila received the bill and the aforesaid documents annexed thereto and presented the bill to
Hyndman, Tavera & Ventura, who accepted it.
The tobacco having arrived at Manila, the firm of Tambunting, owner of the ship Don Ildefonso,
that brought the shipment, requested Hyndman, Tavera & Ventura to send for the goods, which was
done by the company without the knowledge of the National Bank which retained and always had in its
possession the invoice and bill of lading of the tobacco, until it presented them as evidence at the trial.
Hyndman, Tavera & Ventura proceeded to the examination of the tobacco and notify Picornell
that of the tobacco received, there was a certain portion which was of no use and was damaged. This the
only whenPicornell learned that Hyndman, Tavera & Ventura had in their possession the tobacco.

Issue: WON a drawee is liable to the payee upon acceptance.

RULING:

This action is for the recovery of the value of the bill of exchange above-mentioned. The Hyndman,
Tavera & Ventura company accepted it unconditionally, but did not pay it at its maturity. The question
whether or not the tobacco was worth the value of the bill, does not concern the plaintiff bank. Such
partial want of consideration, if it was, does not exist with respect to the bank which paid to Picornell the
full value of said bill of exchange. The bank was a holder in due course, and was such for value full and
complete. The Hyndman, Tavera & Ventura company cannot escape liability in view of section 28 of the
Negotiable Instruments Law.
The fact that Picornell was a commission agent of Hyndman, Tavera & Ventura, in the purchase
of the tobacco, does not necessarily make him an agent of the company in its obligations arising from the
drawing of the bill by him.
 FAR EAST BANK & TRUST COMPANY vs. GOLD PALACE JEWELLERY CO
[G.R. No. 168274. August 20, 2008.]

Facts:

Samuel Tagoe, purchased from Gold Palace's store at SM-North EDSA several pieces of jewelry
valued at P258,000.00. As payment, he offered Foreign Draft No. M-069670 issued by the United
Overseas Bank (Malaysia) BHD Medan Pasar, Kuala Lumpur Branch (UOB), addressed to the Land Bank of
the Philippines, Manila (LBP), and payable to the respondent company. Yang, the assistant general
manager of Gold Palace inquired from Far East as to the nature of the draft. The teller informed her that
the same was similar to a manager's check, but advised her not to release the pieces of jewelry until the
draft had been cleared. Respondent Julie Yang-Go, the manager of Gold Palace deposited the draft in the
company's account with the Far East.
When Far East, the collecting bank, presented the draft for clearing to LBP, the drawee bank, the
latter cleared the same. The foreigner eventually returned to respondent's store to claim the purchased
goods. After ascertaining that the draft had been cleared, respondent Yang released the pieces of jewelry
to Samuel Tagoe. The amount in the draft was more than the value of the goods purchased, she issued,
as his change through a check which was later presented for encashment and was, in fact, paid by the
said bank.
LBP informed Far East that the amount in Foreign Draft No. M-069670 had been materially altered
and that it was returning the same. The material alteration was discovered by UOB after LBP had informed
it that its funds were being depleted following the encashment of the subject draft. Gold Palace had
already utilized portions of the amount. Because of this the outstanding balance of its account was already
inadequate, Far East was able to debit only P168,053.36, but this was done without a prior written notice
to the account holder. Petitioner demanded from respondents the payment of P211,946.64 or the
difference between the amount in the materially altered draft and the amount debited from the
respondent company's account.

Issue: WON Gold Palace should be liable for the altered foreign draft

RULING:

Act No. 2031, or the Negotiable Instruments Law (NIL), explicitly provides that the acceptor, by
accepting the instrument, engages that he will pay it according to the tenor of his acceptance. This
provision applies with equal force in case the drawee pays a bill without having previously accepted it.
His actual payment of the amount in the check implies not only his assent to the order of the drawer and
a recognition of his corresponding obligation to pay the aforementioned sum, but also, his clear
compliance with that obligation. Actual payment by the drawee is greater than his acceptance, which is
merely a promise in writing to pay. The payment of a check includes its acceptance.
In this case, the drawee bank cleared and paid the subject foreign draft and forwarded the amount
thereof to the collecting bank. The latter then credited to Gold Palace's account the payment it received.
Following the plain language of the law, the drawee, by the said payment, recognized and complied with
its obligation to pay in accordance with the tenor of his acceptance. LBP was liable on its payment of the
check according to the tenor of the check at the time of payment, which was the raised amount.
Because of that engagement, LBP could no longer repudiate the payment it erroneously made to
a due course holder. SC held that Gold Palace was not a participant in the alteration of the draft, was not
negligent, and was a holder in due course — it received the draft complete and regular on its face, before
it became overdue and without notice of any dishonor, in good faith and for value, and absent any
knowledge of any infirmity in the instrument or defect in the title of the person negotiating [Link]
relied on the drawee bank's clearance and payment of the draft and not being negligent (it delivered the
purchased jewelry only when the draft was cleared and paid), respondent is amply protected by the said
Section 62.
Far East did not own the draft, it merely presented it for payment. Considering that the warranties
of a general indorser as provided in Section 66 of the NIL are based upon a transfer of title and are
available only to holders in due course, 48 these warranties did not attach to the indorsement for deposit
and collection made by Gold Palace to Far East. Without any legal right to do so, the collecting bank,
therefore, could not debit respondent's account for the amount it refunded to the drawee bank.