Banking Law and Negotiable Instruments Law
Case Digests
Submitted by: TALAO, Lhaila Angelica C.
A316LM AB Legal Management
Submitted to: Atty. Nick Angelo Cunanan
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Casabuena v. Court of Appeals
G.R. No. 115410 [February 27, 1998]
FACTS OF THE CASE
Ciriaco Urdaneta received a parcel of land through a city program for
underprivileged citizens. He then assigned half of the lot to Arsenia Benin after she paid
off his debt of 500 pesos. They signed a deed of sale with mortgage, where Urdaneta
agreed to pay the city in installments over 40 years. Another deed assigned the entire lot
to Benin, who took responsibility for all payments to the city. They also had a verbal
agreement allowing Urdaneta to buy back the property within 3 years. If he failed to do
so, Benin would gain possession for 15 years without ownership transfer. The
administration of the property was later given to Casabuena brothers after Benin sold
them her rights for 7,500 pesos. Despite this sale, Benin built a duplex on the lot and
rented it out. After Urdaneta finished paying the city, the mortgage was released, and the
land's non-selling period was extended. Casabuena initially collected rent for Benin, but
a dispute arose between them, leading to litigation. Upon learning of this, Urdaneta
demanded Casabuena and Benin vacate the property. Their refusal led to Urdaneta filing
an ejectment case against them. In the midst of these conflicts, the court declared the
Urdanetas as the rightful owners, considering the assignment to Benin as security for a
debt due to the city's restriction on selling the land.
ISSUE/S
Whether or not a deed of assignment can transfer ownership of the property to the
assignee?
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
RULING: NO!
The core issue revolves around a debt owed by Ciriaco Urdaneta to Benin. To
secure this debt, the Urdanetas assigned their rights to the land through a legal
agreement. An assignment of credit simply means transferring the rights to collect a debt
from one party (assignor) to another (assignee). Benin, as the assignee, gained the same
rights the Urdanetas had to collect the debt. Importantly, an assignment doesn't transfer
ownership, just the specific rights held by the original creditor. Since Benin stepped into
the Urdanetas' shoes, she was bound by the same restrictions on the property, including
a five-year sales prohibition imposed by the government. This restriction applied because
an assignee can't have greater rights than the assignor. Benin, as an assignee with no
ownership rights, couldn't convey any ownership to the Casabuenas when she "sold"
them the land. In simpler terms, the Casabuenas gained no rights through this transaction
because Benin never had any ownership to transfer.
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. Not having acquired any right over
the land in question, it follows that Benin conveyed nothing to defendants with respect to
the property.
While it is true that the duplex is owned by Benin, 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, only 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 Bulacan lot through a deed of assignment in favor of Benin, the Court
held that the spouses Urdaneta remain its owners, to the exclusion of petitioner.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Consolidated Plywood Industries v. IFC Leasing and Acceptance Corp.
G.R. No. 72593 [April 30, 1987]
FACTS OF THE CASE
Consolidated Plywood Industries, Inc. (CPII) needed tractors for logging and
purchased two used ones from Industrial Products Marketing (IPM), a subsidiary of
Atlantic Gulf & Pacific Company. IPM assured CPII that the tractors were in good working
condition and offered a 90-day warranty. CPII representatives Wee and Vergara signed a
deal to buy the tractors on installment and made a down payment. Legal documents
including a deed of sale with a chattel mortgage, a promissory note, and an assignment
of rights (where IPM transferred its interest in the mortgage to IFC Leasing) were all
completed on the same day. However, the tractors malfunctioned just two weeks after
delivery. Repairs were attempted but ultimately failed. Since CPII's logging operations
were significantly impacted, they informed IPM that they would withhold installment
payments until the warranty was honored. IFC Leasing, claiming to be a rightful owner of
the promissory note, then sued CPII to recover the full amount owed on the tractors,
including interest, attorney fees, and court costs.
ISSUE/S
Whether or not IFC is a holder in due course of a negotiable promissory note so
as to bar all defenses of CPII against IPM?
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
RULING: NO!
The note in question fails to meet the requirement under Sec. 1(d) of Act No. 2013.
IFC is not and will never be a holder in due course of the promissory note but is merely
an assignee. The note in question is not a negotiable instrument for lack of the so-called
words of negotiability. The seller-assignor IPM is liable for breach of warranty and such
liability as a general rule extends to the corporation (IFC) to whom it assigned its rights
and interests. Even assuming that the note is negotiable, IFC which actively participated
in the sale on installment transaction from its inception cannot be regarded as a holder in
due course. Thus, petitioners may raise against the respondent all defenses available to
it as against the seller-assignor, IPM.
In like manner, therefore, even assuming that the subject promissory note is
negotiable, the respondent, a financing company which actively participated in the sale
on installment of the subject two Allis Crawler tractors, cannot be regarded as a holder in
due course of said note. It follows that the respondent's rights under the promissory note
involved in this case are subject to all defenses that the petitioners have against the sellerassignor, Industrial Products Marketing For Section of the Negotiable Instruments Law
provides that "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. . . . ."
Prescinding from the foregoing and setting aside other peripheral issues, the Court
found that both the trial and respondent appellate court erred in holding the promissory
note in question to be negotiable. Such a ruling does not only violate the law and
applicable jurisprudence, but would result in unjust enrichment on the part of both the
seller-assignor and respondent assignee at the expense of the petitioner-corporation
which rightfully rescinded an inequitable contract. It was noted, however, that since the
seller-assignor has not been impleaded herein, there is no obstacle for the respondent to
file a civil suit and litigate its claims against the seller-assignor in the rather unlikely
possibility that it so desires.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Traders Royal Bank v. Court of Appeals
G.R. No. 93397 [March 3, 1997]
FACTS
This case involves a dispute over the transfer of a Central Bank Certificate of
Indebtedness (CBCI) from the Philippine Underwriters Finance Corporation (Philfinance)
to Traders Royal Bank (TRB). The transfer was made under a Repurchase Agreement
and a Detached Assignment. However, the court found that the transfer was null and void
due to lack of negotiability and non-compliance with regulations.
Traders Royal Bank (TRB) filed a petition for mandamus in the Regional Trial Court
of Manila. TRB sought the registration of the transfer of Central Bank Certificate of
Indebtedness (CBCI) No. D891 from Philfinance to TRB. TRB claimed to have acquired
the certificate from Philfinance as a holder in due course and argued that it is entitled to
enforce payment of the instrument. The court found that the transfer of the CBCI from
Filriters to Philfinance and subsequently to TRB was null and void. The court also noted
that the subject CBCI is not a negotiable instrument as it is payable only to Filriters, the
registered owner, and lacks the words of negotiability.
ISSUE/S
Whether or not the Central Bank Certificate of Indebtedness (CBCI) is a negotiable
instrument?
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
RULING: NO!
The instrument provides for a promise to pay the registered owner Filriters. Very
clearly, the instrument was only payable to Filriters. It lacked the words of negotiability
which should have served as an expression of the consent that the instrument may be
transferred by negotiation. The language of negotiability which characterizes a negotiable
paper as a credit instrument is its freedom to circulate as a substitute for money. Hence,
freedom of negotiability is the touchstone relating to the protection of holders in due
course, and the freedom of negotiability is the foundation for the protection, which the law
throws around a holder in due course. This freedom in negotiability is totally absent in a
certificate of indebtedness as it merely acknowledges to pay a sum of money to a
specified person or entity for a period of time.
The transfer of the instrument from Philfinance to TRB was merely an assignment,
and is not governed by the negotiable instruments law. The pertinent question then is—
was the transfer of the CBCI from Filriters to Philfinance and subsequently from
Philfinance to TRB, in accord with existing law, so as to entitle TRB to have the CBCI
registered in its name with the Central Bank? Clearly shown in the record is the fact that
Philfinance’s title over CBCI is defective since it acquired the instrument from Filriters
fictitiously. Although the deed of assignment stated that thetransfer was for ‘value
received‘, there was really no consideration involved. What happened was Philfinance
merely borrowed CBCI from Filriters, a sister corporation.
Thus, for lack of any consideration, the Court held that the assignment made is a
complete nullity. Furthermore, the transfer wasn't in conformity with the regulations set by
the CB. Giving more credence to rule that there was no valid transfer or assignment to
petitioner. The unauthorized use or distribution of the same by a corporate officer of
Filriters cannot bind the said corporation, not without the approval of its Board of Directors,
and the maintenance of the required reserve fund. Consequently, the title of Filriters over
the subject certificate of indebtedness must be upheld over the claimed interest of Traders
Royal Bank.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Gempesaw v. Court of Appeals
G.R. No. 92244 [February 9, 1993]
FACTS
Natividad Gempesaw, a grocery store owner, discovered after two years that her
bookkeeper had manipulated her checkbook. A total of 82 checks were issued, most
exceeding the actual amount owed to suppliers. The endorsements on these checks were
forged, and the checks were deposited into the accounts of Alfredo Romero and Benito
Lam. Despite the forged endorsements, the Philippine Bank of Communications (Buendia
Branch) debited Gempesaw's account for the checks' total value. After the bank refused
to credit her account back, Gempesaw filed a complaint against them. The lower courts
ruled in favor of the bank, citing Gempesaw's negligence in issuing the checks.
Gempesaw appealed this decision to the Supreme Court.
ISSUE/S
Whether or not Gempesaw can recover the money value of the checks from the
bank despite the forged endorsements?
RULING: NO!
As a rule, a drawee bank who has paid a check on which an indorsement has been
forged cannot charge the drawer’s account for the amount of said check. An exception to
the rule is where the drawer is guilty of such negligence which causes the bank to honor
such checks.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Gempesaw did not exercise prudence in taking steps that a careful and prudent
businessman would take in circumstances to discover discrepancies in her account. Her
negligence was the proximate cause of her loss, and under Section 23 of the Negotiable
Instruments Law, is precluded from using forgery as a defense.
On the other hand, the banking rule banning acceptance of checks for deposit or
cash payment with more than one indorsement unless cleared by some bank officials,
does not invalidate the instrument; neither does it invalidate the negotiation or transfer of
said checks. The only kind of indorsement which stops the further negotiation of an
instrument is a restrictive indorsement which prohibits the further negotiation thereof,
pursuant to Section 36 of the Negotiable Instruments Law.
In light of any case not provided for in the Act that is to be governed by the
provisions of existing legislation, pursuant to Section 196 of the Negotiable Instruments
Law, the bank may be held liable for damages in accordance with Article 1170 of the Civil
Code. The drawee bank, in its failure to discover the fraud committed by its employee and
in contravention banking rules in allowing a chief accountant to deposit the checks
bearing second indorsements, was adjudged liable to share the loss with Gempesaw on
a 50:50 ratio.
With the foregoing provisions of the Civil Code being relied upon, it is being made
clear that the decision to hold the drawee bank liable is based on law and substantial
justice and not on mere equity. And although the case was brought before the court not
on breach of contractual obligations, the courts are not precluded from applying to the
circumstances of the case the laws pertinent thereto. Thus, the fact that petitioner's
negligence was found to be the proximate cause of her loss does not preclude her from
recovering damages. The reason why the decision dealt on a discussion on proximate
cause is due to the error pointed out by petitioner as allegedly committed by the
respondent court. And in breaches of contract under Article 1173, due diligence on the
part of the defendant is not a defense.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
De la Victoria v. Hon. Burgos
G.R. No. 111190 [June 27, 1995]
FACTS
Raul Sebreño filed a complaint for damages against Fiscal Bienvenido Mabanto
Jr. in Cebu City. Sebreño emerged victorious, securing an award for damages. Judge
Burgos instructed De La Victoria, the custodian of Mabanto’s paychecks, to withhold the
checks and transfer them to Sebreño. De La Victoria contested this decision, arguing that
the paychecks were not yet Mabanto’s property since they hadn’t been delivered. He
maintained that, as part of public funds, the checks were immune to garnishment.
Meanwhile, Raul H. Sesbreo also filed a similar complaint against Assistant City Fiscals
Bienvenido N. Mabanto, Jr., and Dario D. Rama, Jr. in the Regional Trial Court of Cebu
City. The court ruled in favor of Sesbreo, ordering the defendants to pay P11,000.00 to
the plaintiff. The decision became final, leading to the issuance of a writ of execution. A
notice of garnishment was served on Loreto D. de la Victoria, who held the position of
City Fiscal of Mandaue City, where Mabanto, Jr., was assigned. The notice explicitly
prohibited the disbursement, transfer, or release of Mabanto’s salary checks under
penalty of law. Despite Petitioner’s attempt to quash the garnishment, claiming the checks
were still public funds, the trial court denied the motion and compelled compliance. In
response, Petitioner sought relief by filing a petition before the Supreme Court.
ISSUE/S
Whether or not 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.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
RULING: YES!
The Supreme Court held that under Section 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.
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 Department of Justice
through petitioner as City Fiscal of Mandaue City and head of office. According to the trial
court, the checks of Mabanto, Jr., were already released by the Department of Justice
duly signed by the officer concerned through petitioner and upon service of the writ of
garnishment by the sheriff petitioner was under obligation to hold them for the judgment
creditor. It recognized the role of petitioner as custodian of the checks.
At the same time however it considered the checks as no longer government funds
and presumed delivered to the payee based on the last sentence of Sec. 16 of the
Negotiable Instruments Law which states: "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." Yet, the presumption is not conclusive because the last portion of
the provision says "until the contrary is proved." However this phrase was deleted by the
trial court for no apparent reason. Proof to the contrary is its own finding that the checks
were in the custody of petitioner. 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.
Consequently, we find no difficulty concluding that the trial court exceeded its
jurisdiction in issuing the notice of garnishment concerning the salary checks of Mabanto,
Jr., in the possession of petitioner.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Metropol (Bacolod) Financing & Investment Corp. v. Sambok Motors Co., Ltd.
G.R. No. L- 39641 [February 28, 1983]
FACTS
In a legal battle between Metropol Financing & Investment Corporation (Metropol)
and Sambok Motors Company along with Ng Sambok Sons Motors Co., Ltd. (Sambok),
the central issue revolved around a promissory note. On April 15, 1969, Dr. Javier Villaruel
executed this note in favor of Ng Sambok Sons Motors Co., Ltd., with a total amount of
P15,939.00. The note stipulated twelve equal monthly installments, carrying an interest
rate of one percent per month. Importantly, it also specified that if any installment
remained unpaid, the entire principal sum would become due, along with an additional
twenty-five percent interest on the outstanding amount.
Subsequently, on the same date, Sambok negotiated and indorsed the note in
favor of Metropol Financing & Investment Corporation. The indorsement explicitly
included the phrase “with recourse” and waived various procedural requirements such as
notice of demand, dishonor, protest, and presentment. However, when the maker, Dr.
Villaruel, defaulted on payment, Metropol promptly notified Sambok (as the indorsee) of
the dishonor and demanded payment. Unfortunately, Sambok failed to fulfill its obligation.
The trial court ruled in favor of Metropol, prompting an appeal by Sambok.
Sambok’s argument centered on the inclusion of the words “with recourse” in the
indorsement. According to Sambok, this made them a qualified indorser, implying that
they did not unconditionally guarantee payment if the note was dishonored by the maker
during presentment. The case now awaits resolution before the Supreme Court.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
ISSUE/S
Whether or not Sambok's indorsement "with recourse" makes them a qualified
indorser or a general indorser who is secondarily liable.
RULING: NO!
The Supreme Court court ruled in favor of Metropol, affirming that Sambok’s “with
recourse” indorsement did not grant them qualified status. Sambok, by indorsing the note
“with recourse,” did not assume the role of a qualified indorser. Instead, they became a
general indorser, rendering themselves secondarily liable. In essence, this indorsement
signified that if Dr. Villaruel failed to pay the note, the plaintiff-appellee (Metropol) could
pursue Sambok for payment. The absence of any qualification in the indorsement meant
that Sambok engaged to ensure that, upon due presentment, the note would be accepted
or paid (or both), and in case of dishonor, Sambok would be responsible for the amount
owed to the holder.
Sambok’s intention to indorse the note without qualification was further evident
because they waived the notice of demand, dishonor, protest, and presentment. The
additional words added by Sambok did not limit their liability; instead, they confirmed their
obligations as a general indorser. Sambok’s liability remained secondary, and after the
note’s dishonor due to non-payment, Sambok effectively became a principal debtor with
the same liability as the original obligor. Consequently, the holder could proceed against
Sambok without first pursuing the maker of the note.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Bañas, Jr. v. Court of Appeals
G.R. No. 102967 [February 10, 2000]
FACTS
The Philippine Bank of Commerce, acting as the plaintiff, lodged a complaint
against Jose M. Aruego, the defendant, seeking the recovery of funds it had disbursed on
various drafts endorsed by the defendant. Aruego contended that he endorsed the drafts
in a representative capacity and as an accommodation party. Initially, the complaint was
dismissed upon Aruego's motion, but later the court reversed its decision to dismiss.
Aruego received notice of the reversal, overturning the dismissal, at 5:00 PM on March
11, 1960, and filed his response on March 12, 1960. Despite this, the court deemed
Aruego in default for submitting his response one day beyond the deadline. Aruego
subsequently motioned to annul the default ruling, yet the court rejected the motion and
issued a default judgment. Aruego appealed against both the denials of his motions to
annul the default judgment and the default judgment itself.
ISSUE/S
Whether or not Aruego should be held personally liable for the drafts he accepted
as a drawee/acceptor.
RULING: YES!
The Supreme Court affirmed the judgment by default, holding that the defendant
is personally liable for the drafts he accepted as a drawee/acceptor, despite his claim of
signing in a representative capacity and as an accommodation party. The defendant's
failure to answer on time was excusable, his defenses were null and ineffective.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Chan Wan v. Tan Kim
G.R. No. L-15380 [September 30, 1960]
FACTS
The Petitioner, Chan Wan, sought to collect eleven checks totaling P4,290.00 from
the defendants-appellees, Tan Kim and her husband, Chen So. The checks were payable
to "cash or bearer" and drawn by Tan Kim upon the Equitable Banking Corporation. These
checks were dishonored and returned unpaid due to insufficient funds and other issues
attributable to the drawer. In the lower court, Chan Wan did not testify; instead, his
attorney merely identified the checks and letters of demand. Conversely, Tan Kim testified
that the checks were issued to individuals named Pinong and Muy as mere receipts for
shoes that were never made. The lower court dismissed Chan Wan’s claim based on the
failure to prove his status as a holder in due course and due to the improper presentation
of the crossed checks.
ISSUE/S
Whether or not the plaintiff has the right to collect on the eleven commercial
documents.
RULING: NO!
The Supreme Court ruled in favor of the defendants, affirming the lower court's
decision to dismiss the plaintiff's claim. The Court concluded that Chan Wan was not a
holder in due course and that the crossed checks should have been presented by the
bank mentioned in the crossing, not by Chan Wan himself.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
The Court's ratio decidendi was grounded in several legal principles. Under the
Negotiable Instruments Law, a holder who is not in due course can still recover on the
instrument, but the instrument is subject to defenses as if it were non-negotiable. The
Court noted that the checks were crossed specifically to the China Banking Corporation,
indicating that they should have been deposited with that bank for collection. Chan Wan’s
act of presenting them directly to the drawee bank constituted improper presentment.
Furthermore, the Court observed that the endorsements on the checks suggested they
had been deposited with China Banking Corporation and subsequently returned due to
insufficient funds or closed accounts.
Chan Wan's failure to explain how he obtained the checks after their return further
weakened his position as a holder in due course. The Court also highlighted that the
defendants did not provide substantial evidence of their counterclaim, leading to its
dismissal. Given the lack of crucial details for a fair adjudication, the Court remanded the
case for additional evidence and proceedings consistent with its opinion, while definitively
dismissing the defendants' counterclaim.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
Mesina v. Intermediate Appellate Court
G.R. No. 70145 [November 13, 1986]
FACTS
Respondent Jose Go purchased Check No. 011302 for P800,000.00, dated
December 29, 1983, from Associated Bank but inadvertently left it on the bank manager's
desk. The bank manager then entrusted the check to a bank official, Albert Uy, who had
a visitor named Alexander Lim. Uy briefly left his desk, and upon his return, both Lim and
the check were missing. Jose Go was advised to execute a "STOP PAYMENT" order and
an affidavit of loss, which he complied with. Subsequently, the check was presented for
clearing by Associated Bank from Prudential Bank, Escolta Branch, but it was dishonored
twice due to the stop payment order. Atty. Lorenzo Navarro, representing an unnamed
client, demanded payment on the check, but the bank refused, citing Jose Go's claim.
Consequently, the bank filed an interpleader action on February 2, 1984, naming Jose Go
and John Doe (later identified as Marcelo A. Mesina) as respondents. Mesina claimed the
check was paid to him by Alexander Lim but refused to provide further details. The trial
court denied Mesina's motion to dismiss the interpleader case and declared him in default
for failing to answer. Mesina's petition for certiorari with the Intermediate Appellate Court
(IAC) was dismissed, and his motion for reconsideration was denied. The trial court ruled
in favor of Jose Go, ordering the bank to replace the check or its cash equivalent. Mesina
then appealed to the Supreme Court, alleging errors by the IAC and the trial court.
ISSUE/S
Whether or not the IAC erred in ruling that a cashier's check can be
countermanded even in the hands of a holder in due course.
LGMN26A BANKING LAW AND NEGOTIABLE INSTRUMENTS LAW
RULING: NO!
The Supreme Court ruled that a cashier's check can only be countermanded if the
holder is not a holder in due course. The Court reasoned that Mesina failed to substantiate
his claim as a holder in due course and for consideration or value as shown by the
established facts of the case. He acquired the check from Alexander Lim, who had stolen
it, and Mesina refused to explain the transaction. He had therefore notice of the defect of
his title over the check from the start. The Court emphasized that a holder of a cashier's
check who is not a holder in due course cannot enforce the check against the issuing
bank. The bank was aware of the circumstances surrounding the check's loss and was
justified in dishonoring it.
Jose Go bought it from respondent bank for purposes of transferring his funds from
respondent bank to another bank near his establishment realizing that carrying money in
this form is safer than if it wherein cash. The check was Jose Go's property when it was
misplaced or stolen hence he stopped its payment. At the outset, respondent bank knew
it was Jose Go's check and no one else since Go had not paid or indorsed it to anyone.
The bank was therefore liable to nobody on the check but Jose Go. The bank had no
intention to issue it to petitioner but only to buyer Jose Go. When payment on it was
therefore stopped, respondent bank was not the one who did it but Jose Go, the owner
of the check.
Respondent bank could not be drawer and drawee for clearly, Jose Go owns the
money it represents and he is therefore the drawer and the drawee in the same manner
as if he has a current account and he issued a check against it; and from the moment
said cashier's check was lost and or stolen no one outside of Jose Go can be termed a
holder in due course because Jose Go had not indorsed it in due course. The check in
question suffers from the infirmity of not having been properly negotiated and for value by
respondent Jose Go who as already been said is the real owner of said instrument.