SECTION 41
Case 23
METROPOLITAN BANK AND TRUST COMPANY (formerly ASIANBANK
CORPORATION) V. BA FINANCE CORPORATION and MALAYAN
INSURANCE CO. INC.
[G.R. No. 179952, Dec. 4, 2009] (607 SCRA 620)
FACTS:
Lamberto Bitanga (Bitanga) obtained from respondent BA Finance
Corporation (BA Finance) a loan to secure which, he mortgaged his car to
respondent BA Finance. Bitanga thus had the mortgaged car insured by
respondent Malayan Insurance Co., Inc. (Malayan Insurance). The car was stolen.
On Bitangas claim, Malayan Insurance issued a check payable to the order of B.A.
Finance Corporation and Lamberto Bitanga for P224,500, drawn against China
Banking Corporation (China Bank). The check was crossed with the notation For
Deposit Payees Account Only.
Without the indorsement or authority of his co-payee BA Finance, Bitanga
deposited the check to his account with the Asianbank Corporation (Asianbank),
now merged with petitioner Metropolitan Bank and Trust Company (Metrobank).
Bitanga subsequently withdrew the entire proceeds of the check.
In the meantime, Bitangas loan became past due, but despite demands, he
failed to settle it. BA Finance thereupon demanded the payment of the value of the
check from Asianbank but to no avail, prompting it to file a complaint for sum of
money and damages against Asianbank and Bitanga alleging that, inter alia, it is
entitled to the entire proceeds of the check.
On the issue of whether or not BA Finance has a cause of action, Metrobank
contends that Bitanga is authorized to indorse the check as the drawer names him
as one of the payees. Moreover, his signature is not a forgery nor has he or anyone
forged the signature of the representative of BA Finance Corporation. No
unauthorized indorsement appears on the check. Absent the indispensable fact of
forgery or unauthorized indorsement, the payee may not recover from the collecting
bank.
ISSUE 1:
Whether BA Finance has a cause of action against Metrobank even if the
subject check had not been delivered to BA Finance by the issuer itself?
HELD:
YES. Section 41 of the Negotiable Instruments Law provides:
Where an instrument is payable to the order of two or more payees or
indorsees who are not partners, all must indorse unless the one indorsing has
authority to indorse for the others.
Bitanga alone endorsed the crossed check, and petitioner allowed the
deposit and release of the proceeds thereof, despite the absence of authority of
Bitangas co-payee BA Finance to endorse it on its behalf. Petitioners argument that
since there was neither forgery, nor unauthorized indorsement because Bitanga
was a co-payee in the subject check, the dictum in Associated Bank v. CA does not
apply in the present case fails. The payment of an instrument over a missing
indorsement is the equivalent of payment on a forged indorsement or an
unauthorized indorsement in itself in the case of joint payees.
Accordingly, one who credits the proceeds of a check to the account of the
indorsing payee is liable in conversion to the non-indorsing payee for the entire
amount of the check.
ISSUE 2:
Is Metrobank liable to BA Finance for the full value of the check, under the
Negotiable Instruments Law?
HELD:
YES. Section 68 of the Negotiable Instruments Law instructs that joint
payees who indorse are deemed to indorse jointly and severally. When the maker
dishonors the instrument, the holder thereof can turn to those secondarily liable
the indorser for recovery.
A collecting bank, Asianbank in this case, where a check is deposited and
which indorses the check upon presentment with the drawee bank, is an indorser.
his is because in indorsing a check to the drawee bank, a collecting bank stamps
the back of the check with the phrase all prior endorsements and/or lack of
endorsement guaranteed and, for all intents and purposes, treats the check as a
negotiable instrument, hence, assumes the warranty of an indorser.
Petitioner, as the collecting bank or last indorser, generally suffers the loss
because it has the duty to ascertain the genuineness of all prior indorsements
considering that the act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done its duty to ascertain the
genuineness of prior indorsements.
Case 23
G.R. No. 154469 December 6, 2006
Lessons Applicable: Discharge of instrument and persons secondarily liable
(Negotiable Instruments Law)
FACTS:
 November 12,1994: Renato D. Cabilzo (Cabilzo) issued a Metrobank
Check payable to "CASH" and postdated on November 24, 1994 in the amount
of P1,000 drawn against his Metrobank account to Mr. Marquez, as his sales
commission
 check was presented to Westmont Bank for payment who indorsed it
to Metrobank for appropriate clearing
 After the entries thereon were examined, including the availability of funds
and the authenticity of the signature of the drawer, Metrobank cleared the
check for encashment in accordance with the Philippine Clearing House
Corporation (PCHC) Rules
 November 16, 1994: Cabilzo’s representative was at Metrobank when he was
asked by a bank personnel if Cabilzo had issued a check in the amount of P91K
to which he replied in negative
 That afternoon: Cabilzo called Metrobank to reiterate that he did not issue the
check
 He later discovered that the check of P1K was altered to P91K and date was
changed from Nov 24 to Nov 14.
 Cabilzo demanded that Metrobank re-credit the amount of P91,000.00 to his
account
 June 30, 1995: Through counsel sent a letter-demand for the amount of P90K
 CA affirmed RTC: Favored Cablizo
ISSUE: W/N Cablizo can recover from Metrobank
HELD: YES. CA Affirmed
 material alteration
 changes the items which are required to be stated under Section 1 of the
Negotiable Instruments Law
 Section 1. Form of negotiable instruments. - An instrument to be negotiable
must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in
money;
(c) Must be payable on demand or at a fixed determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.
 changes the effect of the instrument
 Section 125. What constitutes material alteration. – Any alteration which
changes:
(a) The date;
(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relation of the parties;
(e) The medium or currency in which payment is to be made;
Or which adds a place of payment where no place of payment is specified, or any
other change or addition which alters the effect of the instrument in any respect is
a material alteration.
 In the case at bar, the check was altered so that the amount was increased
from P1,000.00 to P91,000.00 and the date was changed from 24 November
1994 to 14 November 1994.
 Section 124. Alteration of instrument; effect of. – Where a negotiable
instrument is materially altered without the assent of all parties liable
thereon, it is avoided, except as against a party who has
himself made, authorized,and assented to the alteration and subsequent
indorsers.
But when the instrument has been materially altered and is in the hands of a
holder in due course not a party to the alteration, he may enforce the payment
thereof according to its original tenor.
 Cabilzo was not the one who made nor authorized the alteration. Neither did
he assent to the alteration by his express or implied acts
 There is no showing that he failed to exercise such reasonable degree of
diligence required of a prudent man which could have otherwise prevented the
loss.
 bank must be a high degree of diligence, if not the utmost diligence
 Surprisingly, however, Metrobank failed to detect the above alterations which
could not escape the attention of even an ordinary person
 "NINETY" is also typed differently and with a lighter ink
 only 2 asterisks were placed before the amount in figures, while 3 asterisks
were placed after such amount
 "NINETY" are likewise a little bigger when compared with the letters of the
words "ONE THOUSAND PESOS ONLY"
 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.
 The corollary liability of Westmont Ban's indorsement, if any, is separate and
independent from the liability of Metrobank to Cabilzo.
Scribd: https://www.scribd.com/doc/126840953/1-Metropolitan-Bank-and-Trust-
Company-vs-BA-Finance-Corp
SECTION 52
Case 24
Banco Atlantico v Auditor General (Negotiable Instruments Law)
BANCO ATLANTICO V. AUDITOR GENERAL 81 SCRA 335
FACTS: Boncan was the Finance Officer of the Philippine Embassy in Madrid who
on many occasions negotiated with Banco Atlantico checks, allegedly endorsed to
her by the embassy. On these occasions, the bank allowed the payment of the
checks, notwithstanding the fact that the drawee bank has not yet
cleared the checks for collection. This was premised on the finding that
Boncan had special relations with the employees of the bank. And that upon
presentment to the drawee bank, the checks were dishonored due to non-
acceptance allegedly on the ground that the drawer has ordered the
stoppage of payment. This prompted Banco Atlantico to collect from the
Philippine Embassy for the funds released to Boncan but the latter
refused. This eventually led to filing of money claim of the bank
with the Auditor General.
ISSUES: 1. Was there a forgery committed on the three (3) checks as contemplated
by See. 23 of the Negotiable Instruments Law (NIL) as to bar petitioner from
enforcing collection from the drawer-Philippine Embassy in Madrid, Spain? And, if
there was such a forgery, is the drawer precluded from setting up forgery or want
of authority of Miss Boncan? and,
2. Do the payments of the aforecited checks without clearing them first with the
drawee bank constitute an actual notice of a defective title in the endorser thereof
and/or an assumption of risk by the petitioner as to defeat collection thereon
OR Is the Philippine embassy liable?
HELD: The Philippine embassy cannot be held liable as Banco Atlantico was
negligent.
On whether or not Banco Atlantico was a holder in due course, it is not.
Following the decision of the Auditor General in denying the claim of the
bank, the checks were demand notes. It should have been put on guard when
Boncan negotiated the checks with them and subsequently deposited
the same to her account. Even though it were demand notes, she instructed
the bank that the same be not presented for collection till a later date. The fact
that the amount was quite big and it was the payee herself who made the request
that the same be not presented for collection until a wasn't even a client of the bank but was someone who had special relations with
fixed date in the future was proof of a glaring infirmity or defect in the
instrument. It loudly proclaims “Take me at your own risk.” It was obvious
by then that the bank had knowledge of the infirmity or defect of
the checks. Furthermore, what it did when it allowed payment before
clearing is beyond the normal and ordinary banking practice especially when
the bank involved is a foreign bank and the amounts involved were large. Boncan
wasn't even a client of the bank but was someone who had special relations with
its officers.
In view of the foregoing, the embassy as the drawer of the 3 checks in
question cannot be held liable. It is apparent that the said 3 checks were
(fraudulently altered) by Boncan as to their accounts and therefore wholly
inoperative (note: should be “avoided”).
Case 24
BANCO ATLANTICO V. AUDITOR GENERAL
81 SCRA 335
FACTS:
Boncan was the Finance Officer of the Philippine Embassy in Madrid who on many
occasions negotiated with Banco Atlantico checks, allegedly endorsed to her by the
embassy. On these occasions, the bank allowed the payment of the checks,
notwithstanding the fact that the drawee bank has not yet
cleared the checks for collection. This was premised on the finding that
Boncan had special relations with the employees of the bank. And that
upon presentment to the drawee bank, the checks were dishonored due to non-
acceptance allegedly on the ground that the drawer has ordered the
stoppage of payment. This prompted Banco Atlantico to collect from the
Philippine Embassy for the funds released to Boncan but the latter
refused. This eventually led to filing of money claim of the bank with the
Auditor General.
HELD:
On whether or not Banco Atlantico was a holder in due course, it is not.
Following the decision of the Auditor General in denying the claim of the
bank, the checks were demand notes. It should have been put on guard when
Boncan negotiated the checks with them and subsequently deposited
the same to her account. Even though it were demand notes, she instructed
the bank that the same be not presented for collection till a later date. The fact
that the amount was quite big and it was the payee herself who made the request
that the same be not presented for collection until a
fixed date in the future was proof of a glaring infirmity or defect in the
instrument. It loudly proclaims “Take me at your own risk.” It was obvious
by then that the bank had knowledge of the infirmity or defect of
the checks. Furthermore, what it did when it allowed payment before
clearing is beyond the normal and ordinary banking practice especially when
the bank involved is a foreign bank and the amounts involved were large. Boncan
its officers.
In view of the foregoing, the embassy as the drawer of the 3 checks in
question cannot be held liable. It is apparent that the said 3 checks were
(fraudulently altered) by Boncan as to their accounts and therefore wholly
inoperative (note: should be “avoided”).
Case 25
Stelco Marketing vs. CA
GR 96160, 17 June 1992, 210 scra 51
--accommodation party
FACTS:
Stelco Marketing Corporation sold structural steel bars to RYL Construction
Inc. RYL gave Stelco’s “sister corporation,” Armstrong Industries, a MetroBank
check from Steelweld Corporation. The check was issued by Steelweld’s
President to Romeo Lim, President of RYL, by way of accommodation, as a
guaranty and not in payment of an obligation. When Armstrong deposited the
check at its bank, it was dishonored because it was drawn against insufficient
funds. When so deposited, the check bore two indorsements, i.e. RYL and
Armstrong. Subsequently, Stelco filed a civil case against RYL and Steelweld to
recover the value of the steel products.
ISSUE:
Whether Steelweld as an accommodating party can be held liable by Stelco for the
dishonored check.
RULING:
Steelweld may be held liable but not by Stelco. Under Section 29 of the NIL,
Steelweld Corp. can be held liable for having issued the subject check for the
accommodation of Romeo Lim. An accommodation party is one who has singed the
instrument as maker, drawer, acceptor, or indorser, without receiving valued
therefor, and for the purpose of lending his name to some other person. Such a
person is liable on the instrument to a holder for value, notwithstanding such
holder, at the time of taking the instrument, knew him to be only an
accommodation party. Stelco however, cannot be deemed a holder of the check for
value as it does not meet two essential requisites prescribed by statute, i.e. that it
did not become “the holder of it before it was overdue, and without notice that it
had been previously dishonored,” and that it did not take the check “in good faith
and for value.”
Case 25 COD basis, RYL never paid upon delivery of the materials and
STELCO MARKETING V. CA despiteinsistent demands.
210 SCRA 51
One year later, RYL issued a check drawn against Metrobank to Armstrong
FACTS: Industries, the sister company and manufacturing arm of Stelco, to the amount of
Petitioner was engaged in the distribution and sale of structural steel bars. RYL its obligations to the latter. The checkhowever was a company check of another
bought on several occasion large quantities of steel bars but the same were never corporation Steelweld Corporation of the Philippines (Steelweld) signed by its
paid for despite several demands by petitioner. President and Vice President. Said check was issued by the president of Steelweld
at the request of the president of RYL as anaccommodation and “only as guaranty
On a relevant date, RYL gave to Armstrong Industries a check in payment but not to pay for anything.” Armstrong subsequently deposited the check but was
of its obligations. The check was drawn by Steelweld Corporation— dishonoured because it was DAIF*. It bore the endorsements of RYL and
allegedly the owner of RYL persuaded the president of Steelweld to Armstrong. The latter filed a complaint against the pres and vp of Steelweld for
accommodate the former in its obligation. The check, when deposited was violation of BP22. The trial court acquitted thedefendants noting that the checks
thereafter dishonored due to insufficient funds. A case ensued for violations were not issued to apply on account for value, it being merely
of BP22 but the case was dismissed as the check was held to be for accommodation for accommodation purposes. However, the court did not release Steelweld from its
purposes only. liabilities, relying on Sec 29 of the NIL for issuing a check for accommodation.

Thereafter a complaint was filed by petitioner against RYL and Steelweld Relying on the previous decision and averring that it was a holder in due course,
for the recovery of sum of money in payment of the steel bars ordered. RYL Stelco subsequently filed a complaint for recovery of the value of the materials from
was nowhere to be found that is why the proceedings commenced as RYL and Steelweld. However, RYL had already been dissolved leading the trial
against Steelweld only. The trial court decided in favor of petitioner but court to rule against Steelweld and hold them liable. Steelweld appealed to the CA
this was reversed by the CA. whichreversed the decision of the RTC declaring that STELCO was not a holder in
due course and Steelweld was a stranger to the contract between STELCO and
HELD: RYL.
Petitioner contends that the acquittal of Lim and Tianson didn't operate to release
Steelweld from its liability as an accommodation party. Noteworthy is that neither Issue: Whether or not STELCO was a holder in due course
said pronouncement nor any other part of the judgment of
acquittal declared it liable to petitioner. To be sure, as regards an Held: STELCO’s reliance on the RTC’s decision in the previous criminal case is
accommodation party, the condition of lack of notice of any infirmity or defect misplaced. Although the RTC maintained that Steelweld was liable for issuing
in title of the persons negotiating it is of no application since the law a check for accommodation, the RTC did not specify to whom it was liable. Despite
preserves the right of recourse of a holder for value against an the records showing that STELCO was in possession of the check, such possession
accommodation party notwithstanding knowledge that at the time of taking the does not give a presumption that the holder is one for value. There was no evidence
instrument, knew him only as an accommodation party. that STELCO had possession before the checks were presented and dishonoured
nor evidence that the checks were given to STELCO, indorsed to STELCO in any
Further, there is no evidence to show that petitioner possessed the check manner or form of payment. Only after said checks were dishonoured were they
before the instrument’s presentment and dishonor. In what transpired acquired by STELCO.
during the transactions involving the check, evidence and facts show that there
was any participation or intervention on the part of petitioner. What STELCO never became a holder for value since nowhere in thecheck was STELCO
the record shows is that only after the check was deposited and dishonored, identified as payee, indorsee, or depositor. Evidence shows that Armstrong was the
petitioner came into possession of it in some way and was able to give it in evidence intended payee, that it was the injured party, and the proper party to bring the
at the trial of the civil case it has instituted against the drawers of the check. action.

Case 25
Stelco Mktg. v. CA (June 17, 1992)

Facts: Petitioner Stelco Marketing Corp (Stelco) is engaged in the distribution and
sale to the public of structural steel bars. It sold on 7 occasions quantities of steel
bars and rolls of G.I sheets with an aggregate amount of P126,859.61 to RYL
Construction, Inc. (RYL). Despite the parties’ agreement that payment would be on
Case 27
YANG V. COURT OF APPEALS
409 SCRA 159
FACTS:
Yang and Chandimari entered into an agreement that the latter would issue to the
former a manager’s check in exchange for two checks that Yang has
payable to the order of David. The difference in amount would be the
profit of the two of them. It was further agreed upon that Yang would
secure a dollar draft, which Chandimari would exchange with another dollar
draft to be secured from a Hong Kong bank. At the agreed time of
rendezvous, it was reported by Yang’s messenger that Chandimari didn't
show up and the drafts and checks were allegedly stolen. This wasn't true
however. Chandimari was able to get hold of the drafts and checks. He
was even able to deliver to David the two checks and was able to get money
in return. Consequently, Yang asked for the stoppage of payment
of the checks she believe to be lost, relying on the report of her
messenger. The stoppage order was eventually lifted by the banks and the drafts
and checks were able to be encashed. Yang then filed an action for
injunction and damages against the banks, Chandimari and David. The
trial court and CA held in favor of David as a holder in due course.
HELD:
Every holder of a negotiable instrument is presumed to be a holder in due
course. This is specially true if one is a holder because he is the payee or indorsee
of the instrument. In the case at bar, it is evident that David was
the payee of the checks. The prima facie presumption of him being a
holder in due course is in his favor. Nonetheless, this presumption is
disputable. On whether he took the check under the conditions set forth in
Section 52 must be proven. Petitioner relies on two arguments on why
David isn’t a holder in due course—first, because he took the checks
without valuable consideration; and second, he failed to inquire on
Chandimari’s title to the checks given to him.
The law gives rise to the presumption of valuable consideration. Petitioner
has the burden of debunking such presumption, which it failed to do so. H
er allegation that David received the checks without consideration is
unsupported and devoid of any evidence.
Furthermore, petitioner wasn't able to show any circumstance which should have
placed David in inquiry as to why and wherefore of the possession of
the checks by Chandimari. David wasn't a privy to the transactions
between Yang and Chandimari. Instead, Chandimari and David had the
agreement between themselves of the delivery of the checks. David even inquired
with the banks on the genuineness of the checks in issue. At that time, he wasn't
aware of any request for the stoppage of payment. Under
these circumstances, David had no obligation to ascertain from Chandimari what
the nature of the latter’s title to the checks was, if any, or the nature of his
possession.
Case 27
Yang v. Court of Appeals [G.R. No. 138074. August 15, 2003]
FACTS
Petitioner Cely Yang and private respondent Prem Chandiramani entered into an
agreement where Yang’s manager’s checks shall be payable to the order of private
respondent Fernando David. Dispute between Yang and Chandiramani arose,
stopping payment of David’s checks. David was not notified, and the stopping
failed.
ISSUE
Whether or not David is grossly negligent amounting to legal absence of good faith.
RULING
NO. David 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. He cannot
be 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.
Case 27
Yang v. Court of Appeals
Lessons Applicable: Rights of the holder (Negotiable Instruments Law)
FACTS:
 December 22, 1987: Cely Yang and Prem Chandiramani entered into an
agreement whereby Yang was to give 2 P2.087M PCIB managers check in the
amount of P4.2 million both payable to the order of Fernando David. Yang and
Chandiramani agreed that the difference of P26K in the exchange would be
their profit to be divided equally between them.
 Yang and Chandiramani also further agreed that the Yang would secure from
FEBTC a dollar draft in the amount of US$200K, payable to PCIB FCDU
Account No. 4195-01165-2, which Chandiramani would exchange for another
dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of Hong
Kong.
 December 22, 1987, Yang procured the ff:
a) Equitable Cashiers Check No. CCPS 14-009467 in the sum of P2,087,000.00,
dated December 22, 1987, payable to the order of Fernando David;
b) FEBTC Cashiers Check No. 287078, in the amount of P2,087,000.00, dated
December 22, 1987, likewise payable to the order of Fernando David; and
c) FEBTC Dollar Draft No. 4771, drawn on Chemical Bank, New York, in the
amount of US$200,000.00, dated December 22, 1987, payable to PCIB FCDU
Account No. 4195-01165-2.
 December 22, 1987 1 p.m.: Yang gave the cashiers checks and dollar drafts to
her business associate, Albert Liong, to be delivered to Chandiramani by
Liongs messenger, Danilo Ranigo
 Ranigo was to meet Chandiramani at 2 p.m. at Philippine Trust Bank, Ayala
Avenue, Makati where he would turn over Yangs cashiers checks and dollar
draft to Chandiramani who, in turn, would deliver to Ranigo a PCIB managers
check in the sum of P4.2 million and a Hang Seng Bank dollar draft for
US$200K in exchange but Chandiramani did not appear
 December 22, 1987 4 p.m.: 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.
 Chandiramani was able to get hold of the instruments
 Chandiramani delivered the 2 cashiers checks to Fernando David at China
Banking Corporation branch in San Fernando City, Pampanga
 In exchange, he got US$360K from David, which he deposited in the savings
account of his wife, Pushpa; and his mother, Rani Reynandas, who held FCDU
Account No. 124 with the United Coconut Planters Bank branch in Greenhills
 He also deposited FEBTC Dollar Draft No. 4771, dated December 22, 1987,
drawn upon the Chemical Bank, New York for US$200K in PCIB FCDU
Account No. 4195-01165-2 on the same date.
 Yang requested FEBTC and Equitable to stop payment on the instruments she
believed to be lost
 Both banks complied with her request
 Yang filed against David and Chandiramani
 CA affirms RTC: in favor of David
ISSUE: W/N David is a holder in due course
HELD:
 Although negotiable instruments do not constitute legal tender, they often
take the place of money as a means of payment
 checks were crossed
 Section 24 of the Negotiable Instruments Law creates a presumption that
every party to an instrument acquired the same for a consideration or for value
 David took the step of asking the manager of his bank to verify from FEBTC
and Equitable as to the genuineness of the checks and only accepted the same
after being assured that there was nothing wrong with said checks
 David did not close his eyes deliberately to the nature or the particulars of a
fraud allegedly committed by Chandiramani upon the petitioner, absent any
knowledge on his part that the action in taking the instruments amounted to
bad faith
SECTION 55
Case 28
ASIA BANKING CORPORATION V. TEN SEN GUAN
44 PHIL 511
FACTS:
Ten Sen Guan ordered from Snow’s Ltd. ten cases of mercerized bastite to be
shipped from New York to Manila. Upon the arrival of the merchandise, a draft
drawn by Snow’s Ltd. against Ten Sen Guan was presented to them for
acceptance. The delivery of the bill of lading and other documents were
being put on hold pending acceptance of the draft that is why Ten Sen
Guan accepted the same. When the cases were opened however, it was
found out that the merchandise wasn't bastite but instead were burlap. Te
n Sen Guan then was prompted to return the bill of lading and other
documents and requested Asia Banking Corporation, the agent of Snow
Ltd. to cancel its acceptance, which the corporation promised to do so. How
ever it didn't do good its promise since it sued Ten Sen Guan for the
amount of the draft. The trial court however ruled in favor of Ten Sen
Guan.
HELD: It is undisputed that the defendants placed the order with Snow Ltd. for 10
cases of mercerized bastite and that the draft was drawn from the
corresponding value of 10 cases of mercerized bastite including incidental
expenses. That when the cases were examined it was found out that it
wasn't bastite but instead were burlap, of which the corporation was
notified and that Ten Sen Guan refused to refused the goods. The
corporation alleges that it is a holder for value but it failed to prove such
allegation. If indeed it was a holder for value, it could have easily proven such fact
by competent evidence but it failed to do so. It wasn't able to give an authentic
account of the transactions. It being a fact that it is not
a holder for value, it is susceptible to any defenses available to Ten Sen
Guan.
According to the findings, the acceptance was conditional. The draft was
for collection and also, the evidence established that the corporation has
released Ten Sen Guan from liability from the draft.