Case Digest (G.R. No. 16454) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In George A. Kauffman v. Philippine National Bank (G.R. No. 16454, September 29, 1921), the plaintiff-appellee, George A. Kauffman, was president and principal shareholder of the Philippine Fiber and Produce Company, a domestic hemp-export corporation. On February 5, 1918, the company declared a P100,000 dividend, of which Kauffman was entitled to P98,000, and credited this sum to his account. In October 1918, treasurer George B. Wicks sought to remit $45,000 of Kauffman’s dividend to him in New York. On October 9, Wicks contracted with the defendant-appellant Philippine National Bank in Manila to transmit the amount by cable at a cost of P90,355.50, delivering a check for that sum to the bank. The bank’s foreign department issued an official receipt and dispatched a cable to its New York agency ordering payment to Kauffman. Upon receipt, the New York agent hesitated and, at the Manila bank’s October 11 direction, “withheld” payment. Meanwhile, Kauffman, having been informed by Case Digest (G.R. No. 16454) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Background of Parties and Dividend Declaration
- George A. Kauffman was president and majority shareholder (holding nearly all capital stock) of the Philippine Fiber and Produce Company (PFPC), a domestic hemp‐export corporation.
- On February 5, 1918, PFPC’s board declared a P100,000 dividend from 1917 surplus, of which P98,000 was credited to Kauffman’s account on the company’s books and remained there until October 1918.
- Telegraphic Transfer Transaction
- On October 9, 1918, George B. Wicks (PFPC treasurer) requested the Philippine National Bank (PNB) in Manila to make a telegraphic transfer of US$45,000 to Kauffman in New York City. PNB quoted a total cost of P90,355.50 (including exchange and message fee). Wicks drew a check for P90,355.50, which PNB accepted and charged as an overdraft against PFPC.
- PNB issued an official receipt to PFPC and sent a cable to its New York agency: “Pay George A. Kauffman, New York, account Philippine Fiber Produce Co., $45,000.” In New York, PNB’s agent suggested withholding payment; PNB Manila agreed by a second cable on October 11.
- Meanwhile, Wicks cabled Kauffman advising him of the deposit; Kauffman presented himself at PNB New York on October 15 to demand payment, which was refused pursuant to the October 11 withholding order.
- Procedural History and Additional Facts
- Kauffman filed suit in the Court of First Instance of Manila to recover P90,355.50 (equivalent to $45,000), plus interest and costs. Judgment was entered in his favor; PNB appealed.
- PFPC lacked sufficient actual funds on deposit to cover the check but had an overdraft credit. No proof was offered of failure of consideration for the telegraphic order. PNB’s defense alleged it withheld payment to protect its security interests in PFPC, but introduced no evidence.
Issues:
- Privity and Third‐Party Beneficiary
- Can Kauffman, who was not a direct contracting party with PNB, maintain an action against the bank for its failure to pay the telegraphic order?
- Applicability of Statutory and Negotiable Instruments Law
- Does the Negotiable Instruments Law (Act No. 2031) apply to the telegraphic order or create any enforceable rights in Kauffman?
- Does article 1257(2) of the Civil Code (stipulation in favor of third person) permit Kauffman’s suit?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)