Treasury warrants were indorsed by A and B. These were presented for encashment by PNB. Subsequently, these were dishonored by the Insular Treasurer. Because of the dishonor, PNB applied A’s deposit in the PNB for payment of the warrant. Is the application of the deposit of A properly enforced?
No. The general indorser of a negotiable instrument engages that if it be dishonored and the necessary proceedings of dishonor be duly taken, he will pay the amount thereof to the holder. In this connection, it has been held that notice of dishonor is necessary in order to charge an indorser and that the right of action against him does not accrue until the notice is given (Gullas v. PNB, G.R. No. L-43191, Nov. 13, 1935)