G.R. No. L‑3120 (December 29 1906)

FACTS
– Plaintiff‑appellant Bryan, Landon Co. purchased from the American Bank a check dated 19 April 1905 for $4,000, payable to R.R. Landon and drawn on First National Bank of San Francisco.
– The plaintiff paid the bank the full amount for the check.
– On 18 May 1905 the American Bank was placed under receivership; its assets, including funds held by the San Francisco bank, were transferred to the receiver, Branagan.
– The check was presented for payment on 26 May 1905 and was refused; it was subsequently protested.
– The plaintiff contended that the purchase of the check effected an equitable assignment of the funds then in the San Francisco bank to his credit, giving him a preferential claim over other creditors. The trial court rejected this, holding the plaintiff merely a general creditor.

ISSUE
Whether a check purchased before a debtor‑bank’s insolvency operates as an equitable assignment of the money in the drawee bank, thereby granting the purchaser a priority claim against the debtor’s receiver and other creditors.

RULING
The Supreme Court of the Philippines affirmed the trial court. Relying on United States Supreme Court authority (e.g., Laclede Bank v. Schuler, 120 U.S. 511; Florence Mining Co. v. Brown, 124 U.S. 385; Fourth Street Bank v. Yardley, 165 U.S. 634), the Court held that:

1. A check is merely an order to pay; it does not create a lien on the drawee bank’s funds nor constitute an automatic equitable assignment of those funds.
2. Until the check is actually presented and paid, the drawer may revoke it, and the holder has no enforceable claim to the specific money in the drawee’s account.
3. In the absence of a separate contract expressly assigning the drawee’s funds to the holder (as was present in Fourth Street Bank), the purchase of a check does not give the holder priority over other general creditors in a bankruptcy or receivership.

Consequently, the plaintiff remained a general creditor without preferential rights. Costs were awarded to the appellees; judgment was entered after the statutory period and the record remanded for compliance.