Firestone Tire vs. CA

Firestone Tire & rubber Co. vs. Court of Appeals

GR No. 113236          March 5, 2001

Quisumbing, J.:

Facts:

            Forjas-Arca Enterprise Company is maintaining a special savings account with Luzon Development Bank, the latter authorized and allowed withdrawals of funds though the medium of special withdrawal slips. These are supplied by Fojas-Arca. Fojas-Arca purchased on credit with FirestoneTire & Rubber Company, in payment Fojas-Arca delivered a 6 special withdrawal slips. In turn, these were deposited by the Firsestone to its bank account in Citibank. With this, relying on such confidence and belief Firestone extended to Fojas-Arca other purchase on credit of its products but several withdrawal slips were dishonored and not paid. As a consequence, Citibank debited the plaintiff’s account representing the aggregate amount of the two dishonored special withdrawal slips. Fojas-Arca averred that the pecuniary losses it suffered are a caused by and directly attributes to defendant’s gross negligence as a result Fojas-Arca filed a complaint.

Issue:

            Whether or not the acceptance and payment of the special withdrawal slips without the presentation of the depositor’s passbook thereby giving the impression that it is a negotiable instrument like a check.

Held:

            No. Withdrawal slips in question were non negotiable instrument. Hence, the rules governing the giving immediate notice of dishonor of negotiable instrument do not apply. The essence of negotiability which characterizes a negotiable paper as a credit instrument lies in its freedom to circulate freely as a substitute for money. The withdrawal slips in question lacked this character.

Read full text here:  FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES vs. COURT OF APPEALS