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PHILIPPINE DEPOSIT INSURANCE CORPORATION v. CA

FACTS:

Plaintiffs-appellees invested in money market placements with Premiere Financing Corporation (PFC) and received promissory notes and checks. These instruments were supposed to be encashed, but they were directed to Regent Saving Bank (RSB) instead. RSB issued certificates of time deposit (CTDs) to the plaintiffs-appellees, stating that the certificates were insured by the Philippine Deposit Insurance Corporation (PDIC). However, when the maturity date of the certificates came, RSB failed to pay the plaintiffs-appellees. PDIC advised them to file a claim, but their claims were denied because the check issued by PFC for the certificates bounced. Consequently, the plaintiffs-appellees filed a collection case against PDIC, RSB, and the Central Bank. The trial court ruled in favor of the plaintiffs-appellees, and PDIC and RSB appealed the decision. The Court of Appeals granted the Central Bank's petition but dismissed the appeals of PDIC and RSB. PDIC now seeks the reversal of the decision.

ISSUES:

  1. Whether the negotiability of commercial paper is dependent on the existence or nonexistence of a guaranty.

  2. Whether the statements in the certificates that they are insured by PDIC make PDIC liable for the same.

  3. Whether the certificates were issued to PFC for value.

  4. Whether RSB demanded payment from PFC for the certificates.

  5. Whether RSB explicitly stated that the validity of the certificates depended on the encashment of the check.

  6. Whether RSB can be held liable to the plaintiffs for the value of the certificates.

RULING:

  1. The negotiability of commercial paper is not dependent on the existence or nonexistence of a guaranty. The transfer of a certificate of deposit cannot impose a liability on the guaranty fund if no deposit was made or no deposit is protected by the guaranty law.

  2. The statements in the certificates that they are insured by PDIC are not binding on PDIC. The mere fact that a certificate states that a certain sum has been deposited or that the deposit is protected by the guaranty law does not make the guaranty fund liable if no deposit was made.

  3. The certificates were not issued to PFC for value because the check issued by PFC for the certificates bounced due to insufficient funds.

  4. RSB did not demand payment from PFC for the certificates.

  5. RSB did not explicitly state in the certificates that their validity relied on the encashment of the check.

  6. RSB cannot be held liable to the plaintiffs for the value of the certificates.

PRINCIPLES:

  • Negotiability of instruments is not dependent on the existence or nonexistence of a guaranty.

  • The liability of the guaranty fund for payment is separate from the liability of the maker of a negotiable instrument.

  • The deposit liability of PDIC is determined by the provisions of the law and is not automatically triggered by statements in certificates of deposit.

  • A claim for deposit insurance with PDIC requires a corresponding deposit to be placed in the insured bank.

  • When a bank issues a certificate of deposit acknowledging a deposit made with a third person or another bank, the bank is liable for the amount of the deposit upon presentment for encashment.

  • A check dishonored by the drawee bank indicates that no deposit came into existence for the issuance of the corresponding certificates of time deposit.