PACHECO V.

CA
319 SCRA 595

FACTS: Due to dire financial needs of petitioner spouses who were engaged in the
construction business, they secured loans from Vicencio. At every loan
secured, the lender compelled the spouses to issue an undated check
despite the admission of spouses that their bank account has insufficient
funds or as on a later date, already closed. Lender assured them that the issuance of the check was only
evidence of indebtedness, that it would not be presented to the bank, and it would be for formalities
only. On the date wherein there was an unpaid balance to the loans secured by the spouses,
the lender had them place a date on two of the later checks issued. Surprised later on, the sp
ouses were charged with estafa as the checks were presented for encashment and was dishonored.

HELD: BY MUTUAL AGREEMENT OF THE PARTIES, THE NEGOTIABLE CHARACTER OF A CHECK

MAY BE WAIVED AND THE INSTRUMENT BE SIMPLY TREATED AS PROOF OF AN
OBLIGATION. There cannot be deceit on the part of the spouses because they agreed with the lender at
the time of the issuance and postdating of the checks that the same shall not be encashed or
presented to the bank. As per assurance of the lender, the checks are nothing but evidence of
the loan or security thereof in lieu of and for the
same purpose as a promissory note.
Gonzales V. RCBC (2006)

FACTS:

Gonzales, New Accounts Clerk in the Retail Banking Department at RCBC Head Office . Dr. Don
Zapanta of the Ade Medical Group drew a foreign check of $7,500 against the drawee bank Wilshire
Center Bank, LA, California payable to Eva Alviar (Alviar), Gonzales mother. Alviar then endorsed this
check.
Since RCBC gives special accommodations to its employees to receive the check’s value w/o awaiting
the clearing period, Gonzales presented the foreign check to Olivia Gomez, the RCBC’s Head of Retail
Banking
Olivia Gomez requested Gonzales to endorse it which she did. Olivia Gomez then acquiesced to the
early encashment of the check and signed the check but indicated thereon her authority of "up
to P17,500.00 only". Carlos Ramos signed it with an "ok" annotation. Presented the check to Rolando
Zornosa, Supervisor of the Remittance section of the Foreign Department of the RCBC Head Office, who
after scrutinizing the entries and signatures authorized its encashment. Gonzales received its peso
equivalent P155,270.85
RCBC tried to collect through its correspondent bank, the First Interstate Bank of California but it was
dishonored the check because: "END. IRREG" or irregular indorsement "account closed"
Unable to collect, RCBC demanded from Gonzales .
November 27, 1987: Through letter Gonzales agreed that the payment be made thru salary deduction.
October 1987: deductions started
March 7, 1988: RCBC sent a demand letter to Alviar for the payment but she did not respond
June 16, 1988: a letter was sent to Gonzales reminding her of her liability as an indorser
July 1988: Gonzales resigned from RCBC paying only P12,822.20 covering 10 months
RCBC filed a complaint for a sum of money against Eva Alviar, Melva Theresa Alviar-Gonzales and the
latter’s husband Gino Gonzales
CA Affirmed RTC: liable Eva Alviar as principal debtor and Melva Theresa Alviar-Gonzales as guarantor

ISSUE: W/N Eva Alviar and Melva Theresa Alvia-Gonzales is liable as general endorsers

HELD: NO. CA REVERSED. RCBC reimburse Gonzales

Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all
subsequent holders in due course. The matters and things mentioned in subdivisions (a), (b), and (c) of
the next preceding section;That the instrument is genuine and in all respects what it purports to be (b)
That he has a good title to it; (c) That all prior parties had capacity to contract and That the instrument
is, at the time of his indorsement, valid and subsisting
In addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case
may be, according to its tenor, and that if it be dishonored and the necessary proceedings on
dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent
indorser who may be compelled to pay it Under Section 66, the warranties for which Alviar and
Gonzales are liable as general endorsers in favor of subsequent endorsers extend only to the state of the
instrument at the time of their endorsements,
This provision cannot be used by the party which introduced a defect on the instrument (RCBC) w/c
qualifiedly endorsed it Had it not been for the qualified endorsement "up to P17,500.00 only" of Olivia
Gomez, who is the employee of RCBC, there would have been no reason for the dishonor of the check
The holder or subsequent endorser who tries to claim under the instrument which had been dishonored
for "irregular endorsement" must not be the irregular endorser himself who gave cause for the dishonor.
Otherwise, a clear injustice results when any subsequent party to the instrument may simply make the
instrument defective and later claim from prior endorsers who have no knowledge or participation in
causing or introducing said defect to the instrument, which thereby caused its dishonor.
FRANSISCO V. COURT OF APPEALS
319 SCRA 354

FACTS:
Fransisco Realty and Development and Herby Commercial and
Construction Corporation entered into a Land Development and
Construction Contract. Fransisco was the president of AFRDC while Ong
was the president of HCCC. It was agreed upon that HCCC would undertake the construction of
housing units and the development of a large parcel of land. The payment would be on a turnkey basis. To
facilitate the payment, AFDRC executed a Deed of Assignment to enable the HCCC to collect
payments from the GSIS. Further, they opened an account with a
bank from which checks would be issued by Fransisco and the GSIS president.

HCCC later on filed a complaint for the unpaid balance in pursuance to its agreement with
AFRDC. However, an amicable settlement ensued, which was embodied in a Memorandum of
Agreement. It was embodied in said agreement that GSIS recognizes its indebtedness to HCCC and that
HCCC would also pay its obligations to AFRDC.

A year later, it was found out that Diaz and Fransisco had drawn checks payable to Ong. Ong
denied accepting said checks and it was further found
out that Diaz entrusted the checks to Fransisco who later forged the signature of Ong, showing that
he indorsed the checks to her and then
she deposited the checks to her personal savings account. This incident prompted Ong to file a
complaint against Fransisco

HELD:
Ong’s signature was found to be forged by Fransisco.

Fransisco’s contention that he was authorized to sign Ong’s name in her favor giving her authority to
collect all the receivables of HCCC from GSIS. This contention is bereft of any merit. The Negotiable
Instruments Law provides that when a 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 as an agent in behalf of
the principal and must disclose the name of his principal. Otherwise, he
will be held liable personally. And assuming she was indeed authorized,
she didn't comply with the requirements of the law. Instead of signing Ong’s name, she should have
signed in her own name as agent of HCCC. Thus, her contentions cannot support or validate her acts of
forgery.