FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES V. CA  [G.R. No. 113236. March 5, 2001]

DOCTRINE: The  essence  of  negotiability  which  characterizes  a  negotiable  paper  as  a credit  instrument  lies  in  its  freedom  to  be  a  substitute  for  money.   

FACTS:Fojas-Arca and Firestone Tire entered into a franchising agreement wherein the former had the privilege to purchase on credit  the latter’s products.  In paying for these products, the former could pay through special withdrawal slips.   In turn, Firestone would deposit these slips with Citibank.  Citibank would  then  honor  and  pay  the  slips.    Citibank  automatically  credits  the account  of  Firestone  then  merely  waited  for  the  same  to  be  honored  and paid  by  Luzon  Development  Bank.    As  this  was  the  circumstances, Firestone  believed  in  the  sufficient  funding  of  the  slips  until  there  was  a time  that  Citibank  informed  it  that  one  of  the  slips  was  dishonored.    It wrote  then  a  demand  letter  to  Fojas -Arca  for  the  payment  and  damages but the latter refused to pay, prompting Firestone to file an action against it.   

ISSUE:Whether or not the withdrawal slips were negotiable instruments?To whom notice of dishonor must be given? HELD:The withdrawal slips, at the outset, are non-negotiable.  Hence, the rule on immediate notice of dishonor is non-applicable to the case at hand.  Thus, the bank was under no obligation to give immediate notice that it wouldn't make  payment  on  the  subject  withdrawal  slips.    Citibank  should  have known  that  withdrawal  slips  are  not  negotiable  instruments.    It  couldn't expect then the slips be treated like checks by other entities.  Payment or notice of dishonor from respondent bank couldn't be expected immediately in contrast to the situation involving checks.  In the case at bar, Citibank relied on the fact that LDB honored and paid the  withdrawal  slips  which  made  it  automatically  credit  the  account  of Firestone  with  the  amount  of  the  subject  withdrawal  slips  then  merely waited for LDB to honor and pay the same.  It bears stressing though that Citibank  couldn't  have  missed  the  non-negotiable  character  of  the  slips.  The  essence  of  negotiability  which  characterizes  a  negotiable  paper  as  a credit  instrument  lies  in  its  freedom  to  be  a  substitute  for  money.    The withdrawal slips in question lacked this character. In the ordinary and usual course of banking operations, current account deposits are accepted by the bank on the basis of deposit slips prepared and signed by the depositor, or the latters agent or representative, who indicates therein the current account number to which the deposit is to be credited, the name of the depositor or current account holder, the date of the deposit, and the amount of the deposit either in cash or in check. The  withdrawal  slips  deposited  were  not  checks  as  Firestone  admits  and Citibank generally was not bound to accept the withdrawal slips as a valid mode of deposit.   Nonetheless, Citibank erroneously accepted the same as such  and  thus,  must  bear  the  risks  attendant  to  the  acceptance  of  the instruments.  Firestone and Citibank could not now shift the risk to LDB for their committed mistake. 

PNB V. CONCEPTION MININGG.R. No. L-16968

DOCTRINE:SEC. 17. Construction where instrument is ambiguous. — Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction apply:(g) Where an instrument containing the word “I promise to pay” is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

FACTS:A promissory note dated march 12, 1954 was executed by Vicente Legarda, president of Concepcion Mining Company, and Jose Sarte. On the face of the promissory note partially reads:

NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine National Bank . . . .The promissory note matured and without payment from the makers. PNB sued Concepcion Mining and Sarte.

Upon the filing of the complaint the defendants presented their answer in which they allege that the co-maker the promissory note Don Vicente L. Legarda died on February 24, 1946 and his estate is in the process of judicial determination in Special Proceedings No. 29060 of the Court of First Instance of Manila. On the basis of this allegation it is prayed, as a special defense, that the estate of said deceased Vicente L. Legarda be included as party-defendant. The court in its decision ruled that the inclusion of said defendant is unnecessary and immaterial

ISSUE: Whether or not the estate of Legarda should be included in the suit.

HELD: No. There is no need for pursuant to Section 17 (g) of the Negotiable Instruments Law:

SEC. 17. Construction where instrument is ambiguous. — Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction apply:(g) Where an instrument containing the word “I promise to pay” is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

And Article 1216 of the Civil Code of the Philippines also provides as follows:ART. 1216. The creditor may proceed against any one of the solidary debtors or some of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others so long as the debt has not been fully collected.

In view of the above quoted provisions, and as the promissory note was executed jointly and severally by the same parties, namely, Concepcion Mining Company, Inc. and Vicente L. Legarda and Jose S. Sarte, the payee of the promissory note had the right to hold any one or any two of the signers of the promissory note responsible for the payment of the amount of the note. This judgment of the lower court should be affirmed.