316 SCRA 488



Petitioner   is   a   quasi-banking   institution   involved   in   money   market transactions.  Alegre invested with petitioner P500,000.  Petitioner issued then a promissory note, which would mature approximately after a month.  The note covered for Alegre’s placement plus interest.  On the maturity of the note, petitioner issued a check payable to Alegre, covering the whole amount due.  It was drawn from petitioner’s current account in BPI.  When the  wife  of  Alegre  tried  to  deposit  the  check,  the  bank  dishonored  the
check.    Petitioner  was  notified  of  this  matter  and  Alegre  demanded  the immediate  payment  in  cash.    In  turn,  petitioner  promised  to  replace  the check on the impossible premise that the first issued be returned to them.  This prompted Alegre to file a complaint against petitioner and petitioner in turn,  filed  a  case  against  BPI  for  allegedly  unlawfully  deducting  from  its account counterfeit checks.  The trial court decided in favor of Alegre.


Whether or not  the Negotiable Instruments Law  is  applicable  to  the  money  market  transaction  held
between petitioner and Alegre?


Considering  the  nature  of  the  money  market  transaction,  Article  1249  of the CC is the applicable provision should be applied.  A money market has been  defined  to  be  a  market  dealing  in  standardized  short-term  credit instruments  where  lenders  and  borrowers  don’t  deal  directly  with  each other but through a middleman or dealer in the open market.  In a money market  transaction,  the  investor  is  the  lender  who  loans  his  money  to  a borrower through a middleman or dealer.
In  the  case  at  bar,  the  transaction  is  in  the  nature  of  a  loan.    Petitioner accepted the check but when he tried to encash it, it was dishonored.  The holder  has  an  immediate  recourse  against  the  drawer,  and  consequently could immediately file an action for the recovery of the value of the check. 
Further, in a loan transaction, the obligation to pay a sum certain in money may be paid in money, which is the legal tender or, by the use of a check.  A check is not legal tender, and therefore cannot constitute valid tender of