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IV.

TRANSFER AND NEGOTIATION


Rizal Commercial Banking Corporation v. Hi-Tri Development Corporation
Facts:
Millan paid the spouses Bakunawa P1,019,514.29 as down payment for the purchase of six (6)
lots with the Spouses Bakunawa giving Millan the Owners Copies of TCTs of said lots.
Due to some obstacles, the sale did not push through; so Spouses Bakunawa rescinded the sale
and offered to return to Millan her down. However, Millan refused to accept back the down
payment. Consequently, the Spouses Bakunawa, through their company, Hi-Tri took out on
October 28, 1991, a Managers Check from RCBC-Ermita in the amount of P 1,019,514.29,
payable to Millans company Rosmil and used this as one of their basis for a complaint against
Millan.
The Spouses Bakunawa retained custody of RCBC Managers Check and refrained from cancelling
or negotiating it. Millan was also informed that the Managers Check was available for her
withdrawal, she being the payee.
On January 31, 2003, without the knowledge of Spouses Bakunawa, RCBC reported the
"P 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. On December 14, 2006, the Republic, through the
Office of the Solicitor General (OSG), filed with the RTC the action for Escheat.
On April 30, 2008, Spouses Bakunawa settled amicably their dispute with Millan. Spouses
Bakunawa tried to recover the P1,019,514.29 under Managers Check but they were informed
that the amount was already subject of the escheat proceedings before the RTC.
The trial court ordered the deposit of the escheated balances with the Treasurer and credited in
favor of the Republic. Respondents claim that they were not able to participate in the trial, as
they were not informed of the ongoing escheat proceedings. Later motion for reconsideration
was denied.
CA reversed the RTC ruling. CA pronounced that RTC Clerk of Court failed to issue individual
notices directed to all persons claiming interest in the unclaimed balances. CA held that the
Decision and Order of the RTC were void for want of jurisdiction.
Issue:
Whether or not the allocated funds may be escheated in favor of the Republic
Held:
There are sufficient grounds to affirm the CA on the exclusion of the funds allocated for the
payment of the Managers Check in the escheat proceedings.
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 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.
Petitioner acknowledges that the Managers 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 Managers Check offered by respondents, the latter retained custody of
the instrument instead of cancelling it. As the Managers 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
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.

In Re: Marten's Estate


Mabel Martens Bonk, filed a claim, based on a note for $1,500, against the administrator of this
estate. Mabel is the daughter of the deceased. A note in the handwriting of her mother, dated
March 1, 1930, promising to pay Mabel $1,500 on December 1, 1930, signed by the decedent.
On the back of the note was the endorsement: "This money is coming to her for teaching $1,000,
and $500. is what the rest got also. Mother." Was found in the safe after her mothers death
Issue:
whether or not the action of the trial court, in denying appellant's claim, was proper because of
the failure to establish that the note was delivered during the lifetime of the deceased.
Held:
Yes, the action was proper. Section 9476 of the Code provides that every contract on a
negotiable instrument is incomplete and revocable until delivery of the instrument for the
purpose of giving effect thereto. This was the common law rule. Obviously, the note here sued
upon could not be made the basis of a valid claim against the estate unless there was a legal
delivery of the same, during the lifetime of the decedent.

De la Victoria v. Burgos
RAUL H. SESBREO filed a complaint for damages against 2 Assistant City Fiscals . After trial
judgment was rendered ordering the defendants to pay P11,000.00 to the plaintiff, private
respondent herein. The decision having become final and executory, on motion of the latter, the
trial court ordered its execution. This order was questioned by the defendants before the Court of
Appeals. However, a writ of execution was issued.
Thereafter, a notice of garnishment was served on petitioner as City Fiscal of Mandaue City
where defendant Mabanto, Jr., was then detailed. The notice directed petitioner 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
Issues:
whether 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
Held:
Garnishment is considered as the species of attachment for reaching credits belonging to
the judgment debtor owing to him from a stranger in litigation. Emphasis is laid on the phrase
belonging to the judgment debtor since it is the focal point of resolving the issues raised.
As Assistant City Fiscal, the source of Mabantos salary is public funds. Under Section 16
of the NIL, every contract on a negotiable instrument is incomplete and revocable until delivery
of the instrument for the purpose of giving effect thereto. As ordinarily understood,
delivery means the transfer of the possession of the instrument by the maker or drawer with
intent to transfer title to the payee and recognize him as the holder thereof.
The petitioner is the custodian of the checks. Inasmuch as said checks were in the
custody of the petitioner and not yet delivered to Mabanto, they didn't belong to him and
still had the character of public funds. The salary check of a government officer or
employee doesn't belong to him
before it has been physically delivered to him. Until that time the check belongs to the
government. Accordingly, before there is actual delivery of the check, the payee has no power
over it, he cannot assign it without the consent of the government.
*If public funds would be allowed to be garnished, then basic services of the government
may be hampered.

Lim v. CA
Manuel Lim and Rosita Lim are the officers of the Rigi Bilt Industries, Inc. (RIGI). RIGI had been
transacting business with Linton Commercial Company, Inc. The Lims ordered 100 pieces of mild
steel plates from Linton and were delivered to the Lims place of business which was in Caloocan.
To pay Linton, the Lims issued a postdated check for P51,800.00. On a different date, the Lims
also ordered another 65 pcs of mild steel plates and were delivered in the place of business.
They again issued another postdated check. On that same day, they also ordered purlins worth
P241,800 which were delivered to them on various dates. The Lims issued 7 checks for this.
When the 7 checks were presented to the drawee bank (Solidbank), it was dishonored because
payment for the checks had been stopped and/or insufficiency of funds. So the Lims were
charged with 7 counts of violation of Bouncing Checks Law.The Malabon trial court held that the
Lims were guilty of estafa and violation of BP 22. They went to CA on appeal.The CA acquitted
the Lims of estafa, on the ground that the checks were not made in payment of an obligation

contracted at the time of their issuance. However, the CA affirmed the finding that they were
guilty of violation for BP 22. Motion for Reconsideration to SC.
Issue:
ssue:
Whether or not the issue was within the jurisdiction of the Malabon Trial Court

Held:
Yes. The venue of jurisdiction lies either in the RTC Caloocan or Malabon Trial Court.
BP 22 is a continuing crime. A person charged with a transitory crime may be validly tried in any
municipality or territory where the offense was partly committed. In determining the proper
venue, the ff. must be considered. 1) 7 checks were issued to Linton in its place of business in
Navotas. 2) The checks were delivered Linton in the same place. 3) The checks were dishonored
in Caloocan 4) The Lims had knowledge
of their insufficiency of funds.

Under sec 191 of the Negotiable Instruments Law:


ISSUE = 1ST delivery of the instrument complete in form to a person who takes it as a holder
HOLDER = payee or indorsee of a bill/note who is in possession of it or the bearer
The place where the bills were written, signed or dated does not necessarily fix or determine the
place where they were executed. It is the delivery that is important. It is the final act essential to
its consummation of an obligation. An undelivered bill is unoperative. The issuance and delivery
of the check must be to a person who takes it as a holder.
Although Linton sent a collector who received the checks fr. The Lims at their place of business,
the checks were actually issued and delivered to Linton in Navotas. The collector is not a
holder or an agent, he was just an employee.

RULE IN TRANSITORY CRIMES. If all the acts material and essential to the crime and requisite
of its consummation occurred in one municipality or territory, the court therein has the sole
jurisdiction to try the case. There are certain crimes in which some acts material and essential to
the crimes and requisite to their consummation occur in one municipality or territory and some in
another, in which event, the court of either has jurisdiction to try the cases, it being understood
that the first court taking cognizance of the case excludes the other. These are the so-called
transitory or continuing crimes under which violation of B.P. Blg. 22 is categorized. In other
words, a person charged with a transitory crime may be validly tried in any municipality or
territory where the offense was in part committed.
CASE AT BAR. In determining proper venue in these cases, the following acts material and
essential to each crime and requisite to its consummation must be considered: (a) the seven (7)

checks were issued to LINTON at its place of business in Balut, Navotas; (b) they were delivered
to LINTON at the same place; (c) they were dishonored in Kalookan City; and (d) petitioners had
knowledge of the insufficiency of their funds in SOLIDBANK at the time the checks were issued.
Since there is no dispute that the checks were dishonored in Kaloocan City, it is no longer
necessary to discuss where the checks were dishonored. Consequently, venue or jurisdiction lies
either in the Regional Trial Court of Kaloocan 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.
RECEIPT OF CHECKS BY A COLLECTOR, NOT THE ISSUANCE AND DELIVERY CONTEMPLATED BY
LAW.
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.
8. CRIMINAL LAW; BATAS PAMBANSA BLG. 22; PRIMA FACIE EVIDENCE OF KNOWLEDGE OF
INSUFFICIENT FUNDS; NOT OVERCOME BY FAILURE OF PARTY TO PAY THE AMOUNTS DUE ON THE
CHECKS. Section 2 of B.P. Blg. 22 establishes a prima facie evidence of knowledge of
insufficient funds. 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 citingPeople 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."
||| (Lim v. Court of Appeals, G.R. No. 107898, [December 19, 1995], 321 PHIL 782-791)

State Investment House v. CA

Allied Banking Corp. v. CA

Montinola v. PNB
FACTS:
Ramos, as a disbursing officer of an army division of the USAFE, made cash advancements w/
the Provincial Treasurer of Lanao. In exchange, the Provl Treasurer of Lanao gave him a

P500,000 check. Thereafter, Ramos presented the check to Laya for encashment. Laya in
his capacity as Provincial Treasurer of Misamis Oriental as drawer, issued a check to
Ramos in the sum of P100000, on the Philippines National Bank as drawee; the P400000 value of
the check was paid in military notes.
Ramos was unable to encash the said check for he was captured by the Japanese. But
after his release, he sold P30000 of the check to Montinola for P90000 Japanese Military notes, of
which only P45000 was paid by the latter. The writing made by Ramos at the back of the
check was to the effect that he was assigning only P30000 of the value of the document with
an instruction to the bank to pay P30000 to Montinola and to deposit the balance to Ramos's
credit. This writing was, however, mysteriously obliterated and in its place, a supposed
indorsement appearing on the back of the check was made for the whole amount of the check.
At the time of the transfer of this check to Montinola, the check was long overdue by
about 2-1/2 years.
Montinola instituted an action against the PNB and the Provincial Treasurer of Misamis Oriental
to collect the sum of P100,000, the amount of the aforesaid check. There now appears on
the face of said check the words in parenthesis "Agent, Phil. National Bank" under the
signature of Laya purportedly showing that Laya issued the check as agent of the Philippine
National Bank.
1.
W/N Montinola cannot hold PNB liable because there is "Agent, Phil. National Bank" isan
alteration - YES
2.
W/N Montinola is a holder in due course - NO
Held:
Montinola's VersionJune, 1944: Ramos, needing money with which to buy foodstuffs and
medicine,offered to sell him the check; to be sure that it was genuine and negotiable,Montinola,
accompanied by his agents and by Ramos himself, went to seePresident Carmona of the
Philippine National Bank in Manila about said check,agreed to the sale of the check for P850,000
Japanese military notes, payable ininstallments; that of this amount, P450,000 was paid to
Ramos inJapanesemilitary notes in 5 installments, and the balance of P400,000 was paid in kind,
that upon payment of the full price, M. V. Ramos duly indorsed the checkto him.
"Agent, Phil. National Bank" now appearing under the signature of the ProvincialTreasurer on the
face of the original check - converts the bank from a meredrawee to a drawer and therefore
changes its liability, constitutes a materialalteration of the instrument without the consent of the
parties liable thereon, andso discharges the instrument. (Section 124 of the Negotiable
Instruments Law). -doesn't make sense so alteration
Montinola may therefore not be regarded as an indorsee. At most he may be regardedas a mere
assignee of the P30,000 sold to him by Ramos, in which case, as suchassignee, he is subject to
all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos.

Neither can Montinola be considered as a holder in due course because section 52 of said law
defines a holder in due course as a holder who has taken the instrument under certain
conditions, one of which is that he became the holder before it was overdue.When Montinola
received the check, it was long overdue.
Neither could it be said that he took it in good faith. He has not paid the full amount of P90,000
for which Ramos sold him P30,000 of the value of the check. Check was issued to M. V. Ramos
not as a person but M. V. Ramos as the disbursingofficer of the USAFFE. Therefore, he had no
right to indorse it personally to plaintiff

Metropol Bacolod Financing & Investment Corp. v. Sambok motors


Facts: Dr. Javier Villaruel executed a promissory note in favor of Ng Sambok Sons Motors Co., Ltd.
On the same date, Sambok Motors, a sister company of Ng Sambok Sons Motors Co., Ltd., and
under the same management as the former, negotiated and indorsed the note in favor of plaintiff
Metropol Financing & Investment Corporation with the following indorsement: "Pay to the order of
Metropol Bacolod Financing & Investment Corporation with recourse. Notice of Demand;
Dishonor; Protest; and Presentment are hereby waived.
Metropol formally presented the promissory note for payment to the maker. Dr. Villaruel failed to
pay the promissory note as demanded, hence Metropol notified Sambok of the fact that the same
has been dishonored and demanded payment. Sambok failed to pay, so Metropol filed a
complaint for collection of a sum of money .Sambok did not deny its liability but contended that
it could not be obliged to pay until after its co-defendant Dr. Villaruel, has been declared
insolvent.
Issue: Whether Sambok Motors Company, by adding the words "with recourse" in the
indorsement of the note, becomes a qualified indorser; that being a qualified indorser, it does not
warrant that if said note is dishonored by the maker on presentment, it will pay the amount to
the holder.
Ruling:
No. A qualified indorsement constitutes the indorser a mere assignor of the title to the
instrument. It may be made by adding to the indorser's signature the words "without recourse"
or any words of similar import. Such an indorsement relieves the indorser of the general
obligation to pay if the instrument is dishonored but not of the liability arising from warranties on
the instrument as provided in Section 65 of the Negotiable Instruments Law. However, appellant
Sambok indorsed the note "with recourse" and even waived the notice of demand, dishonor,
protest and presentment.
"Recourse" means resort to a person who is secondarily liable after the default of the person who
is primarily liable. Appellant, by indorsing the note "with recourse" does not make itself a
qualified indorser but a general indorser who is secondarily liable, because by such indorsement,
it agreed that if Dr. Villaruel fails to pay the note, plaintiff-appellee can go after said appellant.
The effect of such indorsement is that the note was indorsed without qualification. A person who
indorses without qualification engages that on due presentment, the note shall be accepted or
paid, or both as the case may be, and that if it be dishonored, he will pay the amount thereof to
the holder. Appellant Sambok's intention of indorsing the note without qualification is made even

more apparent by the fact that the notice of demand, dishonor, protest and presentment were all
waived.
The words added by said appellant do not limit his liability, but rather confirm his obligation as a
general indorser. Appellant Sambok is not only secondarily liable because after an instrument is
dishonored by non-payment, the person secondarily liable thereon ceases to be such and
becomes a principal debtor. His liability becomes the same as that of the original obligor.
Consequently, the holder need not even proceed against the maker before suing the indorser.
Great Asian Sales Center Corp. v. CA
FACTS:
Great Asian BOD approved a resolution authorizing its Treasurer and General Manager, Arsenio
Lim Piat, Jr. (Arsenio) to secure a loan, not exceeding 1M, from Bancasia. In 1982, Great Asian
BOD approved a resolution authorizing Great Asian to secure a discounting line with Bancasia in
an amount not exceeding P2M and also designated Arsenio as the authorized signatory to sign all
instruments, documents and checks necessary to secure the discounting line
Tan Chong Lin signed 2 surety agreements in favor of Bancasia. Great Asian, through its
Treasurer and General Manager Arsenio, signed 4 Deeds of Assignment of Receivables (Deeds of
Assignment), assigning to Bancasia 15 postdated checks and a Deed of Assignments of
assignment. Great Asian assigned the postdated checks to Bancasia at a discount rate of less
than 24% of the face value of the checks
Arsenio endorsed all the 15 dishonored checks by signing his name at the back of the checks
-8 dishonored checks bore the endorsement of Arsenio below the stamped name of "Great Asian
Sales Center"
-7 dishonored checks just bore the signature of Arsenio
The drawee banks dishonored the 15 checks on maturity when deposited for collection by
Bancasia
ISSUE:
W/N Bancasia and Tang Chon Lin should be held liable under the Civil Code because it was a
separate and distinct deed of assignment
HELD:
YES. Affirmed with Modification. As plain as daylight, the two board resolutions clearly authorize
Great Asian to secure a loan or discounting line from Bancasia. Clearly, the discounting
arrangements entered into by Arsenio under the Deeds of Assignment were the very transactions
envisioned in the two board resolutions of Great Asian to raise funds for its business. There is
nothing in the Negotiable Instruments Law or in the Financing Company Act (old or new), that
prohibits Great Asian and Bancasia parties from adopting the with recourse stipulation uniformly
found in the Deeds of Assignment. Instead of being negotiated, a negotiable instrument may be
assigned.

The endorsement does not operate to make the finance company a holder in due course. For its
own protection, therefore, the finance company usually requires the assignor, in a separate and
distinct contract, to pay the finance company in the event of dishonor of the notes or checks.
(only security). Otherwise, consumers who purchase appliances on installment, giving their
promissory notes or checks to the seller, will have no defense against the finance company
should the appliances later turn out to be defective
As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian under the
Negotiable Instruments Law. Had it so proceeded, the Negotiable Instruments Law would have
governed Bancasias cause of action. Bancasia, however, did not choose this route. Instead,
Bancasia decided to sue Great Asian for breach of contract under the Civil Code, a right that
Bancasia had under the express with recourse stipulation in the Deeds of Assignment.Great
Asian, after paying Bancasia, is subrogated back as creditor of the receivables. Great Asian can
then proceed against the drawers who issued the checks. Even if Bancasia failed to give timely
notice of dishonor, still there would be no prejudice whatever to Great Asian.
Under the Negotiable Instruments Law, notice of dishonor is not required if the drawer has no
right to expect or require the bank to honor the check, or if the drawer has countermanded
payment.
Moreover, under common law, delay in notice of dishonor, where such notice is required,
discharges the drawer only to the extent of the loss caused by the delay.Again, we reiterate that
this obligation of Great Asian is separate and distinct from its warranties as indorser under the
Negotiable Instruments Law.Civil Code are applicable and not the Negotiable Instruments
Law.separate Deeds of Assignment - provisions of the Civil Code are applicable (NOT Negotiable
Instruments Law)Great Asians four contracts assigning its fifteen postdated checks to Bancasia
expressly stipulate the suspensive condition that in the event the drawers of the checks fail to
pay, Great Asian itself will pay Bancasia
The stipulations in the Surety Agreements undeniably mandate the solidary liability of Tan Chong
Lin with Great Asian. Moreover, the stipulations in the Surety Agreements are sufficiently broad,
expressly encompassing "all the notes, drafts, bills of exchange, overdraft and other obligations
of every kind which the PRINCIPAL may now or may hereafter owe the Creditor"

Metropolitan Bank & Trust Co. v. Phil. Bank of Communications


Metropolitan Bank and Trust Company v. Chiok
Francisco v. CA
FACTS:
June 23, 1977: Adalia Francisco (Francisco) president of A. Francisco Realty & Development
Corporation (AFRDC) and Jaime C. Ong (Ong) President and General Manager of Herby
Commercial & ConstructionCorporation (HCCC), entered into a contract where HCCC agreed to
undertake the construction of 35 housing units and the development of 35 hectares of land.
HCCC was to be paid on turn-key basis (basis of the completed houses and developed lands
delivered to and accepted by AFRDC and the GSIS) To facilitate payment, AFRDC executed a

Deed of Assignment in favor of HCCC to enable the it to collect payments directly from the
GSIS. Furthermore, the GSIS and AFRDC put up an Executive Committee Account with
the Insular Bank of Asia & America (IBAA) of P4M from which checks would be issued and cosigned by petitioner Francisco and the GSIS Vice-President Armando Diaz (Diaz).

February 10, 1978: HCCC filed a complaint w/ the RTC against Francisco, AFRDC and the GSIS for
the collection of the unpaid balance under the Land Development and Construction Contract in
the amount of P515,493.89 for completed and delivered housing units and land development.
Sometime in 1979: Ong discovered that Diaz and Francisco had executed and signed 7
checks drawn against the IBAA and payable to HCCC but were never delivered to HCCC. GSIS
gave Francisco custody of the checks since she promised that she would deliver the same to
HCCC. Francisco forged the signature of Ong, without his knowledge or consent, at the dorsal
portion of the said checks to make it appear that HCCC had indorsed the checks; Francisco then
indorsed the checks for a second time by signing her name at the back of the checks and
deposited the checks in her IBAA savings account

June 7, 1979: Ong filed complaints charging Francisco with estafa thru falsification of commercial
documents - dismmised by the Assistant City Fiscal. According to Francisco, she agreed to grant
HCCC the loans in the total amount of P585K and covered by 18promissory notes in order to
obviate the risk of the non-completion of the project. As a means of repayment, Ong allegedly
issued a Certification authorizing Francisco to collect HCCCs receivables from the GSIS

RTC: favored Ong and against IBAA and Francisco. November 21, 1989: IBAA and HCCC entered
into a Compromise Agreement which was approved by the trial court, wherein HCCC
acknowledged receipt of the amount of P370,475.00 in full satisfaction of its claims against IBAA,
without prejudice to the right of IBAA to pursue its claims against Francisco.
CA affirmed RTC. Francisco claims that she was, in any event, authorized to sign Ongs name on
the checks by virtue of the Certification executed by Ong in her favor giving her the authority to
collect all the receivables of HCCC from the GSIS, including the questioned checks.

ISSUE:
W/N Francisco can sign Ongs name on the checks and it was not forgery

HELD: NO.
Francisco had custody of the checks, as proven by the check vouchers bearing her uncontested
signature. Francisco forged the signature of Ong on the checks to make it appear as if Ong had
indorsed said checks
The Negotiable Instruments Law provides that where any person is under obligation to indorse in
a representative capacity, he may indorse in such terms as to negative personal liability An
agent, when so signing, should indicate that he is merely signing in behalf of the principal and
must disclose the name of his principal; otherwise he shall be held personally liable. Instead of
signing Ongs name, Francisco should have signed her own name and expressly indicated that
she was signing as an agent of HCCC

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