Negotiable Instruments; Delivery must be made for purposes of giving effect thereto.

-"[T]he essential elements of the crime of theft are the following: (1) that there be a taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use of violence or intimidation against persons or force upon things."

Considering that the second element is that the thing taken belongs to another, it is relevant to determine whether ownership of the subject check was transferred to petitioner. On this point the Negotiable Instruments Law provides:

Sec. 12. Antedated and postdated – The instrument is not invalid for the reason only that it is antedated or postdated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery. (Underscoring supplied.)

Note however that delivery as the term is used in the aforementioned provision means that the party delivering did so for the purpose of giving effect thereto. Otherwise, it cannot be said that there has been delivery of the negotiable instrument. Once there is delivery, the person to whom the instrument is delivered gets the title to the instrument completely and irrevocably.

If the subject check was given by Puzon to SMC in payment of the obligation, the purpose of giving effect to the instrument is evident thus title to or ownership of the check was transferred upon delivery. However, if the check was not given as payment, there being no intent to give effect to the instrument, then ownership of the check was not transferred to SMC.

The evidence of SMC failed to establish that the check was given in payment of the obligation of Puzon. There was no provisional receipt or official receipt issued for the amount of the check. What was issued was a receipt for the document, a "POSTDATED CHECK SLIP."

Furthermore, the petitioner's demand letter sent to respondent states "As per company policies on receivables, all issuances are to be covered by post-dated checks. However, you have deviated from this policy by forcibly taking away the check you have issued to us to cover the December issuance." Notably, the term "payment" was not used instead the terms "covered" and "cover" were used.

Although the petitioner's witness, Gregorio L. Joven III, states in paragraph 6 of his affidavit that the check was given in payment of the obligation of Puzon, the same is contradicted by his statements in paragraph 4, where he states that "As a standard company operating procedure, all beer purchases by dealers on credit shall be coveredby postdated checks equivalent to the value of the beer products purchased"; in paragraph 9 where he states that "the transaction covered by the said check had not yet been paid for," and in paragraph 8 which clearly shows that partial payment is expected to be made by the return of beer empties, and not by the deposit or encashment of the check. Clearly the term "cover" was not meant to be used interchangeably with "payment."

When taken in conjunction with the counter-affidavit of Puzon – where he states that "As the [liquid beer] contents are paid for, SMC return[s] to me the corresponding PDCs or request[s] me to replace them with whatever was the unpaid balance." – it becomes clear that both parties did not intend for the check to pay for the beer products. The evidence proves that the check was accepted, not as payment, but in accordance with the long-standing policy of SMC to require its dealers to issue postdated checks to cover its receivables. The check was only meant to cover the transaction and in the meantime Puzon was to pay for the transaction by some other means other than the check. This being so, title to the check did not transfer to SMC; it remained with Puzon. The second element of the felony of theft was therefore not established. Petitioner was not able to show that Puzon took a check that belonged to another. Hence, the prosecutor and the DOJ were correct in finding no probable cause for theft.

Consequently, the CA did not err in finding no grave abuse of discretion committed by the DOJ in sustaining the dismissal of the case for theft for lack of probable cause. (San Miguel Corporation vs. Puzon, G.R. No. 167567, September 22, 2010, [Del Castillo, J.]

Negotiable Instruments; Absence of Delivery

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. x x x As a result, the assigned fund is deemed to remain part of the account of Hi-Tri, which procured the Manager’s Check. The doctrine that the deposit represented by a manager’s check automatically passes to the payee is inapplicable, because the instrument – although accepted in advance – remains undelivered.

- 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 manager’s or cashier’s checks. These are bills of exchange drawn by the bank’s manager or cashier, in the name of the bank, against the bank itself. Typically, a manager’s or a cashier’s check is procured from the bank by allocating a particular amount of funds to be debited from the depositor’s 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 manager’s check does not ipso facto work as an automatic transfer of funds to the account of the payee. In case the procurer of the manager’s or cashier’s 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. (Emphasis supplied.)

Petitioner acknowledges that the Manager’s 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 Manager’s Check offered by respondents, the latter retained custody of the instrument instead of cancelling it. As the Manager’s 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 Manager’s 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 Manager’s Check. The doctrine that the deposit represented by a manager’s 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. (Rizal Commercial Banking Corporation vs. Hi-Tri Development Corporation, G.R. No. 192413, June 13, 2012, [Sereno, J.])

Negotiable Instruments; Nature of the relationship between the accommodation party and the accommodated party

       “[T]he relation between an accommodation party and the accommodated party is one of principal and surety—the accommodation party being the surety.[1]  As such, he is deemed an original promissor and debtor from the beginning,[2] he is considered in law as the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter since their liabilities are interwoven as to be inseparable.[3]  Although a contract of suretyship is in essence accessory or collateral to a valid principal obligation, the surety’s liability to the creditor is immediate, primary and absolute; he is directly and equally bound with the principal.[4]  As an equivalent of a regular party to the undertaking, a surety becomes liable to the debt and duty of the principal obligor even without possessing a direct or personal interest in the obligations nor does he receive any benefit therefrom.[5] (Eusebio Gonzales vs. Philippine Commercial and International Bank, et. al., G.R. No. 180257, February 23, 2011, [Velasco, J.:])

            An accommodation bill or note is not considered a real security, but a mere blank, until it has been negotiated, and it then becomes binding upon all of the accommodation indorsers in like manner and to the like effect as if they were successive indorsers,[6] but until it has been negotiated any party may withdraw his indorsement, acceptance, or other liability upon it, and rescind his engagement;[7] and that right is not impaired by the circumstance that he may be indemnified by an assignment, or other security.[8] (Daniel, Elements on the Law of Negotiable Instruments, page 59)

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[1] Garcia v. Llamas, supra at 305; Agro Conglomerates, Inc. v. Court of Appeals, 401 Phil. 644, 654- 655 (2000); Spouses Gardose v. Tarroza, supra at 807; Caneda, Jr. v. Court of Appeals, G.R. No. 81322, February 5, 1990, 181 SCRA 762, 772; Crisologo-Jose v. Court of Appeals, supra at 598; Prudencio v. Court of Appeals, 227 Phil. 7, 12 (1986); and Philippine Bank of Commerce v. Aruego, supra at 539

[2] Garcia v. Llamas, supra at 305

[3] Trade & Investment Development Corp. v. Roblett Industrial Construction Corp., G.R. No. 139290, November 11, 2005, 474 SCRA 510, 531

[4] International Finance Corporation v. Imperial Textile Mills, Inc., G.R. No. 160324, November 15, 2005, 475 SCRA 149, 160; Trade & Investment Development Corp. v. Roblett Industrial Construction Corp., id. at 531; Garcia v. Llamas, supra at 305; Agro Conglomerates, Inc. v. Court of Appeals, supra at 655; and Philippine Bank of Commerce v. Aruego, supra at 540

[5] International Finance Corporation v. Imperial Textile Mills, Inc., id. at 160-161 and Trade & Investment Development Corp. v. Roblett Industrial Construction Corp., id. at 531

[6] Withworth v. Adams, 5 Rand. 342; May v. Boisseau, 8 Leigh, 164

[7] Second Nat. Bank v. Howe, 40 Minn, 390

[8] May v. Boisseau, 8 Leight, 164

Negotiable Instrument; What is the effect of forgery on the instrument?

When a signature is forged or made without the authority of the person whose signature it purports to be, -

• The signature is wholly inoperative, 
• And no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto can be acquired through or under such signature.

            The case of Natividad Gempesaw vs. The Honorable Court of Appeals and Philippine Bank of Communications[1], the Supreme Court, speaking through Justice Campos laid down a detailed discussion on the nature and effect of forgery, to wit:

            “Under the aforecited provision, forgery is a real or absolute defense by the party whose signature was forged.  A party whose signature to an instrument was forged was never a party and never gave his consent to the contract which gave rise to the instrument.  Since his signature does not appear in the instrument, he cannot be held liable thereon by anyone, not even by a holder in due course.  Thus, if a person’s signature is forged as a maker of a promissory note, he cannot be made to pay because he never made the promise to pay.  Or where a person’s signature as a drawer of a check is forged, he cannot charge the amount thereof against the drawer’s account because he never gave the bank the order to pay.  And said  section does not refer only to the forged signature of the maker of a promissory note and of the drawer of a check.  It covers also a forged indorsement, i.e., the forged signature of the payee or indorsee of a note or a check.  Since under said provision a forged signature is “wholly inoperative”, no one can gain title to the instrument through such forged indorsement.  Such an indorsement prevents any subsequent party from acquiring any right as against any party whose name appears prior to the forgery.  Although rights may exist between and among parties subsequent to the forged indorsement, not one of them can acquire tights against parties prior to the forgery.  Such forged indorsement cuts off the rights of all subsequent parties as against parties prior to the forgery.  However, the law makes an exception to these rules where a party is precluded from setting up forgery as a defense.”

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[1] G.R. No. 92244, February 9, 1993