81 SCRA 335



Boncan was the Finance Officer of the Philippine Embassy in Madrid who on many occasions negotiated with Banco Atlantico checks, allegedly endorsed to her by the embassy.  On these occasions, the bank allowed the payment of the checks, notwithstanding the fact that the drawee bank has not yet cleared  the  checks  for  collection.    This  was  premised  on  the  finding  that Boncan  had  special  relations  with  the  employees  of  the  bank.    And  that upon presentment to the drawee bank, the checks were dishonored due to non-acceptance  allegedly  on  the  ground  that  the  drawer  has  ordered  the
stoppage  of payment.    This  prompted  Banco  Atlantico  to  collect  from  the Philippine Embassy for the funds released to Boncan but the latter refused.  This  eventually  led  to  filing  of  money  claim  of  the  bank  with  the  Auditor General.


On  whether  or  not  Banco  Atlantico  was  a  holder  in  due  course,  it  is  not.  Following  the  decision  of  the  Auditor  General  in  denying  the  claim  of  the bank, the checks were demand notes.  It should have been put on guard when Boncan negotiated the checks with them and subsequently deposited
the  same  to  her  account.    Even  though  it  were  demand  notes,  she instructed the bank that the same be not presented for collection till a later date.  The fact that the amount was quite big and it was the payee herself who made the request that the same be not presented for collection until a fixed  date  in  the  future  was  proof  of  a  glaring  infirmity  or  defect  in  the instrument.    It  loudly  proclaims  “Take  me  at  your  own  risk.”    It  was obvious by then that the bank had knowledge of the infirmity or defect of the  checks.    Furthermore,  what  it  did  when  it  allowed  payment  before clearing  is  beyond  the  normal  and  ordinary  banking  practice  especially when the bank involved is a foreign bank and the amounts involved were large.  Boncan wasn't even a client of the bank but was someone who had special relations with its officers.   
In  view  of  the  foregoing,  the  embassy  as  the  drawer  of  the  3  checks  in question cannot be held liable. It is apparent that the said 3 checks were (fraudulently altered) by Boncan as to their accounts and therefore wholly inoperative (note: should be “avoided”).