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G.R. No. L-1405 – 81 Phil. 359 – Mercantile Law – Negotiable Instruments Law – Treasury Warrants
In 1941, a treasury warrant was issued in favor of Placido Urbanes, a government employee in the province of La Union. The said treasury warrant was meant to augment the Food Production Campaign in the said province. It was then negotiated by Urbanes to Benjamin Abubakar, a private individual. When Abubakar sought to have the treasury warrant encashed, the Auditor General denied payment because first of, it is against the appropriating law (Republic Act 80) to authorize payments to private individuals when it comes to treasury warrants. Abubakar then contends that he is entitled to encash as he was a holder in good faith.
ISSUE: Whether or not a treasury warrant is a negotiable instrument.
HELD: No. A treasury warrant is not a negotiable instrument. One of the requirements of a negotiable instrument is that it must be unconditional. In Section 3 of the Negotiable Instruments Law, an order or promise to pay out of a particular fund makes the instrument conditional. A treasury warrant, like the one in this case, comes from a particular fund, a particular appropriation. In this case, it was written on the face of the treasury warrant that it is “payable from the appropriation for food administration”. Thus, it is not negotiable for being conditional.
NOTE the difference: However, an instrument is negotiable if it merely mentions/indicates a particular fund out of which reimbursement is to be made. This does not make the instrument conditional because it does not say that such particular fund is the source of payment. It is only a notice to the drawee that he can reimburse himself out of that particular fund after paying the payee. As to the source of payment to the payee, there is no mention of it.
