CEBU INTERNATIONAL V. CA
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