1.Case Title : MYRON C. PAPA, Administrator of the Testate Estate of Angela M.
Syllabi Class : Civil Law|Commercial Law|Loan|Check|Actions|Compromise
Butte, petitioner, vs. A.U. VALENCIA and CO., INC., FELIX PEÑARROYO, SPS.
ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents.
Case Nature : PETITION for review on certiorari of a decision of the Court of
Appeals.
Syllabi Class : Negotiable
Instruments|Actions|Checks|Presumptions|Obligations|Parties|Settlement of
Estates
Syllabi:
1. Negotiable Instruments; Checks; Presumptions; After more than ten (10)
years from the payment in part by cash and in part by check, the presumption is
that the check had been encashed.-
It is an undisputed fact that respondents Valencia and Peñarroyo had given
petitioner Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in
cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15
June 1973, in payment of the purchase price of the subject lot. Petitioner himself
admits having received said amounts, and having issued receipts therefor.
Petitioner’s assertion that he never encashed the aforesaid check is not
substantiated and is at odds with his statement in his answer that “he can no
longer recall the transaction which is supposed to have happened 10 years ago.”
After more than ten (10) years from the payment in part by cash and in part by
check, the presumption is that the check had been encashed. As already stated,
he even waived the presentation of oral evidence.
2. Negotiable Instruments; Checks; Failure of a payee to encash a check for
more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.-
Granting that petitioner had never encashed the check, his failure to do so for
more than ten (10) years undoubtedly resulted in the impairment of the check
through his unreasonable and unexplained delay.
3. Negotiable Instruments; Checks; Obligations; The acceptance of a check
implies an undertaking of due diligence in presenting it for payment, and if he
from whom it is received sustains loss by want of such diligence, it will be held to
operate as actual payment of the debt or obligation for which it was given.-
While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if
the debtor is prejudiced by the creditor’s unreasonable delay in presentment.
The acceptance of a check implies an undertaking of due diligence in presenting
it for payment, and if he from whom it is received sustains loss by want of such
diligence, it will be held to operate as actual payment of the debt or obligation
for which it was given. It has, likewise, been held that if no presentment is made
at all, the drawer cannot be held liable irrespective of loss or injury unless
presentment is otherwise excused. This is in harmony with Article 1249 of the
Civil Code under which payment by way of check or other negotiable instrument
is conditioned on its being cashed, except when through the fault of the creditor,
the instrument is impaired. The payee of a check would be a creditor under this
provision and if its non-payment is caused by his negligence, payment will be
deemed effected and the obligation for which the check was given as
conditional payment will be discharged.
4. Actions; Parties; Settlement of Estates; An executor or administrator may sue
or be sued without joining the party for whose benefit the action is presented or
defended.-
The estate of Angela M. Butte is not an indispensable party. Under Section 3 of
Rule 3 of the Rules of Court, an executor or administrator may sue or be sued
without joining the party for whose benefit the action is presented or defended.
Division: FIRST DIVISION
Docket Number: G.R. No. 105188
Counsel: Quijano & Padilla, Jimenez, Kintanar & Asuncion Law Offices
Ponente: KAPUNAN
Dispositive Portion:
WHEREFORE, the petition for review is hereby DENIED and the Decision of the
Court of Appeals, dated 27 January 1992 is AFFIRMED.
2. Case Title : CEBU INTERNATIONAL FINANCE CORPORATION, petitioner, vs.
COURT OF APPEALS, VICENTE ALEGRE, respondents.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Agreement|Nature of Compromise Agreement|Garnishment|Litis
Pendentia|Res Judicata
Syllabi:
1. Civil Law; Commercial Law; Loan; In a money market transaction, the
investor is a lender who loans his money to a borrower through a middleman or
dealer.-
Considering the nature of a money market transaction, the above-quoted
provision should be applied in the present controversy. As held in Perez vs. Court
of Appeals, a “money market is a market dealing in standardized short-term
credit instruments (involving large amounts) where lenders and borrowers do
not deal directly with each other but through a middle man or dealer in open
market. In a money market transaction, the investor is a lender who loans his
money to a borrower through a middleman or dealer.
2. Civil Law; Commercial Law; Loan; Check; A check is not a legal tender, and
therefore cannot constitute valid tender of payment.-
In a loan transaction, the obligation to pay a sum certain in money may be paid
in money, which is the legal tender or, by the use of a check. A check is not a
legal tender, and therefore cannot constitute valid tender of payment. In the
case of Philippine Airlines, Inc. vs. Court of Appeals, this Court held: “Since a
negotiable instrument is only a substitute for money and not money, the
delivery of such an instrument does not, by itself, operate as payment (citation
omitted). A check, whether a manager’s check or ordinary check, is not legal
tender, and an offer of a check in payment of a debt is not a valid tender of
payment and may be refused receipt by the obligee or creditor. Mere delivery of
checks does not discharge the obligation under a judgment. The obligation is not
extinguished and remains suspended until the payment by commercial
document is actually realized (Art. 1249, Civil Code, par. 3.)”
3. Civil Law; Actions; Compromise Agreement; Nature of Compromise
Agreement; The compromise agreement could not bind a party who did not sign
the compromise agreement nor avail of its benefits.-
A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. It is an
agreement between two or more persons who, for preventing or putting an end
to a lawsuit, adjust their difficulties by mutual consent in the manner which they
agree on, and which everyone of them prefers in the hope of gaining, balanced
by the danger of losing. The compromise agreement could not bind a party who
did not sign the compromise agreement nor avail of its benefits. Thus, the
stipulations in the compromise agreement is unenforceable against Vicente
Alegre, not a party thereto. His money could not be the subject of an agreement
between CIFC and BPI. Although Alegre’s money was in custody of the bank, the
bank’s possession of it was not in the concept of an owner. BPI cannot validly
appropriate the money as its own.
4. Civil Law; Actions; Garnishment; Garnishment is an attachment by means of
which the plaintiff seeks to subject to his claim the property of the defendant in
the hands of a third person or money owed to such third person or a garnishee
to the defendant; Tender of payment involves a positive and unconditional act
by the obligor of offering legal tender currency as payment to the obligee for the
former’s obligation and demanding that the latter accept the same.-
BPI’s confiscation of Alegre’s money constitutes garnishment without the parties
going through a valid proceeding in court. Garnishment is an attachment by
means of which the plaintiff seeks to subject to his claim the property of the
defendant in the hands of a third person or money owed to such third person or
a garnishee to the defendant. The garnishment procedure must be upon proper
order of RTC-Makati, Branch 62, the court who had jurisdiction over the
collection suit filed by BPI against Alegre. In effect, CIFC has not yet tendered a
valid payment of its obligation to the private respondent. Tender of payment
involves a positive and unconditional act by the obligor of offering legal tender
currency as payment to the obligee for the former’s obligation and demanding
that the latter accept the same. Tender of payment cannot be presumed by a
mere inference from surrounding circumstances.
5. Civil Law; Actions; Litis Pendentia; Requisites for litis pendentia to be a
ground for the dismissal of an action.-
With regard to the third issue, for litis pendentia to be a ground for the dismissal
of an action, the following requisites must concur: (a) identity of parties or at
least such as to represent the same interest in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same acts; and (c)
the identity in the two cases should be such that the judgment which may be
rendered in one would, regardless of which party is successful, amount to res
judicata in the other.
6. Civil Law; Actions; Res Judicata; The general rule is that a compromise has
upon the parties the effect and authority of res judicata, with respect to the
matter definitely stated therein, or which by implication from its terms should be
deemed to have been included therein even if the agreement has not been
judicially approved.-
The compromise agreement between CIFC and BPI, categorically provided that
“In case plaintiff is adjudged liable to Vicente Alegre in Civil Case No. 92-515
arising from the alleged dishonor of BPI Check No. 513397, plaintiff (CIFC)
cannot go after the defendant (BPI); otherwise stated, the defendant shall not
be liable to the plaintiff.” Clearly, this stipulation expressed that CIFC had
already abandoned any further claim against BPI with respect to the value of BPI
Check No. 513397. To ask this Court to allow BPI to be a party in the case at bar,
would amount to res judicata and would violate terms of the compromise
agreement between CIFC and BPI. The general rule is that a compromise has
upon the parties the effect and authority of res judicata, with respect to the
matter definitely stated therein, or which by implication from its terms should be
deemed to have been included therein. This holds true even if the agreement has
not been judicially approved.
Division: SECOND DIVISION
Docket Number: G.R. No. 123031
Counsel: Villanueva, Pacis, Mondragon & Cana Law Offices, Marlito C. Altuna
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the instant petition is hereby DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 44085 is AFFIRMED. Costs against petitioner.
3. Case Title : JUAN A. RUEDA, JR., petitioner, vs. HONORABLE SANDIGAN-
BAYAN and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION
for review on certiorari of a decision of the Sandiganbayan.
Syllabi Class : Courts|Criminal
Law|Sandiganbayan|Evidence|Malversation|Public Officers|Words and
Phrases|Presumption of Innocence
Syllabi:
1. Courts; Sandiganbayan; Evidence; Generally, the factual findings of the
Sandiganbayan are conclusive on the Supreme Court, but in instances where the
exceptions obtain, the Supreme Court is bound to review the facts in order to
avoid a miscarriage of justice.-
Generally, the factual findings of the Sandiganbayan are conclusive on the
Court. However, there are established exceptions to that rule, such as, sans
preclusion, when (1) the conclusion is a finding grounded entirely on speculation,
surmise and conjecture; (2) the inference made is manifestly an error or founded
on a mistake; (3) there is grave abuse of discretion; (4) the judgment is based on
misapprehension of facts; and (5) the findings of fact are premised on the
absence of evidence and are contradicted by evidence on record. In these
instances, this Court is bound to review the facts in order to avoid a miscarriage
of justice. The instant case falls within such exceptions.
2. Criminal Law; Malversation; Public Officers; The mere fact that a public
officer signed the report of cash examination is not an admission of
“shortgage”—his signature is only evidence that he received a copy of the
report; When absence of funds was not due to personal use, the presumption
that the public officer put public funds to personal use is completely destroyed.-
After an assiduous scrutiny, we find petitioner not guilty of malversation of
public funds. The Sandiganbayan found that petitioner admitted his
accountability and failed to have duly forthcoming his cash shortage in the
amount of P107,299.02 with which he is chargeable, and that he did not tender
the required written explanation as to why the shortage was incurred. His failure
to do so instantly created a prima facie evidence pursuant to the last paragraph
of Article 217 of the Revised Penal Code that he had put such missing funds to
personal use. We disagree. Petitioner did not admit any shortage. The mere fact
that he signed the dorsal side of the report of cash examination is not an
admission of “shortage.” His signature was only evidence that he received a
copy of the report. Thus, it is incorrect to say that petitioner admitted his
shortage when he signed the audit report prepared by the audit team. For one
thing, he was made to sign it right away; for another, his signature only meant
an acknowledgment that a demand from him to produce all his cash, money and
paid vouchers had been made. It did not mean that he admitted any shortage. In
fact, subsequent events showed that he had fully explained his accountability.
Thus, he satisfactorily explained the shortage. In other words, there was no
direct evidence or proof that he put public funds to personal use. When absence
of funds was not due to personal use, the presumption is completely destroyed.
The taking or conversion of public funds for personal use must be affirmatively
proved. When there is no shortage, taking, appropriation, conversion or loss,
there is no malversation.
3. Criminal Law; Malversation; Elements.-
The elements of malversation, essential for the conviction of an accused, under
the above penal provision are that: (a) the offender is a public officer; (b) he has
the custody or control of funds or property by reason of the duties of his office;
(c) the funds or property involved are public funds or property for which he is
accountable; and (d) he has appropriated, taken or misappropriated, or has
consented to, or through abandonment or negligence permitted, the taking by
another person of, such funds or property.
4. Criminal Law; Malversation; Words and Phrases; Standard text in accounting
defines “Cash” as consisting of those items that serve as a medium of exchange
and provide a basis for accounting measurement, and to be reported as “cash,”
an item must be readily available and not restricted for use in the payment of
current obligations.-
The auditor’s finding of a “cash shortage” is definitely wrong. In fact and under
accounting principles, there is no cash shortage. The cash and other valid cash
items were produced by petitioner and counted by the auditors in the total
amount of P170,195.26. The amount is intact in cash. The assumed shortage of
P107,229.02 represented “vales,” “chits” and “disbursement vouchers”
considered as part of the general fund. This is an auditing error. It is a generally
accepted auditing principle that cash means “cash on hand or in bank.”
Standard text in accounting defines “Cash” as consisting of those items that
serve as a medium of exchange and provide a basis for accounting
measurement. To be reported as “cash,” an item must be readily available and
not restricted for use in the payment of current obligations. A general guideline
is whether an item is acceptable for deposit at face value by a bank or other
financial institution. “Items that are classified as cash include coin and currency
on hand, and unrestricted funds available on deposit in a bank, which are often
called demand deposits since they can be withdrawn upon demand. Petty cash
funds or change funds and negotiable instruments, such as personal checks,
travelers’ checks, cashiers’ checks, bank drafts, and money orders are also items
commonly reported as cash. The total of these items plus undeposited coin and
currency is sometimes called cash on hand. Interest-bearing accounts, or time
deposits, also are usually classified as cash, even though a bank legally can
demand prior notification before a withdrawal can be made. In practice, banks
generally do not exercise this legal right.
5. Criminal Law; Malversation; It is a mistake for auditors to include as cash
items collectibles in the form of “vales” and “chits” and “disbursement
vouchers” for legitimate expenses of the municipality.-
There was no shortage on peti-tioner’s cash accountability. “Evidence of
shortage is necessary before there could be any taking, appropriation,
conversion, or loss of public funds that would amount to malversation.” The law
requires that the shortage must be clearly established as a fact that over and
above the funds found by the auditors in the actual possession of the
accountable officers, there is an additional amount which could not be produced
or accounted for at the time of audit. In this case, there was absolutely no
shortage as to petitioner’s cash accountability. The auditors mistakenly included
as cash items collectibles in the form of “vales” and “chits” and “disbursement
vouchers” for legitimate expenses of the municipality.
6. Criminal Law; Malversation; To be held accountable the public officer must
receive the money or property, and later fails to account for it.-
An accountable officer under Article 217 of the Revised Penal Code must receive
money or property of the government which he is bound to account for. It is the
nature of the duties of, not the nomenclature used for, or the relative
significance of the title to, the position, which controls in that determination.
Based on this definition, to be held accountable the public officer must receive
the money or property, and later fails to account for it. When a public officer is
asked to account for the cash in his accountability, this necessarily means that
he has to produce the cash in bills and coins and other cash items that he
received. It does not include collectibles and receivables or even promissory
notes.
7. Criminal Law; Malversation; Words and Phrases; “Liquidation” simply means
the settling of indebtedness—it does not necessarily signify payment, and to
liquidate an account, can mean to ascertain the balance due, to whom it is due,
and to whom it is payable; hence, an account that has been liquidated can also
mean that the item has been made certain as to what, and how much, is
deemed to be owing.-
An important moiety in the instant case is that petitioner did not grant the cash
advances or “vales” to the municipal officials. They took the cash advances from
the collections of the municipal collectors. However, they restored or liquidated”
the amounts prior to the conduct of preliminary investigation before the office
of the Ombudsman. The liquidation was done, not by petitioner, but by the
respective debtors. “Liquidation simply means the settling of indebtedness.”
“Liquidation does not necessarily signify payment, and to liquidate an account,
can mean to ascertain the balance due, to whom it is due, and to whom it is
payable; hence, an account that has been liquidated can also mean that the
item has been made certain as to what, and how much, is deemed to be owing.”
8. Criminal Law; Malversation; Presumption of Innocence; The prima facie
evidence that public funds have been put to the personal use of a municipal
treasurer is obliterated by the fact that he did not receive the money; The Court
must not reject arbitrarily an explanation consistent with the presumption of
innocence.-
The prima facie evidence that public funds have been put to the personal use of
petitioner has been obliterated by the fact that he did not receive the money as
municipal treasurer. In Zambrano v. Sandiganbayan, we said that if the accused
did not receive the public funds, there was no malversation. In Diaz vs.
Sandiganbayan, we held that when the absence of funds is not due to the
personal use thereof by the accused, the presumption is completely destroyed;
in fact, the presumption is deemed never to have existed at all. In malversation,
it is necessary to prove that the accused received public funds, and that he could
not account for them and did not have them in his possession and that he could
not give a reasonable excuse for the disappearance of the same. In this case, the
prosecution failed to establish this important element of malversation. In fact, it
did not really exist. Petitioner gave a reasonable and satisfactory explanation of
his cash accountability of public funds that were duly liquidated. The Court must
not reject arbitrarily an explanation consistent with the presumption of
innocence.
9. Criminal Law; Presumption of Innocence; In our criminal justice system, the
overriding consideration is not whether the court doubts the innocence of the
accused but whether it entertains a reasonable doubt as to his guilt.-
In our criminal justice system, the overriding consideration is not whether the
court doubts the innocence of the accused but whether it entertains a
reasonable doubt as to his guilt. This determinant, with the constitutional
presumption of innocence which can be overthrown only by the strength of the
prosecution’s own evidence proving guilt beyond reasonable doubt, irresistibly
dictate an exoneration in this case. The evidence against petitioner is not
enough to engender moral certainty of his guilt. This moral certainty is that
which convinces and satisfies the conscience of those who are to act upon it.
Accordingly, the presumption of innocence which the Constitution guarantees
the petitioner has remained untarnished in this case for want of proof to the
contrary. It is safely entrenched in our jurisprudence that unless the prosecution
discharges its burden to prove the guilt of an accused beyond reasonable doubt,
the latter need not even offer evidence in his behalf.
Division: EN BANC
Docket Number: G.R. No. 129064
Counsel: Benito P. Fabie
Ponente: PARDO
Dispositive Portion:
WHEREFORE, the petition is GRANTED and the decision of respondent
SANDIGANBAYAN promulgated on March 19, 1996 and the resolution adopted
on May 7, 1997 are REVERSED and SET ASIDE. Petitioner JUAN A. RUEDA, JR. is
hereby ACQUITTED on reasonable doubt of the charge of malversation of public
funds, defined and penalized under Article 217 (4) of the Revised Penal Code.
His bail bond is ordered cancelled.
4. Case Title : PIO BARRETTO REALTY DEVELOPMENT CORPORATION, petitioner,
vs. COURT OF APPEALS, JUDGE PERFECTO A.S. LAGUIO, JR., RTC-Branch 18,
Manila, and HONOR P. MOSLARES, respondents.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Judgments|Negotiable
Instruments|Checks|Obligations|Laches|Estoppel
Syllabi:
1. Judgments; Final and executory decisions, more so with those already
executed, may no longer be amended except only to correct errors which are
clerical in nature—amendments or alterations which substantially affect such
judgments as well as the entire proceedings held for that purpose are null and
void for lack of jurisdiction.-
Final and executory decisions, more so with those already executed, may no
longer be amended except only to correct errors which are clerical in nature.
They become the law of the case and are immutable and unalterable regardless
of any claim of error or incorrectness. Amendments or alterations which
substantially affect such judgments as well as the entire proceedings held for
that purpose are null and void for lack of jurisdiction. The reason lies in the fact
that public policy dictates that litigations must be terminated at some definite
time and that the prevailing party should not be denied the fruits of his victory
by some subterfuge devised by the losing party.
2. Negotiable Instruments; Checks; Obligations; While delivery of a check
produces the effect of payment only when it is encashed, the rule is otherwise if
the debtor was prejudiced by the creditor’s unreasonable delay in
presentments—acceptance of a check implies an undertaking of due diligence in
presenting it for payment.-
Clearly then respondent Judge Laguio no longer had any jurisdiction whatsoever
to act on, much less grant, the motion for execution and supplement thereto
filed by Moslares on 17 September 1993 or more than three (3) years later,
claiming that he had already bought the lots. The fact that the check paid to him
by Barretto Realty was never encashed should not be invoked against the latter.
As already stated, Moslares never questioned the tender done three (3) years
earlier. Besides, while delivery of a check produces the effect of payment only
when it is encashed, the rule is otherwise if the debtor was prejudiced by the
creditor’s unreasonable delay in presentment. Acceptance of a check implies an
undertaking of due diligence in presenting it for payment. If no such
presentment was made, the drawer cannot be held liable irrespective of loss or
injury sustained by the payee. Payment will be deemed effected and the
obligation for which the check was given as conditional payment will be
discharged.
3. Judgments; Laches; Estoppel; The principle of laches does not attach when
the judgment is null and void for want of jurisdiction; Estoppel, being an
equitable doctrine, cannot be invoked to perpetuate an injustice.-
The principle of laches does not attach when the judgment is null and void for
want of jurisdiction. The fact that petitioner invoked par. 3 of the Order of 11
February 1994 praying that its P1,000,000.00 check still in Moslares’ possession
be considered sufficient payment of the disputed lots, could not be cited against
it. For one thing, petitioner from the very start had always consistently
questioned and assailed the jurisdiction of the trial court to entertain
respondent’s motion for execution filed three (3) years after the case had in fact
been executed. Secondly, estoppel being an equitable doctrine cannot be
invoked to perpetuate an injustice.
Division: SECOND DIVISION
Docket Number: G.R. No. 132362
Counsel: Encarnacion, Fernandez, Associates, Angeles & Associates
Ponente: BELLOSILLO
Dispositive Portion:
WHEREFORE, the questioned Decision and Resolution of the Court of Appeals
dated 30 June 1997 and 14 January 1998, respectively, are REVERSED and SET
ASIDE. The Order of respondent Judge Perfecto A.S. Laguio, Jr. dated 11
February 1994 in Civil Case No. 84-27008, setting aside his earlier ruling of 7
December 1993 which had declared petitioner Pio Barretto Realty Develop-
ment Corporation as the absolute owner of the real properties in question, and
all subsequent proceedings culminating in the Order of 12 October 1994
authorizing the Clerk of Court, RTC-Manila, to execute a deed of conveyance
over subject properties in favor of respondent Honor P. Moslares, are declared
NULL and VOID for want of jurisdiction.Consequently, petitioner Pio Barretto
Realty Development Corporation is declared the absolute owner of the disputed
properties subject matter of the Compromise Agreement dated 2 May 1986 as
fully implemented by the Deputy Sheriff, RTC-Br. 18, Manila, pursuant to the
final and executory Order dated 14 June 1990 of its Presiding Judge Perfecto
A.S. Laguio, Jr.
5. Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. SPOUSES
REYNALDO AND VICTORIA ROYECA, respondentsCase Nature : PETITION for
review on certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Banks and Banking ; Payment ;
Syllabi:
1. Civil Procedure; Burden of Proof; In civil cases, the party having the burden of
proof must establish his case by a preponderance of evidence, or evidence which
is more convincing to the court as worthy of belief than that which is offered in
opposition thereto.-
—In civil cases, the party having the burden of proof must establish his case by a
preponderance of evidence, or evidence which is more convincing to the court as
worthy of belief than that which is offered in opposition thereto. Thus, the party,
whether plaintiff or defendant, who asserts the affirmative of an issue has the
onus to prove his assertion in order to obtain a favorable judgment. For the
plaintiff, the burden to prove its positive assertions never parts. For the
defendant, an affirmative defense is one which is not a denial of an essential
ingredient in the plaintiff’s cause of action, but one which, if established, will be
a good defense—i.e. an “avoidance” of the claim.
2. Banks and Banking; Payment; Reasonable banking practice and prudence
dictates that, when a check given to a creditor bank in payment of an obligation
is dishonored, the bank should immediately return it to the debtor and demand
its replacement or payment lest itcauses any prejudice to the drawer.-
—The Court cannot ignore what the respondents have consistently raised—that
they were not notified of the non-payment of the checks. Reasonable banking
practice and prudence dictates that, when a check given to a creditor bank in
payment of an obligation is dishonored, the bank should immediately return it to
the debtor and demand its replacement or payment lest it causes any prejudice
to the drawer. In light of this and the fact that the obligation has been partially
paid, we deem it just and equitable to reduce the 3% per month penalty charge
as stipulated in the Promissory Note to 12% per annum. Although a court is not
at liberty to ignore the freedom of the parties to agree on such terms and
conditions as they see fit, as long as they contravene no law, morals, good
customs, public order or public policy, a stipulated penalty, nevertheless, may be
equitably reduced by the courts if it is iniquitous or unconscionable, or if the
principal obligation has been partly or irregularly complied with.
3. Laches; Laches cannot, as a rule, abate a collection suit filed within the
prescriptive period mandated by the New Civil Code.-
—The respondents posit that the petitioner’s claim is barred by laches since it
has been three years since the checks were issued. We do not agree. Laches is a
recourse in equity. Equity, however, is applied only in the absence, never in
contravention, of statutory law. Thus, laches cannot, as a rule, abate a collection
suit filed within the prescriptive period mandated by the New Civil Code. The
petitioner’s action was filed within the ten-year prescriptive period provided
under Article 1144 of the New Civil Code. Hence, there is no room for the
application of laches.
4. Same; Promissory Notes; A promissory note in the hands of the creditor is a
proof of indebtedness rather than proof of payment.-
—In all, we find that the evidence at hand preponderates in favor of the
petitioner. The petitioner’s possession of the documents pertaining to the
obligation strongly buttresses its claim that the obligation has not been
extinguished. The creditor’s possession of the evidence of debt is proof that the
debt has not been discharged by payment. A promissory note in the hands of the
creditor is a proof of indebtedness rather than proof of payment. In an action for
replevin by a mortgagee, it is prima facie evidence that the promissory note has
not been paid. Likewise, an uncanceled mortgage in the possession of the
mortgagee gives rise to the presumption that the mortgage debt is unpaid.
5. Same; A notice of dishonor is required only to preserve the right of the payee
to recover on the check.-
—It should be noted that thepetitioner, as payee, did not have a legal obligation
to inform the respondents of the dishonor of the checks. A notice of dishonor is
required only to preserve the right of the payee to recover on the check. It
preserves the liability of the drawer and the indorsers on the check. Otherwise, if
the payee fails to give notice to them, they are discharged from their liability
thereon, and the payee is precluded from enforcing payment on the check. The
respondents, therefore, cannot fault the petitioner for not notifying them of the
non-payment of the checks because whatever rights were transgressed by such
omission belonged only to the petitioner.
6. Same; Because of this failure of the respondents to present sufficient proof of
payment, it was no longer necessary for the petitioner to prove non-payment,
particularly proof that the checks were dishonored.-
—Because of this failure of the respondents to present sufficient proof of
payment, it was no longer necessary for the petitioner to prove non-payment,
particularly proof that the checks were dishonored. The burden of evidence is
shifted only if the party upon whom it is lodged was able to adduce
preponderant evidence to prove its claim.
7. Same; Settled is the rule that payment must be made in legal tender.-
—Settled is the rule that payment must be made in legal tender. A check is not
legal tender and, therefore, cannot constitute a valid tender of payment. Since a
negotiable instrument is only a substitute for money and not money, the
delivery of such an instrument does not, by itself, operate as payment. Mere
delivery of checks does not discharge the obligation under a judgment. The
obligation is not extinguished and remains suspended until the payment by
commercial document is actually realized.
8. Payment; As a general rule, one who pleads payment has the burden of
proving it.-
—In Jimenez v. National Labor Relations Commission (NLRC), 256 SCRA 84
(1996), cited by both the Regional Trial Court and the Court of Appeals, the
Court elucidated on who, between the plaintiff and defendant, has the burden to
prove the affirmative defense of payment: As a general rule, one who pleads
payment has the burden of proving it. Even where the plaintiff must allege non-
payment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The debtor has the
burden of showing with legal certainty that the obligation has been discharged
by payment. When the existence of a debt is fully established by the evidence
contained in the record, the burden of proving that it has been extinguished by
payment devolves upon the debtor who offers such a defense to the claim of the
creditor. Where the debtor introduces some evidence of payment, the burden of
going forward with the evidence—as distinct from the general burden of proof—
shifts to the creditor, who is then under a duty of producing some evidence to
show non-payment.
Division: THIRD DIVISION
Docket Number: G.R. No. 176664
Counsel: Benedictine Law Center
Ponente: NACHURA
Dispositive Portion:
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The
Court of Appeals Decision dated July 12, 2006, and Resolution dated February
13, 2007, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court,
dated August 11, 2005, is REINSTATED with the MODIFICATION that
respondents are ordered to deliver the possession of the subject vehicle, or in
the alternative, pay the petitioner P48,084.00 plus late penalty charges/interest
thereon at the rate of 12% per annum from May 18, 1997 until fully paid.
Case Title : EUMELIA R. MITRA, petitioner, vs. PEOPLE OF THE PHILIPPINES and
FELICISIMO S. TARCELO, respondents.Case Nature : PETITION for review on
certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Criminal Law|Bouncing Checks Law|Batas Pambansa Blg.
22|Checks|Elements
Syllabi:
1. Criminal Law; Bouncing Checks Law; Batas Pambansa Blg.
22; Checks; Negotiable Instruments; A check is a negotiable instrument that
serves as a substitute for money and as a convenient form of payment in
financial transactions and obligations.-
—A check is a negotiable instrument that serves as a substitute for money and
as a convenient form of payment in financial transactions and obligations. The
use of checks as payment allows commercial and banking transactions to
proceed without the actual handling of money, thus, doing away with the need
to physically count bills and coins whenever payment is made. It permits
commercial and banking transactions to be carried out quickly and efficiently.
But the convenience afforded by checks is damaged by unfunded checks that
adversely affect confidence in our commercial and banking activities, and
ultimately injure public interest.
2. Same; Same; Same; Same; Elements.-
—To reiterate the elements of a violation of BP 22 as contained in the above-
quoted provision, a violation exists where: 1. a person makes or draws and
issues a check to apply on account or for value; 2. the person who makes or
draws and issues the check knows at the time of issue that he does not have
sufficient funds in or credit with the drawee bank for the full payment of the
check upon its presentment; and 3. the check is subsequently dishonored by the
drawee bank for insufficiency of funds or credit, or would have been dishonored
for the same reason had not the drawer, without any valid reason, ordered the
bank to stop payment.
3. Same; Same; Same; Same; The purpose of Batas Pambansa Blg. 22 in
declaring the mere issuance of a bouncing check as malum prohibitum is to
punish the offender in order to deter him and others from committing the
offense, to isolate him from society, to reform and rehabilitate him, and to
maintain social order.-
—BP 22 or the Bouncing Checks Law was enacted for the specific purpose of
addressing the problem of the continued issuance and circulation of unfunded
checks by irresponsible persons. To stem the harm caused by these bouncing
checks to the community, BP 22 considers the mere act of issuing an unfunded
check as an offense not only against property but also against public order. The
purpose of BP 22 in declaring the mere issuance of a bouncing check as malum
prohibitum is to punish the offender in order to deter him and others from
committing the offense, to isolate him from society, to reform and rehabilitate
him, and to maintain social order. The penalty is stiff. BP 22 imposes the penalty
of imprisonment for at least 30 days or a fine of up to double the amount of the
check or both imprisonment and fine.
Division: SECOND DIVISION
Docket Number: G.R. No. 191404
Counsel: M.C. Santos Law Office
Ponente: MENDOZA
Dispositive Portion:
WHEREFORE, the July 31, 2009 Decision and the February 11, 2010 Resolution
of the Court of Appeals in CA-G.R. CR No. 31740 are hereby AFFIRMED.
Case Title : DONNINA C. HALLEY, petitioner, vs. PRINTWELL, INC.,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Corporation Law|Trust Fund Doctrine
Syllabi:
1. Judges; A trial or appellate judge may occasionally view a party’s
memorandum or brief as worthy of due consideration either entirely or partly.-
—It is to be observed in this connection that a trial or appellate judge may
occasionally view a party’s memorandum or brief as worthy of due
consideration either entirely or partly. When he does so, the judge may adopt
and incorporate in his adjudication the memorandum or the parts of it he deems
suitable, and yet not be guilty of the accusation of lifting or copying from the
memorandum. This is because of the avowed objective of the memorandum to
contribute in the proper illumination and correct determination of the
controversy.
2. Same; The prevailing rule is that a stockholder is personally liable for the
financial obligations of the corporation to the extent of his unpaid subscription.-
—The prevailing rule is that a stockholder is personally liable for the financial
obligations of the corporation to the extent of his unpaid subscription. In view of
the petitioner’s unpaid subscription being worth P262,500.00, she was liable up
to that amount.
3. Same; Trust Fund Doctrine; Under the trust fund doctrine, a corporation has
no legal capacity to release an original subscriber to its capital stock from the
obligation of paying for his shares, in whole or in part, without a valuable
consideration, or fraudulently, to the prejudice of creditors.-
—Under the trust fund doctrine, a corporation has no legal capacity to release
an original subscriber to its capital stock from the obligation of paying for his
shares, in whole or in part, without a valuable consideration, or fraudulently, to
the prejudice of creditors. The creditor is allowed to maintain an action upon
any unpaid subscriptions and thereby steps into the shoes of the corporation for
the satisfaction of its debt.
4. Corporation Law; Piercing the Veil of Corporate Fiction; The corporate
personality may be disregarded, and the individuals composing the
corporation will be treated as individuals, if the corporate entity is being used
as a cloak or cover for fraud or illegality; as a justification for a wrong;as an
alter ego, an adjunct, or a business conduit for the sole benefit of the
stockholders.-
—Although a corporation has a personality separate and distinct from those of
its stockholders, directors, or officers, such separate and distinct personality is
merely a fiction created by law for the sake of convenience and to promote the
ends of justice. The corporate personality may be disregarded, and the
individuals composing the corporation will be treated as individuals, if the
corporate entity is being used as a cloak or cover for fraud or illegality; as a
justification for a wrong; as an alter ego, an adjunct, or a business conduit for
the sole benefit of the stockholders. As a general rule, a corporation is looked
upon as a legal entity, unless and until sufficient reason to the contrary appears.
Thus, the courts always presume good faith, and for that reason accord prime
importance to the separate personality of the corporation, disregarding the
corporate personality only after the wrongdoing is first clearly and convincingly
established. It thus behooves the courts to be careful in assessing the milieu
where the piercing of the corporate veil shall be done.
Division: THIRD DIVISION
Docket Number: G.R. No. 157549
Counsel: Carlo Magno Verzo
PonenteJ. : BERSAMIN,
Dispositive Portion:
ACCORDINGLY, we deny the petition for review on certiorari; and affirm with
modification the decision promulgated on August 14, 2002 by ordering the
petitioner to pay to Printwell, Inc. the sum of P262,500.00, plus interest of 12%
per annum to be computed from February 8, 1990 until full payment. The
petitioner shall pay cost of suit in this appeal.
Case Title : PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROBERTO
TONGKO, accused-appellant.Case Nature : APPEAL from a decision of the
Regional Trial Court of Pasig City, Br. 156.
Syllabi Class : Criminal Law|Estafa|Checks|Penalties|Constitutional Law|Cruel
and Unusual Punishments
Syllabi:
1. Criminal Law; Estafa; Elements of Estafa under Article 315, paragraph 2(d) of
the Revised Penal Code.-
—Estafa, under Article 315, paragraph 2(d) of the Revised Penal Code, as
amended by Republic Act No. 4885, has the following elements: (1) postdating
or issuance of a check in payment of an obligation contracted at the time the
check was issued; (2) lack of sufficiency of funds to cover the check; and (3)
damage to the payee thereof.
2. Same; Same; Same; Same; The legislature was not thoughtless in imposing
severe penalties for violation of paragraph 2(d) of Article 315 of the Revised
Penal Code. The history of the law will show that the severe penalties were
intended to stop the upsurge of swindling by issuance of bouncing checks.-
—The legislature was not thoughtless in imposing severe penalties for violation
of par. 2(d) of Article 315 of the Revised Penal Code. The history of the law will
show that the severe penalties were intended to stop the upsurge of swindling
by issuance of bouncing checks. It was felt that unless aborted, this kind of
estafa “. . . would erode the people’s confidence in the use of negotiable
instruments as a medium of commercial transaction and consequently result in
the retardation of trade and commerce and the undermining of the banking
system of the country.” The Court cannot impugn the wisdom of Congress in
setting this policy.
3. Same; Same; Same; Penalties; Constitutional Law; Cruel and Unusual
Punishments; The prohibition of cruel and unusual punishments is generally
aimed at the form or character of the punishment rather than its severity in
respect of duration or amount, and apply to punishments which never existed in
America or which public sentiment has regarded as cruel or obsolete.-
—Appellant contends that the penalty of twenty seven (27) years of reclusion
perpetua is too harsh and out of proportion to the crime he committed. He
submits that his sentence violates Section 19(1), Article III of the Constitution
which prohibits the infliction of cruel, degrading or inhuman punishment. We
are not persuaded. In People v. de la Cruz, we held that “x x x the prohibition of
cruel and unusual punishments is generally aimed at the form or character of
the punishment rather than its severity in respect of duration or amount, and
apply to punishments which never existed in America or which public sentiment
has regarded as cruel or obsolete x x x for instance those inflicted at the
whipping post, or in the pillory, burning at the stake, breaking on the wheel,
disemboweling, and the like. . .”
4. Same; Same; Checks; The postdating of checks simply means that on the date
indicated the checks would be properly funded, not that the checks should be
deemed as issued only then.-
—There is likewise no merit to the submission of appellant that his postdated
checks were in payment of a pre-existing obligation. Again, we note appellant’s
change of theory in foisting this argument. In the trial court, appellant testified
that he issued the postdated checks, thru Bo-ot, a day or two after he obtained
the P100,000.00 loan from Santos. The falsity of the uncorroborated claim,
however, it too obvious and the trial court correctly rejected it. The claim cannot
succeed in light of Santos’ testimony that the issuance of said checks persuaded
her to grant the loans. A look at the two promissory notes will show that they
bear the date August 20, 1993 and they referred to the postdated checks issued
by the appellant. There could be no reference to the postdated checks if they
were issued a day or two after the loans. In this appeal, however, appellant
offers the new thesis that since the checks were postdated December 1993,
ergo, they were issued in payment of the P100,000.00 he got from Santos on
August 20, 1993. The postdating of the checks to December 1993 simply means
that on said date the checks would be properly funded. It does not mean that
the checks should be deemed as issued only on December 1993.
Division: SECOND DIVISION
Docket Number: G.R. No. 123567
Counsel: The Solicitor General, M.B. Tomacruz Law Office
Ponente: PUNO
Dispositive Portion:
IN VIEW WHEREOF, the Decision dated January 16, 1996 of the RTC of Pasig
City, Br. 156 in Criminal Case No. 106614 convicting appellant is affirmed. Costs
against appellant.
Case Title : ERNESTO T. PACHECO and VIRGINIA O. PACHECO, petitioners, vs.
HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Case
Nature : PETITION for review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Criminal Law|Estafa (Swindling)|Bouncing Checks|Negotiable
Instruments|Words and Phrases|Evidence
Syllabi:
1. Criminal Law; Estafa (Swindling); Bouncing Checks; Elements.-
The essential elements in order to sustain a conviction under the above
paragraph are: 1. that the offender postdated or issued a check in payment of
an obligation contracted at the time the check was issued; 2. that such
postdating or issuing a check was done when the offender had no funds in the
bank, or his funds deposited therein were not sufficient to cover the amount of
the check; 3. deceit or damage to the payee thereof.
2. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
Instruments; Words and Phrases; A check has the character of negotiability and
at the same time it constitutes an evidence of indebtedness; A drawer who
issues a check as security or evidence of investment is not liable for estafa.-
The first and third elements are not present in this case. A check has the
character of negotiability and at the same time it constitutes an evidence of
indebtedness. By mutual agreement of the parties, the negotiable character of a
check may be waived and the instrument may be treated simply as proof of an
obligation. There cannot be deceit on the part of the obligor, petitioners herein,
because they agreed with the obligee at the time of the issuance and postdating
of the checks that the same shall not be encashed or presented to the banks. As
per assurance of the lender, the checks are nothing but evidence of the loan or
security thereof in lieu of and for the same purpose as a promissory note. By
their own covenant, therefore, the checks became mere evidence of
indebtedness. It has been ruled that a drawer who issues a check as security or
evidence of investment is not liable for estafa.
3. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
Instruments; In the absence of the essential element of deceit, no estafa is
committed.-
Mrs. Vicencio could not have been deceived nor defrauded by petitioners in
order to obtain the loans because she was informed that they no longer have
funds in their RCBC accounts. In 1992, when the Vicencio family asked Virginia to
place a date on the check, the latter again informed Mrs. Vicencio that their
account with RCBC was already closed as early as August 1989. With the
assurance, however, that the check will only stand as a firm evidence of
indebtedness, Virginia placed a date on the check. Under these circumstances,
Mrs. Vicencio cannot claim that she was deceived or defrauded by petitioners in
obtaining the loan. In the absence of the essential element of deceit, no estafa
was committed by petitioners.
4. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
Instruments; A person in possession of a check has prima facie authority to
complete it by filling up the blanks therein.-
Both courts below relied so much on the fact that Mrs. Vicencio’s husband is a
former Judge who knows the law. He should have known, then, that he need not
even ask the petitioners to place a date on the check, because as holder of the
check, he could have inserted the date pursuant to Section 13 of the Negotiable
Instruments Law (NIL). Moreover, as stated in Section 14 thereof, complainant,
as the person in possession of the check, has prima facie authority to complete it
by filling up the blanks therein. Besides, pursuant to Section 12 of the same law,
a negotiable instrument is not rendered invalid by reason only that it is
antedated or postdated.
5. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
Instruments; Where the complainant knows that the drawer does not have
sufficient funds in the bank at the time the check was issued to him, there is no
estafa through bouncing checks.-
The allegation of Mrs. Vicencio that the date to be placed by Virginia was
necessary so as to make the check evidence of indebtedness is nothing but a
ploy. Petitioners openly disclosed and never hid the fact that they no longer have
funds in the bank as their bank account was already closed. Knowledge by the
complainant that the drawer does not have sufficient funds in the bank at the
time it was issued to him does not give rise to a case for estafa through
bouncing checks.
6. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
Instruments; A check must be presented within a reasonable time from issue.-
A check must be presented within a reasonable time from issue. By current
banking practice, a check becomes stale after more than six (6) months. In fact a
check long overdue for more than two and one-half years is considered stale. In
this case, the checks were issued more than three years prior to their
presentment. In his complaint, complainant alleged that petitioners bought
jewelry from him and that he would not have parted with his jewelry had not
petitioners issued the checks. The evidence on record, however, does not
support the theory of the crime.
7. Criminal Law; Estafa (Swindling); Bouncing Checks; Awareness by the
complainant of the fictitious nature of the pretense cannot give rise to estafa by
means of deceit.-
Following complainant’s theory that he would not have sold the jewelries had
not petitioners issued “postdated” checks, still no estafa can be imputed to
petitioners. It is clear that the checks were not intended for encashment with the
bank, but were delivered as mere security for the payment of the loan and under
an agreement that the checks would be redeemed with cash as they fell due.
Hence, the checks were not intended by the parties to be modes of payment but
only as promissory notes. Since complainant and his wife were well aware of
that fact, they cannot now complain there was deception on the part of
petitioners. Awareness by the complainant of the fictitious nature of the
pretense cannot give rise to estafa by means of deceit. When the payee was
informed by the drawer that the checks are not covered by adequate funds it
does not give rise to bad faith or estafa.
8. Criminal Law; Estafa (Swindling); Bouncing Checks; Persons are presumed to
have taken care of their business.-
Complainant’s allegations that the two subject checks were issued in 1992 as
payment for the jewelry he allegedly sold to petitioners is belied by the evidence
on record. First, com-plainant is not engaged in the sale of jewelry. Neither are
petitioners. If the pieces of jewelry were important to complainant considering
that they were with him for more than twenty-five years already, he would not
have easily parted with them in consideration for unfunded personal checks in
favor of persons whose means of living or source of income were unknown to
him. Applicable here is the legal precept that persons are presumed to have
taken care of their business.
9. Criminal Law; Estafa (Swindling); Bouncing Checks; Evidence; Factual
findings of the trial court bind the Supreme Court; Exceptions.-
The rule that factual findings of the trial court bind this court is not absolute but
admits of exceptions such as when the conclusion is a finding grounded on
speculation, surmise, and conjecture and when the findings of the lower court is
premised on the absence of evidence and is contradicted by the evidence on
record. Based on the foregoing discussions, this Court is constrained to depart
from the general rule. Equally applicable is what Vice-Chancellor Van Fleet once
said: “Evidence to be believed must not only proceed from the mouth of a
credible witness but must be credible in itself—such as the common experience
and observation of mankind can approve as probable under the circumstances.
We have no test of the truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant to these
belongs to the miraculous, and is outside of judicial cognizance.”
10. Criminal Law; Estafa (Swindling); Bouncing Checks; An accused acquitted of
a criminal charge may nevertheless be held civilly liable in the same case where
the facts established by the evidence so warrant.-
Petitioners, however, are not without liability. An accused acquitted of a
criminal charge may nevertheless be held civilly liable in the same case where
the facts established by the evidence so warrant. Based on the records, they still
have an outstanding obligation of P15,000.00 in favor of Mrs. Vicencio. There
was mention that the loan shall earn interests. However, an agreement as to
payment of interest must be in writing, otherwise it cannot be valid, although
there was actual payment of interests by virtue of the advance deductions from
the loan. Once the judgment becomes final and executory, the amount due is
deemed equivalent to a forbearance of credit during the interim period from the
finality of judgment until full payment, in which case it shall earn legal interest
at the rate of twelve percent (12%) per annum pursuant to Central Bank (CB)
Circular No. 416.
Division: FIRST DIVISION
Docket Number: G.R. No. 126670
Counsel: Acerey C. Pacheco
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. Petitioners are
ACQUITTED of the charge of estafa but they are ORDERED to pay Mrs. Vicencio
the amount of P15,000.00 without interest. However, from the time this
judgment becomes final and executory, the amount due shall earn legal interest
of twelve percent (12%) per annum until full payment.
Case Title : BENNY GO, petitioner, vs. ELIODORO BACARON, respondent.Case
Nature : PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
Syllabi Class : Civil Law|Evidence|Mortgages|Loans|Sales|Words and
Phrases|Checks
Syllabi:
1. Civil Law; Mortgages; Loans; Sales; Article 1602 of the Civil Code cites
instances in which a contract of sale is presumed to be an equitable mortgage.-
The instances in which a contract of sale is presumed to be an equitable
mortgage are enumerated in Article 1602 of the Civil Code as follows: “Art.
1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases: (1) When the price of a sale with right to repurchase is
unusually inadequate; (2) When the vendor remains in possession as lessee or
otherwise; (3) When upon or after the expiration of the right to repurchase
another instrument extending the period of redemption or granting a new
period is executed; (4) When the purchaser retains for himself a part of the
purchase price; (5) When the vendor binds himself to pay the taxes on the thing
sold; (6) In any other case where it may be fairly inferred that the real intention
of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation. In any of the foregoing cases, any money,
fruits, or other benefit to be received by the vendee as rent or otherwise shall be
considered as interest which shall be subject to the usury laws.”
2. Civil Law; Mortgages; Loans; Sales; That the parties intended to enter into an
equitable mortgage is bolstered by respondent’s continued payment of the real
property taxes subsequent to the alleged sale.-
That the parties intended to enter into an equitable mortgage is bolstered by
respondent’s continued payment of the real property taxes subsequent to the
alleged sale. Payment of those taxes is a usual burden attached to ownership.
Coupled with continuous possession of the property, it constitutes evidence of
great weight that a person under whose name the realty taxes were declared
has a valid and rightful claim over the land.
3. Civil Law; Mortgages; Loans; Sales; Words and Phrases; An equitable
mortgage has been defined “as one which although lacking in some formality, or
form or words, or other requisites demanded by a statute, nevertheless reveals
the intention of the parties to charge real property as security for a debt, and
contains nothing impossible or contrary to law.”-
An equitable mortgage has been defined “as one which although lacking in
some formality, or form or words, or other requisites demanded by a statute,
nevertheless reveals the intention of the parties to charge real property as
security for a debt, and contains nothing impossible or contrary to law.”
4. Evidence; Checks; Checks presented by petitioner may indeed evince
respondent’s indebtedness to him in the amounts stated on the faces of those
instruments.-
Checks have the character of negotiability. At the same time, they may
constitute evidence of indebtedness. Those presented by petitioner may indeed
evince respondent’s indebtedness to him in the amounts stated on the faces of
those instruments. He, however, acknowledges (1) that respondent paid some of
the obligations through the coprax delivered to petitioner’s father; and (2) that
petitioner owed and subsequently paid respondent P214,000.
Division: THIRD DIVISION
Docket Number: G.R. No. 159048
Counsel: Leonardo D. Suario, Cariaga Law Offices
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the Petition is hereby DENIED,and the assailed Decision and
Resolution AFFIRMED.
Case Title : SPOUSES ANTONIO and LOLITA TAN, petitioners, vs. CARMELITO
VILLAPAZ, respondent.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Obligations and Contracts|Statute of Frauds|Negotiable
Instruments|Checks
Syllabi:
1. Obligations and Contracts; Statute of Frauds; Negotiable
Instruments; Checks; A check, the entries of which are no doubt in writing, could
prove a loan transaction.-
As for petitioners’ reliance on Art. 1358 of the Civil Code, the same is misplaced
for the requirement that contracts where the amount involved exceeds P500.00
must appear in writing is only for convenience. At all events, a check, the entries
of which are no doubt in writing, could prove a loan transaction.
Division: THIRD DIVISION
Docket Number: G.R. No. 160892
Counsel: Dominguez, Paderna & Tan Law Offices, Rodolfo Ta-asan
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the present petition is DENIED.
CONCEPCION CHUA GAW, petitioner, vs. SUY BEN CHUA and FELISA CHUA,
respondents.
Remedial Law; Evidence; Adverse Witnesses; The rule is that the plaintiff must
rely on the strength of his own evidence and not upon the weakness of the
defendant’s evidence; Preponderance of evidence is determined by considering
all the facts and circumstances of the case, culled from the evidence regardless
of who actually presented it.—The delineation of a piece of evidence as part of
the evidence of one party or the other is only significant in determining whether
the party on whose shoulders lies the burden of proof was able to meet the
quantum of evidence needed to discharge the burden. In civil cases, that
burden devolves upon the plaintiff who must establish her case by
preponderance of evidence. The rule is that the plaintiff must rely on the
strength of his own evidence and not upon the weakness of the defendant’s
evidence. Thus, it barely matters who with a piece of evidence is credited. In the
end, the court will have to consider the entirety of the evidence presented by
both parties. Preponderance of evidence is then determined by considering all
the facts and circumstances of the case, culled from the evidence, regardless of
who actually presented it.
Same; Same; Same; Under a rule permitting the impeachment of an adverse
witness, although the calling party does not vouch for the witness’ veracity, he
is nonetheless bound by his testimony if it is not contradicted or remains
unrebutted.—That the witness is the adverse party does not necessarily mean
that the calling party will not be bound by the former’s testimony. The fact
remains that it was at his instance that his adversary was put on the witness
stand. Unlike an ordinary witness, the calling party may impeach an adverse
witness in all respects as if he had been called by the adverse party, except by
evidence of his bad character. Under a rule permitting the impeachment of an
adverse witness, although the calling party does not vouch for the witness’
veracity, he is nonetheless bound by his testimony if it is not contradicted or
remains unrebutted.
Same; Same; Same; A party who calls his adversary as a witness is not bound by
the latter’s testimony only in the sense that he may contradict him by
introducing other evidence to prove a state of facts contrary to what the
witness testifies on.—A party who calls his adversary as a witness is, therefore,
not bound by the latter’s testimony only in the sense that he may contradict
him by introducing other evidence to prove a state of facts contrary to what the
witness testifies on. A rule that provides that the party calling an adverse
witness shall not be bound by his testimony does not mean that such testimony
may not be given its proper weight, but merely that the calling party shall not
be precluded from rebutting his testimony or from impeaching him. This, the
petitioner failed to do.
Same; Same; Best Evidence Rule; A notarized document carries evidentiary
weight as to its due execution and documents acknowledged before a notary
public have in their favor the presumption of regularity.—It is also worthy to
note that both the Deed of Partition and the Deed of Sale were acknowledged
before a Notary Public. The notarization of a private document converts it into a
public document, and makes it admissible in court without further proof of its
authenticity. It is entitled to full faith and credit upon its face. A notarized
document carries evidentiary weight as to its due execution, and documents
acknowledged before a notary public have in their favor the presumption of
regularity. Such a document must be given full force and effect absent a strong,
complete and conclusive proof of its falsity or nullity on account of some flaws
or defects recognized by law. A public document executed and attested through
the intervention of a notary public is, generally, evidence of the facts therein
express in clear unequivocal manner.
Same; Same; Same; The “best evidence rule” as encapsulated in Rule 130,
Section 3 of the Revised Rules of Civil Procedure applies only when the content
of such document is the subject of the inquiry.—The “best evidence rule” as
encapsulated in Rule 130, Section 3, of the Revised Rules of Civil Procedure
applies only when the content of such document is the subject of the inquiry.
Where the issue is only as to whether such document was actually executed, or
exists, or on the circumstances relevant to or surrounding its execution, the
best evidence rule does not apply and testimonial evidence is admissible. Any
other substitutionary evidence is likewise admissible without need to account
for the original. Moreover, production of the original may be dispensed with, in
the trial court’s discretion, whenever the opponent does not bona fide dispute
the contents of the document and no other useful purpose will be served by
requiring production. [Gaw vs. Chua, 551 SCRA 505(2008)]
Case Title : LAND BANK OF THE PHILIPPINES, petitioner, vs. MONET’S EXPORT
AND MANUFACTURING CORP., VICENTE V. TAGLE, SR. and MA. CONSUELO G.
TAGLE, respondents.Case Nature : PETITION for review on certiorari of the
decision and resolution of the Court of Appeals.
Syllabi Class : Evidence|Banks and Banking
Syllabi:
1. Evidence; Documentary Evidence; Entries in the course of business are
accorded unusual reliability because their regularity and continuity are
calculated to discipline record keepers in the habit of precision.-
—Under Section 43, Rule 130 of the Rules of Court, entries prepared in the
regular course of business are prima facie evidence of the truth of what they
state. The billing statement reconciles the transaction entries entered in the
bank records in the regular course of business and shows the net result of such
transactions. Entries in the course of business are accorded unusual reliability
because their regularity and continuity are calculated to discipline record
keepers in the habit of precision. If the entries are financial, the records are
routinely balanced and audited. In actual experience, the whole of the business
world function in reliance of such kind of records.
2. Same; Banks and Banking; The bank does not have to present all the receipts
of payment it issued to all its clients during the entire year.-
—The bank does not have to present all the receipts of payment it issued to all
its clients during the entire year, thousands of them, merely to establish the fact
that only five of them, rather than ten, pertains to the borrower. The original
documents need not be presented in evidence when it is numerous, cannot be
examined in court without great loss of time, and the fact sought to be
established from them is only the general result.
Division: SECOND DIVISION
Docket Number: G.R. No. 184971
Counsel: Dario, Reyes, Hocson & Viado
Ponente: ABAD
Dispositive Portion:
WHEREFORE, the Court GRANTS the petition, SETS ASIDE the Court of Appeals
decision in CA-G.R. CV 88782 dated May 30, 2008 and resolution dated October
10, 2008 and the Regional Trial Court order in Civil Case 93-64350 dated
October 30, 2006, REMANDS the case to the same Regional Trial Court of
Manila for the reception of such evidence as may be needed to determine the
actual amount of indebtedness of respondents Monet’s Export and
Manufacturing Corp. and the spouses Vicente V. Tagle, Sr. and Ma. Consuelo G.
Tagle and adjudicate petitioner Land Bank of the Philippines’ claims as such
evidence may warrant.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 193479 October 19, 2011
PEOPLE OF THE PHILIPPINES, plaintiff-appellee vs. BERNARD G. MIRTO, accused-
appellant.
DECISION
VELASCO, JR., J.:
The Case
This is an appeal from the Decision1 dated August 24, 2009 of the Court of
Appeals (CA) in CA-G.R. CR-H.C. No. 03444, which affirmed the March 24, 2008
Decision2 in Criminal Case Nos. 9034, 9115, 9117 and 9130 of the Regional Trial
Court (RTC), Branch 5 in Tuguegarao City, Cagayan. The RTC found accused
Bernard G. Mirto guilty beyond reasonable doubt of the crime of Qualified
Theft.
The Facts
Seven Informations for Qualified Theft were filed against the accused, docketed
as Criminal Case Nos. 9034, 9115, 9117, 9120, 9123, 9126, and 9130. The
Informations similarly show how the offenses were allegedly committed,
differing only as to the dates of the commission, the number of bags of cement
involved, the particulars of the checks paid by the cement purchasers, the
amounts involved, and the depositary accounts used by accused. The
Information for Criminal Case No. 9034 indicted accused, thus:
The undersigned City Prosecutor of Tuguegarao City accuses BERNARD G.
MIRTO of the crime of QUALIFIED THEFT, defined and penalized under Article
310, in relation to Articles 308 and 309 of the Revised Penal Code, committed as
follows:
That on June 21, 2001, in the City of Tuguegarao, Province of Cagayan and
within the jurisdiction of this Honorable Court, said accused BERNARD G.
MIRTO, being the Branch Manager of UCC-Isabela (Tuguegarao Area), with
intent to gain but without violence against or intimidation of persons nor force
upon things, did then and there willfully, unlawfully and feloniously, with grave
abuse of confidence and without the consent and knowledge of complainant,
UNION CEMENT CORPORATION, a duly organized Corporation operating under
existing laws, represented by REYNALDO S. SANTOS, Assistant Vice President –
Marketing/North Luzon, whose business address is located at 5th Floor
Kalayaan Building, 164 Salcedo Street, Makati, Metro Manila, take, steal and
deposit into his personal Security Bank & Trust Co. (Tuguegarao Branch)
Account No. 0301261982001, the proceeds of 4,600 bags of Portland cement,
owned by herein complainant-Corporation, paid to him by the Philippine
Lumber located at Bonifacio Street, this City, in the form of Checks, namely:
METROBANK CHECK NOS. 103214898 and 1032214896, for P67,000.00 &
P241,200.00, respectively, in the total amount of P308,200.00, which accused is
obligated to convey to the complainant-Union Cement Corporation represented
by its Vice-President-Marketing, REYNALDO S. SANTOS, to its loss, damage and
prejudice, in the aforesaid amount of THREE HUNDRED EIGHT THOUSAND TWO
HUNDRED PESOS, (P308,200.00) Philippine Currency.
Contrary to law.3
To summarize, the seven Informations showed the following details:
Criminal Case
Date of offense
Cement bags
Purchaser/Buyers
Check payments
Amount (PhP)
Checks deposited In
Total Amount were sold directly to them instead of to dealers with credit lines and that, as
(PhP) payment, they issued “Pay to Cash” checks pursuant to the instruction of the
9034 accused.
June 21, 2001 4,600 Philippine Lumber MBTC 103214898 AVP Santos and Dr. Francis Felizardo, Senior Vice-President (SVP) and Head of
67,000.00 SBTC 0301-261982-001 the Marketing Group of UCC, met with the accused at the UCC Sales Office in
MBTC 1032214896 Poro Point, San Fernando City, La Union. In that meeting, the accused admitted
241,200.00 SBTC 0301-261982-001 misusing company money, but pleaded to them not to terminate him as he was
308,200.00 willing to pay back the amount from his salary on installment. He also asked
9115 them not to file charges against him.
May 25, 2001 4,750 out Philippine Lumber MBTC 1030214835 In a Report dated August 8, 2001, the Group Internal Audit confirmed the
116,000.00 SBTC 0301-261982-001 veracity of the June 29, 2001 handwritten admission letter of the accused and
of 5,850 MBTC 1030214833 his July 20, 2001 Certification enumerating the names of the specific bank
116,000.00 SBTC 0301-261982-001 accounts, specific bank holders, and the banks wherein he had deposited the
MBTC 1030214836 funds of UCC-Tuguegarao City Branch. It appeared that the total unremitted
116,000.00 SBTC 0301-261982-001 collections of the accused from May 25, 2001 to June 23, 2001 amounted to
MBTC 1030214834 PhP 6,572,750.
79,750.00 SBTC 0301-261982-001 UCC found that the accused gravely abused the trust and confidence reposed
MBTC 1030214849 on him as Branch Manager and violated company policies, rules, and
58,000.00 MBTC 124-5 [Magno Lim] regulations. Specifically, he used the credit line of accredited dealers in favor of
MBTC 1030214848 persons who either had no credit lines or had exhausted their credit lines. He
87,000.00 MBTC 124-5 [Magno Lim] diverted cement bags from the company’s Norzagaray Plant or La Union Plant
MBTC 1030214847 to truckers who would buy cement for profit. In these transactions, he
116,000.00 MBTC 124-5 [Magno Lim] instructed the customers that payments be made in the form of “Pay to Cash”
688,750.00 checks, for which he did not issue any receipts. He did not remit the checks but
9117 these were either encashed or deposited to his personal bank account at
May 22, 2001 9,950 Mapalo Trucking PNB 0015659 Security Bank & Trust Co. (SBTC)-Tuguegarao City Branch with Account No.
616,100.00 SBTC 0301-261982-001 0301-261982-001 or to the accounts of a certain Magno Lim at MetroBank and
PNB 0015661 Equitable PCIBank, both in Tuguegarao City. Conchito Dayrit, Customer Service
597,800.00 SBTC 0301-261982-001 Officer and Representative of SBTC-Tuguegarao City, confirmed the findings of
1,213,900.00 the UCC internal auditors through the accused’s Statement of Account showing
9120 the various checks deposited to his account, and which subsequently cleared.
June 6, 2001 900 out of 5,100 Alonzo Trucking MBTC Upon arraignment on August 6, 2002, the accused entered a plea of “not guilty”
1140171726 113,400.00 MBTC 124-5 [Magno Lim] to the seven separate charges of qualified theft.5 Trial on the merits ensued.
113,400.00 The Ruling of the RTC
9123 On March 24, 2008, the RTC rendered its Decision, acquitting the accused in
June 22, 2001 2,700 out of 7,100 Mapalo Trucking [no details] Criminal Case Nos. 9120, 9123, and 9126, but finding him guilty beyond
123,300.00 [no details] reasonable doubt of committing Qualified Theft in Criminal Case Nos. 9034,
[no details] 9115, 9117, and 9130. The dispositive portion reads:
246,600.00 [no details] WHEREFORE, premises considered, the Court renders judgment thus:
369,900.00 1.In Criminal Case No. 9034: finding the accused GUILTY BEYOND REASONABLE
9126 DOUBT of the crime of qualified theft;
June 19, 2001 1,800 out of 7,100 Alonzo Trucking MBTC 2.In Criminal Case No. 9115: finding the accused GUILTY BEYOND REASONABLE
114071731 244,800.00 EPCIB 71820-8 [Magno Lim] DOUBT of the crime of qualified theft;
244,800.00 3.In Criminal Case No. 9117: finding the accused GUILTY BEYOND REASONABLE
9130 DOUBT of the crime of qualified theft;
June 27, 2001 500 Rommeleens Enterprises DBP 4.In Criminal Case No. 9120: finding the accused NOT GUILTY, as there is no
0000155348 68,500.00 SBTC 0301-261982-001 showing how he profited from deposits he made to the account of Mr. Magno
68,500.00 Lim;
Per records,4 the accused was branch manager of Union Cement Corporation 5.In Criminal Case No. 9123: finding the accused NOT GUILTY by reason of
(UCC) for the Tuguegarao City area. At the UCC office in Isabela, he shared an insufficiency of evidence;
office room with Restituto P. Renolo, Branch Manager for the province. On 6.In Criminal Case No. 9126: finding the accused NOT GUILTY BEYOND
June 29, 2001, at about noon, the accused confided to Renolo that he had REASONABLE DOUBT of the crime of qualified theft;
misappropriated company funds. Renolo advised him to explain his misdeeds in 7.In Criminal Case No. 9130: finding the accused GUILTY BEYOND REASONABLE
writing to Assistant Vice-President and Head of UCC-North Luzon Reynaldo S. DOUBT of the crime of qualified theft.
Santos (AVP Santos). In view of the foregoing, in the imposition of the penalties upon the accused,
Later that day, at about 5:00 p.m., the accused told Renolo that he would be this Court is guided by the following doctrinal pronouncement of the Supreme
going to Tuguegarao City. Just before Renolo left the office, he saw on the Court in People v. [Mercado], G.R. No. 143676, February 12, 2003:
accused’s table a piece of partly-folded paper, which turned out to be a “Appellant asserts that the trial court erred in applying the proper penalty. As
handwritten letter of the accused to AVP Santos, in which he admitted taking reasoned by appellant, the penalty for Qualified Theft under Article 310 of the
company funds and enumerated the particular accounts and amounts involved. Revised Penal Code is prision mayor in its minimum and medium periods, raised
Renolo took the letter home, read it over the phone to AVP Santos at about by two degrees. Hence, the penalty high by two degrees should be reclusion
7:00 p.m., and faxed it to AVP Santos the following day. temporal in its medium and maximum periods and not reclusion perpetua as
AVP Santos, in turn, sent a copy of the letter to the top management of UCC, imposed by the trial court. Being a divisible penalty, the Indeterminate
which then instructed the Group Internal Audit of the Phinma Group of Sentence Law could then be applied.
Companies to conduct a special audit of the UCC-Tuguegarao City Branch. On the other hand, [appellee] cites the cases of People v. Reynaldo Bago and
Antonio M. Dumalian, AVP and Head of the Group Internal Audit, organized the People v. Cresencia C. Reyes to show that the trial court properly imposed the
audit team composed of Onisimo Prado, as head, with Emmanuel R. Reamico, penalty of reclusion perpetua.
Adeodato M. Logronio, and Glenn Agustin, as members. We agree with the appellee that the trial court imposed the proper penalty.”
The audit team conducted the special audit of the UCC-Tuguegarao City Branch In accordance with the doctrine laid down in People v. Mercado, the accused is
from July 3 to July 25, 2001. They interviewed several cement buyers/dealers, hereby sentenced to suffer the penalty of RECLUSION PERPETUA. Accused is
among them Wilma Invierno of Rommeleen’s Enterprises, Arthur Alonzo of ordered to restitute the private complainant the total amount of TWO MILLION
Alonzo Trucking, Robert Cokee of Philippine Lumber, and Russel Morales of TWO HUNDRED SEVENTY NINE THOUSAND THREE HUNDRED FIFTY PESOS (Php
Mapalo Trucking. All four executed affidavits attesting that UCC cement bags
2,279,350.00) covering the amount represented by the checks involved in these
cases.
Set the promulgation of this Decision on 15 April 2008, at 8:30 o’clock in the
morning.
SO ORDERED.6In convicting the accused, the RTC relied on his admission when
he testified on February 15, 2007 and his Memorandum of the fact of his having
deposited the checks payments from UCC cement sales in his personal account
with SBTC, Tuguegarao City Branch. Contrary to the accused’s argument, the
RTC found that he did not hold his collections in trust for UCC, since he was
never authorized by UCC to retain and deposit checks, as testified to by AVP
Santos. Moreover, the RTC found fatal to accused’s defense his handwritten
letter, dated June 29, 2001, addressed to AVP Santos, which reads in part, “Sir, I
regret to say that a total amount of PhP 6,380,650.00 was misused by me for
various reasons,”7 which the accused admitted to in open court during his
testimony on February 15, 2007.
Aggrieved, accused appealed his conviction before the CA.
The Ruling of the CA
On August 24, 2009, the appellate court rendered the appealed decision,
affirming the findings of the RTC and the conviction of accused-appellant. The
fallo reads:
WHEREFORE, premises considered, the Decision of the Regional Trial Court of
Tuguegarao City, Cagayan, Branch 5, in Criminal Case Nos. 9034, 9115, 9117 and
9130, dated March 24, 2008 and promulgated on April 15, 2008, finding
accused-appellant guilty beyond reasonable doubt of the crime of Qualified
Theft is hereby AFFIRMED and UPHELD.
With costs against the accused-appellant.
SO ORDERED.8
Accused-appellant argued that, first, the Informations indicting him for
Qualified Theft did not adequately inform him of the nature of the offense
charged against him; and second, he had juridical possession of the subject
checks, not merely material possession; hence, the qualifying circumstance of
“grave abuse of confidence” cannot be appreciated against him.
The CA, however, found that accused-appellant only had material possession of
the checks and not juridical possession9 as these checks payments were made
to UCC by its customers and accused-appellant had no right or title to possess
or retain them as against UCC. The fact that accused-appellant was obliged, as
per company policy, to immediately turn over to UCC the payments he received
from UCC customers was attested to by the prosecution witness, UCC Branch
Manager Renolo. Thus, the CA concluded that there was neither a principal-
agent relationship between UCC and accused-appellant nor was accused-
appellant allowed to open a personal account where UCC funds would be
deposited and held in trust for UCC.
Hence, We have this appeal.
The Office of the Solicitor General, representing the People of the Philippines,
submitted a Manifestation and Motion,10 opting not to file any supplemental
brief, there being no new issues raised nor supervening events transpired.
Accused-appellant manifested also not to file a supplemental brief.11 Thus, in
resolving the instant appeal, We consider the sole issue and arguments
accused-appellant earlier raised in his Brief for the Accused-Appellant before
the CA.Accused-appellant raises the same sole assignment of error already
passed upon and resolved by the CA, in that “THE TRIAL COURT ERRED IN
CONCLUDING THAT, BASED ON THE EVIDENCE, THE ACCUSED IS GUILTY OF
QUALIFIED THEFT.”12
The Court’s Ruling
The appeal is bereft of merit.
Accused-appellant argues that the prosecution failed:
(a)To establish that he had material possession of the funds in question;
(b)To refute the authority given to him by UCC;
(c)To establish the element of “taking” under Art. 308 of the Revised Penal Code
(RPC);
(d)To establish that the funds were taken without the consent and knowledge
of UCC;
(e)To establish the element of “personal property” under Art. 308 of the RPC;
and
(f)To establish, in sum, the ultimate facts constitutive of the crime of Qualified
Theft under Art. 310, in relation to Art. 308, of the RPC.
For being closely related, We will discuss together the arguments thus raised.
Article 308 of the Revised Penal Code (RPC), which defines Theft, provides:
ART. 308. Who are liable for theft.—Theft is committed by any person who,
with intent to gain but without violence, against, or intimidation of persons nor
force upon things, shall take personal property of another without the latter’s
consent.
Theft is likewise committed by:
1.Any person who, having found lost property, shall fail to deliver the same to
the local authorities or to its owner;
2.Any person who, after having maliciously damaged the property of another,
shall remove or make use of the fruits or objects of the damage caused by him;
and
3.Any person who shall enter an enclosed estate or a field where trespass is
forbidden or which belongs to another and without the consent of its owner,
shall hunt or fish upon the same or shall gather fruits, cereals, or other forest or
farm products.
Thus, the elements of the crime of Theft are: (1) there was a taking of personal
property; (2) the property belongs to another; (3) the taking was without the
consent of the owner; (4) the taking was done with intent to gain; and (5) the
taking was accomplished without violence or intimidation against the person or
force upon things.13
Theft is qualified under Art. 310 of the RPC, when it is, among others,
committed with grave abuse of confidence, thus:
ART. 310. Qualified Theft.—The crime of theft shall be punished by the
penalties next higher by two degrees than those respectively specified in the
next preceding article, if committed by a domestic servant, or with grave abuse
of confidence, or if the property stolen is motor vehicle, mail matter or large
cattle or consists of coconuts taken from the premises of a plantation, fish
taken from a fishpond or fishery or if property is taken on the occasion of fire,
earthquake, typhoon, volcanic eruption, or any other calamity, vehicular
accident or civil disturbance. (Emphasis supplied.)
The elements of Qualified Theft committed with grave abuse of confidence are
as follows:
1.Taking of personal property;
2. That the said property belongs to another;
3.That the said taking be done with intent to gain;
4.That it be done without the owner’s consent;
5.That it be accomplished without the use of violence or intimidation against
persons, nor of force upon things;
6. That it be done with grave abuse of confidence.14 (Emphasis supplied.)
All of the foregoing elements for Qualified Theft are present in this case.
First. The presence of the first and second elements is abundantly clear. There
can be no quibble that the fund collections through checks payments—all
issued payable to cash—are personal properties belonging to UCC. These funds
through checks were paid by UCC clients for the deliveries of cement from UCC.
One with the courts a quo, We will not belabor this point in the fifth argument
raised by accused-appellant.
Second. The third element is likewise abundantly clear. The collected amounts
subject of the instant case belonged to UCC and not to accused-appellant.
When accused-appellant received them in the form of “Pay to Cash” checks
from UCC customers, he was obliged to turn them over to UCC for he had no
right to retain them. That he kept the checks and deposited them in his account
and in the accounts of Magno Lim knowing all the while that these checks and
their proceeds were not his only proves the presence of unlawful taking.
As the trial court aptly pointed out, accused-appellant’s theory that he only kept
the funds in trust for UCC with the elaborate explanation that once the checks
cleared in his account then he remits them to UCC is completely incredulous.
For one, accused-appellant has not adduced evidence that he indeed remitted
the funds once the corresponding checks were cleared. For another, accused-
appellant could not explain why he deposited some of the checks he collected
in the accounts of Magno Lim in MetroBank (MBTC Account No. 124-5) and
Equitable PCIBank (EPCIB Account No. 71820-8). Moreover, accused-appellant’s
contention of such alleged management practice15 is unsupported by any
evidence showing that prior to the events in mid-2001 there was indeed such a
practice of depositing check collections and remitting the proceeds once the
checks cleared.
Third. The element of intent to gain is amply established through the
affidavit16of Wilma Invierno of Rommeleen’s Enterprises, one of UCC’s
customers, who confirmed that she had been sold cement bags instead of to
dealers with credit lines and she was required by accused-appellant to issue
“pay to cash” checks as payment. The affidavits of Arthur Alonzo17 of Alonzo
Trucking, Robert Cokee18 of Philippine Lumber, and Russel Morales19 of
Mapalo Trucking similarly attested to the same type of sale and payment
arrangement. In so doing, accused-appellant facilitated the collection of “pay to
cash” checks which he deposited in his bank account and in the bank accounts
of Magno Lim. Thus, the fourth element of intent to gain is duly proved.
Fourth. Equally clear and undisputed is the presence of the fifth element.
Accused-appellant admitted having received these checks and depositing them
in his personal account and in the accounts of Magno Lim. Thus, the element of
taking was accomplished without the use of violence or intimidation against
persons, nor of force upon things.
Fifth. That UCC never consented to accused-appellant’s depositing the checks
he collected in his or other accounts is demonstrated by the immediate action
UCC took upon being apprised of the misappropriation and accused-appellant’s
confession letter. UCC lost no time in forming a special audit group from the
Group Internal Audit of Phinma Group of Companies. The special audit group
conducted an internal audit from July 3 to 25, 2001 and submitted a Special
Audit Report20 dated August 8, 2001, showing that the total unremitted
collections of accused-appellant from the period covering May 25, 2001
through June 23, 2001 amounted to PhP 6,572,750.AVP Santos and UCC SVP
and Head of Marketing Group Dr. Felizardo met with accused-appellant who
admitted misappropriating company funds. AVP Santos testified21in open
court on what transpired in that meeting and accused-appellant’s verbal
admission/confession. And with the findings of the auditors that not only did
accused-appellant unlawfully take UCC funds but he also committed the offense
of violating company policies, rules, and regulations, UCC was compelled to file
seven criminal complaints against accused-appellant. This swift and prompt
action undertaken by UCC argues against the notion that it consented to
accused-appellant’s act of depositing of check proceeds from company sales of
cement products in his account or in the accounts of Magno Lim. Sixth. That
accused-appellant committed the crime with grave abuse of confidence is clear.
As gathered from the nature of his position, accused-appellant was a credit and
collection officer of UCC in the Cagayan-Isabela area. His position entailed a
high degree of confidence, having access to funds collected from UCC clients. In
People v. Sison,22 involving a Branch Operation Officer of Philippine
Commercial International Bank (PCIB), the Court upheld the appellant’s
conviction of Qualified Theft, holding that “the management of the PCIB
reposed its trust and confidence in the appellant as its Luneta Branch Operation
Officer, and it was this trust and confidence which he exploited to enrich
himself to the damage and prejudice of PCIB x x x.”23 In People v. Mercado,24
involving a manager of a jewelry store, the Court likewise affirmed the
appellant’s conviction of Qualified Theft through grave abuse of confidence.
In the instant case, it is clear how accused-appellant, as Branch Manager of UCC
who was authorized to receive payments from UCC customers, gravely abused
the trust and confidence reposed upon him by the management of UCC.
Precisely, by using that trust and confidence, accused-appellant was able to
perpetrate the theft of UCC funds to the grave prejudice of the latter. To
repeat, the resulting report of UCC’s internal audit showed that accused-
appellant unlawfully took PhP 6,572,750 of UCC’s funds.
The courts a quo’s finding that accused-appellant admitted misappropriating
UCC’s funds through the appropriation of the subject checks is buttressed by
the testimonies of Renolo and Santos,25 who heard and understood accused-
appellant’s extrajudicial confession. True enough, they were competent to
testify as to the substance of what they heard from accused-appellant—his
declaration expressly acknowledging his guilt to the offense—that may be given
in evidence against him.26That he deposited most of the subject checks in his
account was proved by accused-appellant’s statement of account with SBTC
(Account No. 0301-261982-001) through the testimony of Conchito Dayrit, the
Customer Service Officer and representative of SBTC-Tuguegarao City
Branch.27Moreover, accused-appellant issued a written certification28 dated
July 20, 2001, attesting to the fact of the ownership of the bank accounts where
he deposited the checks he collected from UCC clients, which reads:
07/20/01
To whom it may concern:
This is to certify that to my knowledge, the owner of the following bank
accounts are as follows:
Bank accountOwner
SBC – TUG 0301261982001B. G. Mirto
MBTC – TUG 124-5Magno Lim
EPCI – TUG 71320-8Magno Lim
This certification is issued for whatever purpose it may serve.
(Sgd.) Bernard G. Mirto7/20/01
Signature over printed name date
Further, as can be amply gleaned from accused-appellant’s handwritten
admission and duly borne out by the internal audit team’s findings, he
deliberately used a scheme to perpetrate the theft. This was aptly pointed out
by the CA, which We reproduce for clarity:
UCC found that accused-appellant gravely abused the trust and confidence
reposed on him as Branch Manager and violated company policies, rules and
regulations. He did not remit collections from customers who paid “Pay to
Cash” checks. He used the credit line of accredited dealers in favor of persons
who did not have credit lines or other dealers who had exhausted their credit
line. He diverted cement bags from Norzagaray Plant or La Union Plant to
truckers who would buy cement for profit. In these transactions, he instructed
dealers that check be made in the form of “pay to cash”. He did not issue them
receipts. The checks were either encashed or deposited to accused-appellant’s
personal account No. 0301-261982-001 at Security Bank & Trust Co. (SBTC)
Tuguegarao Branch or deposited to the accounts of a certain Mr. Magno Lim
maintained at MetroBank and EquitablePCIBank, both located at Tuguegarao
City.29 (Emphasis supplied.)
It is, thus, clear that accused-appellant committed Qualified Theft. And as duly
pointed out above, even considering the absence of the handwritten
extrajudicial admission of accused-appellant, there is more than sufficient
evidence adduced by the prosecution to uphold his conviction. As aptly pointed
out by the trial court, the prosecution has established the following:
1.That checks of various customers of UCC were written out as bearer
instruments. Payments in cash were also made.
2.These were received by the accused Mirto who deposited them in his
personal account as well as in the account of Mr. Magno Lim.
3.The monies represented by the checks and the case payments were
consideration for bags of cement purchased from the UCC, the complainant-
corporation.
4.The accused Mirto was never authorized nor was it part of his duties as
branch manager to deposit these proceeds in his account or in the account of
Mr. Magno Lim.30
Defense of Agency Unavailing
As his main defense, accused-appellant cites the testimonies of prosecution
witnesses Restituto Renolo and Reynaldo Santos to impress upon the Court that
he is an agent of UCC. And as an agent, so he claims, an implied trust is
constituted by his juridical possession of UCC funds from the proceeds of
cement sales:
ATTY. CARMELO Z. LASAM: Mr. Renolo, can you tell us the specific duties and
responsibilities of your area sales managers?
RESTITUTO RENOLO: The duties and responsibilities of an area sales officer, we
are in charge of the distribution of our products, cement and likewise its
collection of its sales.31
xxxx
ATTY. RAUL ORACION: Okay, now as Assistant Vice-President for Marketing and
supervisor of all area sales offices and branch managers, could you tell the
duties and responsibilities of the accused Bernard Mirto at that time?
REYNALDO SANTOS: x x x, also collect sales and for the cash for the collection
of our sales.32
To accused-appellant, he had authority to collect and accept payments from
customers, and was constituted an agent of UCC. As collection agent of UCC, he
asserts he can hold the collections in trust and in favor of UCC; and that he is a
trustee of UCC and, therefore, has juridical possession over the collected funds.
Consequently, accused-appellant maintains there was no unlawful taking, for
such taking was with the knowledge and consent of UCC, thereby negating the
elements of taking personal property and without the owner’s consent
necessary in the crime of Qualified Theft.
This contention fails.
The duty to collect payments is imposed on accused-appellant because of his
position as Branch Manager. Because of this employer-employee relationship,
he cannot be considered an agent of UCC and is not covered by the Civil Code
provisions on agency. Money received by an employee in behalf of his or her
employer is considered to be only in the material possession of the
employee.33
The fact that accused-appellant had authority to accept payments from
customers does not give him the license to take the payments and deposit them
to his own account since juridical possession is not transferred to him. On the
contrary, the testimony he cites only bolsters the fact that accused-appellant is
an official of UCC and had the trust and the confidence of the latter and,
therefore, could readily receive payments from customers for and in behalf of
said company.
Proper Penalty
The trial court, as affirmed by the appellate court, sentenced accused-appellant
to restitute UCC the aggregate amount of PhP 2,279,350, representing the
amount of the checks involved here. The trial court also imposed the single
penalty of reclusion perpetua. Apparently, the RTC erred in imposing said single
penalty, and the CA erred in affirming it, considering that accused-appellant had
been convicted on four (4) counts of qualified theft under Criminal Case Nos.
9034, 9115, 9117 and 9130. Consequently, accused-appellant should have been
accordingly sentenced to imprisonment on four counts of qualified theft with
the appropriate penalties for each count. Criminal Case No. 9034 is for PhP
308,200, Criminal Case No. 9115 is for PhP 688,750, Criminal Case No. 9117 is
for PhP 1,213,900, and Criminal Case No. 9130 is for 68,500 for the aggregate
amount of PhP 2,279,350.
Now to get the proper penalty for each count, We refer to People v.
Mercado,34 where We established that the appropriate penalty for Qualified
Theft is reclusion perpetua based on Art. 310 of the RPC, which provides that
“[t]he crime of [qualified] theft shall be punished by the penalties next higher
by two degrees than those respectively specified in [Art. 309] x x x.” (Emphasis
supplied.) Applying the computation made in People v. Mercado to the
present case to arrive at the correct penalties, We get the value of the property
stolen as determined by the trial court, which are PhP 308,200, PhP 688,750,
PhP 1,213,900 and PhP 68,500. Based on Art. 30935 of the RPC, “since the
value of the items exceeds P22,000.00, the basic penalty is prision mayor in its
minimum and medium periods to be imposed in the maximum period, which is
8 years, 8 months and 1 day to 10 years of prision mayor.”36
And in order to determine the additional years of imprisonment, following
People v. Mercado, We deduct PhP 22,000 from each amount and each
difference should then be divided by PhP 10,000, disregarding any amount less
than PhP 10,000. We now have 28 years, 66 years, 119 years and 4 years,
respectively, that should be added to the basic penalty. But the imposable
penalty for simple theft should not exceed a total of 20 years. Therefore, had
accused-appellant committed simple theft, the penalty for each of Criminal
Case Nos. 9034, 9115 and 9117 would be 20 years of reclusion temporal; while
Criminal Case No. 9130 would be from 8 years, 8 months and 1 day of prision
mayor, as minimum, to 14 years of reclusion temporal, as maximum, before the
application of the Indeterminate Sentence Law. However, as the penalty for
Qualified Theft is two degrees higher, the correct imposable penalty is reclusion
perpetua for each count.
In fine, considering that accused-appellant is convicted of four (4) counts of
Qualified Theft with corresponding four penalties of reclusion perpetua, Art. 70
of the RPC on successive service of sentences shall apply. Art. 70 pertinently
provides that “the maximum duration of the convict’s sentence shall not be
more than threefold the length of time corresponding to the most severe of the
penalties imposed upon him. No other penalty to which he may be liable shall
be inflicted after the sum total of those imposed equals the said maximum
period. Such maximum period shall in no case exceed forty years.” Applying
said rule, despite the four penalties of reclusion perpetua for four counts of
Qualified Theft, accused-appellant shall suffer imprisonment for a period not
exceeding 40 years.
WHEREFORE, the appeal is hereby DENIED. The appealed CA Decision dated
August 24, 2009 in CA-G.R. CR-H.C. No. 03444 is AFFIRMED with MODIFICATION
in that accused-appellant Bernard G. Mirto is convicted of four (4) counts of
Qualified Theft and accordingly sentenced to serve four (4) penalties of
reclusion perpetua. But with the application of Art. 70 of the RPC, accused-
appellant shall suffer the penalty of imprisonment for a period not exceeding 40
years.
Costs against accused-appellant.
SO ORDERED.
VELASCO, JR., J., Chairperson, PERALTA, ABAD, MENDOZA, and PERLAS-
BERNABE, JJ.
_____________________
1 Rollo, pp. 2-14. Penned by Associate Justice Martin S. Villarama, Jr. (now a
member of this Court) and concurred in by Associate Justices Magdangal M. de
Leon and Ricardo R. Rosario.
2 CA rollo, pp. 15-28. Penned by Presiding Judge Jezarene C. Aquino.
3 Records, Vol. 1, p. 1.
4 Rollo, pp. 3-5.
5 Records, Vol. 1, p. 38.
6 CA rollo, pp. 26-28.
7 Records, Folder of “Formal Offer of Prosecution’s Evidence,” pp. 27-28, Exhibit
“A.”
8 Rollo, p. 14.
9 [It is well-settled that when the money, goods, or any other personal property
is received by the offender from the offended party in trust or on commission
or for administration, the offender acquires both material or physical
possession and juridical possession of the thing received.] Juridical possession
means a possession which gives the transferee a right over the thing which the
transferee may set up even against the owner (Chua-Burce v. Court of Appeals,
G.R. No. 109595, April 27, 2000, 331 SCRA 1, 13, cited in Matrido v. People, G.R.
No. 179061, July 13, 2009, 592 SCRA 534, 544).
10 Rollo, pp. 25-27, dated January 6, 2011.
11 Id. at 39-40, Manifestation and Motion dated April 18, 2011.
12 Id. at 41.
13 Cruz v. People, G.R. No. 176504, September 3, 2008, 564 SCRA 99, 110; citing
People v. Bago, G.R. No. 122290, April 6, 2000, 330 SCRA 115, 138-139.
14 People v. Puig, G.R. Nos. 173654-765, August 28, 2008, 563 SCRA 564, 570;
Roque v. People, G.R. No. 138954, November 25, 2004, 444 SCRA 98, 120.
15 Rollo, p. 61.
16 Records, Folder of “Formal Offer of Prosecution’s Evidence,” p. 39, Exhibit
“N.”
17 Id. at 35, Exhibit “K.”
18 Id. at 253-254, Exhibit “Z.”
19 Id. at 264-265, Exhibit “II.”
20 Id. at 39-50, Exhibit “O.”
21 TSN, November 17, 2004.
22 G.R. No. 123183, January 19, 2000, 322 SCRA 345.
23 Id. at 364-365.
24 G.R. No. 143676, February 19, 2003, 397 SCRA 746.
25 Testimony of Restituto Renolo, TSN, September 23, 2003; testimony of
Reynaldo Santos, TSN, November 17, 2004.
26 People v. Mercado, supra note 24, at 752-753; citing People v. Maqueda,
G.R. No. 112983, March 22, 1995, 242 SCRA 565, 590.
27 TSN, July 27, 2006, pp. 28-29.
28 Records, Folder of “Formal Offer of Prosecution’s Evidence,” p. 28, Exhibit
“B.”
29 Rollo, pp. 4-5.
30 CA rollo, pp. 25-26.
31 TSN, September 23, 2003, p. 26.
32 TSN, November 17, 2004, p. 27.
33 Matrido v. People, G.R. No. 179061, July 13, 2009, 592 SCRA 534, 543.
34 Supra note 24.
35 Art. 309(1) of the RPC on simple theft provides:
1. The penalty of prision mayor in its minimum and medium periods, if the value
of the thing stolen is more than 12,000 pesos but does not exceed 22,000
pesos; but if the value of the thing stolen exceeds the latter amount, the
penalty shall be the maximum period of the one prescribed in this paragraph,
and one year for each additional ten thousand pesos, but the total of the
penalty which may be imposed shall not exceed twenty years. In such cases,
and in connection with the accessory penalties which may be imposed and for
the purpose of the other provisions of this Code, the penalty shall be termed
prision mayor or reclusion temporal, as the case may be.
36 People v. Mercado, supra note 24, at 758. [People vs. Mirto, G.R. No.
193479(2011)]
Case Title : TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS
GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Loans|Corporation Law|Sales|Negotiable
Instruments|Certificates of Indebtedness|Bonds|Words and Phrases|Piercing
the Veil of Corporate Fiction
Syllabi:
1. Loans; Negotiable Instruments; Certificates of Indebtedness; Bonds; Words
and Phrases; A certificate of indebtedness which pertains to certificates for the
creation and maintenance of a permanent improvement revolving fund, is
similar to a “bond.”-
Properly understood, a certificate of indebtedness pertains to certificates for the
creation and maintenance of a permanent improvement revolving fund, and is
similar to a “bond,” (82 Minn. 202). Being equivalent to a bond, it is properly
understood as an acknowledgment of an obligation to pay a fixed sum of
money. It is usually used for the purpose of long term loans.
2. Loans; Negotiable Instruments; Certificates of Indebtedness; The language
of negotiability which characterizes a negotiable paper as a credit instrument is
its freedom to circulate as a substitute for money.-
The language of negotiability which characterize a negotiable paper as a credit
instrument is its freedom to circulate as a substitute for money. Hence, freedom
of negotiability is the touchstone relating to the protection of holders in due
course, and the freedom of negotiability is the foundation for the protection
which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This
freedom in negotiability is totally absent in a certificate of indebtedness as it
merely acknowledges to pay a sum of money to a specified person or entity for a
period of time.
3. Corporation Law; Piercing the Veil of Corporate Fiction; Piercing the veil of
corporate entity requires the court to see through the protective shroud which
exempts its stockholders from liabilities that ordinarily, they could be subject to,
or distinguishes one corporation from a seemingly separate one, were it not for
the existing corporate fiction.-
Petitioner cannot put up the excuse of piercing the veil of corporate entity, as
this is merely an equitable remedy, and may be awarded only in cases when the
corporate fiction is used to defeat public convenience, justify wrong, protect
fraud or defend crime or where a corporation is a mere alter ego or business
conduit of a person. Piercing the veil of corporate entity requires the court to see
through the protective shroud which exempts its stockholders from liabilities
that ordinarily, they could be subject to, or distinguishes one corporation from a
seemingly separate one, were it not for the existing corporate fiction. But to do
this, the court must be sure that the corporate fiction was misused, to such an
extent that injustice, fraud, or crime was committed upon another, disregarding,
thus, his, her, or its rights. It is the protection of the interests of innocent third
persons dealing with the corporate entity which the law aims to protect by this
doctrine.
4. Corporation Law; Piercing the Veil of Corporate Fiction; Mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital
stock of a corporation is not of itself a sufficient reason for disregarding the
fiction of separate corporate personalities.-
Though it is true that when valid reasons exist, the legal fiction that a
corporation is an entity with a juridical personality separate from its
stockholders and from other corporations may be disregarded, in the absence of
such grounds, the general rule must be upheld. The fact that Philfinance owns
majority shares in Filriters is not by itself a ground to disregard the independent
corporate status of Filriters. In Liddel Co., Inc. vs. Collector of Internal Revenue,
the mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself a sufficient reason
for disregarding the fiction of separate corporate personalities.
5. Corporation Law; Piercing the Veil of Corporate Fiction; An entity which
deals with corporate agents within circumstances showing that the agents are
acting in excess of corporate authority may not hold the corporation liable.-
Petitioner, being a commercial bank, cannot feign ignorance of Central Bank
Circular 769, and its requirements. An entity which deals with corporate agents
within circumstances showing that the agents are acting in excess of corporate
authority, may not hold the corporation liable. This is only fair, as everyone
must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.
6. Sales; Where the sale from one person to another was fictitious, as there was
no consideration, and therefore void and inexistent, the latter has no title to
convey to third persons.-
The transfer made by Filriters to Philfinance did not conform to the said Central
Bank Circular, which for all intents, is considered part of the law. As found by the
courts a quo, Alfredo O. Banaria, who had signed the deed of assignment from
Filriters to Philfinance, purportedly for and in favor of Filriters, did not have the
necessary written authorization from the Board of Directors of Filriters to act for
the latter. As it is, the sale from Filriters to Philfinance was fictitious, and
therefore void and inexistent, as there was no consideration for the same. This is
fatal to the petitioner’s cause, for then, Philfinance had no title over the subject
certificate to convey to Traders Royal Bank. Nemo potest nisi quod de jure
potest—no man can do anything except what he can do lawfully.
Division: SECOND DIVISION
Docket Number: G.R. No. 93397
Counsel: Gonzales, Sinense, Jimenez & Associates, Jaime M. Cabiles, Ruben L.
Almadro
Ponente: TORRES, JR.
Dispositive Portion:
ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated
January 29, 1990 is hereby AFFIRMED.
Case Title : FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES,
petitioner, vs. COURT OF APPEALS and LUZON DEVELOPMENT BANK,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Commercial Law|Banks and Banking
Syllabi:
1. Commercial Law; Banks and Banking; A bank is under obligation to treat the
accounts of its depositors with meticulous care, whether such account consists
only of a few hundred pesos or of millions of pesos.-
A bank is under obligation to treat the accounts of its depositors with meticulous
care, whether such account consists only of a few hundred pesos or of millions of
pesos. The fact that the other withdrawal slips were honored and paid by
respondent bank was no license for Citibank to presume that subsequent slips
would be honored and paid immediately. By doing so, it failed in its fiduciary
duty to treat the accounts of its clients with the highest degree of care.
Docket Number: G.R No. 113236
Counsel: Sycip, Salazar, Hernandez & Gatmaitan, Cao Law Office
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in
CA-G.R. CV No. 29546 is AFFIRMED. Costs against petitioner.
Case Title : ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioners, vs.
PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Negotiable Instruments Law|Civil Law|Promissory
Note|Parties|Maker|Obligations|Subrogation|Legal Subrogation
Syllabi:
1. Negotiable Instruments Law; Promissory Note; Parties; Maker; Persons
writing their names on face of promissory notes are makers.-
Under the Negotiable Instruments Law, persons who write their names on the
face of promissory notes are makers, promising that they will pay to the order of
the payee or any holder according to its tenor.
2. Civil Law; Obligations; Subrogation; Legal Subrogation; Legal subrogation is
that which takes place by operation of law.-
Subrogation is the transfer of all the rights of the creditor to a third person, who
substitutes him in all his rights. It may either be legal or conventional. Legal
subrogation is that which takes place without agreement but by operation of
law because of certain acts. Instances of legal subrogation are those provided in
Article 1302 of the Civil Code. Conventional subrogation, on the other hand, is
that which takes place by agreement of the parties.
3. Civil Law; Obligations; Subrogation; Legal Subrogation; Knowledge of debtor
not necessary.-
Roxas’ acquiescence is not necessary for subrogation to take place because the
instant case is one of legal subrogation that occurs by operation of law, and
without need of the debtor’s knowledge.
Division: SECOND DIVISION
Docket Number: G.R. No. 136729
Counsel: Manuel Q. Molina, Office of the Government Corporate Counsel,
Isabelo G. Gumaru
Ponente: AUSTRIA-MARTINEZ
Dispositive Portion:
WHEREFORE, finding no error with the decision of the Court of Appeals dated
December 10, 1998, the same is hereby AFFIRMED in toto.
Case Title : ROMEO C. GARCIA, petitioner, vs. DIONISIO V. LLAMAS,
respondent.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Civil Law|Commercial
Law|Actions|Obligations|Extinguishment|Novation|Kinds|Elements|Proof|Ne
gotiable Instruments Law|Promissory Notes|Accommodation Party|Pleadings
and Practice|Summary Judgment|Judgment on the Pleadings
Syllabi:
1. Civil Law; Obligations; Extinguishment; Novation; Definition.-
Novation is a mode of extinguishing an obligation by changing its objects or
principal obligations, by substituting a new debtor in place of the old one, or by
subrogating a third person to the rights of the creditor. Article 1293 of the Civil
Code defines novation.
2. Civil Law; Obligations; Extinguishment; Novation; Kinds; In general, there
are two (2) modes of substituting the person of the debtor: (1) expromision and
(2) delegacion.-
In general, there are two modes of substituting the person of the debtor: (1)
expromision and (2) delegacion. In expromision, the initiative for the change
does not come from—and may even be made without the knowledge of—the
debtor, since it consists of a third person’s assumption of the obligation. As such,
it logically requires the consent of the third person and the creditor. In
delegacion, the debtor offers, and the creditor accepts, a third person who
consents to the substitution and assumes the obligation; thus, the consent of
these three persons are necessary. Both modes of substitution by the debtor
require the consent of the creditor.
3. Civil Law; Obligations; Extinguishment; Novation; Kinds; Novation may also
be extinctive and modificatory.-
Novation may also be extinctive or modificatory. It is extinctive when an old
obligation is terminated by the creation of a new one that takes the place of the
former. It is merely modificatory when the old obligation subsists to the extent
that it remains compatible with the amendatory agreement. Whether extinctive
or modificatory, novation is made either by changing the object or the principal
conditions, referred to as objective or real novation; or by substituting the
person of the debtor or subrogating a third person to the rights of the creditor,
an act known as subjective or personal novation.
4. Civil Law; Obligations; Extinguishment; Novation; Kinds; Elements; For
novation to take place, the following requisites must concur.-
For novation to take place, the following requisites must concur: 1) There must
be a previous valid obligation. 2) The parties concerned must agree to a new
contract. 3) The old contract must be extinguished. 4) There must be a valid new
contract.
5. Civil Law; Obligations; Extinguishment; Novation; Kinds; Novation may also
be express or implied.-
Novation may also be express or implied. It is express when the new obligation
declares in unequivocal terms that the old obligation is extinguished. It is
implied when the new obligation is incompatible with the old one on every
point. The test of incompatibility is whether the two obligations can stand
together, each one with its own independent existence.
6. Civil Law; Obligations; Extinguishment; Novation; Proof; Well-settled is the
rule that nova-tion is never presumed.-
Well-settled is the rule that novation is never presumed. Consequently, that
which arises from a purported change in the person of the debtor must be clear
and express.
7. Commercial Law; Negotiable Instruments Law; Promissory Notes; As the
note was made payable to a specific person, it is covered by the general
provisions of the Civil Code, not the NIL.-
By its terms, the note was made payable to a specific person rather than to
bearer or to order—a requisite for negotiability under Act 2031, the Negotiable
Instruments Law (NIL). Hence, petitioner cannot avail himself of the NIL’s
provisions on the liabilities and defenses of an accommodation party. Besides, a
non-negotiable note is merely a simple contract in writing and is evidence of
such intangible rights as may have been created by the assent of the parties.
The promissory note is thus covered by the general provisions of the Civil Code,
not by the NIL.
8. Commercial Law; Negotiable Instruments Law; Promissory
Notes; Accommodation Party; Under Article 29 of Act 2031, an accommodation
party is liable for the instrument to a holder for value.-
Under Article 29 of Act 2031, an accommodation party is liable for the
instrument to a holder for value even if, at the time of its taking, the latter knew
the former to be only an accommodation party. The relation between an
accommodation party and the party accommodated is, in effect, one of principal
and surety—the accommodation party being the surety. It is a settled rule that a
surety is bound equally and absolutely with the principal and is deemed an
original promissor and debtor from the beginning. The liability is immediate and
direct.
9. Actions; Pleadings and Practice; Summary Judgment; A summary judgment
is a procedural device designed for the prompt disposition of actions in which
the pleadings raise only a legal, not a genuine, issue regarding any material
fact.-
Under Section 3 of Rule 35 of the Rules of Court, a summary judgment may be
rendered after a summary hearing if the pleadings, supporting affidavits,
depositions and admissions on file show that (1) except as to the amount of
damages, there is no genuine issue regarding any material fact; and (2) the
moving party is entitled to a judgment as a matter of law. A summary judgment
is a procedural device designed for the prompt disposition of actions in which
the pleadings raise only a legal, not a genuine, issue regarding any material fact.
Consequently, facts are asserted in the complaint regarding which there is yet
no admission, disavowal or qualification; or specific denials or affirmative
defenses are set forth in the answer, but the issues are fictitious as shown by the
pleadings, depositions or admissions. A summary judgment may be applied for
by either a claimant or a defending party.
10. Actions; Pleadings and Practice; Judgment on the Pleadings; A judgment on
the pleadings is proper when an answer fails to render an issue or otherwise
admits the material allegations of the adverse party’s pleading.-
On the other hand, under Section 1 of Rule 34 of the Rules of Court, a judgment
on the pleadings is proper when an answer fails to render an issue or otherwise
admits the material allegations of the adverse party’s pleading. The essential
question is whether there are issues generated by the pleadings. A judgment on
the pleadings may be sought only by a claimant, who is the party seeking to
recover upon a claim, counterclaim or cross-claim; or to obtain a declaratory
relief.
Division: FIRST DIVISION
Docket Number: G.R. No. 154127
Counsel: Carlos G. Nery, Jr., Felipe N. Egargo, Jr.
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, this Petition is hereby DENIED and the assailed Decision
AFFIRMED. Costs against petitioner.
Case Title : TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO
CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and
SECURITY BANK CORPORATION, respondents.Case Nature : PETITION for review
on certiorari of a decision of the Court of Appeals.
Syllabi Class : Commercial Law|Actions|Banks and Banking|Letters of
Credit|Standby Credits|Words and Phrases|Uniform Customs and Practice
(UCP) for Documentary Credits|“Independence
Principle”|Guarantee|Contracts|Injunction|Requisites|Actions|Appeals|Pleadi
ngs and Practice|Obligations and Contracts|Forum Shopping
Syllabi:
1. Commercial Law; Banks and Banking; Letters of Credit; Standby
Credits; Words and Phrases; In commercial transactions, a letter of credit is a
financial device developed by merchants as a convenient and relatively safe
mode of dealing with sales of goods to satisfy the seemingly irreconcilable
interests of a seller, who refuses to part with his goods before he is paid, and a
buyer, who wants to have control of the goods before paying; Generally, credits
in non-sale settings have come to be known as standby credits.-
The letter of credit evolved as a mercantile specialty, and the only way to
understand all its facets is to recognize that it is an entity unto itself. The
relationship between the beneficiary and the issuer of a letter of credit is not
strictly contractual, because both privity and a meeting of the minds are lacking,
yet strict compliance with its terms is an enforceable right. Nor is it a third-party
beneficiary contract, because the issuer must honor drafts drawn against a
letter regardless of problems subsequently arising in the underlying contract.
Since the bank’s customer cannot draw on the letter, it does not function as an
assignment by the customer to the beneficiary. Nor, if properly used, is it a
contract of suretyship or guarantee, because it entails a primary liability
following a default. Finally, it is not in itself a negotiable instrument, because it
is not payable to order or bearer and is generally conditional, yet the draft
presented under it is often negotiable. In commercial transactions, a letter of
credit is a financial device developed by merchants as a convenient and
relatively safe mode of dealing with sales of goods to satisfy the seemingly
irreconcilable interests of a seller, who refuses to part with his goods before he
is paid, and a buyer, who wants to have control of the goods before paying. The
use of credits in commercial transactions serves to reduce the risk of
nonpayment of the purchase price under the contract for the sale of goods.
However, credits are also used in non-sale settings where they serve to reduce
the risk of nonperfor- mance. Generally, credits in the non-sale settings have
come to be known as standby credits.
2. Commercial Law; Banks and Banking; Letters of Credit; Standby
Credits; Commercial Credits and Standby Credits, Distinguished.-
There are three significant differences between commercial and standby credits.
First, commercial credits involve the payment of money under a contract of sale.
Such credits become payable upon the presentation by the seller-beneficiary of
documents that show he has taken affirmative steps to comply with the sales
agreement. In the standby type, the credit is payable upon certification of a
party’s nonperformance of the agreement. The documents that accompany the
beneficiary’s draft tend to show that the applicant has not performed. The
beneficiary of a commercial credit must demonstrate by documents that he has
performed his contract. The beneficiary of the standby credit must certify that
his obligor has not performed the contract.
3. Commercial Law; Banks and Banking; Letters of Credit; A letter of credit
changes its nature as different transactions occur and if carried through to
completion ends up as a binding contract between the issuing and honoring
banks without any regard or relation to the underlying contract or disputes
between the parties thereto.-
By definition, a letter of credit is a written instrument whereby the writer
requests or authorizes the addressee to pay money or deliver goods to a third
person and assumes responsibility for payment of debt therefor to the
addressee. A letter of credit, however, changes its nature as different
transactions occur and if carried through to completion ends up as a binding
contract between the issuing and honoring banks without any regard or relation
to the underlying contract or disputes between the parties thereto.
4. Commercial Law; Banks and Banking; Letters of Credit; Uniform Customs
and Practice (UCP) for Documentary Credits; Since letters of credit have gained
general acceptability in international trade transactions, the International
Chamber of Commerce (ICC) has published from time to time updates on the
Uniform Customs and Practice for Documentary Credits to standardize practices
in the letter of credit area; The observance of the UCP is justified by Article 2 of
the Code of Commerce which provides that in the absence of any particular
provision in the Code of Commerce, commercial transactions shall be governed
by usages and customs generally observed.-
Since letters of credit have gained general acceptability in international trade
transactions, the ICC has published from time to time updates on the Uniform
Customs and Practice (UCP) for Documentary Credits to standardize practices in
the letter of credit area. The vast majority of letters of credit incorporate the
UCP. First published in 1933, the UCP for Documentary Credits has undergone
several revisions, the latest of which was in 1993. In Bank of the Philippine
Islands v. De Reny Fabric Industries, Inc., this Court ruled that the observance of
the UCP is justified by Article 2 of the Code of Commerce which provides that in
the absence of any particular provision in the Code of Commerce, commercial
transactions shall be governed by usages and customs generally observed. More
recently, in Bank of America, NT SA v. Court of Appeals, this Court ruled that
there being no specific provisions which govern the legal complexities arising
from transactions involving letters of credit, not only between or among banks
themselves but also between banks and the seller or the buyer, as the case may
be, the applicability of the UCP is undeniable.
5. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Under the “independence principle,” banks assume no liability or
responsibility for the form, sufficiency, accuracy, genuineness, falsification or
legal effect of any documents, or for the general and/or particular conditions
stipulated in the documents or superimposed thereon, nor do they assume any
liability or responsibility for the description, quantity, weight, quality, condition,
packing, delivery, value or existence of the goods represented by any
documents, or for the good faith or acts and/or omissions, solvency,
performance or standing of the consignor, the carriers, or the insurers of the
goods, or any other person whomsoever.-
Article 3 of the UCP provides that credits, by their nature, are separate
transactions from the sales or other contract(s) on which they may be based and
banks are in no way concerned with or bound by such contract(s), even if any
reference whatsoever to such contract(s) is included in the credit. Consequently,
the undertaking of a bank to pay, accept and pay draft(s) or negotiate and/or
fulfill any other obligation under the credit is not subject to claims or defenses by
the applicant resulting from his relationships with the issuing bank or the
beneficiary. A beneficiary can in no case avail himself of the contractual
relationships existing between the banks or between the applicant and the
issuing bank. Thus, the engagement of the issuing bank is to pay the seller or
beneficiary of the credit once the draft and the required documents are
presented to it. The so-called “independence principle” assures the seller or the
beneficiary of prompt payment independent of any breach of the main contract
and precludes the issuing bank from determining whether the main contract is
actually accomplished or not. Under this principle, banks assume no liability or
responsibility for the form, sufficiency, accuracy, genuineness, falsification or
legal effect of any documents, or for the general and/or particular conditions
stipulated in the documents or superimposed thereon, nor do they assume any
liability or responsibility for the description, quantity, weight, quality, condition,
packing, delivery, value or existence of the goods represented by any
documents, or for the good faith or acts and/or omissions, solvency,
performance or standing of the consignor, the carriers, or the insurers of the
goods, or any other person whomsoever.
6. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; The independent nature of the letter of credit may be: (a)
independence in toto where the credit is independent from the justification
aspect and is a separate obligation from the underlying agreement; or (b)
independence may be only as to the justification aspect, though in both cases
the payment may be enjoined if in the light of the purpose of the credit the
payment of the credit would constitute fraudulent abuse of the credit.-
The independent nature of the letter of credit may be: (a) independence in toto
where the credit is independent from the justification aspect and is a separate
obligation from the underlying agreement like for instance a typical standby; or
(b) independence may be only as to the justification aspect like in a commercial
letter of credit or repayment standby, which is identical with the same
obligations under the underlying agreement. In both cases the payment may be
enjoined if in the light of the purpose of the credit the payment of the credit
would constitute fraudulent abuse of the credit.
7. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; The independence principle liberates the issuing bank from the duty
of ascertaining compliance by the parties in the main contract; As it is, the
independence doctrine works to the benefit of both the issuing bank and the
beneficiary.-
As discussed above, in a letter of credit transaction, such as in this case, where
the credit is stipulated as irrevocable, there is a definite undertaking by the
issuing bank to pay the beneficiary provided that the stipulated documents are
presented and the conditions of the credit are complied with. Precisely, the
independence principle liberates the issuing bank from the duty of ascertaining
compliance by the parties in the main contract. As the principle’s nomenclature
clearly suggests, the obligation under the letter of credit is independent of the
related and originating contract. In brief, the letter of credit is separate and
distinct from the underlying transaction. Given the nature of letters of credit,
petitioner’s argument—that it is only the issuing bank that may invoke the
independence principle on letters of credit—does not impress this Court. To say
that the independence principle may only be invoked by the issuing banks would
render nugatory the purpose for which the letters of credit are used in
commercial transactions. As it is, the independence doctrine works to the benefit
of both the issuing bank and the beneficiary.
8. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Guarantee;Jurisprudence has laid down a clear distinction between a
letter of credit and a guarantee in that the settlement of a dispute between the
parties is not a prerequisite for the release of funds under a letter of credit.-
Petitioner’s argument that any dispute must first be resolved by the parties,
whether through negotiations or arbitration, before the beneficiary is entitled to
call on the letter of credit in essence would convert the letter of credit into a
mere guarantee. Jurisprudence has laid down a clear distinction between a
letter of credit and a guarantee in that the settlement of a dispute between the
parties is not a pre-requisite for the release of funds under a letter of credit. In
other words, the argument is incompatible with the very nature of the letter of
credit. If a letter of credit is drawable only after settlement of the dispute on the
contract entered into by the applicant and the beneficiary, there would be no
practical and beneficial use for letters of credit in commercial transactions.
9. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Owing to the nature and purpose of standby letters of credit, banks
are left with little or no alternative but to honor the credit or the call for
payment.-
While it is the bank which is bound to honor the credit, it is the beneficiary who
has the right to ask the bank to honor the credit by allowing him to draw
thereon. The situation itself emasculates petitioner’s posture that LHC cannot
invoke the independence principle and highlights its puerility, more so in this
case where the banks concerned were impleaded as parties by petitioner itself.
Respondent banks had squarely raised the independence principle to justify their
releases of the amounts due under the Securities. Owing to the nature and
purpose of the standby letters of credit, this Court rules that the respondent
banks were left with little or no alternative but to honor the credit and both of
them in fact submitted that it was “ministerial” for them to honor the call for
payment.
10. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Contracts; A contract once perfected, binds the parties not only to
the fulfillment of what has been expressly stipulated but also to all the
consequences which according to their nature, may be in keeping with good
faith, usage, and law.-
A contract once perfected, binds the parties not only to the fulfillment of what
has been expressly stipulated but also to all the consequences which according
to their nature, may be in keeping with good faith, usage, and law. A careful
perusal of the Turnkey Contract reveals the intention of the parties to make the
Securities answerable for the liquidated damages occasioned by any delay on
the part of petitioner. The call upon the Securities, while not an exclusive remedy
on the part of LHC, is certainly an alternative recourse available to it upon the
happening of the contingency for which the Securities have been proffered.
Thus, even without the use of the “independence principle,” the Turnkey
Contract itself bestows upon LHC the right to call on the Securities in the event
of default.
11. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Injunction;Requisites; Most writers agree that fraud is an exception
to the independence principle; The remedy for fraudulent abuse is an injunction.-
Most writers agree that fraud is an exception to the independence principle.
Professor Dolan opines that the untruthfulness of a certificate accompanying a
demand for payment under a standby credit may qualify as fraud sufficient to
support an injunction against payment. The remedy for fraudulent abuse is an
injunction. However, injunction should not be granted unless: (a) there is clear
proof of fraud; (b) the fraud constitutes fraudulent abuse of the independent
purpose of the letter of credit and not only fraud under the main agreement;
and (c) irreparable injury might follow if injunction is not granted or the recovery
of damages would be seriously damaged.
12. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Injunction; The issuance of the writ of preliminary injunction as an
ancillary or preventive remedy to secure the rights of a party in a pending case is
entirely within the discretion of the court taking cognizance of the case, the only
limitation being that this discretion should be exercised based upon the grounds
and in the manner provided by law.-
Generally, injunction is a preservative remedy for the protection of one’s
substantive right or interest; it is not a cause of action in itself but merely a
provisional remedy, an adjunct to a main suit. The issuance of the writ of
preliminary injunction as an ancillary or preventive remedy to secure the rights
of a party in a pending case is entirely within the discretion of the court taking
cognizance of the case, the only limitation being that this discretion should be
exercised based upon the grounds and in the manner provided by law. Before a
writ of preliminary injunction may be issued, there must be a clear showing by
the complaint that there exists a right to be protected and that the acts against
which the writ is to be directed are violative of the said right. It must be shown
that the invasion of the right sought to be protected is material and substantial,
that the right of complainant is clear and unmistakable and that there is an
urgent and paramount necessity for the writ to prevent serious damage.
Moreover, an injunctive remedy may only be resorted to when there is a
pressing necessity to avoid injurious consequences which cannot be remedied
under any standard compensation.
13. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; It is premature and absurd to conclude that the draws on the
Securities were outright fraudulent where the International Chamber of
Commerce and the Construction Industry Authority Commission have not ruled
with finality on the existence of default.-
The pendency of the arbitration proceedings would not per se make LHC’s draws
on the Securities wrongful or fraudulent for there was nothing in the Contract
which would indicate that the parties intended that all disputes regarding delay
should first be settled through arbitration before LHC would be allowed to call
upon the Securities. It is therefore premature and absurd to conclude that the
draws on the Securities were outright fraudulent given the fact that the ICC and
CIAC have not ruled with finality on the existence of default.
14. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Actions;Appeals; Pleadings and Practice; Matters, theories or
arguments not brought out in the proceedings below will ordinarily not be
considered by a reviewing court as they cannot be raised for the first time on
appeal.-
Nowhere in its complaint before the trial court or in its pleadings filed before the
appellate court, did petitioner invoke the fraud exception rule as a ground to
justify the issuance of an injunction. What petitioner did assert before the courts
below was the fact that LHC’s draws on the Securities would be premature and
without basis in view of the pending disputes between them. Petitioner should
not be allowed in this instance to bring into play the fraud exception rule to
sustain its claim for the issuance of an injunctive relief. Matters, theories or
arguments not brought out in the proceedings below will ordinarily not be
considered by a reviewing court as they cannot be raised for the first time on
appeal. The lower courts could thus not be faulted for not applying the fraud
exception rule not only because the existence of fraud was fundamentally
interwoven with the issue of default still pending before the arbitral tribunals,
but more so, because petitioner never raised it as an issue in its pleadings filed in
the courts below. At any rate, petitioner utterly failed to show that it had a clear
and unmistakable right to prevent LHC’s call upon the Securities.
15. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Principle”; Obligations and Contracts; Obligations arising from contracts have
the force of law between the contracting parties and should be complied with in
good faith.-
Prudence should have impelled LHC to await resolution of the pending issues
before the arbitral tribunals prior to taking action to enforce the Securities. But,
as earlier stated, the Turnkey Contract did not require LHC to do so and,
therefore, it was merely enforcing its rights in accordance with the tenor
thereof. Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith. More
importantly, pursuant to the principle of autonomy of contracts embodied in
Article 1306 of the Civil Code, petitioner could have incorporated in its Contract
with LHC, a proviso that only the final determination by the arbitral tribunals
that default had occurred would justify the enforcement of the Securities.
However, the fact is petitioner did not do so; hence, it would have to live with its
inaction.
16. Actions; Injunction; Settled is the rule that injunction would not lie where
the acts sought to be enjoined have already become fait accompli or an
accomplished or consummated act.-
In a Manifestation, dated 30 March 2001, LHC informed this Court that the
subject letters of credit had been fully drawn. This fact alone would have been
sufficient reason to dismiss the instant petition. Settled is the rule that injunction
would not lie where the acts sought to be enjoined have already become fait
accompli or an accomplished or consummated act. In Ticzon v. Video Post
Manila, Inc. this Court ruled that where the period within which the former
employees were prohibited from engaging in or working for an enterprise that
competed with their former employer—the very purpose of the preliminary
injunction—has expired, any declaration upholding the propriety of the writ
would be entirely useless as there would be no actual case or controversy
between the parties insofar as the preliminary injunction is concerned. In the
instant case, the consummation of the act sought to be restrained had rendered
the instant petition moot—for any declaration by this Court as to propriety or
impropriety of the non-issuance of injunctive relief could have no practical effect
on the existing controversy. The other issues raised by petitioner particularly
with respect to its right to recover the amounts wrongfully drawn on the
Securities, according to it, could properly be threshed out in a separate
proceeding.
17. Actions; Pleadings and Practice; Forum Shopping; Considering the
seriousness of the charge of forum shopping and the severity of the sanctions for
its violation, the Court will refrain from making any definitive ruling on the issue
until the party alleged to have committed forum shopping has been given ample
opportunity to respond to the charge.-
Forum Shopping is a very serious charge. It exists when a party repetitively
avails of several judicial remedies in different courts, simultaneously or
successively, all substantially founded on the same transactions and the same
essential facts and circumstances, and all raising substantially the same issues
either pending in, or already resolved adversely, by some other court. It may
also consist in the act of a party against whom an adverse judgment has been
rendered in one forum, of seeking another and possibly favorable opinion in
another forum other than by appeal or special civil action of certiorari, or the
institution of two or more actions or proceedings grounded on the same cause
on the supposition that one or the other court might look with favor upon the
other party. To determine whether a party violated the rule against forum
shopping, the test applied is whether the elements of litis pendentia are present
or whether a final judgment in one case will amount to res judicata in another.
Forum Shopping constitutes improper conduct and may be punished with
summary dismissal of the multiple petitions and direct contempt of court.
Considering the seriousness of the charge of forum Shopping and the severity of
the sanctions for its violation, the Court will refrain from making any definitive
ruling on this issue until after petitioner has been given ample opportunity to
respond to the charge.
Division: SECOND DIVISION
Docket Number: G.R. No. 146717
Counsel: Romulo, Mabanta, Buenaventura, Sayoc and Delos Angeles, M. B.
Tomacruz & Associates Law Offices, Castro, Yan Binas, Ortile, Samillano &
Mangrobang, Quasha, Ancheta, Peña & Nolasco, Sycip, Salazar, Hernandez &
Gatmaitan
Ponente: TINGA
Dispositive Portion:
WHEREFORE, the instant petition is DENIED, with costs against petitioner.
Case Title : PEOPLE OF THE PHILIPPINES, appellee, vs. ALOMA REYES and
TRICHIA MAE REYES (AT LARGE), accused. ALOMA REYES, appellant.Case
Nature : APPEAL from a decision of the Regional Trial Court of Davao City, Br.
11.
Syllabi Class : Criminal Law|Appeals|Estafa|Bouncing Checks Law|Banks and
Banking|Words and Phrases|Presumption of Innocence|Evidence|Remand of
Cases
Syllabi:
1. Criminal Law; Estafa; Bouncing Checks Law; Elements.-
Under Article 315, paragraph 2(d) of the Revised Penal Code, estafa is
committed by any person who shall defraud another by false pretenses or
fraudulent acts executed prior to or simultaneously with the commission of the
fraud. It is committed with the following essential elements which must be
proved to sustain a conviction: 1. postdating or issuance of a check in payment
of an obligation contracted at the time the check was issued; 2. lack of
sufficiency of funds to cover the check; and 3.damage to the payee thereof.
2. Criminal Law; Estafa; Bouncing Checks Law; Banks and Banking; Words and
Phrases; Negotiable Order of Withdrawal (NOW) Accounts are defined as
interest-bearing deposit accounts that combine the payable on demand feature
of checks and the investment feature of savings accounts; The fact that a NOW
check shall be payable only to a specific person, and not valid when payable to
“BEARER” or to “CASH” or when indorsed by the payee to another person, is
inconsequential; Negotiability is not the gravamen of the crime of estafa
through bouncing checks—it is the fraud or deceit employed by the accused in
issuing a worthless check that is penalized.-
Section X223 of the Manual of Regulations for Banks defines Negotiable Order
of Withdrawal (NOW) Accounts as interest-bearing deposit accounts that
combine the payable on demand feature of checks and the investment feature
of savings accounts. The fact that a NOW check shall be payable only to a
specific person, and not valid when made payable to “BEARER” or to “CASH” or
when indorsed by the payee to another person, is inconsequential. The same
restriction is produced when a check is crossed: only the payee named in the
check may deposit it in his bank account. If a third person accepts a cross check
and pays cash for its value despite the warning of the crossing, he cannot be
considered in good faith and thus not a holder in due course. The purpose of the
crossing is to ensure that the check will be encashed by the rightful payee only.
Yet, despite the restriction on the negotiability of cross checks, we held that they
are negotiable instruments. To be sure, negotiability is not the gravamen of the
crime of estafa through bouncing checks. It is the fraud or deceit employed by
the accused in issuing a worthless check that is penalized.
3. Criminal Law; Estafa; Bouncing Checks Law; Deceit, to constitute estafa,
should be the efficient cause of defraudation—a check issued in payment of a
preexisting obligation does not constitute estafa even if there is no fund in the
bank to cover the amount of the check.-
Deceit, to constitute estafa, should be the efficient cause of defraudation. It
must have been committed either prior or simultaneous with the defraudation
complained of. There must be concomitance: the issuance of a check should be
the means to obtain money or property from the payee. Hence, a check issued in
payment of a pre-existing obligation does not constitute estafa even if there is
no fund in the bank to cover the amount of the check.
4. Appeals; The rule that findings of facts of trial courts are accorded not only
respect, but at times, finality, admits of exceptions, as when there is a
misapprehension of facts.-
While findings of fact of trial courts are accorded not only respect, but at times,
finality, this rule admits of exceptions, as when there is a misappreciation of
facts.
5. Criminal Law; Estafa; Bouncing Checks; There is no estafa through bouncing
checks when it is shown that private complainant knew that the drawer did not
have sufficient funds in the bank at the time the check was issued to him.-
We held in Pacheco v. Court of Appeals that there is no estafa through bouncing
checks when it is shown that private complainant knew that the drawer did not
have sufficient funds in the bank at the time the check was issued to him. Such
knowledge negates the element of deceit and constitutes a defense in estafa
through bouncing checks.
6. Criminal Law; Estafa; Bouncing Checks; Presumption of Innocence; As a
matter of right, the constitutional presumption of innocence of the accused
must be favored regardless of the inconsistencies in her testimony or the
weakness of her own testimony.-
Despite the inconsistencies in the testimony of appellant, these were minor and
did not destroy her credibility nor shatter the theory of the defense. To be sure,
the prosecution failed to prove the guilt of appellant beyond reasonable doubt.
As a matter of right, the constitutional presumption of innocence of appellant
must be favored regardless of the inconsistencies in her testimony or the
weakness of her own defense.
7. Criminal Law; Estafa; Bouncing Checks; An accused acquitted of estafa may
be held civilly liable in the same case where the facts established by the evidence
so warrant.-
Appellant, however, is not without liability. An accused acquitted of estafa may
be held civilly liable in the same case where the facts established by the evidence
so warrant. In the case at bar, the records lack sufficient evidence to determine
the amount of her remaining obligation.
8. Appeals; Evidence; Remand of Cases; Where the evidence is not sufficient to
warrant a conclusion, the case should be remanded to the court a quo for
reception of further evidence.-
This Court is not a trier of facts and where the evidence on record is not
sufficient to warrant a conclusion, the case should be remanded to the court a
quo for reception of further evidence.
Division: SECOND DIVISION
Docket Number: G.R. No. 154159
Counsel: The Solicitor General, Marissa Grace L. Corrales
Ponente: PUNO
Dispositive Portion:
IN VIEW WHEREOF, appellant Aloma Reyes is ACQUITTED of estafa under Article
315, paragraph 2(d) of the Revised Penal Code, as amended. The assailed
Sentence of the Regional Trial Court of Davao City, Branch 11, dated March 13,
2002 is REVERSED and SET ASIDE. The case is REMANDED to the court a quo for
the determination of appellant’s civil liability. The Director of the Bureau of
Corrections is DIRECTED to release her IMMEDIATELY unless she is being
lawfully held for another offense.
Case Title : NOE S. ANDAYA, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Criminal Procedure|Criminal Law|Appeals|Falsification of Private
Documents|Falsification of Commercial Documents|Criminal
Procedure|Pleadings and Practice|Disbursement Vouchers|Words and
Phrases|Presumption of Innocence|Right to be Informed
Syllabi:
1. Criminal Procedure; Appeals; An appeal in a criminal case opens the whole
action for review on any question including those not raised by the parties.-
—Time honored is the principle that an appeal in a criminal case opens the
whole action for review on any question including those not raised by the
parties. After a careful and thorough review of the records, we are convinced
that petitioner should be acquitted based on reasonable doubt.
2. Criminal Procedure; Pleadings and Practice; Public prosecutors must
carefully study the evidence on record before filing the corresponding
information in courts of law and must be vigilant in identifying and rectifying
errors made.-
—It is an opportune time to remind public prosecutors of their important duty to
carefully study the evidence on record before filing the corresponding
information in our courts of law and to be vigilant in identifying and rectifying
errors made. Mistakes in filing the proper information and in the ensuing
prosecution of the case serve only to frustrate the State’s interest in enforcing its
criminal laws and adversely affect the administration of justice.
3. Same; Same; Same; Falsification of Private Documents; Where the charge in
the information for falsification of private document was causing damage to a
financial entity because the accused caused it to appear in the disbursement
voucher that a person was entitled to a finder’s fee when in truth and in fact the
entity owed no such amount to said person but the proof adduced during trial
showed that the acts of the accused were designed to lower the tax base of
another person and aid the latter in evading payment of taxes on the finder’s
fee, the accused cannot be convicted of falsifying the voucher with criminal
intent to cause damage to the government.-
—As in the Burgos case, the information in the case at bar is valid, however,
there is a variance between the allegation in the information and proof adduced
during trial with respect to the third essential element of falsification of private
document, i.e., the falsification caused damage or was committed with intent to
cause damage to a third party. To reiterate, petitioner was charged in the
information with causing damage to AFPSLAI in the amount of P21,000.00
because he caused it to appear in the disbursement voucher that Guilas was
entitled to a P21,000.00 finder’s fee when in truth and in fact AFPSLAI owed no
such amount to Guilas. However, he was convicted by the trial court of falsifying
the voucher with criminal intent to cause damage to the government because
the trial court found that petitioner’s acts were designed to lower the tax base
of Hernandez and aid the latter in evading payment of taxes on the finder’s fee.
We find this variance material and prejudicial to petitioner which, perforce, is
fatal to his conviction in the instant case. By the clear and unequivocal terms of
the information, the prosecution endeavored to prove that the falsification of
the voucher by petitioner caused damage to AFPSLAI in the amount of
P21,000.00 and not that the falsification of the voucher was done with intent to
cause damage to the government. It is apparent that this variance not merely
goes to the identity of the third party but, more importantly, to the nature and
extent of the damage done to the third party. Needless to state, the defense
applicable for each is different.
4. Same; Same; Same; The main purpose of requiring the various elements of a
crime to be set out in the information is to enable the accused to suitably
prepare his defense because he is presumed to have no independent
knowledge of the facts that constitute the offense; To convict an accused of a
ground not alleged while he is concentrating his defense against the ground
alleged would plainly be unfair and underhanded.-
—It is fundamental that every element constituting the offense must be alleged
in the information. The main purpose of requiring the various elements of a
crime to be set out in the information is to enable the accused to suitably
prepare his defense because he is presumed to have no independent knowledge
of the facts that constitute the offense. The allegations of facts constituting the
offense charged are substantial matters and an accused’s right to question his
conviction based on facts not alleged in the information cannot be waived. No
matter how conclusive and convincing the evidence of guilt may be, an accused
cannot be convicted of any offense unless it is charged in the information on
which he is tried or is necessarily included therein. To convict him of a ground
not alleged while he is concentrating his defense against the ground alleged
would plainly be unfair and underhanded. The rule is that a variance between
the allegation in the information and proof adduced during trial shall be fatal to
the criminal case if it is material and prejudicial to the accused so much so that
it affects his substantial rights.
5. Same; Presumption of Innocence; Right to be Informed; The prosecution has
the duty to prove each and every element of the crime charged in the
information to warrant a finding of guilt for the said crime or for any other crime
necessarily included therein.-
—In all criminal prosecutions, the burden of proof is on the prosecution to
establish the guilt of the accused beyond reasonable doubt. It has the duty to
prove each and every element of the crime charged in the information to
warrant a finding of guilt for the said crime or for any other crime necessarily
included therein. However, in the case at bar, the prosecution failed to prove the
third essential element of the crime charged in the information. Thus, petitioner
should be acquitted due to insufficiency of evidence.
6. Same; Same; Same; Same; Disbursement Vouchers; Words and Phrases; A
disbursement voucher is a private document only-
—it is not a commercial document because it is not a document used by
merchants or businessmen to promote or facilitate trade or credit transactions
nor it is defined and regulated by the Code of Commerce or other commercial
law; A private document is a deed or instrument executed by a private person
without the intervention of a public notary or of other person legally authorized,
by which some disposition or agreement is proved, evidenced or set forth.—The
second element of the offense charged in the information, i.e., the falsification
was committed in Disbursement Voucher No. 58380, a private document, is
likewise present. It appears that the public prosecutor erroneously characterized
the disbursement voucher as a commercial document so that he designated the
offense as estafa through falsification of commercial document in the preamble
of the information. However, as correctly ruled by the trial court, the subject
voucher is a private document only; it is not a commercial document because it
is not a document used by merchants or businessmen to promote or facilitate
trade or credit transactions nor is it defined and regulated by the Code of
Commerce or other commercial law. Rather, it is a private document, which has
been defined as a deed or instrument executed by a private person without the
intervention of a public notary or of other person legally authorized, by which
some disposition or agreement is proved, evidenced or set forth, because it
acted as the authorization for the release of the P21,000.00 finder’s fee to
Guilas and as the receipt evidencing the payment of this finder’s fee.
7. Same; Same; Falsification of Commercial Documents; Criminal
Procedure; Pleadings and Practice;Although the public prosecutor designated
the offense charged in the information as estafa through falsification of
commercial document, the accused could be convicted of falsification of private
document, had it been proper, under the well-settled rule that it is the
allegations in the information that determines the nature of the offense and not
the technical name given by the public prosecutor in the preamble of the
information.-
—Although the public prosecutor designated the offense charged in the
information as estafa through falsification of commercial document, petitioner
could be convicted of falsification of private document, had it been proper,
under the well-settled rule that it is the allegations in the information that
determines the nature of the offense and not the technical name given by the
public prosecutor in the preamble of the information. We explained this principle
in the case of U.S. v. Lim San in this wise: From a legal point of view, and in a
very real sense, it is of no concern to the accused what is the technical name of
the crime of which he stands charged. It in no way aids him in a defense on the
merits. x x x That to which his attention should be directed, and in which he,
above all things else, should be most interested, are the facts alleged. The real
question is not did he commit a crime given in the law some technical and
specific name, but did he perform the acts alleged in the body of the information
in the manner therein set forth. x x x The real and important question to him is,
“Did you perform the acts alleged in the manner alleged?” not, “Did you commit
a crime named murder?” If he performed the acts alleged, in the manner stated,
the law determines what the name of the crime is and fixes the penalty therefor.
x x x If the accused performed the acts alleged in the manner alleged, then he
ought to be punished and punished adequately, whatever may be the name of
the crime which those acts constitute.
8. Criminal Law; Falsification of Private Documents; Elements.-
—The elements of falsification of private document under Article 172,
paragraph 2 in relation to Article 171 of the Revised Penal Code are: (1) the
offender committed any of the acts of falsification under Article 171 which, in
the case at bar, falls under paragraph 2 of Article 171, i.e., causing it to appear
that persons have participated in any act or proceeding when they did not in
fact so participate; (2) the falsification was committed on a private document;
and (3) the falsification caused damage or was committed with intent to cause
damage to a third party.
Division: FIRST DIVISION
Docket Number: G.R. No. 168486
Counsel: Luis S. Salas, The Solicitor General
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the petition is GRANTED. The September 29, 2004 Decision and
April 26, 2005 Resolution of the Court Appeals in CA-G.R. CR No. 26556 are
REVERSED and SET ASIDE. Petitioner is ACQUITTED based on reasonable doubt.
The Bail Bond is CANCELLED.
Case Title : LEONILA BATULANON, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Criminal Law|Falsification|Estafa|Pleadings and
Practice|Handwriting|Compromise|Words and Phrases
Syllabi:
1. Criminal Law; Falsification; Estafa; Pleadings and Practice; Although the
offense charged in the information is estafa through falsification of commercial
document, the accused could be convicted of falsification of private document
under the well-settled rule that it is the allegations in the information that
determines the nature of the offense and not the technical name given in the
preamble of the information.-
—Although the offense charged in the information is estafa through falsification
of commercial document, appellant could be convicted of falsification of private
document under the well-settled rule that it is the allegations in the information
that determines the nature of the offense and not the technical name given in
the preamble of the information. In Andaya v. People, 493 SCRA 539 (2006), we
held: From a legal point of view, and in a very real sense, it is of no concern to
the accused what is the technical name of the crime of which he stands charged.
It in no way aids him in a defense on the merits. x x x That to which his attention
should be directed, and in which he, above all things else, should be most
interested, are the facts alleged. The real question is not did he commit a crime
given in the law some technical and specific name, but did he perform the acts
alleged in the body of the information in the manner therein set forth. x x x The
real and important question to him is, “Did you perform the acts alleged in the
manner alleged?” not, “Did you commit a crime named murder?” If he
performed the acts alleged, in the manner stated, the law determines what the
name of the crime is and fixes the penalty therefor. x x x If the accused
performed the acts alleged in the manner alleged, then he ought to be punished
and punished adequately, whatever may be the name of the crime which those
acts constitute.
2. Same; Same; Elements of Estafa Through Conversion or Misappropriation.-
—The elements of estafa through conversion or misappropriation under Art. 315
(1) (b) of the Revised Penal Code are: (1) that money, goods or other personal
property is received by the offender in trust, or on commission, or for
administration, or under any other obligation involving the duty to make
delivery of, or to return, the same; (2) that there be misappropriation or
conversion of such money or property by the offender or denial on his part of
such receipt; (3) that such misappropriation or conversion or denial is to the
prejudice of another; (4) that there is a demand made by the offended party on
the offender. (Note: The 4th element is not necessary when there is evidence of
misappropriation of the goods by the defendant)
3. Same; Same; The essence of falsification is the act of making untruthful or
false statements.-
—In Criminal Case No. 3627, the trial court convicted petitioner Batulanon for
falsifying Dennis Batulanon’s signature in the cash voucher based on the
Information charging her of signing the name of her 3 year old son, Dennis. The
records, however, reveal that in Cash Voucher No. 374A, petitioner Batulanon
did not falsify the signature of Dennis. What she did was to sign: “by:
lbatulanon” to indicate that she received the proceeds of the loan in behalf of
Dennis. Said act does not fall under any of the modes of falsification under
Article 171 because there in nothing untruthful about the fact that she used the
name of Dennis and that as representative of the latter, obtained the proceeds
of the loan from PCCI. The essence of falsification is the act of making untruthful
or false statements, which is not attendant in this case. As to whether, such
representation involves fraud which caused damage to PCCI is a different matter
which will make her liable for estafa, but not for falsification. Hence, it was an
error for the courts below to hold that petitioner Batulanon is also guilty of
falsification of private document with respect to Criminal Case No. 3627
involving the cash voucher of Dennis.
4. Same; Same; Estafa; There is no complex crime of estafa through
falsification of private document;If the falsification of a private document is
committed as a means to commit estafa, the proper crime to be charged is
falsification; If the estafa can be committed without the necessity of falsifying a
document, the proper crime to be charged is estafa.-
—As there is no complex crime of estafa through falsification of private
document, it is important to ascertain whether the offender is to be charged
with falsification of a private document or with estafa. If the falsification of a
private document is committed as a means to commit estafa, the proper crime
to be charged is falsification. If the estafa can be committed without the
necessity of falsifying a document, the proper crime to be charged is estafa.
Thus, in People v. Reyes, 56 Phil. 286 (1931), the accused made it appear in the
time book of the Calamba Sugar Estate that a laborer, Ciriaco Sario, worked 21
days during the month of July, 1929, when in reality he had worked only 11
days, and then charged the offended party, the Calamba Sugar Estate, the
wages of the laborer for 21 days. The accused misappropriated the wages
during which the laborer did not work for which he was convicted of falsification
of private document.
5. Same; Same; Words and Phrases; Vouchers are private documents and not
commercial documents because they are not documents used by merchants or
businessmen to promote or facilitate trade or credit transactions, nor are they
defined and regulated by the Code of Commerce or other commercial
law; Private documents are deeds or instruments executed by a private person
without the intervention of a public notary or of other person legally authorized,
by which some disposition or agreement is proved, evidenced or set forth.-
—The Court of Appeals correctly ruled that the subject vouchers are private
documents and not commercial documents because they are not documents
used by merchants or businessmen to promote or facilitate trade or credit
transactions nor are they defined and regulated by the Code of Commerce or
other commercial law. Rather, they are private documents, which have been
defined as deeds or instruments executed by a private person without the
intervention of a public notary or of other person legally authorized, by which
some disposition or agreement is proved, evidenced or set forth.
6. Same; Same; Compromise; In criminal cases, except those involving quasi-
offenses or criminal negligence or those allowed by law to be compromised, an
offer of compromise by the accused may be received in evidence as an implied
admission of guilt.-
—The claim that Batulanon’s letter to the cooperative asking for a compromise
was not an admission of guilt is untenable. Section 27, Rule 130 of the Rules of
Court provides that in criminal cases, except those involving quasi-offenses or
criminal negligence or those allowed by law to be compromised, an offer of
compromise by the accused may be received in evidence as an implied
admission of guilt.
7. Same; Same; Handwriting; The handwriting of a person may be proved by
any witness who believes it to be the handwriting of such person because he has
seen the person write, or has seen writing purporting to be his upon which the
witness has acted or been charged, and has thus acquired knowledge of the
handwriting of such person.-
—Medallo categorically declared that she saw Batulanon forge the signatures of
Oracion and Arroyo in the vouchers and made it appear that the amounts stated
therein were actually received by these persons. As to the signature of Arroyo,
Medallo’s credible testimony and her familiarity with the handwriting of
Batulanon proved that it was indeed the latter who signed the name of Arroyo.
Contrary to Batulanon’s contention, the prosecution is not duty-bound to
present the persons whose signatures were forged as Medallo’s eyewitness
account of the incident was sufficient. Moreover, under Section 22, Rule 132 of
the Rules of Court, the handwriting of a person may be proved by any witness
who believes it to be the handwriting of such person because he has seen the
person write, or has seen writing purporting to be his upon which the witness
has acted or been charged, and has thus acquired knowledge of the handwriting
of such person.
8. Same; Same; Elements of Falsification of Private Documents.-
—The elements of falsification of private document under Article 172,
paragraph 2 of the Revised Penal Code are: (1) that the offender committed any
of the acts of falsification, except those in paragraph 7, Article 171; (2) that the
falsification was committed in any private document; and (3) that the
falsification caused damage to a third party or at least the falsification was
committed with intent to cause such damage.
Division: FIRST DIVISION
Docket Number: G.R. No. 139857
Counsel: Acharon, Alconera & Associates, The Solicitor General
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the Decision appealed from is AFFIRMED with the following
MODIFICATIONS:
Republic of the Philippines
Supreme Court
Manila
SECOND DIVISION
PENTACAPITAL INVESTMENT CORPORATION, G.R. No. 1
Petitioner,
- versus -
MAKILITO B. MAHINAY,
Respondent.
x--------------------------------------------------x
PENTACAPITAL INVESTMENT CORPORATION,
Petitioner, G.R. No. 181482

Present:

CARPIO, J.,
- versus - Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
MAKILITO B. MAHINAY,
Respondent. Promulgated:

July 5, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before us are two consolidated petitions for review on certiorari under

Rule 45 of the Rules of Court filed by petitioner Pentacapital Investment
Corporation. In G.R. No. 171736, petitioner assails the Court of Appeals (CA)
Decision[1] dated December 20, 2005 and Resolution[2] dated March 1, 2006 in
CA-G.R. SP No. 74851; while in G.R. No. 181482, it assails the CA
Decision[3]dated October 4, 2007 and Resolution[4] dated January 21, 2008 in CA-
G.R. CV No. 86939.

The Facts

Petitioner filed a complaint for a sum of money against respondent

Makilito Mahinay based on two separate loans obtained by the latter,
amounting to P1,520,000.00 and P416,800.00, or a total amount
of P1,936,800.00. These loans were evidenced by two promissory
notes[5] dated February 23, 1996. Despite repeated demands, respondent failed
to pay the loans, hence, the complaint.[6]

In his Answer with Compulsory Counterclaim,[7] respondent claimed that

petitioner had no cause of action because the promissory notes on which its
complaint was based were subject to a condition that did not occur.[8] While
admitting that he indeed signed the promissory notes, he insisted that he never
took out a loan and that the notes were not intended to be evidences of
indebtedness.[9] By way of counterclaim, respondent prayed for the payment of
moral and exemplary damages plus attorney’s fees.[10]
 Respondent explained that he was the counsel of Ciudad Real
Development Inc. (CRDI). In 1994, Pentacapital Realty Corporation (Pentacapital
Realty) offered to buy parcels of land known as the Molino Properties, owned
by CRDI, located in Molino, Bacoor, Cavite. The Molino Properties, with a total
area of 127,708 square meters, were sold at P400.00 per sq m. As the Molino
Properties were the subject of a pending case, Pentacapital Realty paid only the
down payment amounting toP12,000,000.00. CRDI allegedly instructed
Pentacapital Realty to pay the former’s creditors, including respondent who
thus received a check worth P1,715,156.90.[11] It was further agreed that the
balance would be payable upon the submission of an Entry of Judgment
showing that the case involving the Molino Properties had been decided in
favor of CRDI.[12]

Respondent, Pentacapital Realty and CRDI allegedly agreed that

respondent had a charging lien equivalent to 20% of the total consideration of
the sale in the amount of P10,277,040.00. Pending the submission of the Entry
of Judgment and as a sign of good faith, respondent purportedly returned
the P1,715,156.90 check to Pentacapital Realty. However, the Molino
Properties continued to be haunted by the seemingly interminable court actions
initiated by different parties which thus prevented respondent from collecting
his commission.

On motion[13] of respondent, the Regional Trial Court (RTC) allowed

him to file a Third Party Complaint[14] against CRDI, subject to the payment of
docket fees.[15]
 Admittedly, respondent earlier instituted an action for Specific
Performance against Pentacapital Realty before the RTC of Cebu City, Branch
57, praying for the payment of his commission on the sale of the Molino
Properties.[16] In an Amended Complaint,[17] respondent referred to the action
he instituted as one of Preliminary Mandatory Injunction instead of Specific
Performance. Acting on Pentacapital Realty’s Motion to Dismiss, the RTC
dismissed the case for lack of cause of action.[18] The dismissal became final and
executory.

With the dismissal of the aforesaid case, respondent filed a Motion

to Permit Supplemental Compulsory Counterclaim.[19] In addition to the
damages that respondent prayed for in his compulsory counterclaim, he sought
the payment of his commission amounting to P10,316,640.00, plus interest at
the rate of 16% per annum, as well as attorney’s fees equivalent to 12% of his
principal claim.[20] Respondent claimed that Pentacapital Realty is a 100%
subsidiary of petitioner. Thus, although petitioner did not directly participate in
the transaction between Pentacapital Realty, CRDI and respondent, the latter’s
claim against petitioner was based on the doctrine of piercing the veil of
corporate fiction. Simply stated, respondent alleged that petitioner and
Pentacapital Realty are one and the same entity belonging to the Pentacapital
Group of Companies.[21]

Over the opposition of petitioner, the RTC, in an Order[22] dated

August 22, 2002, allowed the filing of the supplemental counterclaim.
Aggrieved, petitioner sought recourse in the CA through a special
civil action for certiorari, seeking to reverse and set aside the RTC Order. The
case was docketed as CA-G.R. SP No. 74851. On December 20, 2005, the CA
rendered the assailed Decision dismissing the petition.[23] The appellate court
sustained the allowance of the supplemental compulsory counterclaim based
on the allegations in respondent’s pleading. The CA further concluded that
there was a logical relationship between the claims of petitioner in its complaint
and those of respondent in his supplemental compulsory counterclaim. The CA
declared that it was inconsequential that respondent did not clearly allege the
facts required to pierce the corporate separateness of petitioner and its
subsidiary, the Pentacapital Realty.[24]
Petitioner now comes before us in G.R. No. 171736, raising the
following issues:
A.
WHETHER RESPONDENT MAHINAY IS BARRED
FROM ASSERTING THE CLAIM CONTAINED IN HIS
“SUPPLEMENTAL COMPULSORY COUNTERCLAIM” ON THE
GROUNDS OF (1) RES JUDICATA, (2) WILLFUL AND
DELIBERATE FORUM SHOPPING, AND (3) FAILURE TO
INTERPOSE SUCH CLAIM ON TIME PURSUANT TO SECTION
2 OF RULE 9 OF THE RULES OF COURT;
B.
WHETHER RESPONDENT MAHINAY’S
SUPPLEMENTAL COMPULSORY COUNTERCLAIM IS
ACTUALLY A THIRD-PARTY COMPLAINT AGAINST
PENTACAPITAL REALTY, THE INTRODUCTION OF WHICH
REQUIRES THE PAYMENT OF THE NECESSARY DOCKET
FEES;
C.
ASSUMING FOR THE SAKE OF PURE ARGUMENT
THAT IT IS PROPER TO PIERCE THE CORPORATE VEIL AND
TO ALLOW RESPONDENT MAHINAY TO LODGE A
“SUPPLEMENTAL COMPULSORY COUNTERCLAIM”
AGAINST HEREIN PETITIONER PENTACAPITAL
INVESTMENT FOR AN ALLEGED OBLIGATION OF ITS
SUBSIDIARY, PENTACAPITAL REALTY, ON THE THEORY
THAT THEY ARE “ONE AND THE SAME COMPANY,”
WHETHER PENTACAPITAL REALTY SHOULD HAVE AT
LEAST BEEN MADE A PARTY TO THE CASE AS RULED BY
THIS HONORABLE COURT IN FILMERCO COMMERCIAL
CO., INC. VS. INTERMEDIATE APPELLATE COURT;
D.
WHETHER RESPONDENT MAHINAY SHOULD BE
ALLOWED TO PRESENT EVIDENCE ON HIS SO-CALLED
“SUPPLEMENTAL COMPULSORY COUNTERCLAIM”
INASMUCH AS (1) RESPONDENT MAHINAY’S PLEADINGS
ARE BEREFT OF ANY ALLEGATIONS TO BUTTRESS THE
MERGING OF PENTACAPITAL REALTY AND PENTACAPITAL
INVESTMENT INTO ONE ENTITY AND THE CONSEQUENT
IMPUTATION ON THE LATTER OF THE FORMER’S
SUPPOSED LIABILITY ON RESPONDENT MAHINAY’S
SUPPLEMENTAL COMPULSORY COUNTERCLAIM, AND (2)
THE INCIDENTS ALLEGEDLY PERTAINING TO, AND WHICH
WOULD THEREBY SUPPORT, THE PIERCING OF
CORPORATE VEIL ARE NOT EVIDENTIARY MATTERS
MATERIAL TO THE PROCEEDINGS BEFORE THE COURT A
QUO CONSIDERING THAT THE SAME ARE BEYOND THE
SCOPE OF THE PLEADINGS;
E.
WHETHER THE DOCTRINE OF PIERCING THE
CORPORATE VEIL MAY BE INVOKED AND APPLIED IN
ORDER TO EVADE AN OBLIGATION AND FACILITATE
PROCEDURAL WRONGDOING; AND
F.
WHETHER PETITIONER PENTACAPITAL
INVESTMENT COMMITTED FORUM SHOPPING WHEN IT
FILED THE PRESENT PETITION DURING THE PENDENCY OF
THE MOTION FOR RECONSIDERATION IT FILED BEFORE
THE COURT A QUO AND, SUBSEQUENTLY, OF THE APPEAL
BEFORE THE COURT OF APPEALS TO QUESTION THE
JUDGMENT OF THE COURT A QUO.[25]
There being no writ of injunction or Temporary Restraining Order
(TRO), the proceedings before the RTC continued and respondent was allowed
to present his evidence on his supplemental compulsory counterclaim. After
trial on the merits, the RTC rendered a decision[26] dated March 20, 2006, the
dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED,
plaintiff’s complaint is hereby ordered dismissed for lack
of merit. This court, instead, finds that defendant was
able to prove by a clear preponderance of evidence his
cause of action against plaintiff as to defendant’s
compulsory and supplemental counterclaims. That,
therefore, this court hereby orders the plaintiff to pay
unto defendant the following sums, to wit:
1. P1,715,156.90 representing the amount
plaintiff is obligated to pay defendant as
provided for in the deed of sale and
the supplemental agreement, plus interest at
the rate of 16% per annum, to be
computed from September 23, 1998 until the
said amount shall have been fully paid;
2. Php 10,316,640.00 representing defendant’s
share of the proceeds of the sale of the
Molino property (defendant’s charging lien)
plus interest at the rate of 16% per annum, to
be computed from September 23, 1998 until
the said amount shall have been fully paid;
3. Php 50,000.00 as attorney’s fees based on
quantum meruit;
4. Php 50,000.00 litigation expenses, plus
costs of suit.
This court finds it unnecessary to rule on the
third party complaint, the relief prayed for therein being
dependent on the possible award by this court of the
relief of plaintiff’s complaint.[27]
On appeal, the CA, in CA-G.R. CV No. 86939, affirmed in toto the
above decision. The CA found no basis for petitioner to collect the amount
demanded, there being no perfected contract of loan for lack of
consideration.[28] As to respondent’s supplemental compulsory counterclaim,
quoting the findings of the RTC, the appellate court held that respondent was
able to prove by preponderance of evidence that it was the intent of
Pentacapital Group of Companies and CRDI to give him P10,316,640.00
andP1,715,156.90.[29] The CA likewise affirmed the award of interest at the rate
of 16% per annum, plus damages.[30]
Unsatisfied, petitioner moved for reconsideration of the aforesaid
Decision, but it was denied in a Resolution[31] dated January 21, 2008. Hence,
the present petition in G.R. No. 181482, anchored on the following arguments:
A.
Considering that the inferences made in the
present case are manifestly absurd, mistaken or
impossible, and are even contrary to the admissions of
respondent Mahinay, and inasmuch as the judgment is
premised on a misapprehension of facts, this Honorable
Court may validly take cognizance of the errors relative to
the findings of fact of both the Honorable Court of
Appeals and the court a quo.
B.
Respondent Mahinay is liable to petitioner
PentaCapital Investment for the PhP1,936,800.00 loaned
to him as well as for damages and attorney’s fees.
1.
The Honorable Court of
Appeals erred in concluding that
respondent Mahinay failed to
receive the money he borrowed
when there is not even any dispute
as to the fact that respondent
Mahinay did indeed receive the
PhP1,936,800.00 from petitioner
PentaCapital Investment.
2.
The Promissory Notes
executed by respondent Mahinay
are valid instruments and are
binding upon him.
C.
Petitioner PentaCapital Investment cannot be held
liable on the supposed “supplemental compulsory
counterclaim” of respondent Mahinay.
1.
The findings of fact as well as
the conclusions arrived at by the
Court of Appeals in its decision
were based on mistaken
assumptions and on erroneous
appreciation of the evidence on
record.
2.
There is no evidence on
record to support the merging of
PentaCapital Realty and petitioner
PentaCapital Investment into one
entity and the consequent
imputation on the latter of the
former’s supposed liability on
respondent Mahinay’s
supplemental compulsory
counterclaim.
3.
Inasmuch as the claim of
respondent Mahinay is supposedly
against PentaCapital Realty, and
considering that petitioner
PentaCapital Investment is a
separate, distinct entity from
PentaCapital Realty, the latter
should have been impleaded as it is
an indispensable party.
D.
Assuming for the sake of pure argument that it is
proper to disregard the corporate fiction and to consider
herein petitioner PentaCapital Investment and its
subsidiary, PentaCapital Realty, as one and the same
entity, respondent Mahinay’s “supplemental compulsory
counterclaim” must still necessarily fail.
1.
The cause of action of
respondent Mahinay, as contained
in his “supplemental compulsory
counterclaim,” is already barred by
a prior judgment (res judicata).
2.
Considering that the
dismissal on the merits by the RTC
Cebu of respondent Mahinay’s
complaint against PentaCapital
Realty for attorney’s fees has
attained finality, respondent
Mahinay committed a willful act of
forum shopping when he
interposed the exact same claim in
the proceedings a quo as a
supposed supplemental
compulsory counterclaim against
what he claims to be “one and the
same” company.
3.
Respondent Mahinay’s
supplemental compulsory
counterclaim is actually a third
party complaint against
PentaCapital Realty; the filing
thereof therefore requires the
payment of the necessary docket
fees.
E.
The doctrine of piercing the corporate veil is an
equitable remedy which cannot and should not be
invoked, much less applied, in order to evade an
obligation and facilitate procedural wrongdoing.[32]
Simply put, the issues for resolution are: 1) whether the admission of
respondent’s supplemental compulsory counterclaim is proper; 2) whether
respondent’s counterclaim is barred by res judicata; and (3) whether petitioner
is guilty of forum-shopping.
The Court’s Ruling
Admission of Respondent’s
Supplemental Compulsory Counterclaim
The pertinent provision of the Rules of Court is Section 6 of Rule 10,
which reads:
Sec. 6. Supplemental pleadings. – Upon motion
of a party, the court may, upon reasonable notice and
upon such terms as are just, permit him to serve a
supplemental pleading setting forth transactions,
occurrences or events which have happened since the
date of the pleading sought to be supplemented. The
adverse party may plead thereto within ten (10) days
from notice of the order admitting the supplemental
pleading.
As a general rule, leave will be granted to a party who desires to file
a supplemental pleading that alleges any material fact which happened or came
within the party’s knowledge after the original pleading was filed, such being
the office of a supplemental pleading. The application of the rule would ensure
that the entire controversy might be settled in one action, avoid unnecessary
repetition of effort and unwarranted expense of litigants, broaden the scope of
the issues in an action owing to the light thrown on it by facts, events and
occurrences which have accrued after the filing of the original pleading, and
bring into record the facts enlarging or charging the kind of relief to which
plaintiff is entitled. It is the policy of the law to grant relief as far as possible for
wrongs complained of, growing out of the same transaction and thus put an prevail. The burden of proof remains where it is, but by the presumption, the
end to litigation.[33] one who has that burden is relieved for the time being from introducing
evidence in support of the averment, because the presumption stands in the
In his Motion to Permit Supplemental Compulsory Counterclaim, place of evidence unless rebutted.[40]
respondent admitted that, in his Answer with Compulsory Counterclaim, he
claimed that, as one of the corporations composing the Pentacapital Group of
Companies, petitioner is liable to him for P10,316,640.00, representing 20%
attorney’s fees and share in the proceeds of the sale transaction between
Pentacapital Realty and CRDI. In the same pleading, he further admitted that he
did not include this amount in his compulsory counterclaim because he had
earlier commenced another action for the collection of the same amount
against Pentacapital Realty before the RTC of Cebu. With the dismissal of the
RTC-Cebu case, there was no more legal impediment for respondent to file the
supplemental counterclaim.

Moreover, in his Answer with Compulsory Counterclaim, respondent

already alleged that he demanded from Pentacapital Group of Companies to
which petitioner supposedly belongs, the payment of his 20% commission. This,
in fact, was what prompted respondent to file a complaint before the RTC-Cebu
for preliminary mandatory injunction for the release of the said amount.

Given these premises, it is obvious that the alleged obligation of

petitioner already existed and was known to respondent at the time of the filing
of his Answer with Counterclaim. He should have demanded payment of his
commission and share in the proceeds of the sale in that Answer with
Compulsory Counterclaim, but he did not. He is, therefore, proscribed from
incorporating the same and making such demand via a supplemental pleading.
The supplemental pleading must be based on matters arising subsequent to the
filing of the original pleading related to the claim or defense presented therein,
and founded on the same cause of action.[34]Supplemental pleadings must state
transactions, occurrences or events which took place since the time the
pleading sought to be supplemented was filed.[35]

Even on the merits of the case, for reasons that will be discussed
below, respondent’s counterclaim is doomed to fail.

Petitioner’s Complaint

In its complaint for sum of money, petitioner prayed that respondent

be ordered to pay his obligation amounting toP1,936,800.00 plus interest and
penalty charges, and attorney’s fees. This obligation was evidenced by two
promissory notes executed by respondent. Respondent, however, denied
liability on the ground that his obligation was subject to a condition that did not
occur. He explained that the promissory notes were dependent upon the
happening of a remote event that the parties tried to anticipate at the time
they transacted with each other, and the event did not happen.[36] He further
insisted that he did not receive the proceeds of the loan.

To ascertain whether or not respondent is bound by the promissory

notes, it must be established that all the elements of a contract of loan are
present. Like any other contract, a contract of loan is subject to the rules
governing the requisites and validity of contracts in general. It is elementary in
this jurisdiction that what determines the validity of a contract, in general, is the
presence of the following elements: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause of the
obligation which is established.[37]

In this case, respondent denied liability on the ground that the

promissory notes lacked consideration as he did not receive the proceeds of the
loan.

We cannot sustain his contention.

Under Article 1354 of the Civil Code, it is presumed that consideration

exists and is lawful unless the debtor proves the contrary.[38] Moreover, under
Section 3, Rule 131 of the Rules of Court, the following are disputable
presumptions: (1) private transactions have been fair and regular; (2) the
ordinary course of business has been followed; and (3) there was sufficient
consideration for a contract.[39] A presumption may operate against an
adversary who has not introduced proof to rebut it. The effect of a legal
presumption upon a burden of proof is to create the necessity of presenting
evidence to meet the legal presumption or the prima facie case created
thereby, and which, if no proof to the contrary is presented and offered, will
 In the present case, as proof of his claim of lack of consideration,
respondent denied under oath that he owed petitioner a single centavo. He
added that he did not apply for a loan and that when he signed the promissory
notes, they were all blank forms and all the blank spaces were to be filled up
only if the sale transaction over the subject properties would not push through
because of a possible adverse decision in the civil cases involving them (the
properties). He thus posits that since the sale pushed through, the promissory
notes did not become effective.
Lastly, respondent promised to pay 25% of his outstanding obligations as
attorney’s fees in case of non-payment thereof. Attorney’s fees here are in the
nature of liquidated damages. As long as said stipulation does not contravene
law, morals, or public order, it is strictly binding upon respondent. Nonetheless,
courts are empowered to reduce such rate if the same is iniquitous or
unconscionable pursuant to the above-quoted provision.[49] This sentiment is
echoed in Article 2227 of the Civil Code, to wit:

Contrary to the conclusions of the RTC and the CA, we find such proof
insufficient to overcome the presumption of consideration. The presumption
that a contract has sufficient consideration cannot be overthrown by the bare,
uncorroborated and self-serving assertion of respondent that it has no
consideration.[41] The alleged lack of consideration must be shown by
preponderance of evidence.[42]
Art. 2227. Liquidated damages, whether intended
as an indemnity or a penalty, shall be equitably reduced if
they are iniquitous or unconscionable.
Hence, we reduce the stipulated attorney’s fees from 25% to 10%.[50]

As it now appears, the promissory notes clearly stated that respondent

promised to pay petitioner P1,520,000.00 andP416,800.00, plus interests and
penalty charges, a year after their execution. Nowhere in the notes was it
stated that they were subject to a condition. As correctly observed by
petitioner, respondent is not only a lawyer but a law professor as well. He is,
therefore, legally presumed not only to exercise vigilance over his concerns but,
more importantly, to know the legal and binding effects of promissory notes
and the intricacies involving the execution of negotiable instruments including
the need to execute an agreement to document extraneous collateral
conditions and/or agreements, if truly there were such.[43] This militates
against respondent’s claim that there was indeed such an agreement. Thus, the
promissory notes should be accepted as they appear on their face.

Respondent’s liability is not negated by the fact that he has uncollected

commissions from the sale of the Molino properties. As the records of the case
show, at the time of the execution of the promissory notes, the Molino
properties were subject of various court actions commenced by different
parties. Thus, the sale of the properties and, consequently, the payment of
respondent’s commissions were put on hold. The non-payment of his
commissions could very well be the reason why he obtained a loan from
petitioner.

In Sierra v. Court of Appeals,[44] we held that:

A promissory note is a solemn

acknowledgment of a debt and a formal commitment to
repay it on the date and under the conditions agreed
upon by the borrower and the lender. A person who signs
such an instrument is bound to honor it as a legitimate
obligation duly assumed by him through the signature he
affixes thereto as a token of his good faith. If he reneges
on his promise without cause, he forfeits the sympathy
and assistance of this Court and deserves instead its
sharp repudiation.

Aside from the payment of the principal obligation of P1,936,800.00, the

parties agreed that respondent pay interest at the rate of 25% from February
17, 1997 until fully paid. Such rate, however, is excessive and thus, void. Since
the stipulation on the interest rate is void, it is as if there was no express
contract thereon. To be sure, courts may reduce the interest rate as reason and
equity demand.[45] In this case, 12% interest is reasonable.

The promissory notes likewise required the payment of a penalty

charge of 3% per month or 36% per annum. We find such rates unconscionable.
This Court has recognized a penalty clause as an accessory obligation which the
parties attach to a principal obligation for the purpose of ensuring the
performance thereof by imposing on the debtor a special prestation (generally
consisting of the payment of a sum of money) in case the obligation is not
fulfilled or is irregularly or inadequately fulfilled.[46] However, a penalty charge
of 3% per month is unconscionable;[47] hence, we reduce it to 1% per month or
12% per annum, pursuant to Article 1229 of the Civil Code which states:

Art. 1229. The judge shall equitably reduce the

penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has
been no performance, the penalty may also be reduced by
the courts if it is iniquitous or unconscionable.[48]
 Respondent’s Counterclaim and Supplemental
Counterclaim
The RTC, affirmed by the CA, granted respondent’s counterclaims as it
applied the doctrine of piercing the veil of corporate fiction. It is undisputed
that the parties to the contract of sale of the subject properties are Pentacapital
Realty as the buyer, CRDI as the seller, and respondent as the agent of CRDI.
Respondent insisted, and the RTC and the CA agreed, that petitioner, as the
parent company of Pentacapital Realty, was aware of the sale transaction, and
that it was the former who paid the consideration of the sale. Hence, they
concluded that the two corporations should be treated as one entity.
Petitioner assails the CA Decision sustaining the grant of
respondent’s counterclaim and supplemental counterclaim on the following
grounds: first, respondent’s claims are barred by res judicata, the same having
been adjudicated with finality by the RTC-Cebu in Civil Case No. CEB-
25032; second, piercing the veil of corporate fiction is without basis; third, the
case is dismissible for failure to implead Pentacapital Realty as indispensable
party; and last, respondent’s supplemental counterclaim is actually a third party
complaint against Pentacapital Realty, the filing thereof requires the payment
of the necessary docket fees.
Petitioner’s contentions are meritorious.
Res judicata means “a matter adjudged; a thing judicially acted upon or
decided; a thing or matter settled by judgment.” It lays the rule that an existing
final judgment or decree rendered on the merits, without fraud or collusion, by
a court of competent jurisdiction, upon any matter within its jurisdiction, is
conclusive of the rights of the parties or their privies, in all other actions or suits
in the same or any other judicial tribunal of concurrent jurisdiction on the
points and matters in issue in the first suit.[51]
The requisites of res judicata are:
(1) The former judgment or order must be
final;
(2) It must be a judgment on the merits;
(3) It must have been rendered by a court
having jurisdiction over the subject matter and
the parties; and
(4) There must be between the first and
second actions, identity of parties, subject
matter, and cause of action.[52]
These requisites are present in the instant case. It is undisputed that
respondent instituted an action for Preliminary Mandatory Injunction against
Pentacapital Realty, before the RTC of Cebu City, docketed as Civil Case No.
CEB-25032. On motion of Pentacapital Realty, in an Order dated August 15,
2001, the court dismissed the complaint on two grounds: 1) non-payment of
the correct filing fee considering that the complaint was actually a collection of
sum of money although denominated as Preliminary Mandatory Injunction; and
2) lack of cause of action. The court treated the complaint as a collection suit
because respondent was seeking the payment of his unpaid commission or
share in the proceeds of the sale of the Molino Properties. Additionally, the RTC
found that respondent had no cause of action against Pentacapital Realty, there
being no privity of contract between them. Lastly, the court held that it was
CRDI which agreed that 20% of the total consideration of the sale be paid and
delivered to respondent.[53]Instead of assailing the said Order, respondent filed
his supplemental compulsory counterclaim, demanding again the payment of
his commission, this time, against petitioner in the instant case. The Order,
therefore, became final and executory.
Respondent’s supplemental counterclaim against petitioner is
anchored on the doctrine of piercing the veil of corporate fiction. Obviously,
after the dismissal of his complaint before the RTC-Cebu, he now proceeds
against petitioner, through a counterclaim, on the basis of the same cause of
action. Thus, if we follow respondent’s contention that petitioner and
Pentacapital Realty are one and the same entity, the latter being a subsidiary of
the former, respondent is barred from instituting the present case based on the
principle of bar by prior judgment. The RTC-Cebu already made a definitive
conclusion that Pentacapital Realty is not a privy to the contract between
respondent and CRDI. It also categorically stated that it was CRDI which agreed
to pay respondent’s commission equivalent to 20% of the proceeds of the sale.
With these findings, and considering that petitioner’s alleged liability stems
from its supposed relation with Pentacapital Realty, logic dictates that the
findings of the RTC-Cebu, which had become final and executory, should bind
petitioner.
It is well-settled that when material facts or questions in issue in a
former action were conclusively settled by a judgment rendered therein, such
facts or questions constitute res judicata and may not again be litigated in a
subsequent action between the same parties or their privies regardless of the
form of the latter.[54] Absolute identity of parties is not required, and where a
shared identity of interest is shown by the identity of the relief sought by one
person in a prior case and the second person in a subsequent case, such was
deemed sufficient.[55] There is identity of parties not only when the parties in
the cases are the same, but also between those in privity with them.
No other procedural law principle is indeed more settled than that
once a judgment becomes final, it is no longer subject to change, revision,
amendment, or reversal, except only for correction of clerical errors, or the
making of nunc pro tunc entries which cause no prejudice to any party, or
where the judgment itself is void. The underlying reason for the rule is two-
fold: (1) to avoid delay in the administration of justice and thus make orderly
the discharge of judicial business; and (2) to put judicial controversies to an end,
at the risk of occasional errors, inasmuch as controversies cannot be allowed to
drag on indefinitely and the rights and obligations of every litigant must not
hang in suspense for an indefinite period of time.[56]
In view of the foregoing disquisitions, we find no necessity to discuss the
other issues raised by petitioner.
Forum Shopping
For his part, respondent adopts the conclusions made by the RTC
and the CA in granting his counterclaims. He adds that the petition should be
dismissed on the ground of forum-shopping. He argues that petitioner is guilty
of forum-shopping by filing the petition for review (G.R. No. 181482), assailing
the CA Decision dated October 4, 2007, despite the pendency of G.R. No.
171736 assailing the CA Decision dated December 20, 2005.
We do not agree with respondent.
Forum-shopping is the act of a litigant who repetitively availed of
several judicial remedies in different courts, simultaneously or successively, all
substantially founded on the same transactions and the same essential facts
and circumstances, and all raising substantially the same issues, either pending
in or already resolved adversely by some other court, to increase his chances of
obtaining a favorable decision if not in one court, then in another.[57]
What is important in determining whether forum-shopping exists is the
vexation caused the courts and parties-litigants by a party who asks different
courts and/or administrative agencies to rule on the same or related causes
and/or grant the same or substantially the same reliefs, in the process creating
the possibility of conflicting decisions being rendered by the different fora upon
the same issues.[58]
Forum-shopping can be committed in three ways: (1) by filing
multiple cases based on the same cause of action and with the same prayer, the
previous case not having been resolved yet (where the ground for dismissal
is litis pendentia); (2) by filing multiple cases based on the same cause of action
and with the same prayer, the previous case having been finally resolved
(where the ground for dismissal is res judicata); and (3) by filing multiple cases
based on the same cause of action but with different prayers (splitting of causes
of action, where the ground for dismissal is also either litis pendentia or res
judicata).[59]
More particularly, the elements of forum-shopping are: (a) identity of
parties or at least such parties that represent the same interests in both actions;
(b) identity of rights asserted and reliefs prayed for, the relief being founded on
the same facts; (c) identity of the two preceding particulars, such that any
judgment rendered in the other action will, regardless of which party is
successful, amount to res judicata in the action under consideration.[60]

These elements are not present in this case. In G.R. No. 171736, petitioner
assails the propriety of the admission of respondent’s supplemental compulsory
counterclaim; while in G.R. No. 181482, petitioner assails the grant of
respondent’s supplemental compulsory counterclaim. In other words, the first
case originated from an interlocutory order of the RTC, while the second case is
an appeal from the decision of the court on the merits of the case. There is,
therefore, no forum-shopping for the simple reason that the petition and the
appeal involve two different and distinct issues.
WHEREFORE, premises considered, the petitions are hereby GRANTED.
The Decisions and Resolutions of the Court of Appeals dated December 20,
2005 and March 1, 2006, in CA-G.R. SP No. 74851, and October 4, 2007 and
January 21, 2008, in CA-G.R. CV No. 86939, are REVERSED and SET ASIDE.
Respondent Makilito B. Mahinay is ordered to pay petitioner Pentacapital
Investment Corporation P1,936,800.00 plus 12% interest per annum,
and 12% per annum penalty charge, starting February 17, 1997. He
is likewise ordered to pay 10% of his outstanding obligation as attorney’s
fees. No pronouncement as to costs.
SO ORDERED.
Case Title : BIBIANO V. BAÑAS, JR., petitioner, vs. COURT OF APPEALS,
AQUILINO T. LARIN, RODOLFO TUAZON AND PROCOPIO TALON,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Appeals|Negotiable Instruments
Law|Taxation|Actions|Evidence|Promissory Notes|Words and Phrases|Tax
Amnesty|Statutory Construction|Sales|Installment Method|Although the
proceed of a discounted promissory note is not considered part of the initial
payment|it is still taxable income for the year it was converted into
cash|Libel|Damages|Public Officers|Taxation
Syllabi:
1. Appeals; Evidence; Findings of fact by the Court of Appeals especially if they
affirm factual findings of the trial court will not be disturbed by the Supreme
Court, unless these findings are not supported by evidence.-
As repeatedly held, findings of fact by the Court of Appeals especially if they
affirm factual findings of the trial court will not be disturbed by this Court, unless
these findings are not supported by evidence. Similarly, neither should we
disturb a finding of the trial court and appellate court that an allegation is not
supported by evidence on record. Thus, we agree with the conclusion of
respondent court that herein private respondents, on the basis of evidence,
could not be held liable for extortion.
2. Negotiable Instruments Law; Promissory Notes; Words and
Phrases; Ordinarily, when a bill is discounted, the lender (e.g. banks, financial
institution) charges or deducts a certain percentage from the principal value as
its compensation.-
It will be recalled that petitioner entered into a deed of sale purportedly on
installment. On the same day, he discounted the promissory note covering the
future installments. The discounting seems questionable because ordinarily,
when a bill is discounted, the lender (e.g. banks, financial institution) charges or
deducts a certain percentage from the principal value as its compensation. Here,
the discounting was done by the buyer.
3. Taxation; Tax Amnesty; The mere filing of tax amnesty return under
Presidential Decrees 1740 and 1840 does not ipso facto shield the taxpayer from
immunity against prosecution—to avail of a tax amnesty granted by the
government, and to be immune from suit on its delinquencies, the taxpayer
must have voluntarily disclosed his previously untaxed income and must have
paid the corresponding tax on such previously untaxed income.-
On July 2, 1981, two weeks after the filing of the tax evasion complaint against
him by respondent Larin on June 17, 1981, petitioner availed of the tax amnesty
under P.D. No. 1740. His amended tax return for the years 1974-1979 was filed
with the BIR office of Valenzuela, Bulacan, instead of Manila where the
petitioner’s principal office was located. He again availed of the tax amnesty
under P.D. No. 1840. His disclosure, however, did not include the income from
his sale of land to AYALA on cash basis. Instead he insisted that such sale was on
installment. He did not amend his income tax return. He did not pay the tax
which was considerably increased by the income derived from the discounting.
He did not meet the twin requirements of P.D. 1740 and 1840, declaration of his
untaxed income and full payment of tax due thereon. Clearly, the petitioner is
not entitled to the benefits of P.D. Nos. 1740 and 1840. The mere filing of tax
amnesty return under P.D. 1740 and 1840 does not ipso facto shield him from
immunity against prosecution. Tax amnesty is a general pardon to taxpayers
who want to start a clean tax slate. It also gives the government a chance to
collect uncollected tax from tax evaders without having to go through the
tedious process of a tax case. To avail of a tax amnesty granted by the
government, and to be immune from suit on its delinquencies, the taxpayer
must have voluntarily disclosed his previously untaxed income and must have
paid the corresponding tax on such previously untaxed income.
4. Taxation; Tax Amnesty; Statutory Construction; A tax amnesty, much like a
tax exemption, is never favored nor presumed in law and if granted by statute,
the terms of the amnesty like that of a tax exemption must be construed strictly
against the taxpayer and liberally in favor of the taxing authority.-
It also bears noting that a tax amnesty much like a tax exemption, is never
favored nor presumed in law and if granted by statute, the terms of the amnesty
like that of a tax exemption must be construed strictly against the taxpayer and
liberally in favor of the taxing authority. Hence, on this matter, it is our view that
petitioner’s claim of immunity from prosecution under the shield of availing tax
amnesty is untenable.
5. Taxation; Sales; Installment Method; Words and Phrases; Initial payment
under Section 43 of the 1977 National Internal Revenue Code and Section 175 of
Revenue Regulation No. 2 means the payment received in cash or property
excluding evidences of indebtedness due and payable in subsequent years, like
promissory notes or mortgages, given of the purchaser during the taxable year
of sale—it does not include amounts received by the vendor in the year of sale
from the disposition to a third person of notes given by the vendee as part of the
purchase price which are due and payable in subsequent years.-
Section 43 and Sec. 175 says that among the entities who may use the above-
mentioned installment method is a seller of real property who disposes his
property on installment, provided that the initial payment does not exceed 25%
of the selling price. They also state what may be regarded as installment
payment and what constitutes initial payment. Initial payment means the
payment received in cash or property excluding evidences of indebtedness due
and payable in subsequent years, like promissory notes or mortgages, given of
the purchaser during the taxable year of sale. Initial payment does not include
amounts received by the vendor in the year of sale from the disposition to a
third person of notes given by the vendee as part of the purchase price which
are due and payable in subsequent years. Such disposition or discounting of
receivable is material only as to the computation of the initial payment. If the
initial payment is within 25% of total contract price, exclusive of the proceeds of
discounted notes, the sale qualifies as an installment sale, otherwise it is a
deferred sale.
6. Taxation; Sales; Installment Method; Although the proceed of a discounted
promissory note is not considered part of the initial payment, it is still taxable
income for the year it was converted into cash;If the seller disposes the entire
installment obligation by discounting the bill or the promissory note, he
necessarily must report the balance of the income from the discounting not only
income from the initial install-ment payment-
Although the proceed of a discounted promissory note is not considered part of
the initial payment, it is still taxable income for the year it was converted into
cash. The subsequent payments or liquidation of certificates of indebtedness is
reported using the installment method in computing the proportionate income
to be returned, during the respective year it was realized. Non-dealer sales of
real or personal property may be reported as income under the installment
method provided that the obligation is still outstanding at the close of that year.
If the seller disposes the entire installment obligation by discounting the bill or
the promissory note, he necessarily must report the balance of the income from
the discounting not only income from the initial installment payment.
7. Taxation; Sales; Installment Method; Where the seller has the promissory
notes covering the succeeding installment payments of the land issued by the
buyer, discounted by said buyer itself, on the same day of the sale, he loses
entitlement to report the sale as a sale on installment since a taxable disposition
results and the seller is required by law to report in his returns the income
derived from the discounting.-
Where an installment obligation is discounted at a bank or finance company, a
taxable disposition results, even if the seller guarantees its payment, continues
to collect on the installment obligation, or handles repossession of merchandise
in case of default. This rule prevails in the United States. Since our income tax
laws are of American origin, interpretations by American courts on our parallel
tax laws have persuasive effect on the interpretation of these laws. Thus, by
analogy, all the more would a taxable disposition result when the discounting of
the promissory note is done by the seller himself. Clearly, the indebtedness of
the buyer is discharged, while the seller acquires money for the settlement of his
receivables. Logically then, the income should be reported at the time of the
actual gain. For income tax purposes, income is an actual gain or an actual
increase of wealth. Although the proceeds of a discounted promissory note is
not considered initial payment, still it must be included as taxable income on the
year it was converted to cash. When petitioner had the promissory notes
covering the succeeding installment payments of the land issued by AYALA,
discounted by AYALA itself, on the same day of the sale, he lost entitlement to
report the sale as a sale on installment since, a taxable disposition resulted and
petitioner was required by law to report in his returns the income derived from
the discounting. What petitioner did is tantamount to an attempt to circumvent
the rule on payment of income taxes gained from the sale of the land to AYALA
for the year 1976.
8. Actions; Libel; Damages; Actual damages cannot be allowed unless
supported by evidence on the record—the court cannot rely on speculation,
conjectures or guesswork as to the fact and amount of damages.-
The records of the case contain no statement whatsoever of the amount of the
actual damages sustained by the respondents. Actual damages cannot be
allowed unless supported by evidence on the record. The court cannot rely on
speculation, conjectures or guesswork as to the fact and amount of damages. To
justify a grant of actual or compensatory damages, it is necessary to prove with
a reasonable degree of certainty, the actual amount of loss. Since we have no
basis with which to assess, with certainty, the actual or compensatory damages
counter-claimed by respondent Larin, the award of such damages should be
deleted.
9. Actions; Libel; Damages; Public Officers; As a rule, a public official may not
recover damages for charges of falsehood related to his official conduct unless
he proves that the statement was made with actual malice.-
Moral damages may be recovered in cases involving acts referred to in Article 21
of the Civil Code. As a rule, a public official may not recover damages for charges
of falsehood related to his official conduct unless he proves that the statement
was made with actual malice. In Babst, et al. vs. National Intelligence Board, et
al., 132 SCRA 316, 330 (1984), we reiterated the test for actual malice as set
forth in the landmark American case of New York Times vs. Sullivan, which we
have long adopted, in defamation and libel cases, viz.: “. . . with knowledge that
it was false or with reckless disregard of whether it was false or not.”
10. Actions; Libel; Damages; Public Officers; Taxation; There is sufficient basis
for the award of moral and exemplary damages in favor of a Bureau of Internal
Revenue official where he suffered anxiety and humiliation because of a
baseless prosecution by a taxpayer.-
We appreciate petitioner’s claim that he filed his 1976 return in good faith and
that he had honestly believed that the law allowed him to declare the sale of the
land, in installment. We can further grant that the pertinent tax laws needed
construction, as we have earlier done. That petitioner was offended by the
headlines alluding to him as tax evader is also fully understandable. All these,
however, do not justify what amounted to a baseless prosecution of respondent
Larin. Petitioner presented no evidence to prove Larin extorted money from him.
He even admitted that he never met nor talked to respondent Larin. When the
tax investigation against the petitioner started, Larin was not yet the Regional
Director of BIR Region IV-A, Manila. On respondent Larin’s instruction,
petitioner’s tax assessment was considered one involving a sale of capital asset,
the income from which was subjected to only fifty percent (50%) assessment,
thus reducing the original tax assessment by half. These circumstances may be
taken to show that Larin’s involvement in extortion was not indubitable. Yet,
petitioner went on to file the extortion cases against Larin in different fora. This
is where actual malice could attach on petitioner’s part. Significantly, the trial
court did not err in dismissing petitioner’s complaints, a ruling affirmed by the
Court of Appeals. Keeping all these in mind, we are constrained to agree that
there is sufficient basis for the award of moral and exemplary damages in favor
of respondent Larin. The appellate court believed respondent Larin when he said
he suffered anxiety and humiliation because of the unfounded charges against
him. Petitioner’s actions against Larin were found “unwarranted and baseless,”
and the criminal charges filed against him in the Tanodbayan and City Fiscal’s
Office were all dismissed. Hence, there is adequate support for respondent
court’s conclusion that moral damages have been proved.
11. Actions; Libel; Damages; Public Officers; Considering that in the instant case
the award is in favor of a government official in connection with his official
function, it is with caution that the Supreme Court affirms granting moral
damages, for it might open the floodgates for government officials counter-
claiming damages in suits filed against them in connection with their functions.-
It will be noted that in above cases, the parties who were awarded moral
damages were not public officials. Considering that here, the award is in favor of
a government official in connection with his official function, it is with caution
that we affirm granting moral damages, for it might open the floodgates for
government officials counter-claiming damages in suits filed against them in
connection with their functions. Moreover, we must be careful lest the amounts
awarded make citizens hesitate to expose corruption in the government, for fear
of lawsuits from vindictive government officials. Thus, conformably with our
declaration that moral damages are not intended to enrich anyone, we hereby
reduce the moral damages award in this case from two hundred thousand
(P200,000.00) pesos to seventy five thousand (P75,000.00) pesos, while the
exemplary damage is set at P25,000.00 only.
12. Actions; Libel; Damages; The law allows the award of attorney’s fees when
exemplary damages are awarded, and when the party to a suit was compelled
to incur expenses to protect his interest.-
The law allows the award of attorney’s fees when exemplary damages are
awarded, and when the party to a suit was compelled to incur expenses to
protect his interest. Though government officers are usually represented by the
Solicitor General in cases connected with the performance of official functions,
considering the nature of the charges, herein respondent Larin was compelled to
hire a private lawyer for the conduct of his defense as well as the successful
pursuit of his counterclaims. In our view, given the circumstances of this case,
there is ample ground to award in his favor P50,000.00 as reasonable attorney’s
fees.
Division: SECOND DIVISION
Docket Number: G.R. No. 102967
Counsel: Cuevas, De la Cuesta & De las Alas, Francisco Malate, Ramon U. Ampil
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the assailed decision of the Court of Appeals dated November 29,
1991, is hereby AFFIRMED with MODIFICATION so that the award of actual
damages are deleted; and that petitioner is hereby ORDERED to pay to
respondent Larin moral damages in the amount of P75,000.00, exemplary
damages in the amount of P25,000.00, and attorney’s fees in the amount of
P50,000.00 only.
[G.R. No. 117319. July 19, 2006]
BPI FAMILY BANK versus COURT OF APPEALS, COURT OF TAX APPEALS AND
COMMISSIONER OF INTERNAL REVENUE
Third Division
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated JULY
19, 2006.
G.R. No. 117319 (BPI Family Bank versus Court of Appeals, Court of Tax
Appeals and Commissioner of Internal Revenue)
x --------------------------------------------------------------------------------------------------------
----------------- x
RESOLUTION
From April 28, 1986 to December 19, 1986, petitioner affixed and paid
the documentary stamps on its confirmations of sale of T-bills and Central Bank
bills. On April 6, 1987, the Bureau of Internal Revenue (BIR) issued Revenue
Memorandum Circular No. 13-87[1] stating among others that no documentary
stamp tax shall be imposed on documents of conveyance of instruments
enumerated in Section 229,[2] presently Section 180 of the National Internal
Revenue Code (NIRC). Pursuant thereto, petitioner filed with the BIR a claim for
refund, amounting to P1,116,612, alleging among others that T-bills and Central
Bank bills fall within the purview of the instruments enumerated in Section 229
(now Section 180) of the National Internal Revenue Code.
On April 15, 1988, petitioner filed a petition for review with the
respondent Court of Tax Appeals. The Court of Tax Appeals denied the claim for
refund, and later on, the motion for reconsideration. On appeal, the Court of
Appeals ruled that, procedurally, the petitioner failed to attach in its petition
the proof of service and the duplicate original of the Court of Tax Appeals'
decision; and on the substantial merits of the appeal, the sale and transfer of T-
bills and Central Bank bills are subject to documentary stamp tax under Section
225[3] (now Section 176) of the NIRC. The dispositive portion of the Court of
Appeals' decision reads as follows:
WHEREFORE, the instant petition is hereby DISMISSED and the decision under
review AFFIRMED.
Costs against petitioner.
SO ORDERED.[4]
Hence, this petition, raising the following issues:
From the foregoing it is clear that there is a procedural as well as substantive
issue that presents itself in this case. The procedural issue is whether the
petition is dismissible for failure to comply with the requirements of Supreme
Court Circular No. 1-88. The substantive issue is whether the Court of Appeals
committed reversible error in not ruling that Treasury Bills and Central [Bank]
Bills are promissory notes or are included in the definition of deposit substitutes
under sec. 180 of the NIRC.[5] (Stress supplied.)
Simply, the issue on the substantive aspect is, Are T-bills and Central
Bank bills subject to documentary stamp tax under Section 225 of the NIRC? On
the procedural aspect, the issue is: Did the Court of Appeals err in dismissing
the petition for failure to attach the proof of service and the duplicate original
of the Court of Tax Appeals' decision?
Before us, petitioner now submits that said government securities do not
fall under Section 225. Also, petitioner claims that those cited government
securities are deemed as promissory notes and/or deposit substitutes
enumerated under Section 229 (now Section 180), hence, by virtue of Revenue
Memorandum Circular No. 13-87, they are not subject to documentary stamp
tax. Petitioner also contends that:
(1) in BIR Ruling No. 036 dated February 10, 1988, the then
Commissioner has issued an opinion addressed to the Chief
of the Banks, Financing & Insurance Division of the BIR that,
since treasury bills are considered as deposit substitutes, they
are subject to documentary stamp tax under Section 229 of
the NIRC;[6]
(2) Revenue Regulations No. 17-84, Section 2(h)(b) provided that,
the following borrowings shall be considered as deposit
substitutes, ". . .(b) All borrowings of the national and local
government and its instrumentalities including the Central
Bank of the Philippines, evidenced by debt instruments
denoted as treasury bonds, bills, notes, certificates of
indebtedness and similar instruments;"[7]
(3) Revenue Memorandum Circular No. 13-87, stated that, since
Section 225 of the NIRC applies only to documents of
conveyances covering instruments stated in Sections 223 and
224 (now Secs. 174 and 175) of the NIRC, it follows that
documents of conveyance covering instruments stated in
Section 229 are not subject to DST.[8]
Therefore, according to petitioner, the subject government
securities are exempt from documentary stamp taxes.
The tax court and the appellate court, however, held that T-bills and
Central Bank bills, under its governing laws, Republic Act No. 245, as amended
by Presidential Decree No. 142,[9] and R.A. No. 265,[10] are denominated as
evidence of indebtedness, hence, are deemed the same as certificates of
obligations or certificates of indebtedness. They added that the issuance of said
government securities falls within the purview of Sections 222 (now Section
173) and 223 (now Section 174), while its sale, transfer or conveyance is under
Section 225 (now Section 176) of the NIRC.
We agree with the ruling of both the tax and appellate courts.
It bears stressing that the main issue raised before us is: Are
confirmations of sale of the subject government securities, between herein
petitioner and private individuals/entities, subject to documentary stamp tax?
A perusal of Section 225[11] shows that on all sales, or agreements to sell,
or memoranda of sales, or deliveries, or transfer of certificates of obligation, in
any association, company, or corporation; or transfer of such securities by
delivery, or by any paper, or agreement, or memorandum or other evidences of
transfer or sale whether entitling the holder in any manner to the benefit of
such certificates of obligation, there shall be collected a documentary stamp
tax. In this case, we have to inquire whether the T-bills and Central Bank bills
are covered by the said provision.
Under Section 1[12] of Republic Act No. 245, as amended by P.D. No. 142,
Treasury bills are evidence of indebtedness, issued by the National Government
on a discount basis and offered for sale either at auction on competitive or non-
competitive basis, payable at any date not later than one year from the date of
issue. Central Bank bills are also evidence of indebtedness issued by the Central
Bank conformably with Section 98[13] of R.A. No. 265, which authorizes the
Central Bank to issue and negotiate Central Bank obligations, and to place, buy,
and sell freely its negotiable evidence of indebtedness.
Contrary to petitioner's argument, a certificate of indebtedness is
different from ordinary debt instruments such as promissory notes and deposit
substitutes. A certificate of indebtedness includes only instruments having the
general character of investment securities as distinguished from instruments
evidencing debts arising in ordinary transactions between individuals.[14] As
distinguished from a promissory note which is an unconditional promise in
writing made by one person to another, signed by the maker, engaging to pay
on demand, or at a fixed or determinable future time, a sum certain in money,
to order or bearer,[15] T-bills and Central Bank bills are investment securities of a
public character, issued by the Philippine Government, thru the Central Bank of
the Philippines.
On the other hand, the chief feature of a deposit substitute is
borrowing.[16] In this case, petitioner sells government securities to private
individuals/entities, in which its confirmations of sale are being subjected to
documentary stamp tax. There is no borrowing or debt instrument involved in
this case. Here, the petitioner, as the seller, simply conveys through sale,
specific government securities to the buyer, who thereby acquires title thereto,
including the plenary right of disposal. As there is no borrowing, there is no
debt with respect to which the seller can be primarily bound. Nor is the seller
subsidiarily bound to respond in case the issuer of the said securities defaults,
hypothetically assuming that the Philippine Government, as issuer of the
securities sold, could default. Precisely, the sale of said government securities is
always "without recourse."
Both the respondent courts correctly held that whether T-bills and
Central Bank bills are denominated as certificates of obligations, certificates of
indebtedness or evidence of indebtedness, they bear the same
meaning. Section 225 is clear. On all sales, or agreements to sell, or
memoranda of sales, or deliveries, or transfer of certificates of obligation in any
association, company, or corporation; or transfer of such securities by delivery,
or by any paper, or agreement, or memorandum or other evidences of transfer
or sale whether entitling the holder in any manner to the benefit of such
certificates of obligation, there shall be collected a documentary stamp tax. The
nomenclatures, i.e., evidence of indebtedness, certificate of obligation and
certificate of indebtedness, bear the same meaning and although their various
appellations are used interchangeably by law, they all refer to the subject
securities, i.e., T-bills and Central Bank bills.
Rules and regulations issued by the administrative officials to implement
a law cannot go beyond the terms and provisions of the latter.[17] While the
interpretation placed upon a law by the executive officers is entitled to great
respect by the courts, nevertheless, it is not conclusive and will be ignored if
judicially found to be erroneous. Administrative rulings have been aptly
described as follows: "They are the best guess of the moment and incidentally
often contain such well considered and sound law; but the courts have held that
they do not prevent an entire change of front at any time and are merely
advisory - sort of an information service to the taxpayer." Moreover,
administrative rulings of previous Commissioners are not conclusive and
binding upon their successors[18] if the latter become convinced that a law
warrants a different construction. Therefore, courts will not countenance
administrative rulings that are not consistent and in harmony with the law they
seek to apply and implement. Therefore, the confirmations of sale of
government securities made by the petitioner to private individuals/entities are
subject to documentary stamp tax pursuant to Section 225 of the NIRC.
 We see no need to rule on the procedural issues, since the Court of
Appeals, despite pronouncement of the alleged procedural defects,
nevertheless, ruled on the merits of the case.
WHEREFORE, the instant petition is DENIED. The Court of Appeals'
decision dated September 19, 1994 in CA-G.R. SP No. 29853 isAFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court
[1]
Supplementary Revenue Memorandum Circular to Revenue Memorandum
Circular No. 33-86, Publishing Questions and Answers to Documentary Stamp
Tax.
[2] SEC. 229. Stamp Tax on negotiable promissory notes, bills of exchange,
drafts, certificates of deposit bearing interest and others not payable on sight or
demand. - On all bills of exchange (between points within the Philippines),
drafts or certificates of deposit drawing interest, or orders for the payment of
any sum of money otherwise than at sight or on demand, on all negotiable
promissory notes, except bank notes issued for circulation, and on each renewal
of any such note, there shall be collected a documentary stamp tax . . .
[3] SEC. 225. Stamp tax on sales, agreements to sell, memoranda of sales,
deliveries or transfer of bonds, due bills, certificate of obligation, or shares or
certificates of stock. - On all sales, or agreements to sell, or memoranda of sales,
or deliveries, or transfer of bonds, dues-bills, certificates of obligation, or shares
or certificates of stock, in any association, company, or corporation, or transfer
of such securities by assignment in blank, or by delivery, or by any paper, or
agreement, or memorandum or other evidences of transfer or sale whether
entitling the holder in any manner to the benefit of such certificate of obligation
. . . or for the future transfer of any . . . certificate of obligation . . . there shall be
collected a documentary stamp tax . . .
[4]
Rollo, p. 100.
[5] Id. at 189.
[6] Id. at 22-23.
[7]
Id. at 23.
[8] Id. at 21.
[9] AMENDING REPUBLIC ACT NO. 245 ENTITLED "AN ACT AUTHORIZING THE
SECRETARY OF FINANCE TO BORROW TO MEET PUBLIC EXPENDITURES
AUTHORIZED BY LAW AND FOR OTHER PURPOSES.
[10]
AN ACT ESTABLISHING THE CENTRAL BANK OF THE PHILIPPINES, DEFINING
ITS POWERS IN THE ADMINISTRATION OF THE MONETARY AND BANKING
SYSTEM, AMENDING THE PERTINENT PROVISIONS OF THE ADMINISTRATIVE
CODE WITH RESPECT TO THE CURRENCY AND THE BUREAU OF BANKING, AND
FOR OTHER PURPOSES.
[11] Supra, note 3.
[12] Section 1. In order to meet public expenditures authorized by law or to
provide for the purchase, redemption, or refunding of any obligations, either
direct or guaranteed, of the Philippine Government, the Secretary of Finance,
with the approval of the President of the Philippines, after consultation with the
Monetary Board, is authorized to borrow from time to time on the credit of the
Republic of the Philippines such sum or sums as in his judgment may be
necessary, and to issue therefore evidences of indebtedness of the Philippine
Government.
Such evidences of indebtedness may be of the following types:
a. Treasury bills issued on a discount basis or at par and payable at maturity
without interest. Treasury bills may be offered for sale either on a competitive
basis or at a fixed rate of discount or at par and may be made payable at any
date not later than one year from the date of issue; x x x x
[13] SEC. 98. Issue and negotiation of Central Bank obligations. - In order to
provide the Central Bank with effective instruments for open market
operations, the Bank may, subject to such rules and regulations as the
Monetary Board may prescribe and in accordance with the principles stated in
Section 96 of this Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bank. Said evidences of indebtedness may be issued
directly against the international reserve of the Bank or against the securities
which it has acquired under the provisions of Section 97 of this Act, or may be
issued without relation to specific types of assets of the Bank. x x x x
[14]
The Revised Documentary Stamp Tax Regulation, promulgated by the
Department of Finance on September 16, 1924. XXII O.G. 112, p. 2335.
[15] ACT No. 2031, Sec. 184. Promissory note defined. - A negotiable promissory
note within the meaning of this Act is an unconditional promise in writing made
by one person to another, signed by the maker, engaging to pay on demand, or
at a fixed or determinable future time, a sum certain in money to order or to
bearer. Where a note is drawn to the maker's own order, it is not complete
until indorsed by him.
[16]
Revenue Memorandum Circular No. 62-2003 provides,
[T]he chief feature of a deposit substitute is "borrowing." Without borrowing,
there is no deposit substitute. The sale of a debt instrument is deemed
"borrowing" if the seller assumes liability to pay what in essence is a loan, by
whatever name it is called and whatever be its form. The liability may be either
primary or subsidiary. Primary liability refers to the obligation to pay back the
purchase price (loan). There is a subsidiary liability if there is recourse against
the seller in case the person primarily liable under the underlying instrument
fails to pay. For this reason, "deposit substitutes" include certificates of
assignment or participation "with recourse." Of course, if the seller is, by
stipulation, already primarily liable - as where he has the firm obligation to buy
back the very same debt paper he has sold - it is superfluous to talk of transfer
"with or without recourse." Where, however, there is indeed no liability to pay,
either primary or subsidiary, there is no borrowing or debt that can give rise to
a deposit substitute . . .
[17] People v. Lim, 108 Phil. 1091, 1094 (1960).
[18] Hilado v. Coll. Of Internal Rev. and Ct. of Tax Appeals, 100 Phil. 288, 294
(1956).
Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COMMISSIONER
OF INTERNAL REVENUE, respondent.
Case Nature : PETITION for review on certiorari of a decision of the Court of
Appeals.
Syllabi Class : Documentary Stamp Tax|Bills of Exchange|Letters of
Credit|Taxation|Excise Tax|Negotiable Instruments Law (Act No. 2031|Word
and Phrases|Documentary Stamp Tax|“Draft” and “Bank Draft|”
Explained|Words and Phrases;|Interests
Syllabi:
1. Documentary Stamp Tax; Section 195 (now Section 182) of the National
Internal Revenue Code (NIRC) imposes a documentary stamp tax on (1) foreign
bills of exchange, (2) letters of credit, and (3) orders, by telegraph or otherwise,
for the payment of money issued by express or steamship companies or by any
person or persons.-
—The first issue raised by the petitioner is whether BPI is liable for documentary
stamp taxes in connection with its sale of foreign exchange to the Central Bank
in 1986 under Section 195 (now Section 182) of the NIRC, quoted hereunder: Sec.
182. Stamp tax on foreign bills of exchange and letters of credit. On all foreign
bills of exchange and letters of credit (including orders, by telegraph or
otherwise, for the payment of money issued by express or steamship companies
or by any person or persons) drawn in but payable out of the Philippines in a set
of three or more according to the custom of merchants and bankers, there shall
be collected a documentary stamp tax of thirty centavos on each two hundred
pesos, or fractional part thereof, of the face value of such bill of exchange or
letter of credit, or the Philippine equivalent of such face value, if expressed in
foreign country. To determine what is being taxed under this section, a
discussion on the nature of the acts covered by Section 195 (now Section 182) of
the NIRC is indispensable. This section imposes a documentary stamp tax on (1)
foreign bills of exchange, (2) letters of credit, and (3) orders, by telegraph or
otherwise, for the payment of money issued by express or steamship companies
or by any person or persons. This enumeration is further limited by the
qualification that they should be drawn in the Philippines and payable outside of
the Philippines.
2. Same; Collecting charges incident to tax delinquency is mandatory.-
—Based on established doctrine, these charges incident to delinquency are
compensatory in nature and are imposed for the taxpayers’ use of the funds at
the time when the State should have control of said funds. Collecting such
charges is mandatory. Therefore, the Decision of the Court of Appeals imposing
a 20% delinquency interest over the assessment reduced by the CTA was
justified and in accordance with Section 249(c)(3) of the NIRC.
3. Taxation; Interests; Even if an assessment is later reduced by the courts, a
delinquency interest should still be imposed from the time demand was made
by the Commissioner of Internal Revenue;The intention of the law is precisely to
discourage delay in the payment of taxes due to the State and, in this sense, the
surcharge and interest charged are not penal but compensatory in nature-
—they are compensation to the State for the delay in payment, or for the
concomitant use of the funds by the taxpayer beyond the date he is supposed to
have paid them to the State.—In the case of Philippine Refining Company v.
Court of Appeals, 256 SCRA 667 (1996), this Court categorically ruled that even if
an assessment was later reduced by the courts, a delinquency interest should
still be imposed from the time demand was made by the CIR. As correctly
pointed out by the Solicitor General, the deficiency tax assessment in this case,
which was the subject of the demand letter of respondent Commissioner dated
April 11, 1989, should have been paid within thirty (30) days from receipt
thereof. By reason of petitioner’s default thereon, the delinquency penalties of
25% surcharge and interest of 20% accrued from April 11, 1989. The fact that
petitioner appealed
4. Excise Tax; The power to levy an excise upon the performance of an act or
the engaging in an occupation does not depend upon the domicile of the
person subject to the excise, nor upon the physical location of the property
and in connection with the act or occupation taxed, but depends upon the
place in which the act is performed or occupation engaged in; Section 195
(now Section 182) of the NIRC would be rendered invalid if the fact that the
payment was made outside of the country can be used as a basis for
nonpayment of the tax.-
—BPI argues that the foreign exchange sold was deposited and
5. Bills of Exchange; “Draft” and “Bank Draft,” Explained; Words and
Phrases; In the case of a bill of exchange, the funds may belong to the drawer
and need not be advanced by the drawee, as in the case of a check or a
draft; A draft is a form of a bill of exchange used mainly in transactions between
persons physically remote from each other, an order made by one person, say
the buyer of goods, addressed to a person having in his possession funds of such
buyer ordering the addressee to pay the purchase price to the seller of the
goods, and where the order is made by one bank to another, it is referred to as a
bank draft.-
—The fact that the funds belong to BPI and were not advanced by the
correspondent bank will not remove the transaction from the coverage of
Section 195 (now Section 182) of the NIRC. There are transactions covered by
this section wherein funds belonging to the drawer are used for payment. A bill
of exchange, when drawn in the Philippines but payable in another country,
would surely be covered by this section. And in the case of a bill of exchange, the
funds may belong to the drawer and need not be advanced by the drawee, as in
the case of a check or a draft. In the description of a draft provided hereunder,
the drawee is in possession of funds belonging to the drawer of the bill: A draft
is a form of a bill of exchange used mainly in transactions between persons
physically remote from each other. It is an order made by one person, say the
buyer of goods, addressed to a person having in his possession funds of such
buyer ordering the addressee to pay the purchase price to the seller of the
goods. Where the order is made by one bank to another, it is referred to as a
bank draft.
6. Same; Same; “Credit” and “Deposit,” Defined; Words and Phrases; By the
definition of “credit” being equated with the term “deposits,” BPI’s deposit
account with its correspondent bank is much the same as the “credit” referred
to in Section 51 of Regulations No. 26-
—the fact that the funds transferred to the Central Bank’s account with the
Federal Reserve Bank are from BPI’s deposit account with the correspondent
bank can only underline that the present case is the same situation described
under Section 51 of Regulations No. 26.—BPI further alleges that since the funds
transferred to the Federal Reserve Bank were taken from BPI’s account with the
correspondent bank, this is not the transaction contemplated under Section 51
of Regulations No. 26. BPI argues that Section 51 of Regulations No. 26, in using
the phrase “with which local bank has credit,” involves transactions wherein the
drawee bank pays with its own funds and excludes from the coverage of the law
situations wherein the funds paid out by the correspondent bank are owned by
the drawer. In the case of Republic of the Philippines v. Philippine National Bank,
3 SCRA 851 (1961), the Court equated “credit” with the term “deposits,” and
identified the depositor as the creditor and the bank as the debtor. And as
correctly stated by the trial court, the term “credit” in its usual meaning is a sum
credited on the books of a company to a person who appears to be entitled to it.
It presupposes a creditordebtor relationship, and may be said to imply ability, by
reason of property or estates, to make a promised payment. It is the correlative
to debt or indebtedness, and that which is due to any person, as distinguished
from that which he owes. The same is true with the term “deposits” in banks
where the relationship created between the depositor and the bank is that of
creditor and debtor. By this definition of “credit,” BPI’s deposit account with its
correspondent bank is much the same as the “credit” referred to in Section 51 of
Regulations No. 26. Thus, the fact that the funds transferred to the Central
Bank’s account with the Federal Reserve Bank are from BPI’s deposit account
with the correspondent bank can only underline that the present case is the
same situation described under Section 51 of Regulations No. 26.
7. Same; What is being taxed is the facility that allows a party to draw the draft
or make the order to pay within the Philippines and have the payment made in
another country.-
—BPI alleges that the assailed decision must be reversed since the sale between
BPI and the Central Bank of foreign exchange, as distinguished from foreign bills
of exchange, is not subject to the documentary stamp taxes prescribed in
Section 195 (now Section 182) of the NIRC. This argument leaves much to be
desired. In this case, it is not the sale of foreign exchange per se that is being
taxed under Section 195 of the NIRC. This section refers to a documentary stamp
tax, which is an excise upon the facilities used in the transaction of the business
separate and apart from the business itself. It is not a tax upon the business
itself which is so transacted, but it is a duty upon the facilities made use of and
actually employed in the transaction of the business, and separate and apart
from the business itself. Section 195 (now Section 182) of the NIRC covers
foreign bills of exchange, letters of credit, and orders of payment for money,
drawn in Philippines, but payable outside the Philippines. From this
enumeration, two common elements need to be present: (1) drawing the
instrument or ordering a drawee, within the Philippines; and (2) ordering that
drawee to pay another person a specified amount of money outside the
Philippines. What is being taxed is the facility that allows a party to draw the
draft or make the order to pay within the Philippines and have the payment
made in another country.
8. Taxation; Documentary Stamp Tax; The phrase “orders, by telegraph or
otherwise, for the payment of money” used in reference to documentary stamp
taxes may be found in an earlier documentary tax provision, Section 1449(i) of
the Administrative Code of 1917, which was substantially reproduced in Section
195 (now Section 182) of the NIRC.-
—The phrase “orders, by telegraph or otherwise, for the payment of money”
used in reference to documentary stamp taxes may be found in an earlier
documentary tax provision, Section 1449(i) of the Administrative Code of 1917,
which was substantially reproduced in Section 195 (now Section 182) of the
NIRC. Regulations No. 26, which provided the rules and guidelines for the
documentary stamp tax imposed under the Administrative Code of 1917,
contains an explanation for the phrase “orders, by telegraph or otherwise, for
the payment of money”: What may be regarded as telegraphic transfer.—A
local bank cables to a certain bank in a foreign country with which bank said
local bank has a credit, and directs that foreign bank to pay to another bank or
person in the same locality a certain sum of money, the document for and in
respect such transaction will be regarded as a telegraphic transfer, taxable
under the provisions of Section 1449(i) of the Administrative Code.
9. Letters of Credit; Word and Phrases; A letter of credit is one whereby one
person requests some other person to advance money or give credit to a third
person, and promises that he will repay the same to the person making the
advancement, or accept the bill drawn upon himself for the like amount.-
—The Code of Commerce loosely defines a “letter of credit” and provides for its
essential conditions, thus: Art. 567. Letters of credit are those issued by one
merchant to another or for the purpose of attending to a commercial
transaction. Art. 568. The essential conditions of letters of credit shall be: 1. To
be issued in favor of a definite person and not to order. 2. To be limited to a
fixed and specified amount, or to one or more undetermined amounts, but
within a maximum the limits of which has to be stated exactly. A more explicit
definition of a letter of credit can be found in the commentaries: A letter of
credit is one whereby one person requests some other person to advance money
or give credit to a third person, and promises that he will repay the same to the
person making the advancement, or accept the bills drawn upon himself for the
like amount. A bill of exchange and a letter of credit may differ as to their
negotiability, and as to who owns the funds used for the payment at the time
payment is made. However, in both bills of exchange and letters of credit, a
person orders another to pay money to a third person.
10. Same; A “foreign bill of exchange” may be drawn outside the Philippines,
payable outside the Philippines, or both drawn and payable outside of the
Philippines.-
—Section 129 of the same law classifies bills of exchange as inland and foreign,
the distinction is laid down by where the bills are drawn and paid. Thus, a
“foreign bill of exchange” may be drawn outside the Philippines, payable outside
the Philippines, or both drawn and payable outside of the Philippines. Sec. 129.
Inland and foreign bills of exchange.—An inland bill of exchange is a bill which
is, or on its face purports to be, both drawn and payable within the Philippines.
Any other bill is a foreign bill. x x x
11. Bills of Exchange; Negotiable Instruments Law (Act No. 2031); Words and
Phrases; “Bills of Exchange,” Defined.-
—A definition of a “bill of exchange” is provided by Section 39 of Regulations
No. 26, the rules governing documentary taxes promulgated by the Bureau of
Internal Revenue (BIR) in 1924: Sec. 39. Definition of “bill of exchange.” The term
bill of exchange denotes checks, drafts, and all
Division: FIRST DIVISION
Docket Number: G.R. No. 137002
Counsel: Padilla Law Office, The Solicitor General
Ponente: CHICO-NAZARIO
Dispositive Portion:
WHEREFORE, premises considered, this Court DENIES this petition and AFFIRMS
the Decision of the Court of Appeals in CA-G.R. SP No. 57362 dated 14 August
1998, ordering that petitioner Bank of the Philippine Islands to pay Respondent
Commissioner of Internal Revenue the deficiency documentary stamp tax in the
amount of P690,030.00 inclusive of surcharge and compromise penalty, plus
20% annual interest from 7 June 1990 until fully paid. Costs against the
petitioner.
Case Title : SECURITY BANK CORPORATION (formerly SECURITY BANK AND
TRUST COMPANY), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Taxation|Documentary Stamp Tax (DST)|Administrative
Law|Court of Tax Appeals|Compromise Agreements|Words and Phrases|The
issue of DST assessment on sales of securities with repurchase
agreement|which was the subject of the reassessment being questioned in this
case|is definitely not within the scope of the compromise agreement|being
limited as it is to DST on promissory notes—the Court simply cannot agree with
the petitioner that securities and promissory notes for purposes of the subject
Compromise Agreement are one and the thing|The BIR Commissioner has the
sole power and authority to compromise taxes
Syllabi:
1. Taxation; Documentary Stamp Tax (DST); It is clear from the plain language
of the law that all sales of securities, without making any distinction as to the
nature or type of the sale, i.e., whether it be with a repurchase agreement or
not, are taxable.-
—The NIRC levies DST upon documents, instruments and papers as follows: SEC.
173. Stamp taxes upon documents, instruments, and papers—Upon documents,
instruments, and papers, and upon acceptances, assignments, sales, and
transfers of the obligation, right, or property incident thereto, there shall be
levied, collected and paid for, and in respect of the transaction so had or
accomplished, the corresponding documentary stamp taxes prescribed in the
following sections of this Title, by the person making, signing, issuing, accepting,
or transferring the same, and at the same time such act is done or transaction
had: Provided,That whenever one party to the taxable document enjoys
exemption from the tax herein imposed, the other party to thereto who is not
exempt shall be the one directly liable for the tax. (Emphasis supplied.)
Particularly covering sales of securities, which SBC has been assessed by the BIR
in this case, and the corresponding DST rates due thereon at the time the said
tax accrued, the former Section 225 (now Section 176) of the NIRC provides: It is
clear from the plain language of the law that all sales of securities, without
making any distinction as to the nature or type of the sale, i.e., whether it be
with a repurchase agreement or not, are taxable. On the other hand, all
securities consisting of bonds, due-bills, certificates of obligation, or shares or
certificates of stock in any association, company or corporation, of whatever
type or nature are within the scope of this section.
2. Same; Same; Same; The BIR Commissioner has the sole power and authority
to compromise taxes;Ultra vires acts of revenue officials cannot have any valid
and binding legal effect upon the BIR so as to proscribe the latter from issuing
reassessment of unpaid DST on the sales of securities.-
—As regards SBC’s contention that the BIR, through its various officials,
accepted its offer to settle its entire DST deficiency assessment for 1983 which
included the DST assessment for securities with repurchase agreement in the tax
base for purposes of the computation of the DST due and collectible, suffice it to
say that such acceptance and approval were not made by the BIR Commissioner
himself, who, under Section 204 of the NIRC, has the sole power and authority to
compromise taxes. Neither was there any showing that the BIR Commissioner
specifically authorized those revenue officials, who purportedly accepted and
approved SBC’s offer of payment, to compromise the DST on sale of securities,
which, to stress, were not included in the Compromise Agreement of August 15,
1988 by delegating his power to compromise said DST assessment on securities.
This ultra vires act of those revenue officials cannot have any valid and binding
legal effect upon the BIR, so as to proscribe the latter from issuing the assailed
reassessment of unpaid DST on the sales of securities under repurchase
agreements for the year 1983.
3. Same; Same; Compromise Agreements; Words and Phrases; The issue of DST
assessment on sales of securities with repurchase agreement, which was the
subject of the reassessment being questioned in this case, is definitely not within
the scope of the compromise agreement, being limited as it is to DST on
promissory notes-
—the Court simply cannot agree with the petitioner that securities and
promissory notes for purposes of the subject Compromise Agreement are one
and the same thing; The term “promissory note” has a definite meaning under
the negotiable instruments law, which does not include “securities.”—The issue
of DST assessment on sales of securities with repurchase agreement, which was
the subject of the reassessment being questioned in this case, is definitely not
within the scope of the compromise agreement, being limited as it is to DST on
promissory notes issued prior to October 15, 1984. The DST assessed on the
former arises from the act of “selling” securities (presently taxed under Section
176), while the DST assessed in the latter is on the act of “issuing” promissory
notes (taxed under Section 180). It is evident from the separate provisions
governing the two that the law treats these two instruments differently. This
Court simply cannot agree with SBC that securities and promissory notes for
purposes of the subject Compromise Agreement are one and the same thing.
Besides, even assuming, in gratia argumenti, that promissory notes may be
included under the generic term “securities,” securities cannot be included under
the specific term “promissory notes” so as to be deemed within the scope of the
same compromise agreement. To be sure, the term “promissory note” has a
definite meaning under the negotiable instruments law, which does not include
“securities,” and this definite meaning is what is deemed incorporated in the
compromise agreement entered into by and between SBC and the BIR, unless a
different definition is therein expressly agreed upon, which is not the case.
4. Same; Same; Court of Tax Appeals; As a matter of principle, the Supreme
Court will not set aside the conclusion reached by the Court of Tax Appeals
which is, by the very nature of its function, dedicated exclusively to the study
and consideration of tax problems and has necessarily developed an expertise
on the subject unless there has been an abuse or improvident exercise of
authority.-
—The Court has no basis to rule in the present petition for review on certiorari,
which by its very nature is limited to questions of law and not of facts, whether
the securities subject of the tax assessment in this case in fact fall within the
ambit of said revenue memorandum circulars. This Court is bound by the factual
findings by the CTA, which did not rule that the subject securities, because of
what type these were, fall under Section 229 (now Section 180) instead of 225
(now Section 176) of the NIRC. In Commissioner of Internal Revenue v. Court of
Appeals, the Court ruled: x x x the Court of Tax Appeals is a highly specialized
body specifically created for the purpose of reviewing tax cases. Through its
expertise, it is undeniably competent to determine the issue of whether. x x x
Consequently, as a matter of principle, this Court will not set aside the
conclusion reached by the Court of Tax Appeals which is, by the very nature of its
function, dedicated exclusively to the study and consideration of tax problems
and has necessarily developed an expertise on the subject unless there has been
an abuse or improvident exercise of authority. This point becomes more evident
in the case before us where the unanimous findings and conclusions of both the
Court of Tax Appeals and the Court of Appeals appear untainted by any abuse of
authority, much less grave abuse of discretion.
5. Same; Same; Administrative Law; BIR circulars and rulings cannot prevail
over the clear and plain language of the Tax Code.-
—SBC contends, however, that the sales of securities being levied upon are not
covered by Section 225 (now Section 176), but instead fall under Section 229
(now Section 180) of the Tax Code. In this respect, SBC invokes Revenue
Memorandum Circulars No. 13-87 and No. 33-86 and BIR Ruling No. 119-91. We
are not persuaded for the simple reason that the BIR circulars and ruling relied
upon were all issued after 1983, the tax period involved in this case. Those
circulars and ruling cannot prevail over the clear and plain language of the Tax
Code.
Division: SECOND DIVISION
Docket Number: G.R. No. 130838
Counsel: Castro, Biñas, Ortile, Samillano & Mangrobang, The Solicitor General
Ponente: GARCIA
Dispositive Portion:
WHEREFORE, the petition is DENIED and the assailed CA Decision dated August
29, 1997 is AFFIRMED in toto.
Case Title : INTERNATIONAL EXCHANGE BANK, petitioner, vs. COMMISSIONER
OF INTERNAL REVENUE, respondent.Case Nature : PETITION for review on
certiorari of a decision of the Court of Tax Appeals.
Syllabi Class : Taxation|Documentary Stamp Tax (DST)|Banks and
Banking|Words and Phrases|Tax Avoidance
Syllabi:
1. Taxation; Documentary Stamp Tax (DST); Banks and Banking; A passbook
representing an interest earning deposit account issued by a bank qualifies as a
certificate of deposit drawing interest.-
—As correctly found by the CTA En Banc, a passbook representing an interest
earning deposit account issued by a bank qualifies as a certificate of deposit
drawing interest. A document to be deemed a certificate of deposit requires no
specific form as long as there is some written memorandum that the bank
accepted a deposit of a sum of money from a depositor. What is important and
controlling is the nature or meaning conveyed by the passbook and not the
particular label or nomenclature attached to it, inasmuch as substance, not
form, is paramount.
2. Same; Same; Same; Tax Avoidance; While tax avoidance schemes and
arrangements are not prohibited, tax laws cannot be circumvented in order to
evade payment of just taxes.-
—While tax avoidance schemes and arrangements are not prohibited, tax laws
cannot be circumvented in order to evade payment of just taxes.To claim that
time deposits evidenced by passbooks should not be subject to DST is a clear
evasion of the rule on equality and uniformity in taxation that requires the
imposition of DST on documents evidencing transactions of the same kind, in
this particular case, on all certificates of deposits drawing interest.
3. Same; Same; Same; Words and Phrases; The Documentary Stamp Tax (DST)
is levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the
execution of specific instruments.-
—It bears emphasis that DST is levied on the exercise by persons of certain
privileges conferred by law for the creation, revision, or termination of specific
legal relationships through the execution of specific instruments. It is an excise
upon the privilege, opportunity or facility offered at exchanges for the
transaction of the business.
4. Same; Same; Same; A Fixed Savings Deposit (FSD), like a time deposit,
provides for a higher interest rate when the deposit is not withdrawn within
the required fixed period, otherwise, it earns interest pertaining to a regular
savings deposit; Having a fixed term and the reduction of interest rate in case of
pre-termination are essential features of a time deposit.-
—As for petitioner’s argument that its FSD is similar to a regular savings deposit
because it is evidenced by a passbook, and that based on the legislative
deliberations on the bill which was to become R.A. 9243 which amended Section
180 of the NIRC (which is to a large extent the same as Section 180 of the Tax
Code, as amended by R.A. 7660), Congress admitted that deposits evidenced by
passbooks which have features akin to time deposits are not subject to DST, the
same does not lie. The FSD, like a time deposit, provides for a higher interest
rate when the deposit is not withdrawn within the required fixed period;
otherwise, it earns interest pertaining to a regular savings deposit. Having a
fixed term and the reduction of interest rates in case of pre-termination are
essential features of a time deposit.
5. Same; Same; Same; A regular savings account with a passbook which is
withdrawable at any time is not subject to Documentary Stamp Tax (DST), unlike
a time deposit which is payable on a fixed maturity date.-
—Orders for the payment of sum of money payable at sight or on demand are of
course explicitly exempted from the payment of DST. Thus, a regular savings
account with a passbook which is withdrawable at any time is not subject to
DST, unlike a time deposit which is payable on a fixed maturity date.
6. Same; Same; Same; A certificate of deposit may or may not be negotiable-
—a certificate of deposit may be payable to the depositor, to the order of the
depositor, or to some other person or his order; The negotiable character of any
and all documents under Section 180 of the National Internal Revenue Code
(NIRC).—Contrary to petitioner’s claim, not all certificates of deposit are
negotiable. A certificate of deposit may or may not be negotiable as gathered
from the use of the conjunction or, instead of and, in its definition. A certificate
of deposit may be payable to the depositor, to the order of the depositor, or to
some other person or his order. In any event, the negotiable character of any
and all documents under Section 180 is immaterial for purposes of imposing
DST.
Division: SECOND DIVISION
Docket Number: G.R. No. 171266
Counsel: Enrico G. Valdez, Rhodora J. Corcuera-Menzon
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the petition is DENIED.
Case Title : NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) and
Spouses EDUARDO R. DEE and ARCELITA M. DEE, petitioners, vs. PHILIPPINE
NATIONAL BANK, respondent.Case Nature : PETITION for review on certiorari of
a decision of the Court of Appeals.
Syllabi Class : Actions|Obligations and
Contracts|Mortgages|Appeals|Loans|Promissory Notes|Interest
Rates|Escalation Clauses|Principle of Mutuality of Contracts|Usury Law|Banks
and Banking|Words and Phrases|Credit Lines|Contract Clause|Disclosure
Statements|Truth in Lending Act|Damages|Novation|Attorney’s Fees|Notarial
Law|Legal Ethics|Act 496 has repealed the Spanish Notarial
Law|Evidence|Entries in Ledgers|Presumptions|Foreclosure of Mortgage
Syllabi:
1. Actions; Appeals; As a rule, questions of fact cannot be the subject of a
petition for review on certiorari, but as an exception, factual findings of the
Court of Appeals may be reviewed on appeal when, inter alia, the factual
inferences are manifestly mistaken, the judgment is based on a
misapprehension of facts, or the Court of Appeals manifestly overlooked certain
relevant and undisputed facts that, if properly considered, would justify a
different legal conclusion.-
It must be stressed that only questions of law may be raised in a petition for
review on certiorari under Rule 45 of the Rules of Court. As a rule, questions of
fact cannot be the subject of this mode of appeal, for “[t]he Supreme Court is
not a trier of facts.” As exceptions to this rule, however, factual findings of the
CA may be reviewed on appealwhen, inter alia, the factual inferences are
manifestly mistaken;the judgment is based on a misapprehension of facts; or
the CA manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different legal conclusion. In the present
case, these exceptions exist in various instances, thus prompting us to take
cognizance of factual issues and to decide upon them in the interest of justice
and in the exercise of our sound discretion. Indeed, Petitioner NSBCI’s loan
accounts with respondent appear to be bloated with some iniquitous imposition
of interests, penalties, other charges and attorney’s fees. To demonstrate this
point, the Court shall take up one by one the promissory notes, the credit
agreements and the disclosure statements.
2. Obligations and Contracts; Loans; Promissory Notes; Interest
Rates; Escalation Clauses; Principle of Mutuality of Contracts; A borrower’s
accessory duty to pay interest does not give the lender unrestrained freedom to
charge any rate other than that which was agreed upon—it would be the zenith
of farcicality to specify and agree upon rates that could be subsequently
upgraded at whim by only one party to the agreement; The “unilateral
determination and imposition” of increased rate is violative of the principle of
mutuality of contracts ordained in Article 1308 of the Civil Code.-
In each drawdown, the Promissory Notes specified the interest rate to be
charged: 19.5 percent in the first, and 21.5 percent in the second and again in
the third. However, a uniform clause therein permitted respondent to increase
the rate “within the limits allowed by law at any time depending on whatever
policy it may adopt in the future x x x,” without even giving prior notice to
petitioners. The Court holds that petitioners’ accessory duty to pay interest did
not give respondent unrestrained freedom to charge any rate other than that
which was agreed upon. No interest shall be due, unless expressly stipulated in
writing. It would be the zenith of farcicality to specify and agree upon rates that
could be subsequently upgraded at whim by only one party to the agreement.
The “unilateral determination and imposition”of increased rates is “violative of
the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.”
One-sided impositions do not have the force of law between the parties,
because such impositions are not based on the parties’ essential equality.
3. Obligations and Contracts; Loans; Promissory Notes; Interest
Rates; Escalation Clauses; Principle of Mutuality of Contracts; Although
escalation clauses are valid in maintaining fiscal stability and retaining the value
of money on long-term contracts, giving the lender an unbridled right to adjust
the interest independently and upwardly would completely take away from the
borrower the “right to assent to an important modification in their agreement”
and would also negate the element of mutuality in their contracts.-
Although escalation clauses are valid in maintaining fiscal stability and retaining
the value of money on long-term contracts, giving respondent an unbridled right
to adjust the interest independently and upwardly would completely take away
from petitioners the “right to assent to an important modification in their
agreement” and would also negate the element of mutuality in their contracts.
The clause cited earlier made the fulfillment of the contracts “dependent
exclusively upon the uncontrolled will” of respondent and was therefore void.
Besides, the pro forma promissory notes have the character of a contract
d’adhésion, “where the parties do not bargain on equal footing, the weaker
party’s [the debtor’s] participation being reduced to the alternative ‘to take it or
leave it.’ ”
4. Obligations and Contracts; Loans; Promissory Notes; Interest
Rates; Escalation Clauses; Usury Law;While the Usury Law ceiling on interest
rates was lifted by Central Bank Circular No. 905, nothing in the said Circular
grants lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.-
“While the Usury Law ceiling on interest rates was lifted by [Central Bank]
Circular No. 905, nothing in the said Circular grants lenders carte blanche
authority to raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets.” In fact, we have declared
nearly ten years ago that neither this Circular nor PD 1684, which further
amended the Usury Law, “authorized either party to unilaterally raise the
interest rate without the other’s consent.”
5. Obligations and Contracts; Loans; Promissory Notes; Interest
Rates; Escalation Clauses; Usury Law;Rates found to be iniquitous or
unconscionable are void, as if there were no express contract thereon.-
A similar case eight years ago pointed out to the same respondent (PNB) that
borrowing signified a capital transfusion from lending institutions to businesses
and industries and was done for the purpose of stimulating their growth; yet
respondent’s continued “unilateral and lopsided policy” of increasing interest
rates “without the prior assent” of the borrower not only defeats this purpose,
but also deviates from this pronouncement. Although such increases are not
usurious, since the “Usury Law is now legally inexistent”—the interest ranging
from 26 percent to 35 percent in the statements of account—“must be equitably
reduced for being iniquitous, unconscionable and exorbitant.” Rates found to be
iniquitous or unconscionable are void, as if it there were no express contract
thereon. Above all, it is undoubtedly against public policy to charge excessively
for the use of money.
6. Obligations and Contracts; Loans; Promissory Notes; Interest
Rates; Escalation Clauses; A borrower’s request for restructuring does not
indicate any agreement to an interest increase—there can be no implied waiver
of a right when there is no clear, unequivocal and decisive act showing such
purpose; No one receiving a proposal to modify a loan contract, especially
interest—a vital component—is obliged to answer the proposal.-
It cannot be argued that assent to the increases can be implied either from the
June 18, 1991 request of petitioners for loan restructuring or from their lack of
response to the statements of account sent by respondent. Such request does
not indicate any agreement to an interest increase; there can be no implied
waiver of a right when there is no clear, unequivocal and decisive act showing
such purpose. Besides, the statements were not letters of information sent to
secure their conformity; and even if we were to presume these as an offer, there
was no acceptance. No one receiving a proposal to modify a loan contract,
especially interest—a vital component—is “obliged to answer the proposal.”
7. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Words and Phrases; Credit Lines; “Revolving Credit Line,” Explained.-
Banks give credit lines to businessmen in order to assist them in the operation of
their business. A fixed limit or ceiling may be placed on the account, provided its
balance does not exceed such stipulated limit or ceiling. The balance may
perhaps never be cleared, since the credit revolves round and round; hence, the
title “revolving credit.” Miranda, Essentials of Money, Credit and Banking (5th
rev. ed., 1981), pp. 96-99. Moreover, a “revolving credit line” is a formal
commitment by a bank to lend a borrower up to a specified amount of money
over a given period of time. The actual notes evidencing the debt are short-term;
but the borrower may renew them up to a specified maximum throughout the
duration of such commitment. The bank, in turn, is legally bound under the loan
agreement to have funds available whenever money is borrowed. At the
maturity of the commitment, borrowings then owing can be converted into a
“term loan.” Van Horne, Financial Management and Policy (5th ed., 1980), pp.
520-521. Thus, when a borrower needs money, it makes a drawdown or
availment on the credit line in the form of a note or “promise to pay” a certain
principal amount. The balance of all unpaid principals, otherwise known as
outstanding drawdowns or availments, at any given time, should not exceed the
ceiling or limit. After due payment of any drawdown or availment, the borrower
can make succeeding drawdowns or availments within the maximum amount
committed, provided the line has not yet expired.
8. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Words and Phrases; “Gross or Intermediation Spread,” Explained.-
The difference between the interest and other service fees charged by a bank to
its borrowers and clients and the interest it pays to its depositors and other
suppliers of funds is the “gross or intermediation spread.” IBON Databank Phils.,
Inc., The Philippine Financial System—A Primer (1983), p. 36.
9. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Where the disclosure statements, as well as the credit agreements, do
not provide for any increase in the specified interest rates, none would be
permitted.-
In sum, the three disclosure statements, as well as the two credit agreements
considered by this Court, did not provide for any increase in the specified interest
rates. Thus, none would now be permitted. When cross-examined, Julia Ang-
Lopez, Finance Account Analyst II of PNB, Dagupan Branch, even testified that
the bases for computing such rates were those sent by the head office from time
to time, and not those indicated in the notes or disclosure statements.
10. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Contract Clause; The sole purpose of the impairment clause of the
Constitution is to safeguard the integrity of valid contractual agreements
against unwarranted interference by the State in the form of laws—private
individuals’ intrusions on interest rates is governed by statutory enactments like
the Civil Code.-
In addition to the preceding discussion, it is then useless to belabor the point
that the increase in rates violates the impairment clause of the Constitution,
because the sole purpose of this provision is to safeguard the integrity of valid
contractual agreements against unwarranted interference by the State in the
form of laws. Private individuals’ intrusions on interest rates is governed by
statutory enactments like the Civil Code.
11. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Disclosure Statements;Truth in Lending Act; The effect, when the
borrower is not clearly informed of the Disclosure Statements—prior to the
consummation of the availment or drawdown—is that the lender will have no
right to collect upon such charge or increases thereof, even if stipulated in the
Notes; The time is now ripe to give teeth to the often ignored forty-one-year old
“Truth in Lending Act” and thus transform it from a snivelling paper tiger to a
growling financial watchdog of hapless borrowers.-
No penalty charges or increases thereof appear either in the Disclosure
Statements or in any of the clauses in the second and the third Credit
Agreements earlier discussed. While a standard penalty charge of 6 percent per
annum has been imposed on the amounts stated in all three Promissory Notes
still remaining unpaid or unrenewed when they fell due, there is no stipulation
therein that would justify any increase in that charges. The effect, therefore,
when the borrower is not clearly informed of the Disclosure Statements—prior
to the consummation of the availment or drawdown—is that the lender will
have no right to collect upon such charge or increases thereof, even if stipulated
in the Notes. The time is now ripe to give teeth to the often ignored forty-one-
year old “Truth in Lending Act” and thus transform it from a snivelling paper
tiger to a growling financial watchdog of hapless borrowers.
12. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Disclosure Statements;Damages; Liquidated damages intended as
penalty shall be equitably reduced to zilch where iniquitous or unconscionable.-
We have earlier said that the Notes are contracts of adhesion; although not
invalid per se, any apparent ambiguity in the loan contracts—taken as a
whole—shall be strictly construed against respondent who caused it. Worse, in
the statements of account, the penalty rate has again been unilaterally
increased by respondent to 36 percent without petitioners’ consent. As a result
of its move, such liquidated damages intended as a penalty shall be equitably
reduced by the Court to zilch for being iniquitous or unconscionable.
13. Obligations and Contracts; Loans; Promissory Notes; Banks and
Banking; Disclosure Statements;Novation; Novation can never be presumed,
and the animus novandi must appear by express agreement of the parties, or by
their acts that are too clear and unequivocal to be mistaken.-
Although the first Disclosure Statement was furnished Petitioner NSBCI prior to
the execution of the transaction, it is not a contract that can be modified by the
related Promissory Note, but a mere statement in writing that reflects the true
and effective cost of loans from respondent. Novation can never be presumed,
and the animus novandi “must appear by express agreement of the parties, or
by their acts that are too clear and unequivocal to be mistaken.” To allow
novation will surely flout the “policy of the State to protect its citizens from a
lack of awareness of the true cost of credit.”
14. Obligations and Contracts; Loans; Promissory Notes; Attorney’s
Fees; Attorney’s fees are not an integral part of the cost of borrowing, but arise
only when collecting upon the Notes becomes necessary.-
We affirm the equitable reduction in attorney’s fees. These are not an integral
part of the cost of borrowing, but arise only when collecting upon the Notes
becomes necessary. The purpose of these fees is not to give respondent a larger
compensation for the loan than the law already allows, but to protect it against
any future loss or damage by being compelled to retain counsel—in-house or
not—to institute judicial proceedings for the collection of its credit. Courts have
has the power to determine their reasonableness based on quantum meruit and
to reduce the amount thereof if excessive.
15. Obligations and Contracts; Loans; Promissory Notes; Attorney’s
Fees; Notarial Law; Legal Ethics;Act 496 has repealed the Spanish Notarial
Law; A party’s engagement of his counsel in another capacity concurrent with
the practice of law is not prohibited, so long as the roles being assumed by such
counsel is made clear to the client.-
The disqualification argument in the Affidavit of Publication raised by petitioners
no longer holds water, inasmuch as Act 496 has repealed the Spanish Notarial
Law.In the same vein, their engagement of their counsel in another capacity
concurrent with the practice of law is not prohibited, so long as the roles being
assumed by such counsel is made clear to the client. The only reason for this
clarification requirement is that certain ethical considerations operative in one
profession may not be so in the other.
16. Obligations and Contracts; Loans; Evidence; Entries in
Ledgers; Presumptions; Without a doubt, the subsidiary ledgers in a manual
accounting system are mere private documents that support and are controlled
by the general ledger; We go by the presumption that the recording of private
transactions has been fair and regular, and that the ordinary course of business
has been followed.-
Contrary to petitioners’ assertions, the subsidiary ledgers of respondent properly
reflected all entries pertaining to Petitioner NSBCI’s loan accounts. In
accordance with the Generally Accepted Accounting Principles (GAAP) for the
Banking Industry, all interests accrued or earned on such loans, except those
that were restructured and non-accruing, have been periodically taken into
income. Without a doubt, the subsidiary ledgers in a manual accounting system
are mere private documents that support and are controlled by the general
ledger. Such ledgers are neither foolproof nor standard in format, but are
periodically subject to audit. Besides, we go by the presumption that the
recording of private transactions has been fair and regular, and that the
ordinary course of business has been followed.
17. Obligations and Contracts; Loans; Evidence; Words and Phrases; “General
Ledgers,” and “Subsidiary Ledgers,” Explained.-
A “general ledger,” on the one hand, is a summary or repository of accounts to
which debits and credits resulting from financial transactions are posted from
journals or books of original entry; a “subsidiary ledger,” on the other, is a
special type of ledger confined chiefly to a particular account.
18. Mortgages; Foreclosure of Mortgage; No personal notice is required in an
extrajudicial foreclosure since such action is in rem, requiring only notice by
publication and posting, in order to bind parties interested in the foreclosed
property.-
In the accessory contract of real mortgage, in which immovable property or real
rights thereto are used as security for the fulfillment of the principal loan
obligation,the bid price may be lower than the property’s fair market value. In
fact, the loan value itself is only 70 percent of the appraised value. As correctly
emphasized by the appellate court, a low bid price will make it easier for the
owner to effect redemption by subsequently reacquiring the property or by
selling the right to redeem and thus recover alleged losses. Besides, the public
auction sale has been regularly and fairly conducted, there has been ample
authority to effect the sale,and the Certificates of Title can be relied upon. No
personal notice is even required, because an extrajudicial foreclosure is an
action in rem, requiring only notice by publication and posting, in order to bind
parties interested in the foreclosed property.
Division: THIRD DIVISION
Docket Number: G.R. No. 148753
Counsel: Cesar M. Cariño, Dinah B. Tabada
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, this Petition is hereby PARTLY GRANTED. The Decision of the
Court of Appeals is AFFIRMED, with the MODIFICATION that PNB is ORDERED to
refund the sum of P3,686,101.52 representing the overcollection computed
above, plus interest thereon at the legal rate of six percent (6%) per annum
from the filing of the Complaint until the finality of this Decision. After this
Decision becomes final and executory, the applicable rate shall be twelve
percent (12%) per annum until its satisfaction. No costs.
Case Title : BANK OF THE PHILIPPINE ISLANDS, INC., petitioner, vs. SPS.
NORMAN AND ANGELINA YU and TUANSON BUILDERS CORPORATION
represented by PRES. NORMAN YU, respondents.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Loans|Penalty Charges
Syllabi:
1. Remedial Law; Civil Procedure; Summary Judgments; A summary judgment
is apt when the essential facts of the case are uncontested or the parties do not
raise any genuine issue of fact.-
—A summary judgment is apt when the essential facts of the case are
uncontested or the parties do not raise any genuine issue of fact. Here, to
resolve the issue of the excessive charges allegedly incorporated into the auction
bid price, the RTC simply had to look at a) the pleadingsof the parties; b) the
loan agreements, the promissory note, and the real estate mortgages between
them; c) the foreclosure and bidding documents; and d) the admissions and
other disclosures between the parties during pre-trial. Since the parties admitted
not only the existence, authenticity, and genuine execution of these documents
but also what they stated, the trial court did not need to hold a trial for the
reception of the evidence of the parties.
2. Same; Penalty Charges; Courts have authority to reduce penalty charges
when these are unreasonable and iniquitous.-
—Nonetheless, the courts have authority to reduce penalty charges when these
are unreasonable and iniquitous. Considering that BPI had already received over
P2.7 million in interest and that it seeks to impose the penalty charge of 3% per
month or 36% per annum on the total amount due—principal plus interest, with
interest not paid when due added to and becoming part of the principal and also
bearing interest at the same rate—the Court finds the ruling of the RTC in its
original decision reasonable and fair. Thus, the penalty charge of 12% per
annum or 1% per month is imposed.
3. Same; Same; Penalty charges stipulated in the promissory notes declared
valid.-
—The ruling that is more in point is that laid down in The Consolidated Bank and
Trust Corporation v. Court of Appeals, 246 SCRA 193 (1995) a case cited in New
Sampaguita. The Consolidated Bank ruling declared valid the penalty charges
that were stipulated in the promissory notes. What the Court disallowed in that
case was the collection of a handling charge that the promissory notes did not
contain.
4. Same; Promissory Notes; A promissory note is an acknowledgment of a debt
and commitment to repay it on the date and under the conditions that the
parties agreed on; It is a valid contract absent proof of acts which might have
vitiated consent.-
—In this case, although BPI failed to state the penalty charges in the disclosure
statement, the promissory note that the Yus signed, on the same date as the
disclosure statement, contained a penalty clause that said: “I/We jointly and
severally, promise to further pay a late payment charge on any overdue amount
herein at the rate of 3% per month.” The promissory note is an acknowledgment
of a debt and commitment to repay it on the date and under the conditions that
the parties agreed on. It is a valid contract absent proof of acts which might
have vitiated consent.
5. Loans; Words and Phrases; “Finance Charge”; A finance charge represents
the amount to be paid by the debtor incident to the extension of credit.-
—Penalty charge, which is liquidated damages resulting from a breach, falls
under item (6) or finance charge. A finance charge “represents the amount to be
paid by the debtor incident to the extension of credit.” The lender may provide
for a penalty clause so long as the amount or rate of the charge and the
conditions under which it is to be paid are disclosed to the borrower before he
enters into the credit agreement.
Division: SECOND DIVISION
 87/98/100 75,000.00 02/12/98
Docket Number: G.R. No. 184122
87/98/197 195,000.00 03/19/98

87/97/761 60,000.00 09/26/97

Republic of the Philippines

87/97/768 30,000.00 09/29/97
Supreme Court
Manila
87/97/767 180,000.00 09/29/97

FIRST DIVISION 87/97/970 110,000.00 12/29/97

87/97/747 50,000.00 09/22/97

UNION BANK OF THE PHILIPPINES, G.R. Nos. 173090-91
Petitioner, 87/96/944 605,000.00 12/19/97
Present:
87/98/191 470,000.00 03/16/98
CORONA, C.J.,
Chairperson,
87/98/198 505,000.00 03/19/98
- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and 87/98/090 449,000.00 02/09/98
VILLARAMA, JR., JJ.
US$3,632,000.00[4]
SPOUSES RODOLFO T. TIU AND
VICTORIA N. TIU, Promulgated:
Respondents.
September 7, 2011 On June 23, 1998, Union Bank advised the spouses Tiu through a
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x letter[5] that, in view of the existing currency risks, the loans shall be
redenominated to their equivalent Philippine peso amount on July 15,
1998. On July 3, 1998, the spouses Tiu wrote to Union Bank authorizing the
DECISION latter to redenominate the loans at the rate of US$1=P41.40[6] with interest of
19% for one year.[7]

LEONARDO-DE CASTRO, J.: On December 21, 1999, Union Bank and the spouses Tiu entered into
a Restructuring Agreement.[8] The Restructuring Agreement contains a clause
wherein the spouses Tiu confirmed their debt and waived any action on account
This is a Petition for Review on Certiorari seeking to reverse the Joint thereof. To quote said clause:
Decision[1] of the Court of Appeals dated February 21, 2006 in CA-G.R. CV No.
00190 and CA-G.R. SP No. 00253, as well as the Resolution[2] dated June 1, 1. Confirmation of Debt – The BORROWER
2006 denying the Motion for Reconsideration. hereby confirms and accepts that as of
December 8, 1999, its outstanding principal
The factual and procedural antecedents of this case are as follows: indebtedness to the BANK under the
Agreement and the Notes amount to ONE
On November 21, 1995, petitioner Union Bank of the Philippines HUNDRED FIFTY[-]FIVE MILLION THREE
(Union Bank) and respondent spouses Rodolfo T. Tiu and Victoria N. Tiu (the HUNDRED SIXTY[-]FOUR THOUSAND EIGHT
spouses Tiu) entered into a Credit Line Agreement (CLA) whereby Union Bank HUNDRED PESOS (PHP 155,364,800.00)
agreed to make available to the spouses Tiu credit facilities in such amounts as exclusive of interests, service and penalty
may be approved.[3] From September 22, 1997 to March 26, 1998, the spouses charges (the “Indebtedness”) and further
Tiu took out various loans pursuant to this CLA in the total amount of three confirms the correctness, legality, collectability
million six hundred thirty-two thousand dollars (US$3,632,000.00), as evidenced and enforceability of the Indebtedness. The
by promissory notes: BORROWER unconditionally waives any action,
demand or claim that they may otherwise
PN No. Amount in US$ Date Granted have to dispute the amount of the
Indebtedness as of the date specified in this
87/98/111 72,000.00 02/16/98 Section, or the collectability and enforceability
thereof. It is the understanding of the parties
87/98/108 84,000.00 02/13/98 that the BORROWER’s acknowledgment,
affirmation, and waiver herein are material
considerations for the BANK’s agreeing to
87/98/152 320,000.00 03/02/98
restructure the Indebtedness which would
have already become due and payable as of
87/98/075 150,000.00 01/30/98 the above date under the terms of the
Agreement and the Notes.[9]
87/98/211 32,000.00 03/26/98

87/98/071 110,000.00 01/29/98 The restructured amount (P155,364,800.00) is the sum of the
following figures: (1) P150,364,800.00, which is the value of the
87/98/107 135,000.00 02/13//98 US$3,632,000.00 loan as redenominated under the above-mentioned exchange
rate of US$1=P41.40; and (2) P5,000,000.00, an additional loan given to the
spouses Tiu to update their interest payments.[10]
 Under the same Restructuring Agreement, the parties declared that
the loan obligation to be restructured (after deducting thedacion price of
properties ceded by the Tiu spouses and adding: [1] the taxes, registration fees
and other expenses advanced by Union Bank in registering the Deeds of Dation
in Payment; and [2] other fees and charges incurred by the Indebtedness) is one
hundred four million six hundred sixty-eight thousand seven hundred forty-one
pesos (P104,668,741.00) (total restructured amount).[11] The Deeds of Dation in
Payment referred to are the following:
1. Dation of the Labangon properties – Deed executed by Juanita
Tiu, the mother of respondent Rodolfo Tiu, involving ten
parcels of land with improvements located in Labangon, Cebu
City and with a total land area of 3,344 square meters, for the
amount of P25,130,000.00. The Deed states that these
properties shall be leased to the Tiu spouses at a monthly rate
ofP98,000.00 for a period of two years.[12]
2. Dation of the Mandaue property – Deed executed by the
spouses Tiu involving one parcel of land with improvements
located in A.S. Fortuna St., Mandaue City, covered by TCT No.
T-31604 and with a land area of 2,960 square meters, for the
amount of P36,080,000.00. The Deed states that said property
shall be leased to the Tiu spouses at a monthly rate
ofP150,000.00 for a period of two years.[13]
As likewise provided in the Restructuring Agreement, the spouses
Tiu executed a Real Estate Mortgage in favor of Union Bank over their
“residential property inclusive of lot and improvements” located at P. Burgos
St., Mandaue City, covered by TCT No. T-11951 with an area of 3,096 square
meters.[14]
The spouses Tiu undertook to pay the total restructured amount
(P104,668,741.00) via three loan facilities (payment schemes).
The spouses Tiu claim to have made the following payments:
(1) P15,000,000.00 on August 3, 1999; and (2) anotherP13,197,546.79 as of May
8, 2001. Adding the amounts paid under the Deeds of Dation in Payment, the
spouses Tiu postulate that their payments added up to P89,407,546.79.[15]
Asserting that the spouses Tiu failed to comply with the payment
schemes set up in the Restructuring Agreement, Union Bank initiated
extrajudicial foreclosure proceedings on the residential property of the spouses
Tiu, covered by TCT No. T-11951. The property was to be sold at public auction
on July 18, 2002.
The spouses Tiu, together with Juanita T. Tiu, Rosalinda T. King,
Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu, filed with the Regional Trial
Court (RTC) of Mandaue City a Complaint seeking to have the Extrajudicial
Foreclosure declared null and void. The case was docketed as Civil Case No.
MAN-4363.[16] Named as defendants were Union Bank and Sheriff IV Veronico
C. Ouano (Sheriff Oano) of Branch 55, RTC, Mandaue City. Complainants
therein prayed for the following: (1) that the spouses Tiu be declared to have
fully paid their obligation to Union Bank; (2) that defendants be permanently
enjoined from proceeding with the auction sale; (3) that Union Bank be ordered
to return to the spouses Tiu their properties as listed in the Complaint; (4) that
Union Bank be ordered to pay the plaintiffs the sum of P10,000,000.00 as moral
damages, P2,000,000.00 as exemplary damages,P3,000,000.00 as attorney’s
fees and P500,000.00 as expenses of litigation; and (5) a writ of preliminary
injunction or temporary restraining order be issued enjoining the public auction
sale to be held on July 18, 2002.[17]
The spouses Tiu claim that from the beginning the loans were in
pesos, not in dollars. Their office clerk, Lilia Gutierrez, testified that the spouses
Tiu merely received the peso equivalent of their US$3,632,000.00 loan at the
rate of US$1=P26.00. The spouses Tiu further claim that they were merely
forced to sign the Restructuring Agreement and take up an additional loan
ofP5,000,000.00, the proceeds of which they never saw because this amount
was immediately applied by Union Bank to interest payments.[18]
The spouses Tiu allege that the foreclosure sale of the mortgaged
properties was invalid, as the loans have already been fully paid. They also
allege that they are not the owners of the improvements constructed on the lot
because the real owners thereof are their co-petitioners, Juanita T. Tiu,
Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu.[19]
The spouses Tiu further claim that prior to the signing of the
Restructuring Agreement, they entered into a Memorandum of Agreement with
Union Bank whereby the former deposited with the latter several certificates of
shares of stock of various companies and four certificates of title of various
parcels of land located in Cebu. The spouses Tiu claim that these properties
have not been subjected to any lien in favor of Union Bank, yet the latter
continues to hold on to these properties and has not returned the same to the
former.[20]
On the other hand, Union Bank claims that the Restructuring
Agreement was voluntarily and validly entered into by both parties. Presenting
as evidence the Warranties embodied in the Real Estate Mortgage, Union Bank
contends that the foreclosure of the mortgage on the residential property of
the spouses Tiu was valid and that the improvements thereon were absolutely
owned by them. Union Bank denies receiving certificates of shares of stock of
various companies or the four certificates of title of various parcels of land from
the spouses Tiu. However, Union Bank also alleges that even if said certificates
were in its possession it is authorized under the Restructuring Agreement to
retain any and all properties of the debtor as security for the loan.[21]
The RTC issued a Temporary Restraining Order[22] and, eventually, a
Writ of Preliminary Injunction[23] preventing the sale of the residential property
of the spouses Tiu. [24]
On December 16, 2004, the RTC rendered its Decision[25] in Civil Case
No. MAN-4363 in favor of Union Bank. The dispositive portion of the Decision
read:
WHEREFORE, premises considered, judgment
is hereby rendered dismissing the Complaint and lifting
and setting aside the Writ of Preliminary Injunction. No
pronouncement as to damages, attorney’s fees and costs
of suit.[26]
In upholding the validity of the Restructuring Agreement, the RTC
held that the spouses Tiu failed to present any evidence to prove either fraud or
intimidation or any other act vitiating their consent to the same. The exact
obligation of the spouses Tiu to Union Bank is therefore P104,668,741.00, as
agreed upon by the parties in the Restructuring Agreement. As regards the
contention of the spouses Tiu that they have fully paid their indebtedness, the
RTC noted that they could not present any detailed accounting as to the total
amount they have paid after the execution of the Restructuring Agreement.[27]
On January 4, 2005, Union Bank filed a Motion for Partial
Reconsideration,[28] protesting the finding in the body of the December 16, 2004
Decision that the residential house on Lot No. 639 is not owned by the spouses
Tiu and therefore should be excluded from the real properties covered by the
real estate mortgage. On January 6, 2005, the spouses Tiu filed their own
Motion for Partial Reconsideration and/or New Trial.[29] They alleged that the
trial court failed to rule on their fourth cause of action wherein they mentioned
that they turned over the following titles to Union Bank: TCT Nos. 30271,
116287 and 116288 and OCT No. 0-3538. They also prayed for a partial new
trial and for a declaration that they have fully paid their obligation to Union
Bank.[30]
On January 11, 2005, the spouses Tiu received from Sheriff Oano a
Second Notice of Extra-judicial Foreclosure Sale of Lot No. 639 to be held
on February 3, 2005. To prevent the same, the Tiu spouses filed with the Court
of Appeals a Petition for Prohibition and Injunction with Application for
TRO/Writ of Preliminary Injunction.[31] The petition was docketed as CA-G.R. SP
No. 00253. The Court of Appeals issued a Temporary Restraining Order on
January 27, 2005.[32]
On January 19, 2005, the RTC issued an Order denying Union Bank’s
Motion for Partial Reconsideration and the Tiu spouses’ Motion for Partial
Reconsideration and/or New Trial.[33]
Both the spouses Tiu and Union Bank appealed the case to the Court
of Appeals.[34] The two appeals were given a single docket number, CA-G.R.
CEB-CV No. 00190. Acting on a motion filed by the spouses Tiu, the Court of
Appeals consolidatedCA-G.R. SP No. 00253 with CA-G.R. CEB-CV No. 00190.[35]
On April 19, 2005, the Court of Appeals issued a Resolution finding
that there was no need for the issuance of a Writ of Preliminary Injunction as
the judgment of the lower court has been stayed by the perfection of the
appeal therefrom.[36]
On May 9, 2005, Sheriff Oano proceeded to conduct the extrajudicial
sale. Union Bank submitted the lone bid ofP18,576,000.00.[37] On June 14,
2005, Union Bank filed a motion with the Court of Appeals praying that Sheriff
Oano be ordered to issue a definite and regular Certificate of Sale.[38] On July
21, 2005, the Court of Appeals issued a Resolution denying the Motion and
suspending the auction sale at whatever stage, pending resolution of the appeal
and conditioned upon the filing of a bond in the amount of P18,000,000.00 by
the Tiu spouses.[39] The Tiu spouses failed to file said bond.[40]
On February 21, 2006, the Court of Appeals rendered the assailed
Joint Decision in CA-G.R. CV No. 00190 and CA-G.R. SP No. 00253. The Court of
Appeals dismissed the Petition for Prohibition, CA-G.R. SP No. 00253, on the
ground that the proper venue for the same is with the RTC.[41]
On the other hand, the Court of Appeals ruled in favor of the spouses
Tiu in CA-G.R. CV No. 00190. The Court of Appeals held that the loan
transactions were in pesos, since there was supposedly no stipulation the loans
will be paid in dollars and since no dollars ever exchanged hands. Considering
that the loans were in pesos from the beginning, the Court of Appeals reasoned
that there is no need to convert the same. By making it appear that the loans
were originally in dollars, Union Bank overstepped its rights as creditor, and
made unwarranted interpretations of the original loan agreement. According to
the Court of Appeals, the Restructuring Agreement, which purportedly attempts
to create a novation of the original loan, was not clearly authorized by the
debtors and was not supported by any cause or consideration. Since the
Restructuring Agreement is void, the original loan of P94,432,000.00
(representing the amount received by the spouses Tiu of US$3,632,000.00 using
the US$1=P26.00 exchange rate) should subsist. The Court of Appeals likewise
invalidated (1) the P5,000,000.00 charge for interest in the Restructuring
Agreement, for having been unilaterally imposed by Union Bank; and (2) the
lease of the properties conveyed in dacion en pago, for being against public
policy.[42]
In sum, the Court of Appeals found Union Bank liable to the spouses
Tiu in the amount of P927,546.79. For convenient reference, we quote relevant
portion of the Court of Appeal’s Decision here:
To summarize the obligation of the Tiu
spouses, they owe Union Bank P94,432,000.00. The Tiu
spouses had already paid Union Bank the amount
of P89,407,546.79. On the other hand, Union Bank must
return to the Tiu spouses the illegally collected rentals in
the amount ofP5,952,000.00. Given these findings, the
obligation of the Tiu spouses has already been fully
paid. In fact, it is the Union Bank that must return to the
Tiu spouses the amount of NINE HUNDRED TWENTY[-
]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX PESOS
AND SEVENTY[-]NINE CENTAVOS (P927,546.79).[43]
With regard to the ownership of the improvements on the subject
mortgaged property, the Court of Appeals ruled that it belonged to respondent
Rodolfo Tiu’s father, Jose Tiu, since 1981. According to the Court of Appeals,
Union Bank should not have relied on warranties made by debtors that they are
the owners of the property. The appellate court went on to permanently enjoin
Union Bank from foreclosing the mortgage not only of the property covered by
TCT No. T-11951, but also any other mortgage over any other property of the
spouses Tiu.[44]
The Court of Appeals likewise found Union Bank liable to return the
certificates of stocks and titles to real properties of the spouses Tiu in its
possession. The appellate court held that Union Bank made judicial admissions
of such possession in its Reply to Plaintiff’s Request for Admission.[45] In the
event that Union Bank can no longer return these certificates and titles, it was
mandated to shoulder the cost for their replacement.[46]
Finally, the Court of Appeals took judicial notice that before or during
the financial crisis, banks actively convinced debtors to make dollar loans in the
guise of benevolence, saddling borrowers with loans that ballooned twice or
thrice their original loans. The Court of Appeals, noting “the cavalier way with
which banks exploited and manipulated the situation,”[47] held Union Bank liable
to the spouses Tiu for P100,000.00 in moral damages, P100,000.00 in exemplary
damages, and P50,000.00 in attorney’s fees.[48]
The Court of Appeals disposed of the case as follows:
WHEREFORE, in view of the foregoing
premises, judgment is hereby rendered by us
permanently enjoining Union Bank from foreclosing the
mortgage of the residential property of the Tiu spouses
which is covered by Transfer Certificate of Title No. 11951
and from pursuing other foreclosure of mortgages over
any other properties of the Tiu spouses for the above-
litigated debt that has already been fully paid. If a
foreclosure sale has already been made over such
properties, this Court orders the cancellation of such
foreclosure sale and the Certificate of Sale thereof if any
has been issued. This Court orders Union Bank to
return to the Tiu spouses the amount of NINE
HUNDRED TWENTY[-]SEVEN THOUSAND FIVE HUNDRED
FORTY[-]SIX PESOS AND SEVENTY[-]NINE CENTAVOS
(P927,546.79) representing illegally collected
rentals. This Court also orders Union Bank to return to
the Tiu spouses all the certificates of shares of stocks and
titles to real properties of the Tiu spouses that were
deposited to it or, in lieu thereof, to pay the cost for the
replacement and issuance of new certificates and new
titles over the said properties. This Court finally orders
Union Bank to pay the Tiu spouses ONE HUNDRED
THOUSAND PESOS (P100,000.00) in moral damages, ONE
HUNDRED THOUSAND PESOS (P100,000.00) in exemplary
damages, FIFTY THOUSAND PESOS (P50,000.00) in
attorney’s fees and cost, both in the lower court and in
this Court.[49]
On June 1, 2006, the Court of Appeals rendered the assailed
Resolution denying Union Bank’s Motion for Reconsideration.
Hence, this Petition for Review on Certiorari, wherein Union Bank
submits the following issues for the consideration of this Court:
1. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT CONCLUDED THAT THERE WERE NO DOLLAR
LOANS OBTAINED BY [THE] TIU SPOUSES FROM
UNION BANK DESPITE [THE] CLEAR ADMISSION OF
INDEBTEDNESS BY THE BORROWER-MORTGAGOR
TIU SPOUSES.
2. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT NULLIFIED THE RESTRUCTURING AGREEMENT
BETWEEN TIU SPOUSES AND UNION BANK FOR LACK
OF CAUSE OR CONSIDERATION DESPITE THE
ADMISSION OF THE BORROWER-MORTGAGOR TIU
SPOUSES OF THE DUE AND VOLUNTARY EXECUTION
OF SAID RESTRUCTURING AGREEMENT.
3. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT PERMANENTLY ENJOINED UNION BANK FROM
FORECLOSING THE MORTGAGE ON THE
RESIDENTIAL PROPERTY OF THE TIU SPOUSES
DESPITE THE ADMISSION OF NON-PAYMENT OF
THEIR OUTSTANDING LOAN TO THE BANK BY THE
BORROWER-MORTGAGOR TIU SPOUSES;
 4. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT FIXED THE AMOUNT OF THE OBLIGATION OF
RESPONDENT SPOUSES CONTRARY TO THE
PROVISIONS OF THE PROMISSORY NOTES,
RESTRUCTURING AGREEMENT AND [THE]
VOLUNTARY ADMISSIONS BY BORROWER-
MORTGAGOR TIU SPOUSES;
5. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT RULED ON THE ALLEGED RENTALS PAID BY
RESPONDENT SPOUSES WITHOUT ANY FACTUAL
BASIS;
6. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT HELD WITHOUT ANY FACTUAL BASIS THAT THE
LOAN OBLIGATION OF TIU SPOUSES HAS BEEN
FULLY PAID;
7. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT HELD WITHOUT ANY FACTUAL BASIS THAT THE
HOUSE INCLUDED IN THE REAL ESTATE MORTGAGE
DID NOT BELONG TO THE TIU SPOUSES.
8. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR IN
ORDERING UNION BANK TO RETURN THE
CERTIFICATES OF SHARES OF STOCK AND TITLES TO
REAL PROPERTIES OF TIU SPOUSES ALLEGEDLY IN
THE POSSESSION OF UNION BANK.
9. WHETHER OR NOT THE COURT OF APPEALS
VIOLATED THE DOCTRINES AND PRINCIPLES ON
APPELLATE JURISDICTION.
10. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR IN
AWARDING DAMAGES AGAINST UNION BANK.[50]
Validity of the Restructuring Agreement
As previously discussed, the Court of Appeals declared that the
Restructuring Agreement is void on account of its being a failed novation of the
original loan agreements. The Court of Appeals explained that since there was
no stipulation that the loans will be paid in dollars, and since no dollars ever
exchanged hands, the original loan transactions were in pesos.[51] Proceeding
from this premise, the Court of Appeals held that the Restructuring Agreement,
which was meant to convert the loans into pesos, was unwarranted. Thus, the
Court of Appeals reasoned that:
Be that as it may, however, since the loans of
the Tiu spouses from Union Bank were peso loans from
the very beginning, there is no need for conversion
thereof. A Restructuring Agreement should merely
confirm the loans, not add thereto. By making it appear
in the Restructuring Agreement that the loans were
originally dollar loans, Union Bank overstepped its rights
as a creditor and made unwarranted interpretations of
the original loan agreement. This Court is not bound by
such interpretations made by Union Bank. When one
party makes an interpretation of a contract, he makes it
at his own risk, subject to a subsequent challenge by the
other party and a modification by the courts. In this case,
that party making the interpretation is not just any party,
but a well entrenched and highly respected bank. The
matter that was being interpreted was also a financial
matter that is within the profound expertise of the
bank. A normal person who does not possess the same
financial proficiency or acumen as that of a bank will most
likely defer to the latter’s esteemed opinion,
representations and interpretations. It has been often
stated in our jurisprudence that banks have a fiduciary
duty to their depositors. According to the case of Bank of
the Philippine Islands vs. IAC (G.R. No. 69162, February 21,
1992), “as a business affected with public interest and
because of the nature of its functions, the bank is under
obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary
nature of their relationship.” Such fiduciary relationship
should also extend to the bank’s borrowers who, more
often than not, are also depositors of the bank. Banks are
in the business of lending while most borrowers hardly
know the basics of such business. When transacting with
a bank, most borrowers concede to the expertise of the
bank and consider their procedures, pronouncements
and representations as unassailable, whether such be
true or not. Therefore, when there is a doubtful banking
transaction, this Court will tip the scales in favor of the
borrower.
Given the above ruling, the Restructuring
Agreement, therefore, between the Tiu spouses and
Union Bank does not operate to supersede all previous
loan documents, as claimed by Union Bank. But the said
Restructuring Agreement, as it was crafted by Union
Bank, does not merely confirm the original loan of the Tiu
spouses but attempts to create a novation of the said
original loan that is not clearly authorized by the debtors
and that is not supported by any cause or
consideration. According to Article 1292 of the New Civil
Code, in order that an obligation may by extinguished by
another which substitutes the same, it is imperative that
it be so declared in unequivocal terms, or that the old and
the new obligations be on every point incompatible with
each other. Such is not the case in this instance. No valid
novation of the original obligation took place. Even
granting arguendo that there was a novation, the sudden
change in the original amount of the loan to the new
amount declared in the Restructuring Agreement is not
supported by any cause or consideration. Under Article
1352 of the Civil Code, contracts without cause, or with
unlawful cause, produce no effect whatever. A contract
whose cause did not exist at the time of the transaction is
void. Accordingly, Article 1297 of the New Civil Code
mandates that, if the new obligation is void, the original
one shall subsist, unless the parties intended that the
former relation should be extinguished at any
event. Since the Restructuring Agreement is void and
since there was no intention to extinguish the original
loan, the original loan shall subsist.[52]
Union Bank does not dispute that the spouses Tiu received the
loaned amount of US$3,632,000.00 in Philippine pesos, not dollars, at the
prevailing exchange rate of US$1=P26.[53] However, Union Bank claims that this
does not change the true nature of the loan as a foreign currency loan, [54] and
proceeded to illustrate in its Memorandum that the spouses Tiu obtained
favorable interest rates by opting to borrow in dollars (but receiving the
equivalent peso amount) as opposed to borrowing in pesos.[55]
We agree with Union Bank on this point. Although indeed, the
spouses Tiu received peso equivalents of the borrowed amounts, the loan
documents presented as evidence, i.e., the promissory notes,[56] expressed the
amount of the loans in US dollars and not in any other currency. This clearly
indicates that the spouses Tiu were bound to pay Union Bank in dollars, the
amount stipulated in said loan documents. Thus, before the Restructuring
Agreement, the spouses Tiu were bound to pay Union Bank the amount of
US$3,632,000.00 plus the interest stipulated in the promissory notes, without
converting the same to pesos. The spouses Tiu, who are in the construction
business and appear to be dealing primarily in Philippine currency, should
therefore purchase the necessary amount of dollars to pay Union Bank, who
could have justly refused payment in any currency other than that which was
stipulated in the promissory notes.

We disagree with the finding of the Court of Appeals that the
testimony of Lila Gutierrez, which merely attests to the fact that the spouses Tiu
received the peso equivalent of their dollar loan, proves the intention of the
parties that such loans should be paid in pesos. If such had been the intention
of the parties, the promissory notes could have easily indicated the same.
Such stipulation of payment in dollars is not prohibited by any
prevailing law or jurisprudence at the time the loans were taken. In this regard,
Article 1249 of the Civil Code provides:
Art. 1249. The payment of debts in money
shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency
which is legal tender in the Philippines.
Although the Civil Code took effect on August 30, 1950, jurisprudence had
upheld[57] the continued effectivity of Republic Act No. 529, which took effect
earlier on June 16, 1950. Pursuant to Section 1[58] of Republic Act No. 529, any
agreement to pay an obligation in a currency other than the Philippine currency
is void; the most that could be demanded is to pay said obligation in Philippine
currency to be measured in the prevailing rate of exchange at the time the
obligation was incurred.[59] On June 19, 1964, Republic Act No. 4100 took effect,
modifying Republic Act No. 529 by providing for several exceptions to the nullity
of agreements to pay in foreign currency.[60]
On April 13, 1993, Central Bank Circular No. 1389[61] was issued,
lifting foreign exchange restrictions and liberalizing trade in foreign currency. In
cases of foreign borrowings and foreign currency loans, however, prior Bangko
Sentral approval was required. On July 5, 1996, Republic Act No. 8183 took
effect,[62] expressly repealing Republic Act No. 529 in Section 2[63]thereof. The
same statute also explicitly provided that parties may agree that the obligation
or transaction shall be settled in a currency other than Philippine currency at the
time of payment.[64]
Although the Credit Line Agreement between the spouses Tiu and
Union Bank was entered into on November 21, 1995,[65]when the agreement to
pay in foreign currency was still considered void under Republic Act No. 529, the
actual loans,[66] as shown in the promissory notes, were taken out
from September 22, 1997 to March 26, 1998, during which time Republic Act
No. 8183 was already in effect. In United Coconut Planters Bank v. Beluso,[67] we
held that:
[O]pening a credit line does not create a credit
transaction of loan or mutuum, since the former is merely
a preparatory contract to the contract of loan
or mutuum. Under such credit line, the bank is merely
obliged, for the considerations specified therefor, to lend
to the other party amounts not exceeding the limit
provided. The credit transaction thus occurred not when
the credit line was opened, but rather when the credit
line was availed of. x x x.[68]
Having established that Union Bank and the spouses Tiu validly
entered into dollar loans, the conclusion of the Court of Appeals that there were
no dollar loans to novate into peso loans must necessarily fail.
Similarly, the Court of Appeals’ pronouncement that the novation
was not supported by any cause or consideration is likewise incorrect. This
conclusion suggests that when the parties signed the Restructuring Agreement,
Union Bank got something out of nothing or that the spouses Tiu received no
benefit from the restructuring of their existing loan and was merely taken
advantage of by the bank. It is important to note at this point that in the
determination of the nullity of a contract based on the lack of consideration, the
debtor has the burden to prove the same. Article 1354 of the Civil Code
provides that “[a]though the cause is not stated in the contract, it is presumed
that it exists and is lawful, unless the debtor proves the contrary.”
In the case at bar, the Restructuring Agreement was signed at the
height of the financial crisis when the Philippine peso was rapidly
depreciating. Since the spouses Tiu were bound to pay their debt in dollars, the
cost of purchasing the required currency was likewise swiftly increasing. If the
parties did not enter into the Restructuring Agreement in December 1999 and
the peso continued to deteriorate, the ability of the spouses Tiu to pay and the
ability of Union Bank to collect would both have immensely suffered. As shown
by the evidence presented by Union Bank, the peso indeed continued to
deteriorate, climbing to US$1=P50.01 on December 2000.[69] Hence, in order to
ensure the stability of the loan agreement, Union Bank and the spouses Tiu
agreed in the Restructuring Agreement to peg the principal loan
at P150,364,800.00 and the unpaid interest at P5,000,000.00.
Before this Court, the spouses Tiu belatedly argue that their consent
to the Restructuring Agreement was vitiated by fraud and mistake, alleging that
(1) the Restructuring Agreement did not take into consideration their substantial
payment in the amount ofP40,447,185.60 before its execution; and (2) the dollar
loans had already been redenominated in 1997 at the rate of US$1=P26.34.[70]
We have painstakingly perused over the records of this case, but
failed to find any documentary evidence of the alleged payment
of P40,447,185.60 before the execution of the Restructuring Agreement. In
paragraph 16 of their Amended Complaint, the spouses Tiu alleged payment
of P40,447,185.60 for interests before the conversion of the dollar loan.[71] This
was specifically denied by Union Bank in paragraph 5 of its Answer with
Counterclaim.[72] Respondent Rodolfo Tiu testified that they made “50 million
plus” in cash payment plus “other monthly interest payments,”[73] and identified
a computation of payments dated July 17, 2002 signed by himself.[74] Such
computation, however, was never formally offered in evidence and was in any
event, wholly self-serving.
As regards the alleged redenomination of the same dollar loans in
1997 at the rate of US$1=P26.34, the spouses Tiu merely relied on the following
direct testimony of Herbert Hojas, one of the witnesses of Union Bank:
Q: Could you please describe what kind of loan was
the loan of the spouses Rodolfo Tiu, the
plaintiffs in this case?
A: It was originally an FCDU, meaning a dollar loan.
Q: What happened to this FCDU loan or dollar loan?
A: The dollar loan was re-denominated in view of the
very unstable exchange of the dollar and the
peso at that time,
Q: Could you still remember what year this account
was re-denominated from dollar to peso?
A: I think it was on the year 1997.
Q: Could [you] still remember what was then the
prevailing exchange rate between the dollar
and the peso at that year 1997?
A: Yes. I have here the list of the dollar exchange rate
from January 1987 (sic). It was P26.34 per
dollar.[75]
Neither party presented any documentary evidence of the alleged
redenomination in 1997. Respondent Rodolfo Tiu did not even mention it in his
testimony. Furthermore, Hojas was obviously uncertain in his statement that
said redenomination was made in 1997.
As pointed out by the trial court, the Restructuring Agreement, being
notarized, is a public document enjoying a prima faciepresumption of
authenticity and due execution. Clear and convincing evidence must be
presented to overcome such legal presumption.[76] The spouses Tiu, who
attested before the notary public that the Restructuring Agreement “is their
own free and voluntary act and deed,”[77] failed to present sufficient evidence to
prove otherwise. It is difficult to believe that the spouses Tiu, veteran
businessmen who operate a multi-million peso company, would sign a very
important document without fully understanding its contents and
consequences.

This Court therefore rules that the Restructuring Agreement is valid
and, as such, a valid and binding novation of loans of the spouses Tiu entered
into from September 22, 1997 to March 26, 1998 which had a total amount of
US$3,632,000.00.
Validity of the Foreclosure of Mortgage
The spouses Tiu challenge the validity of the foreclosure of the
mortgage on two grounds, claiming that: (1) the debt had already been fully
paid; and (2) they are not the owners of the improvements on the mortgaged
property.
(1) Allegation of full payment of the mortgage debt
In the preceding discussion, we have ruled that the Restructuring
Agreement is a valid and binding novation of loans of the spouses Tiu entered
into from September 22, 1997 to March 26, 1998 in the total amount of
US$3,632,000.00. Thus, in order that the spouses Tiu can be held to have fully
paid their loan obligation, they should present evidence showing their payment
of the total restructured amount under the Restructuring Agreement which
was P104,668,741.00. As we have discussed above, however, while respondent
Rodolfo Tiu appeared to have identified during his testimony a computation
dated July 17, 2002 of the alleged payments made to Union Bank,[78] the same
was not formally offered in evidence. Applying Section 34, Rule 132[79] of the
Rules of Court, such computation cannot be considered by this Court. We have
held that a formal offer is necessary because judges are mandated to rest their
findings of facts and their judgment only and strictly upon the evidence offered
by the parties at the trial. It has several functions: (1) to enable the trial judge to
know the purpose or purposes for which the proponent is presenting the
evidence; (2) to allow opposing parties to examine the evidence and object to its
admissibility; and (3) to facilitate review by the appellate court, which will not be
required to review documents not previously scrutinized by the trial
court.[80] Moreover, even if such computation were admitted in evidence, the
same is self-serving and cannot be given probative weight. In the case at bar,
the records do not contain even a single receipt evidencing payment to Union
Bank.
The Court of Appeals, however, held that several payments made by
the spouses Tiu had been admitted by Union Bank. Indeed, Section 11, Rule 8
of the Rules of Court provides that an allegation not specifically denied is
deemed admitted. In such a case, no further evidence would be required to
prove the antecedent facts. We should therefore examine which of the
payments specified by the spouses Tiu in their Amended Complaint[81] were not
specifically denied by Union Bank.
The allegations of payment are made in paragraphs 16 to 21 of the
Amended Complaint:
16. Before conversion of the dollar loan into a
peso loan[,] the spouses Tiu had already paid the
defendant bank the amount of P40,447,185.60 for
interests;
17. On August 3, 1999 and August 12, 1999,
plaintiffs made payments in the amount
of P15,000,000.00;
18. In order to lessen the obligation of
plaintiffs, the mother of plaintiff Rodolfo T. Tiu, plaintiff
Juanita T. Tiu, executed a deed of dacion in payment in
favor of defendant involving her 10 parcels of land
located in Labangon, Cebu City for the amount
of P25,130,000.00. Copy of the deed was attached to the
original complaint as Annex “C”;
19. For the same purpose, plaintiffs spouses
Tiu also executed a deed of dacion in payment of their
property located at A.S. Fortuna St., Mandaue City for the
amount of P36,080,000.00. Copy of the deed was
attached to the original complaint as Annex “D”;
20. The total amount of the two dacions in
payment made by the plaintiffs was P61,210,000.00;
21. Plaintiffs spouses Tiu also made other
payment of the amount of P13,197,546.79 as of May 8,
2001;[82]
In paragraphs 4 and 5 of their Answer with Counterclaim,[83] Union
Bank specifically denied the allegation in paragraph 9 of the Complaint, but
admitted the allegations in paragraphs 17, 18, 19, 20 and 21
thereof. Paragraphs 18, 19 and 20 allege the two deeds of dacion. However,
these instruments were already incorporated in the computation of the
outstanding debt (i.e., subtracted from the confirmed debt of P155,364,800.00),
as can be gleaned from the following provisions in the Restructuring Agreement:
a.) The loan obligation to the BANK to be
restructured herein after deducting from the
Indebtedness of the BORROWER the dacion
price of the properties subject of the Deeds of
Dacion and adding to the Indebtedness all the
taxes, registration fees and other expenses
advanced by the bank in registering the Deeds
of Dacion, and also adding to the Indebtedness
the interest, and other fees and charges
incurred by the Indebtedness, amounts to ONE
HUNDRED FOUR MILLION SIX HUNDRED SIXTY-
EIGHT THOUSAND SEVEN HUNDRED FORTY-
ONE PESOS (PHP104,668,741.00) (the “TOTAL
RESTRUCTURED AMOUNT”).[84]
As regards the allegations of cash payments in paragraphs 17 and 21
of the Amended Complaint, the date of the alleged payment is critical as to
whether they were included in the Restructuring Agreement. The payment
of P15,000,000.00 alleged in paragraph 17 of the Amended Complaint was
supposedly made on August 3 and 12, 1999. This payment was before the date
of execution of the Restructuring Agreement on December 21, 1999, and is
therefore already factored into the restructured obligation of the
spouses.[85] On the other hand, the payment of P13,197,546.79 alleged in
paragraph 21 of the Amended Complaint was dated May, 8, 2001. Said
payment cannot be deemed included in the computation of the spouses Tiu’s
debt in the Restructuring Agreement, which was assented to more than a year
earlier. This amount (P13,197,546.79) is even absent[86] in the computation of
Union Bank of the outstanding debt, in contrast with the P15,000,000.00
payment which is included[87] therein. Union Bank did not explain this
discrepancy and merely relied on the spouses Tiu’s failure to formally offer
supporting evidence. Since this payment ofP13,197,546.79 on May 8, 2001 was
admitted by Union Bank in their Answer with Counterclaim, there was no need
on the part of the spouses Tiu to present evidence on the same. Nonetheless, if
we subtract this figure from the total restructured amount (P104,668,741.00) in
the Restructuring Agreement, the result is that the spouses Tiu still owe Union
Bank P91,471,194.21.
(2) Allegation of third party ownership of the improvements on the
mortgaged lot
The Court of Appeals, taking into consideration its earlier ruling that
the loan was already fully paid, permanently enjoined Union Bank from
foreclosing the mortgage on the property covered by Transfer Certificate of Title
No. 11951 (Lot No. 639) and from pursuing other foreclosure of mortgages over
any other properties of the spouses Tiu. The Court of Appeals ruled:
The prayer, therefore, of the Tiu spouses to
enjoin the foreclosure of the real estate mortgage over
their residential property has merit. The loan has already
been fully paid. It should also be noted that the house
constructed on the residential property of the Tiu spouses
is not registered in the name of the Tiu spouses, but in
the name of Jose Tiu (Records, pp. 127-132), the father of
appellant and petitioner Rodolfo Tiu, since 1981. It had
been alleged by the Tiu spouses that Jose Tiu died
on December 18, 1983, and, that consequently upon his
death, Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu,
 Rosalie T. Young and Rosenda T. Tiu became owners of
the house (Records, p. 116). This allegation has not been
substantially denied by Union Bank. All that the Union
Bank presented to refute this allegation are a Transfer
Certificate of Title and a couple of Tax Declarations which
do not indicate that a residential house is titled in the
name of the Tiu spouses. In fact, in one of the Tax
Declarations, the market value of the improvements is
worth only P3,630.00. Certainly, Union Bank should have
been aware that this Tax Declaration did not cover the
residential house. Union Bank should also not rely on
warranties made by debtors that they are the owners of
the property. They should investigate such
representations. The courts have made consistent rulings
that a bank, being in the business of lending, is obligated
to verify the true ownership of the properties mortgaged
to them. Consequently, this Court permanently enjoins
Union Bank from foreclosing the mortgage of the
residential property of the Tiu spouses which is covered
by Transfer Certificate of Title No. 11951 and from
pursuing other foreclosure of mortgages over any other
properties of the Tiu spouses. If a foreclosure sale has
already been made over such properties, this Court
orders the cancellation of such foreclosure sale and the
Certificate of Sale thereof if any has been issued, and the
return of the title to the Tiu spouses.[88]
We disagree. Contrary to the ruling of the Court of Appeals, the
burden to prove the spouses Tiu’s allegation – that they do not own the
improvements on Lot No. 639, despite having such improvements included in
the mortgage – is on the spouses Tiu themselves. The fundamental rule is that
he who alleges must prove.[89] The allegations of the spouses Tiu on this matter,
which are found in paragraphs 35 to 39[90] of their Amended Complaint, were
specifically denied in paragraph 9 of Union Bank’s Answer with Counterclaim.[91]
Upon careful examination of the evidence, we find that the spouses
Tiu failed to prove that the improvements on Lot No. 639 were owned by third
persons. In fact, the evidence presented by the spouses Tiu merely attempt to
prove that the improvements on Lot No. 639 were declared for taxes in the
name of respondent Rodolfo Tiu’s father, Jose Tiu, who allegedly died on
December 18, 1983. There was no effort to show how their co-plaintiffs in the
original complaint, namely Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie
T. Young and Rosenda T. Tiu, became co-owners of the house. The spouses Tiu
did not present evidence as to (1) who the heirs of Jose Tiu are; (2) if Juanita T.
Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu are
indeed included as heirs; and (3) why petitioner Rodolfo Tiu is not included as an
heir despite being the son of Jose Tiu. No birth certificate of the alleged heirs,
will of the deceased, or any other piece of evidence showing judicial or
extrajudicial settlement of the estate of Jose Tiu was presented.
In light of the foregoing, this Court therefore sets aside the ruling of
the Court of Appeals permanently enjoining Union Bank from foreclosing the
mortgage on Lot No. 639, including the improvements thereon.
Validity of Alleged
Rental Payments on
the Properties
Conveyed to the Bank
via Dacion en Pago
The Court of Appeals found the lease contracts over the properties
conveyed to Union Bank via dacion en pago to be void for being against public
policy. The appellate court held that since the General Banking Law of
2000[92] mandates banks to immediately dispose of real estate properties that
are not necessary for its own use in the conduct of its business, banks should not
enter into two-year contracts of lease over properties paid to them
through dacion.[93] The Court of Appeals thus ordered Union Bank to return the
rentals it collected. To determine the amount of rentals paid by the spouses Tiu
to Union Bank, the Court of Appeals simply multiplied the monthly rental
stipulated in the Restructuring Agreement by the stipulated period of the lease
agreement:
For the Labangon property, the Tiu spouses
paid rentals in the amount of P98,000.00 per month for
two years, or a total amount ofP2,352,000.00. For the
A.S. Fortuna property, the Tiu spouses paid rentals in the
amount of P150,000.00 per month for two years, or a
total amount of P3,600,000.00. The total amount in
rentals paid by the Tiu spouses to Union Bank is FIVE
MILLION NINE HUNDRED FIFTY- TWO THOUSAND PESOS
(P5,952,000.00). This Court finds that the return of this
amount to the Tiu spouses is called for since it will better
serve public policy. These properties that were given by
the Tiu spouses to Union Bank as payment should not be
used by the latter to extract more money from the
former. This situation is analogous to having a debtor pay
interest for a debt already paid. Instead of leasing the
properties, Union Bank should have instructed the Tiu
spouses to vacate the said properties so that it could
dispose of them.[94]
The Court of Appeals committed a serious error in this regard. As
pointed out by petitioner Union Bank, the spouses Tiu did not present any proof
of the alleged rental payments. Not a single receipt was formally offered in
evidence. The mere stipulation in a contract of the monthly rent to be paid by
the lessee is certainly not evidence that the same has been paid. Since the
spouses Tiu failed to prove their payment to Union Bank of the amount
of P5,952,000.00, we are constrained to reverse the ruling of the Court of
Appeals ordering its return.
Even assuming arguendo that the spouses Tiu had duly proven that it
had paid rent to Union Bank, we nevertheless disagree with the finding of the
Court of Appeals that it is against public policy for banks to enter into two-year
contracts of lease of properties ceded to them through dacion en pago. The
provisions of law cited by the Court of Appeals, namely Sections 51 and 52 of the
General Banking Law of 2000, merely provide:
SECTION 51. Ceiling on Investments in Certain
Assets. — Any bank may acquire real estate as shall be
necessary for its own use in the conduct of its
business: Provided, however, That the total investment in
such real estate and improvements thereof, including
bank equipment, shall not exceed fifty percent (50%) of
combined capital accounts: Provided, further, That the
equity investment of a bank in another corporation
engaged primarily in real estate shall be considered as
part of the bank's total investment in real estate, unless
otherwise provided by the Monetary Board.
SECTION 52. Acquisition of Real Estate by Way
of Satisfaction of Claims. — Notwithstanding the
limitations of the preceding Section, a bank may acquire,
hold or convey real property under the following
circumstances:
52.1. Such as shall be mortgaged to it in good
faith by way of security for debts;
52.2. Such as shall be conveyed to it in
satisfaction of debts previously contracted in the course
of its dealings; or
52.3. Such as it shall purchase at sales under
judgments, decrees, mortgages, or trust deeds held by it
and such as it shall purchase to secure debts due it.
Any real property acquired or held under the
circumstances enumerated in the above paragraph shall
be disposed of by the bank within a period of five (5)
years or as may be prescribed by the Monetary
Board: Provided, however, That the bank may, after said
period, continue to hold the property for its own use,
subject to the limitations of the preceding Section.

Section 52.2 contemplates a dacion en pago. Thus, Section 52
undeniably gives banks five years to dispose of properties conveyed to them in
satisfaction of debts previously contracted in the course of its dealings, unless
another period is prescribed by the Monetary Board. Furthermore, there
appears to be no legal impediment for a bank to lease the real properties it has
received in satisfaction of debts, within the five-year period that such bank is
allowed to hold the acquired realty.
We do not dispute the interpretation of the Court of Appeals that the
purpose of the law is to prevent the concentration of land holdings in a few
hands, and that banks should not be allowed to hold on to the properties
contemplated in Section 52 beyond the five-year period unless such bank has
exerted its best efforts to dispose of the property in good faith but
failed. However, inquiries as to whether the banks exerted best efforts to
dispose of the property can only be done if said banks fail to dispose of the same
within the period provided. Such inquiry is furthermore irrelevant to the issues
in the case at bar.
Order to Return
Certificates Allegedly
in Union Bank’s
Possession
In the Amended Complaint, the spouses Tiu alleged[95] that they
delivered several certificates and titles to Union Bank pursuant to a
Memorandum of Agreement. These certificates and titles were not subjected
to any lien in favor of Union Bank, but the latter allegedly continued to hold on
to said properties.
The RTC failed to rule on this issue. The Court of Appeals, tackling
this issue for the first time, ruled in favor of the Tiu spouses and ordered the
return of these certificates and titles. The appellate court added that if Union
Bank can no longer return these certificates or titles, it should shoulder the cost
for their replacement.[96]
Union Bank, asserting that the Memorandum of Agreement did not,
in fact, push through, denies having received the subject certificates and
titles. Union Bank added that even assuming arguendo that it is in possession of
said documents, the Restructuring Agreement itself allows such possession.[97]
The evidence on hand lends credibility to the allegation of Union
Bank that the Memorandum of Agreement did not push through. The copy of
the Memorandum of Agreement attached by the spouses Tiu themselves to
their original complaint did not bear the signature of any representative from
Union Bank and was not notarized.[98]
We, however, agree with the finding of the Court of Appeals that
despite the failure of the Memorandum of Agreement to push through, the
certificates and titles mentioned therein do appear to be in the possession of
Union Bank. As held by the Court of Appeals:
Lastly, this Court will order, as it hereby
orders, Union Bank to return to the Tiu spouses all the
certificates of shares of stocks and titles to real properties
of the Tiu spouses in its possession. Union Bank cannot
deny possession of these items since it had made judicial
admissions of such possession in their document entitled
“Reply to Plaintiffs’ request for Admission” (records, pp.
216-217). While in that document, Union Bank only
admitted to the possession of four real estate titles, this
Court is convinced that all the certificates and titles
mentioned in the unconsummated Memorandum of
Agreement (Records, pp. 211-213) were given by the Tiu
spouses to Union Bank for appraisal. This finding is
further bolstered by the admission of the Union Bank that
it kept the titles for safekeeping after it rejected the
Memorandum of Agreement. Since Union Bank rejected
these certificates and titles of property, it should return
the said items to the Tiu spouses. If Union Bank can no
longer return these certificates and titles or if it has
misplaced them, it shall shoulder the cost for the
replacement and issuance of new certificates and new
titles over the said properties.[99]
As regards Union Bank’s argument that it has the right to retain said
documents pursuant to the Restructuring Agreement, it is referring to paragraph
11(b), which provides that:
11. Effects of Default – When the BORROWER is in
default, such default shall have the following
effects, alternative, concurrent and cumulative with
each other:
xxxx
(b) The BANK shall be entitled to all
the remedies provided for and further shall have the
right to effect or apply against the partial or full
payment of any and all obligations of the
BORROWER under this Restructuring Agreement
any and all moneys or other properties of the
BORROWER which, for any reason, are or may
hereafter come into the possession of the Bank or
the Bank’s agent. All such moneys or properties
shall be deemed in the BANK’s possession as soon
as put in transit to the BANK by mail or carrier.[100]
In the first place, notwithstanding the foregoing provision, there is no
clear intention on the part of the spouses Tiu to deliver the certificates over
certain shares of stock and real properties as security for their debt. From the
terms of the Memorandum of Agreement, these certificates were surrendered
to Union Bank in order that the said properties described therein be given their
corresponding loan values required for the restructuring of the spouses Tiu’s
outstanding obligations. However, in the event the parties fail to agree on the
valuation of the subject properties, Union Bank agrees to release the
same.[101] As Union Bank itself vehemently alleges, the Memorandum of
Agreement was not consummated. Moreover, despite the fact that the Bank
was aware, or in possession, of these certificates,[102] at the time of execution of
the Restructuring Agreement, only the mortgage over the real property covered
by TCT No. T-11951 was expressly mentioned as a security in the Restructuring
Agreement. In fact, in its Reply to Request for Admission,[103] Union Bank
admitted that (1) the titles to the real properties were submitted to it for
appraisal but were subsequently rejected, and (2) no real estate mortgages were
executed over the said properties. There being no agreement that these
properties shall secure respondents’ obligation, Union Bank has no right to
retain said certificates.
Assuming arguendo that paragraph 11(b) of the Restructuring
Agreement indeed allows the retention of the certificates (submitted to the
Bank ostensibly for safekeeping and appraisal) as security for spouses Tiu’s debt,
Union Bank’s position still cannot be upheld. Insofar as said provision permits
Union Bank to apply properties of the spouses Tiu in its possession to the full or
partial payment of the latter’s obligations, the same appears to impliedly allow
Union Bank to appropriate these properties for such purpose. However, said
provision cannot be validly applied to the subject certificates and titles without
violating the prohibition against pactum commissorium contained in Article 2088
of the Civil Code, to the effect that “[t]he creditor cannot appropriate the things
given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to
the contrary is null and void.” Applicable by analogy to the present case is our
ruling in Nakpil v. Intermediate Appellate Court,[104] wherein property held in
trust was ceded to the trustee upon failure of the beneficiary to answer for the
amounts owed to the former, to wit:
For, there was to be automatic appropriation of the
property by Valdes in the event of failure of petitioner to
pay the value of the advances. Thus, contrary to
respondent's manifestations, all the elements of
a pactum commissorium were present: there was a
creditor-debtor relationshipbetween the parties;
the property was used as security for the loan; and, there
was automatic appropriation by respondent of Pulong
Maulap in case of default of petitioner.[105] (Emphases
supplied.)
 WHEREFORE, the Petition is PARTIALLY GRANTED. The Joint
Decision of the Court of Appeals in CA-G.R. CV No. 00190 and CA-G.R. SP No.
This Court therefore affirms the order of the Court of Appeals for 00253 dated February 21, 2006 is hereby AFFIRMED insofar as it ordered
Union Bank to return to the spouses Tiu all the certificates of shares of stock and petitioner Union Bank of the Philippines to return to the respondent spouses
titles to real properties that were submitted to it or, in lieu thereof, to pay the Rodolfo T. Tiu and Victoria N. Tiu all the certificates of shares of stock and titles
cost for the replacement and issuance of new certificates and new titles over the to real properties that were submitted to it or, in lieu thereof, to pay the cost for
said properties. the replacement and issuance of new certificates and new titles over the said
properties. The foregoing Joint Decision is hereby SET ASIDE: (1) insofar as it
Validity of the Award of Damages permanently enjoined Union Bank of the Philippines from foreclosing the
mortgage of the residential property of respondent spouses Rodolfo T. Tiu and
The Court of Appeals awarded damages in favor of the spouses Tiu Victoria N. Tiu which is covered by Transfer Certificate of Title No. 11951;
based on its taking judicial notice of the alleged exploitation by many banks of (2) insofar as it ordered Union Bank of the Philippines to return to the
the Asian financial crisis, as well as the foreclosure of the mortgage of the home respondent spouses Rodolfo T. Tiu and Victoria N. Tiu the amount
of the spouses Tiu despite the alleged full payment by the latter. As regards the of P927,546.79 representing illegally collected rentals; and (3) insofar as it
alleged manipulation of the financial crisis, the Court of Appeals held: ordered Union Bank of the Philippines to pay the respondent spouses Rodolfo T.
Tiu and Victoria N. TiuP100,000.00 in moral damages, P100,000.00 in exemplary
As a final note, this Court observes the damages, P50,000.00 in attorney’s fees and cost, both in the lower court and in
irregularity in the circumstances [surrounding] dollar this Court.
loans granted by banks right before or during the Asian
financial crisis. It is of common knowledge that many No further pronouncement as to costs.
banks, around that time, actively pursued and convinced
debtors to make dollar loans or to convert their peso
loans to dollar loans allegedly because of the lower SO ORDERED.
interest rate of dollar loans. This is a highly suspect [1]
behavior on the part of the banks because it is irrational Rollo, pp. 74-96; penned by Associate Justice Isaias P. Dicdican with
for the banks to voluntarily and actively proffer a Associate Justices Ramon M. Bato, Jr. and Apolinario D. Bruselas, Jr.,
conversion that would give them substantially less concurring.
[2]
income. In the guise of benevolence, many banks were Id. at 97-100.
[3] Records, pp. 12-13.
able to convince borrowers to make dollar loans or to [4]
convert their peso loans to dollar loans. Soon thereafter, Id. at 14.
[5] Id.
the Asian financial crisis hit, and many borrowers were
[6] Written in the document as “@ 41.40%”.
saddled with loans that ballooned to twice or thrice the [7]
amount of their original loans. This court takes judicial Records, p. 333.
[8] Id. at 334-344.
notice of these events or matters which are of public [9]
knowledge. It is inconceivable that the banks were Id. at 335.
[10] Id. at 115.
unaware of the looming Asian financial crisis. Being in the
[11]
forefront of the financial world and having access to Id. at 335.
[12] Id. at 354-357.
financial data that were not available to the average
[13] Id. at 350-353.
borrower, the banks were in such a position that they had
[14]
a higher vantage point with respect to the financial Id. at 339.
[15] Id. at 114.
landscape over their average clients. The cavalier way
[16] Id. at 2-11.
with which banks exploited and manipulated the situation [17]
is almost too palpable that they openly and unabashedly Id. at 10.
[18]
struck heavy blows on the Philippine economy, industries Rollo, pp. 163-164.
[19] Id. at 169.
and businesses. The banks have a fiduciary duty to their [20]
clients and to the Filipino people to be transparent in Id. at 168.
[21]
their dealings and to make sure that the latter’s interest Id. at 42-61.
[22] Records, pp. 97-98.
are not prejudiced by the former’s interest. Article 1339 [23]
of the New Civil Code provides that the failure to disclose Id. at 420-423.
[24] Rollo, pp. 75-78.
facts, when there is a duty to reveal them, as when the [25]
parties are bound by confidential relations, constitutes Id. at 101-120.
[26] Id. at 120.
fraud. Undoubtedly, the banks and their clients are
[27] Id. at 117-118.
bound by confidential relations. The almost perfect [28]
timing of the banks in convincing their clients to shift to Records, pp. 787-794.
[29] Id. at 799-815.
dollar loans just when the Asian financial crisis struck [30]
indicates that the banks not only failed to disclose facts to Id. at 814-815.
[31] CA rollo (CA-G.R. SP No. 00253), pp. 2-8.
their clients of the looming crisis, but also suggests of the
[32]
insidious design to take advantage of these undisclosed Id. at 90-91.
[33] Records, p. 828.
facts.[106]
[34] Id. at 830-831, 836-837.
[35] CA rollo (CA-G.R. SP No. 00253), pp. 140-141.
[36]
We have already held that the foreclosure of the mortgage was CA rollo (CA-G.R. SP No. 00190), pp. 92-95.
[37]
warranted under the circumstances. As regards the alleged exploitation by Id. at 253.
[38] Id. at 250-256.
many banks of the Asian financial crisis, this Court rules that the generalization [39]
made by the appellate court is unfounded and cannot be the subject of judicial Id. at 305-307.
[40] Rollo, p. 78.
notice. “It is axiomatic that good faith is always presumed unless convincing [41]
evidence to the contrary is adduced. It is incumbent upon the party alleging bad Id. at 79.
[42] Id. at 83-91.
faith to sufficiently prove such allegation. Absent enough proof thereof, the
[43] Id. at 92.
presumption of good faith prevails.”[107] The alleged insidious design of many [44]
banks to betray their clients during the Asian financial crisis is certainly not of Id. at 92-93.
[45]
public knowledge. The deletion of the award of moral and exemplary damages Id. at 91.
[46] Id. at 91-92.
in favor of the spouses Tiu is therefore in order. [47] Id. at 93.
[48] Id. at 93-95.
[49] Id. at 95-96. declared by the Government of the Philippines shall be legal tender
[50] Id. at 282-283. for all debts, public and private.
[51] Id. at 83. [61] Otherwise known as the Consolidated Foreign Exchange Rules and
[52]
Id. at 85-87. Regulations.
[53] Id. at 292. [62] Republic Act No. 8183 provides that it shall take effect fifteen (15)
[54] Id. at 293. days after its publication in the Official Gazette or in two (2) national
[55]
Id. at 293-295. newspapers of general circulation. It was published in Malaya and
[56] Records, pp. 252-278. the Manila Times on June 20, 1996.
[57] Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102 Phil. 1, 9 [63] SECTION 2. Republic Act Numbered Five Hundred Twenty-Nine
(1957); Arrieta v. National Rice and Corn Corporation, 119 Phil. 339, (R.A. No. 529), as amended entitled "An Act to Assure Uniform Value
349-350 (1964). of Philippine Coin and Currency," is hereby repealed.
[58] SECTION 1. Every provision contained in, or made with respect [64] SECTION 1. All monetary obligations shall be settled in the
to, any obligation which provision purports to give the obligee the Philippine currency which is legal tender in the Philippines. However,
right to require payment in gold or in a particular kind of coin or the parties may agree that the obligation or transaction shall be
currency other than Philippine currency or in an amount of money of settled in any other currency at the time of payment.
the Philippines measured thereby, be as it is hereby declared
against public policy, and null, void and of no effect, and no such TCT number Registry of Deeds Location
provision shall be contained in, or made with respect to, any 116288 Cebu City Panganiban St., Cebu City
obligation hereafter incurred. Every obligation heretofore or Panganiban St., Cebu City
116287 Cebu City
hereafter incurred, whether or not any such provision as to
OCT No. 0-3538 Cebu City Panganiban St., Cebu City
payment is contained therein or made with respect thereto,
shall be discharged upon payment in any coin or currency which
at the time of payment is legal tender for public and private
30271 Cebu City Minglanilla, Cebu Province
debts: Provided, That, if the obligation was incurred prior to the
[65] Records, pp. 12-13.
enactment of this Act and required payment in a particular kind of
[66] Id. at 252-278.
coin or currency other than Philippine currency, it shall be
[67] G.R. No. 159912, August 17, 2007, 530 SCRA 567.
discharged in Philippine currency measured at the prevailing rates of
[68] Id. at 599.
exchange at the time the obligation was incurred, except in case of a
[69]
loan made in a foreign currency stipulated to be payable in the same TSN, October 8, 2004, pp. 8-9.
[70] Rollo, pp. 247-248.
currency in which case the rate of exchange prevailing at the time of
[71]
the stipulated date of payment shall prevail. All coin and currency, Records, p. 114.
[72] Id. at 232.
including Central Bank notes, heretofore or hereafter issued and
[73]
declared by the Government of thePhilippines shall be legal tender TSN, October 1, 2002, pp. 38-39.
[74] Id. at 18-19.
for all debts, public and private.
[75]
[59] Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., supra note 57. TSN, October 8, 2004, pp. 4-5.
[76] Domingo v. Robles, 493 Phil. 916, 921 (2005).
[60]
SEC. 1. Every provision contained in, or made with respect to, any
[77] Records, p. 344; Restructuring Agreement, p. 11.
domestic obligation to wit, any obligation contracted in the
[78] TSN, October 1, 2002, pp. 18-19.
Philippines which provisions purports to give the obligee the right to
[79] SEC. 34. Offer of Evidence. — The court shall consider no evidence
require payment in gold or in a particular kind of coin or currency
other than Philippine currency or in an amount of money of the which has not been formally offered. The purpose for which the
Philippines measured thereby, be as it is hereby declared against evidence is offered must be specified.
[80] Heirs of Pedro Pasag v. Parocha, G.R. No. 155483, April 27, 2007, 522
public policy, and null, void, and of no effect, and no such provision
shall be contained in, or made with respect to, any obligation SCRA 410, 416.
[81] Records, pp. 110-119.
hereafter incurred. The above prohibition shall not apply to (a)
[82]
transactions where the funds involved are the proceeds of loans or Id. at 114.
[83] Id. at 232.
investments made directly or indirectly, through bona fide
[84] Id. at 335.
intermediaries or agents, by foreign governments, their agencies and
[85] See records, pp. 134-135.
instrumentalities, and international financial and banking institutions
[86] Id.
so long as the funds are identifiable, as having emanated from the
[87] Id. at 134.
sources enumerated above; (b) transactions affecting high-priority
[88] Rollo, pp. 92-93.
economic projects for agricultural, industrial and power
[89] Spouses Bejoc v. Cabreros, 502 Phil. 336, 343 (2005).
development as may be determined by the National Economic
[90]
Council which are financed by or through foreign funds; (c) forward 35. That in 1983, the Spouses Jose Tiu and Juanita
exchange transactions entered into between banks or between Tiu, and during the existence of their marriage,
banks and individuals or juridical persons; (d) import-export and constructed their house on Lot No. 639 and declared the
other international banking, financial investment and industrial same for taxation purposes in the name of Jose Tiu;
transactions. With the exception of the cases enumerated in items 36. That Jose Tiu died on December 18, 1983;
(a), (b), (c) and (d) in the foregoing provision, in which bases the 37. That consequently upon his death, the
terms of the parties' agreement shall apply, every other domestic plaintiffs Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu,
obligation heretofore or hereafter incurred, whether or not any such Rosalie T. Young and Rosenda T. Tiu became owners of
provision as to payment is contained therein or made with respect the aforesaid house;
thereto, shall be discharged upon payment in any coin or currency 38. That the herein plaintiffs have not
which at the time of payment is legal tender for public and private executed any real estate mortgage on their house
debts: Provided, That if the obligation was incurred prior to the constructed on plaintiffs spouses Tiu’s lot in favor of
enactment of this Act and required payment in a particular kind of defendant bank;
coin or currency other than Philippine currency, it shall be 39. Consequently, the extra-judicial
discharged in Philippine currency measured at the prevailing rates of foreclosure sale of said house is null and void as the real
exchange at the time the obligation was incurred, except in case of a owners of the same have not mortgaged the said house
loan made in a foreign currency stipulated to be payable in the same to defendant bank; (Records, p. 116.)
[91] Records, pp. 232-233.
currency in which case the rate of exchange prevailing at the time of
[92] Republic Act No. 8791.
the stipulated date of payment shall prevail. All coin and currency,
[93] Rollo, pp. 90-91.
including Central Bank notes, heretofore and hereafter issued and
[94] Id. at 91.
[95] 40. Before the execution of the restructuring
agreement, the plaintiffs and the defendant bank entered
into a memorandum of agreement, whereby the plaintiffs
turned over to defendant bank in the meanwhile the
following real and personal properties:
a) Shares of stock of the Borrower/Mortgagor
in Grand Convention Center, Cebu Country Club, Subic
Bay Yacht Club, Alta Vista Golf and Country Club and Cebu
Grand Salinas Development Corporation,
b) Real Estate properties:
Copy of the memorandum of agreement was
attached to the original complaint as Annex
“I”;
41. As can be seen from the Restructuring
Agreement, only the lot subject of the sheriff’s notice of
extrajudicial foreclosure sale was mortgaged to guarantee
plaintiff’s obligation;
42. None of the properties mentioned in
paragraph 40 hereof have been subjected to any lien in
favor of defendant bank but the defendant bank
continues to hold on to said properties and has not
returned the same to the plaintiffs spouses Tiu (Records,
p. 117).
[96]
Rollo, pp. 91-92.
[97] Id. at 317.
[98] Records, pp. 41-42.
[99] Rollo, pp. 91-92.
[100] Records, p. 341.
[101] Id. at 41.
[102] Id. at 209; see Acknowledgement Receipt dated November 24, 1999.
[103] Id. at 216-217.
[104]
G.R. No. 74449, August 20, 1993, 225 SCRA 456.
[105] Id. at 467-468.
[106] Rollo, pp. 93-94.
[107] Pacific Basin Securities Co., Inc. v. Oriental Petroleum And Minerals
Corp., G.R. Nos. 143972, 144056 and 144056, August 31, 2007, 531
SCRA 667, 689.
Case Title : THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE
PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Appeals|Obligations and Contracts|Banks and
Banking|Evidence|Fraud|Words and Phrases|Checks|Negotiable Instruments
Syllabi:
1. Appeals; Evidence; It is well settled that the findings of fact of the lower
court, especially when affirmed by the Court of Appeals, are binding upon the
Supreme Court.-
As to the first issue, we find for the respondents. The issue as to what constitutes
the terms of the oral compromise or any subsequent novation is a question of
fact that was resolved by the Regional Trial Court and the Court of Appeals in
favor of respondents. It is well settled that the findings of fact of the lower court,
especially when affirmed by the Court of Appeals, are binding upon this Court.
While there are exceptions to this rule, the present case does not fall under any
one of them, the petitioner’s claim to the contrary, notwithstanding.
2. Obligations and Contracts; Fraud; Words and Phrases; Fraud is the
deliberate intention to cause damage or prejudice, the voluntary execution of a
wrongful act, or a willful omission, knowing and intending the effects which
naturally and necessarily arise from such act or omission; The fraud referred to
in Article 1170 of the Civil Code is the deliberate and intentional evasion of the
normal fulfillment of an obligation.-
Fraud has been defined as the deliberate intention to cause damage or
prejudice. It is the voluntary execution of a wrongful act, or a willful omission,
knowing and intending the effects which naturally and necessarily arise from
such act or omission; the fraud referred to in Article 1170 of the Civil Code is the
deliberate and intentional evasion of the normal fulfillment of obligation. We
fail to see how the act of the petitioner bank in requiring the respondent to sign
the joint motion to dismiss could constitute as fraud. True, petitioner may have
been remiss in informing Dr. Gueco that the signing of a joint motion to dismiss
is a standard operating procedure of petitioner bank. However, this cannot in
anyway have prejudiced Dr. Gueco. The motion to dismiss was in fact also for
the benefit of Dr. Gueco, as the case filed by petitioner against it before the
lower court would be dismissed with prejudice. The whole point of the parties
entering into the compromise agreement was in order that Dr. Gueco would pay
his outstanding account and in return petitioner would return the car and drop
the case for money and replevin before the Metropolitan Trial Court. The joint
motion to dismiss was but a natural consequence of the compromise agreement
and simply stated that Dr. Gueco had fully settled his obligation, hence, the
dismissal of the case. Petitioner’s act of requiring Dr. Gueco to sign the joint
motion to dismiss cannot be said to be a deliberate attempt on the part of
petitioner to renege on the compromise agreement of the parties. It should,
likewise, be noted that in cases of breach of contract, moral damages may only
be awarded when the breach was attended by fraud or bad faith. The law
presumes good faith.
3. Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A
stale check is one which has not been presented for payment within a
reasonable time after its issue.-
A stale check is one which has not been presented for payment within a
reasonable time after its issue. It is valueless and, therefore, should not be paid.
Under the negotiable instruments law, an instrument not payable on demand
must be presented for payment on the day it falls due. When the instrument is
payable on demand, presentment must be made within a reasonable time after
its issue. In the case of a bill of exchange, presentment is sufficient if made
within a reasonable time after the last negotiation thereof.
4. Banks and Banking; Checks; Negotiable Instruments; A check must be
presented for payment within a reasonable time after its issue, and in
determining what is a “reasonable time,” regard is to be had to the nature of
the instrument, the usage of trade or business with respect to such instruments,
and the facts of the particular case.-
A check must be presented for payment within a reasonable time after its issue,
and in determining what is a “reasonable time,” regard is to be had to the
nature of the instrument, the usage of trade or business with respect to such
instruments, and the facts of the particular case. The test is whether the payee
employed such diligence as a prudent man exercises in his own affairs. This is
because the nature and theory behind the use of a check points to its immediate
use and payability. In a case, a check payable on demand which was long
overdue by about two and a half (2-1/2) years was considered a stale check.
Failure of a payee to encash a check for more than ten (10) years undoubtedly
resulted in the check becoming stale. Thus, even a delay of one (1) week or two
(2) days, under the specific circumstances of the cited cases constituted
unreasonable time as a matter of law.
5. Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A
manager’s check is one drawn by the bank’s manager upon the bank itself, and
it is similar to a cashier’s check both as to effect and use. A cashier’s check is a
check of the bank’s cashier on his own or another check—it is a bill of exchange
drawn by the cashier of a bank upon the bank itself, and accepted in advance by
the act of its issuance.-
In the case at bar, however, the check involved is not an ordinary bill of
exchange but a manager’s check. A manager’s check is one drawn by the bank’s
manager upon the bank itself. It is similar to a cashier’s check both as to effect
and use. A cashier’s check is a check of the bank’s cashier on his own or another
check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the
bank itself, and accepted in advance by the act of its issuance. It is really the
bank’s own check and may be treated as a promissory note with the bank as a
maker. The check becomes the primary obligation of the bank which issues it
and constitutes its written promise to pay upon demand. The mere issuance of it
is considered an acceptance thereof. If treated as promissory note, the drawer
would be the maker and in which case the holder need not prove presentment
for payment or present the bill to the drawee for acceptance.
6. Banks and Banking; Checks; Negotiable Instruments; Even assuming that
presentment is needed, failure to present a manager’s check for payment within
a reasonable time will result to the discharge of the drawer only to the extent of
the loss caused by the delay.-
Even assuming that presentment is needed, failure to present for payment
within a reasonable time will result to the discharge of the drawer only to the
extent of the loss caused by the delay. Failure to present on time, thus, does not
totally wipe out all liability. In fact, the legal situation amounts to an
acknowledgment of liability in the sum stated in the check. In this case, the
Gueco spouses have not alleged, much less shown that they or the bank which
issued the manager’s check has suffered damage or loss caused by the delay or
non-presentment. Definitely, the original obligation to pay certainly has not
been erased.
Division: FIRST DIVISION
Docket Number: G.R. No. 141968

Counsel: Tomas R. Leonidas, Estrella, Estrella & Associates
Ponente: KAPUNAN
Dispositive Portion:
WHEREFORE, premises considered, the petition for review is given due course.
The decision of the Court of Appeals affirming the decision of the Regional Trial
Court is SET ASIDE. Respondents are further ordered to pay the original
obligation amounting to P150,000.00 to the petitioner upon surrender or
cancellation of the manager’s check in the latter’s possession, afterwhich,
petitioner is to return the subject motor vehicle in good working condition.
Case Title : TERESITA L. VERTUDES, petitioner, vs. JULIE BUENAFLOR and
BUREAU OF IMMIGRATION, respondents.Case Nature : PETITION for review on
certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Constitutional Law|Remedial Law|Due Process|Right to Cross-
examination|Certiorari
Syllabi:
1. Constitutional Law; Due Process; Right to Cross-examination; Where a party
has had the opportunity to cross-examine a witness but failed to avail himself of
it, he necessarily forfeits the right to cross-examine and the testimony given on
direct examination of the witness will be received or allowed to remain in the
record.-
We have explained the meaning of the right to cross-examination as a vital
element of due process as follows: The right of a party to confront and cross-
examine opposing witnesses in a judicial litigation, be it criminal or civil in
nature, or in proceedings before administrative tribunals with quasi-judicial
powers, is a fundamental right which is part of due process. However, the right
is a personal one which may be waived expressly or impliedly by conduct
amounting to a renunciation of the right of cross-examination. Thus, where a
party has had the opportunity to cross-examine a witness but failed to avail
himself of it, he necessarily forfeits the right to cross-examine and the testimony
given on direct examination of the witness will be received or allowed to remain
in the record.
2. Constitutional Law; Due Process; It is well-settled that the essence of due
process in administrative proceedings is an opportunity to explain one’s side or
an opportunity to seek reconsideration of the action or ruling complained of.-
It is well-settled that the essence of due process in administrative proceedings is
an opportunity to explain one’s side or an opportunity to seek reconsideration of
the action or ruling complained of. This was clearly satisfied in the case at bar.
Records show that petitioner not only gave her sworn written explanation of the
charges against her during the initial stage of the investigation, she also
submitted: a) a sworn counter-affidavit refuting the charges against her, with all
the attached annexes as evidence; b) a Motion to Re-open the case with the BI;
c) a Motion for Reconsideration and/or New Trial with the BI; d) an Appeal to
the CSC; e) a Motion for Reconsideration with the CSC; f) an Appeal to the CA; g)
a Motion for Reconsideration with the CA; and h) the instant petition for review.
3. Constitutional Law; Due Process; What due process demands is for the chief
of the bureau to personally weigh and assess the evidence which the
subordinate has gathered and not merely to rely on the recommendation of said
investigating officer.-
There is nothing essentially wrong in the head of a bureau adopting the
recommendation of a subordinate. Section 47, Book V of the Administrative
Code of 1987 gives the chief of bureau or office or department the power to
delegate the task of investigating a case to a subordinate. What due process
demands is for the chief of the bureau to personally weigh and assess the
evidence which the subordinate has gathered and not merely to rely on the
recommendation of said investigating officer.
4. Remedial Law; Certiorari; It is settled that only questions of law are
entertained in petitions for review on certiorari under Rule 45 of the Rules of
Court; Findings of fact of quasi-judicial agencies, like the Bureau of Immigration
(BI) and the Civil Service Commission (CSC), are accorded not only respect but
even finality if such findings are supported by substantial evidence.-
It is settled that only questions of law are entertained in petitions for review on
certiorari under Rule 45 of the Rules of Court. It is not the function of this Court,
in a petition under Rule 45, to scrutinize, weigh and analyze evidence all over
again. Well-settled is the rule that the findings of fact of quasi-judicial agencies,
like the BI and the CSC, are accorded not only respect but even finality if such
findings are supported by substantial evidence. Substantial evidence is such
amount of relevant evidence which a reasonable mind might accept as
adequate to support a conclusion, even if other equally reasonable minds might
conceivably opine otherwise.
Division: SECOND DIVISION
Docket Number: G.R. No. 153166
Counsel: Glenn G. Hao, Horacio R. Makalintal, Jr.
Ponente: PUNO
Dispositive Portion:
IN VIEW WHEREOF, the petition is DENIED. The Court of Appeals Decision dated
February 12, 2002 and Resolution dated April 16, 2002 in CA-G.R. SP No. 58766
are AFFIRMED.
G.R. No. 170325. September 26, 2008.*
PHILIPPINE NATIONAL BANK, petitioner, vs. ERLANDO T. RODRIGUEZ and
NORMA RODRIGUEZ, respondents.
Courts; Judgments; Amendment of decisions is more acceptable than an
erroneous judgment attaining finality to the prejudice of innocent parties; The
Court does not sanction careless disposition of cases by courts of justice—the
highest degree of diligence must go into the study of every controversy
submitted for decision by litigants.—Prefatorily, amendment of decisions is
more acceptable than an erroneous judgment attaining finality to the prejudice
of innocent parties. A court discovering an erroneous judgment before it
becomes final may, motu proprio or upon motion of the parties, correct its
judgment with the singular objective of achieving justice for the litigants.
However, a word of caution to lower courts, the CA in Cebu in this particular
case, is in order. The Court does not sanction careless disposition of cases by
courts of justice. The highest degree of diligence must go into the study of every
controversy submitted for decision by litigants. Every issue and factual detail
must be closely scrutinized and analyzed, and all the applicable laws judiciously
studied, before the promulgation of every judgment by the court. Only in this
manner will errors in judgments be avoided.
Negotiable Instruments Law; Checks; Fictitious Payee Rule; As a rule, when the
payee is fictitious or not intended to be the true recipient of the proceeds, the
check is considered as a bearer instrument.—As a rule, when the payee is
fictitious or not intended to be the true recipient of the proceeds, the check is
considered as a bearer instrument. A check is “a bill of exchange drawn on a
bank payable on demand.” It is either an order or a bearer instrument.
Same; Same; Same; “Bearer” and “Order” Instruments; Words and Phrases; An
order instrument requires an indorsement from the payee or holder before it
may be validly negotiated while a bearer instrument is negotiable by mere
delivery.—The distinction between bearer and order instruments lies in their
manner of negotiation. Under Section 30 of the NIL, an order instrument
requires an indorsement from the payee or holder before it may be validly
negotiated. A bearer instrument, on the other hand, does not require an
indorsement to be validly negotiated. It is negotiable by mere delivery. The
provision reads: SEC. 30. What constitutes negotiation.—An instrument is
negotiated when it is transferred from one person to another in such manner as
to constitute the transferee the holder thereof. If payable to bearer, it is
negotiated by delivery; if payable to order, it is negotiated by the indorsement
of the holder completed by delivery.
Same; Same; Same; Same; Under Section 9(c) of the Negotiable Instruments
Law (NIL), a check payable to a specified payee may nevertheless be considered
as a bearer instrument if it is payable to the order of a fictitious or non-existing
person, and such fact is known to the person making it so payable.—A check
that is payable to a specified payee is an order instrument. However, under
Section 9(c) of the NIL, a check payable to a specified payee may nevertheless
be considered as a bearer instrument if it is payable to the order of a fictitious
or non-existing person, and such fact is known to the person making it so
payable. Thus, checks issued to “Prinsipe Abante” or “Si Malakas at si
Maganda,” who are well-known characters in Philippine mythology, are bearer
instruments because the named payees are fictitious and non-existent.
Same; Same; Same; Same; Words and Phrases; Legal Research; In discussing the
broader meaning of the term “fictitious” as used in the Negotiable Instruments
Law (NIL), court rulings in the United States are a logical starting point since our
law on negotiable instruments was directly lifted from the Uniform Negotiable
Instruments Law of the United States; A review of US jurisprudence yields that
an actual, existing, and living payee may also be “fictitious” if the maker of the
check did not intend for the payee to in fact receive the proceeds of the
check—if the payee is not the intended recipient of the proceeds of the check,
the payee is considered a “fictitious” payee and the check is a bearer
instrument; In a fictitious-payee situation, the drawee bank is absolved from
liability and the drawer bears the loss, the underlying theory being that one
cannot expect a fictitious payee to negotiate the check by placing his
indorsement thereon.—We have yet to discuss a broader meaning of the term
“fictitious” as used in the NIL. It is for this reason that We look elsewhere for
guidance. Court rulings in the United States are a logical starting point since our
law on negotiable instruments was directly lifted from the Uniform Negotiable
Instruments Law of the United States. A review of US jurisprudence yields that
an actual, existing, and living payee may also be “fictitious” if the maker of the
check did not intend for the payee to in fact receive the proceeds of the check.
This usually occurs when the maker places a name of an existing payee on the
check for convenience or to cover up an illegal activity. Thus, a check made
expressly payable to a non-fictitious and existing person is not necessarily an
order instrument. If the payee is not the intended recipient of the proceeds of
the check, the payee is considered a “fictitious” payee and the check is a bearer
instrument. In a fictitious-payee situation, the drawee bank is absolved from
liability and the drawer bears the loss. When faced with a check payable to a
fictitious payee, it is treated as a bearer instrument that can be negotiated by
delivery. The underlying theory is that one cannot expect a fictitious payee to
negotiate the check by placing his indorsement thereon. And since the maker
knew this limitation, he must have intended for the instrument to be negotiated
by mere delivery. Thus, in case of controversy, the drawer of the check will bear
the loss. This rule is justified for otherwise, it will be most convenient for the
maker who desires to escape payment of the check to always deny the validity
of the indorsement. This despite the fact that the fictitious payee was purposely
named without any intention that the payee should receive the proceeds of the
check.
Same; Same; Same; Under the commercial bad faith exception to the fictitious-
payee rule, a showing of commercial bad faith on the part of the drawee bank,
or any transferee of the check for that matter, will work to strip it of this
defense.—There is a commercial bad faith exception to the fictitious-payee
rule. A showing of commercial bad faith on the part of the drawee bank, or any
transferee of the check for that matter, will work to strip it of this defense. The
exception will cause it to bear the loss. Commercial bad faith is present if the
transferee of the check acts dishonestly, and is a party to the fraudulent
scheme. Said the US Supreme Court in Getty: Consequently, a transferee’s lapse
of wary vigilance, disregard of suspicious circumstances which might have well
induced a prudent banker to investigate and other permutations of negligence
are not relevant considerations under Section 3-405 x x x. Rather, there is a
“commercial bad faith” exception to UCC 3-405, applicable when the transferee
“acts dishonestly—where it has actual knowledge of facts and circumstances
that amount to bad faith, thus itself becoming a participant in a fraudulent
scheme. x x x Such a test finds support in the text of the Code, which omits a
standard of care requirement from UCC 3-405 but imposes on all parties an
obligation to act with “honesty in fact.” x x x
Same; Same; Same; For the fictitious-payee rule to be available as a defense,
the bank must show that the maker did not intend for the named payees to be
part of the transaction involving the checks—mere lack of knowledge on the
part of the payees of the existence of the checks is not tantamount to a lack of
intention on the part of maker that the payees would not receive the checks’
proceeds; It is a requisite condition of a fictitious-payee situation that the maker
of the check intended for the payee to have no interest in the transaction.—For
the fictitious-payee rule to be available as a defense, PNB must show that the
makers did not intend for the named payees to be part of the transaction
involving the checks. At most, the bank’s thesis shows that the payees did not
have knowledge of the existence of the checks. This lack of knowledge on the
part of the payees, however, was not tantamount to a lack of intention on the
part of respondents-spouses that the payees would not receive the checks’
proceeds. Considering that respondents-spouses were transacting with PEMSLA
and not the individual payees, it is understandable that they relied on the
information given by the officers of PEMSLA that the payees would be receiving
the checks. Verily, the subject checks are presumed order instruments. This is
because, as found by both lower courts, PNB failed to present sufficient
evidence to defeat the claim of respondents-spouses that the named payees
were the intended recipients of the checks’ proceeds. The bank failed to satisfy
a requisite condition of a fictitious-payee situation—that the maker of the check
intended for the payee to have no interest in the transaction. Because of a
failure to show that the payees were “fictitious” in its broader sense, the
fictitious-payee rule does not apply. Thus, the checks are to be deemed payable
to order. Consequently, the drawee bank bears the loss.
Same; Same; Same; Banks and Banking; A bank that regularly processes checks
that are neither payable to the customer nor duly indorsed by the payee is
apparently grossly negligent in its operations.—PNB was remiss in its duty as
the drawee bank. It does not dispute the fact that its teller or tellers accepted
the 69 checks for deposit to the PEMSLA account even without any indorsement
from the named payees. It bears stressing that order instruments can only be
negotiated with a valid indorsement. A bank that regularly processes checks
that are neither payable to the customer nor duly indorsed by the payee is
apparently grossly negligent in its operations. This Court has recognized the
unique public interest possessed by the banking industry and the need for the
people to have full trust and confidence in their banks. For this reason, banks
are minded to treat their customer’s accounts with utmost care, confidence,
and honesty.
Same; Same; Same; Same; In a checking transaction, the drawee bank has the
duty to verify the genuineness of the signature of the drawer and to pay the
check strictly in accordance with the drawer’s instructions, i.e., to the named
payee in the check.—In a checking transaction, the drawee bank has the duty to
verify the genuineness of the signature of the drawer and to pay the check
strictly in accordance with the drawer’s instructions, i.e., to the named payee in
the check. It should charge to the drawer’s accounts only the payables
authorized by the latter. Otherwise, the drawee will be violating the instructions
of the drawer and it shall be liable for the amount charged to the drawer’s
account.
Banks and Banking; The trustworthiness of bank employees is indispensable to
maintain the stability of the banking industry—banks are enjoined to be extra
vigilant in the management and supervision of their employees.—PNB was
negligent in the selection and supervision of its employees. The trustworthiness
of bank employees is indispensable to maintain the stability of the banking
industry. Thus, banks are enjoined to be extra vigilant in the management and
supervision of their employees. In Bank of the Philippine Islands v. Court of
Appeals, 216 SCRA 51 (1992), this Court cautioned thus: Banks handle daily
transactions involving millions of pesos. By the very nature of their work the
degree of responsibility, care and trustworthiness expected of their employees
and officials is far greater than those of ordinary clerks and employees. For
obvious reasons, the banks are expected to exercise the highest degree of
diligence in the selection and supervision of their employees.
Actions; Default; Failure to file an answer is a ground for a declaration that
defendant is in default.—We note that the RTC failed to thresh out the merits of
PNB’s cross-claim against its co-defendants PEMSLA and MPC. The records are
bereft of any pleading filed by these two defendants in answer to the complaint
of respondents-spouses and cross-claim of PNB. The Rules expressly provide
that failure to file an answer is a ground for a declaration that defendant is in
default. Yet, the RTC failed to sanction the failure of both PEMSLA and MPC to
file responsive pleadings. Verily, the RTC dismissal of PNB’s cross-claim has no
basis. Thus, this judgment shall be without prejudice to whatever action the
bank might take against its co-defendants in the trial court. [Philippine National
Bank vs. Rodriguez, 566 SCRA 513(2008)]
Case Title : SAN MIGUEL CORPORATION, petitioner, vs. BARTOLOME PUZON,
JR., respondent.Case Nature : PETITION for review on certiorari of the decision
and resolution of the Court of Appeals.
Syllabi Class : Criminal Law|Theft|Negotiable Instruments Law|Checks|Words
and Phrases
Syllabi:
1. Criminal Procedure; Preliminary Investigation; Probable Cause; The
determination of the existence or absence of probable cause lies within the
discretion of the prosecuting officers after conducting a preliminary
investigation upon complaint of an offended party.-
—“Probable cause is defined as such facts and circumstances that will engender
a well-founded belief that a crime has been committed and that the respondent
is probably guilty thereof and should be held for trial.” On the fine points of the
determination of probable cause, Reyes v. Pearlbank Securities, Inc. (560 SCRA
518 [2008]) comprehensively elaborated that: The determination of [the
existence or absence of probable cause] lies within the discretion of the
prosecuting officers after conducting a preliminary investigation upon complaint
of an offended party. Thus, the decision whether to dismiss a complaint or not is
dependent upon the sound discretion of the prosecuting fiscal. He may dismiss
the complaint forthwith, if he finds the charge insufficient in form or substance
or without any ground. Or he may proceed with the investigation if the
complaint in his view is sufficient and in proper form. To emphasize, the
determination of probable cause for the filing of information in court is an
executive function, one that properly pertains at the first instance to the public
prosecutor and, ultimately, to the Secretary of Justice, who may direct the filing
of the corresponding information or move for the dismissal of the case.
Ultimately, whether or not a complaint will be dismissed is dependent on the
sound discretion of the Secretary of Justice. And unless made with grave abuse
of discretion, findings of the Secretary of Justice are not subject to review. For
this reason, the Court considers it sound judicial policy to refrain from interfering
in the conduct of preliminary investigations and to leave the Department of
Justice ample latitude of discretion in the determination of what constitutes
sufficient evidence to establish probable cause for the prosecution of supposed
offenders. Consistent with this policy, courts do not reverse the Secretary of
Justice’s findings and conclusions on the matter of probable cause except in
clear cases of grave abuse of discretion.
2. Same; Same; Negotiable Instruments Law; Checks; Words and
Phrases; Delivery as the term is used in Section 12 of the Negotiable Instruments
Law means that the party delivering did so for the purpose of giving effect
thereto.-
—Considering that the second element is that the thing taken belongs to
another, it is relevant to determine whether ownership of the subject check was
transferred to petitioner. On this point the Negotiable Instruments Law provides:
Sec. 12. Antedated and postdated.—The instrument is not invalid for the reason
only that it is antedated or postdated, provided this is not done for an illegal or
fraudulent purpose. The person to whom an instrument so dated is delivered
acquires the title thereto as of the date of delivery. (Underscoring supplied.)
Note however that delivery as the term is used in the aforementioned provision
means that the party delivering did so for the purpose of giving effect thereto.
Otherwise, it cannot be said that there has been delivery of the negotiable
instrument. Once there is delivery, the person to whom the instrument is
delivered gets the title to the instrument completely and irrevocably. If the
subject check was given by Puzon to SMC in payment of the obligation, the
purpose of giving effect to the instrument is evident thus title to or ownership of
the check was transferred upon delivery. However, if the check was not given as
payment, there being no intent to give effect to the instrument, then ownership
of the check was not transferred to SMC.
3. Criminal Law; Theft; Elements.-
—“[T]he essential elements of the crime of theft are the following: (1) that there
be a taking of personal property; (2) that said property belongs to another; (3)
that the taking be done with intent to gain; (4) that the taking be done without
the consent of the owner; and (5) that the taking be accomplished without the
use of violence or intimidation against persons or force upon things.”
Division: FIRST DIVISION
Docket Number: G.R. No. 167567
Counsel: Castell & Bermejo
Ponente: DEL CASTILLO
Dispositive Portion:
WHEREFORE, the petition is DENIED. The December 21, 2004 Decision and
March 28, 2005 Resolution of the Court of Appeals in CA-G.R. SP. No. 83905 are
AFFIRMED.
Case Title : FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO
O. BORROMEO, INC, petitioners, vs. AMANCIO SUN and the COURT OF APPEALS,
respondents.Case Nature : PETITION for review on certiorari of a resolution of
the then Intermediate Appellate Court.
Syllabi Class :
Courts|Evidence|Evidence|Handwritings|Assignments|Negotiable Instruments
Law|Expert Witnesses
Syllabi:
1. Courts; Evidence; Appeals.-
Well-settled is the rule that “factual findings of the Court of Appeals are
conclusive on the parties and not reviewable by the Supreme Court—and they
carry even more weight when the Court of Appeals affirms the factual findings
of the trial court.”
2. Evidence; Handwritings; Assignments; Negotiable Instruments Law; The fact
that a Deed of Assignment is dated January 16, 1974 while the questioned
signature was found to be circa 1954-1957, and not that of 1974, does not
necessarily mean that the deed is a forgery, as where it was clearly intended to
be signed in blank to facilitate the assignment of shares from one person to
another at any future time, similar to Section 14 of the Negotiable Instruments
Law where the blanks may be filled up by the holder, the signing in blank being
with the assumed authority to do so.-
That the Deed of Assignment is dated January 16, 1974 while the questioned
signature was found to be circa 1954-1957, and not that of 1974, is of no
moment. It does not necessarily mean, that the deed is a forgery. Pertinent
records reveal that the subject Deed of Assignment is embodied in a blank form
for the assignment of shares with authority to transfer such shares in the books
of the corporation. It was clearly intended to be signed in blank to facilitate the
assignment of shares from one person to another at any future time. This is
similar to Section 14 of the Negotiable Instruments Law where the blanks may
be filled up by the holder, the signing in blank being with the assumed authority
to do so. Indeed, as the shares were registered in the name of Federico O.
Borromeo just to give him personality and standing in the business community,
private respondent had to have a counter evidence of ownership of the shares
involved. Thus, the execution of the deed of assignment in blank, to be filled up
whenever needed. The same explains the discrepancy between the date of the
deed of assignment and the date when the signature was affixed thereto.
3. Evidence; Handwritings; Expert Witnesses; Courts may place whatever
weight is due on the testimony of an expert witness.-
Petitioners, however, question the “Report” of the document examiner on the
ground that they were not given an opportunity to cross-examine the Philippine
Constabulary document examiner; arguing that they never waived their right to
question the competency of the examiner concerned. While the Court finds merit
in the contention of petitioners, that they did not actually waive their right to
cross-examine on any aspect of subject Report of the Philippine Constabulary
Crime Laboratory, the Court discerns no proper basis for deviating from the
findings of the Court of Appeals on the matter. It is worthy to stress that courts
may place whatever weight is due on the testimony of an expert witness.
Conformably, in giving credence and probative value to the said “Report” of the
Philippine Constabulary Crime Laboratory, corroborating the findings of the trial
Court, the Court of Appeals merely exercised its discretion. There being no grave
abuse in the exercise of such judicial discretion, the findings by the Court of
Appeals should not be disturbed on appeal.
Division: THIRD DIVISION
Docket Number: G.R. No. 75908
Counsel: Angara, Abello, Concepcion, Regala & Cruz, Villamor, Laxa & Associates
Ponente: PURISIMA
Dispositive Portion:
WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed
Resolution, dated March 13, 1986, AFFIRMED. No pronouncement as to costs.
Case Title : QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO
GONZALES and EUFEMIA GONZALES, petitioners, vs. THE COURT OF APPEALS
(CA) and REPUBLIC PLANTERS BANK, respondents.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Remedial Law|Actions|Prescription
Syllabi:
1. Remedial Law; Actions; Prescription; Prescription of actions is interrupted
when they are filed before the court, when there is a written extrajudicial
demand by the creditors, and when, there is any written acknowledgment of the
debt by the debtor.-
The Civil Code provides that an action upon a written contract, an obligation
created by law, and a judgment must be brought within ten years from the time
the right of action accrues. x x x Prescription of actions is interrupted when they
are filed before the court, when there is a written extrajudicial demand by the
creditors, and when, there is any written acknowledgment of the debt by the
debtor.
2. Remedial Law; Actions; Prescription; A mortgage action prescribes after ten
years from the time the right of action accrued.-
With respect to the first to the fifth causes of action, as gleaned from the
complaint, the Bank seeks the recovery of the deficient amount of the obligation
after the foreclosure of the mortgage. Such suit is in the nature of a mortgage
action because its purpose is precisely to enforce the mortgage contract. A
mortgage action prescribes after ten years from the time the right of action
accrued.
Division: THIRD DIVISION

Docket Number: G.R. No. 126568
Counsel: Mariano R. Riva, The Chief Legal Counsel
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the CA Decision is hereby AFFIRMED with
MODIFICATION.Republic Bank’s Complaint with respect to its first to sixth
causes of action is hereby DISMISSED. Its complaint with respect to its seventh
to ninth causes of action is REMANDED to the court of origin, the Manila
Regional Trial Court, Branch 36, for it to determine the amounts due the Bank
thereunder.
[G.R. No. 142047. July 10, 2006]
SPS. SERGIO AND MILAGROS OJEDA versus ANDRELINA ORBETA
Third Division
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated JULY
10, 2006.
G.R. No. 142047 (Sps. Sergio and Milagros Ojeda versus Andrelina
Orbeta)
Petitioner spouses Sergio Ojeda and Milagros Ojeda seek a reversal of
the February 24, 2000 Decision[1] rendered by the Court of Appeals in CA-G.R.
CV No. 59985 entitled Andrelina Orbeta v. Sps. Sergio Ojeda and Milagros
Ojeda. The questioned decision affirmed the February 23, 1995 Decision[2] of
the Regional Trial Court, Branch 106 of Quezon City in Civil Case No. Q-91-7794.
The facts of this case are not complicated.
From 1986 to 1989, the spouses Ojeda obtained various loans they would
use as additional capital from Andrelina Orbeta, a general merchandiser and
former market stall holder. Over time, Orbeta extended a total of 18 loans to
the spouses.[3] Although the couple failed to pay their obligations on time,
Orbeta continued to accommodate them, and lent them more money on the
assurance that they would soon pay all their debts. Every time Orbeta would
verbally demand payment, she was told that payment was forthcoming and
there was nothing to worry about since the spouses' business was doing well
and the couple had a daughter based in Japan who always sent them
money. To their sincerity, they aver, they even delivered a copy of the
registration papers of one of their vehicles to Orbeta.
Notwithstanding all their promises, however, the spouses' obligations
remained unpaid. Orbeta made numerous demands but all attempts to collect
from the couple proved futile. Frustrated by their failure to pay, Orbeta
through her lawyer sent a demand letter to the spouses on March
1989.[4] Eventually, on July 1989, after an accounting of all outstanding loans
due, Milagros Ojeda issued Security Bank and Trust Company Check No. 027836
dated September 1, 1989 for P487,133.87, representing full settlement of all
obligations due in favor of Orbeta. When presented for payment, however, the
check was dishonored for having been drawn against an account already closed.
Consequently, Orbeta filed Criminal Case No. Q-90-10226 for violation
of Batas Pambansa Bilang 22 against Milagros Ojeda with the Regional Trial
Court of Quezon City.[5] After a plea of guilty, judgment was rendered against
the accused in a decision[6] dated October 11, 1990. The dispositive portion of
the decision read:
WHEREFORE, considering the plea of Guilty entered by accused Milagros Ojeda
this morning, the Court hereby renders judgment:
1. Finding said accused GUILTY beyond reasonable doubt of the offense
charged;
2. Sentencing her to suffer the penalty of ONE (1) YEAR imprisonment; and
3. To pay costs.
The decision was promulgated in open Court this morning in the presence of
the accused herself, Assistant City Prosecutor Perpetuo LB Alonzo and Atty.
Renerio S. Payumo.
SO ORDERED.
Consistent with the reservation made by Ojeda in the BP 22 case, Civil
Case No. Q-91-7794 was subsequently filed against the spouses to collect on the
civil aspect of the BP 22 case. In the civil case, the Regional Trial Court ruled as
follows:
WHEREFORE, finding no cogent reason to deny the relief being prayed for, the
cause of action of plaintiff having been fully established and proven by
preponderant evidence, judgment is hereby rendered ordering defendants to
pay plaintiff:
1. The amount of Four Hundred Eighty Seven Thousand One Hundred
Thirteen and 87/100 (P487,113.87) pesos with 12% interest from filing of the
case until fully paid.
2. 25% of the principal obligation as and by way of attorney's fees.
3. Cost of suit.
SO ORDERED.[7]
Aggrieved, the spouses brought their case to the Court of Appeals where
the Regional Trial Court's judgment was affirmed, to wit:
WHEREFORE, with the sole modification that the award for attorney's fee[s] is
hereby eliminated, the Judgment appealed from is in all other
respectsAFFIRMED, with the costs of this instance to be taxed against the
defendants-appellants.
SO ORDERED.[8]
Before us now are the following issues: (1) Are the spouses liable for
issuing Security Bank and Trust Company Check No. 027836? (2) Did the Court
of Appeals err in upholding the propriety of the civil case that was instituted
separately from the BP 22 case?
To justify their prayer for a reversal of the Court of Appeals' decision, the
spouses insist that there are special and important reasons present in the case
which constitute a question of law and there was a misapprehension of facts
committed by the Court of Appeals which must be rectified.
Petitioners maintain that any obligation arising from Security Bank and
Trust Company Check No. 027836 is invalid and illegal since the same was
issued in blank except for the signature of Milagros Ojeda. They further claim
that they already paid P55,000 to satisfy their obligation to Orbeta of P30,000
only. The couple also aver that the motion of Orbeta to file a separate civil
action was merely noted by the Regional Trial Court in the BP 22 case and there
was no order granting the institution of a separate civil action.
Respondent Orbeta, on the other hand, counters that the errors raised
by the spouses deal with questions of fact which have already been passed
upon and decided by the Regional Trial Court and the Court of Appeals and
cannot now be raised in this petition for review. Orbeta also contends that, the
couple cannot assert for the first time that the motion to file a separate civil
action was merely noted and no order was issued by the Regional Trial Court
granting the same since a full blown trial had been conducted without the said
issue having been raised by the spouses, hence, they are barred from doing so,
since they are considered to have waived any objection they may have had on
the subject. Finally, Orbeta points out that the judgment in the BP 22 case did
not contain an award for civil liability which is tantamount to the Regional Trial
Court's approval of the motion.[9]
To resolve the first issue, we must here emphasize that the jurisdiction of
this Court in a petition such as this is limited to reviewing errors of law that
might have been committed by the lower court. The allegation of the spouses
that Security Bank and Trust Company Check No. 027836 was delivered to
Orbeta in blank except for the signature of Milagros Ojeda and the amount of
P10,000 annotated at the back of the check, and their contention that they
cannot be held liable for the face value of the check since Milagros Ojeda was
not the one who filled up the date, name of the payee and the amount
appearing on the check, are questions of fact that require us to re-examine the
evidence presented by the contending parties during trial. This cannot be done
in a petition for review. Under Rule 45, only questions of law may be raised in a
petition for review, except in very few specified instances, e.g. where there is
variance in the factual findings of the trial and appellate courts. Since both the
Regional Trial Court and the Court of Appeals agree on the cited facts, we are
bound by their factual findings.
In any event, the spouses do not deny that the check was delivered to
Orbeta and that the signature appearing on the check belongs to Milagros
Ojeda. Even if the check was delivered to Orbeta in blank, we must stress that
the presumption is that the latter had prima facieauthority to complete the
check by filling up the same. Here, the provision of Section 14 of the Negotiable
Instruments Law is pertinent:
SEC. 14. Blanks; when may be filled. - Where the instrument is wanting in any
material particular, the person in possession thereof has a prima
facieauthority to complete it by filling up the blanks therein. And a signature
on a blank paper delivered by the person making the signature in order that the
paper may be converted into a negotiable instrument operates as a prima
facie authority to fill it up as such for any amount. In order, however, that any
such instrument, when completed may be enforced against any person who
became a party thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable time. But if any
such instrument, after completion, is negotiated to a holder in due course, it is
valid and effectual for all purposes in his hands, and he may enforce it as if it
had been filled up strictly in accordance with the authority given and within a
reasonable time. (Emphasis supplied.)
The law merely requires that the instrument be in the possession of a
person other than the drawer or maker, and from such possession, together
with the fact that the instrument is wanting in a material particular, the law
presumes agency to fill up the blanks.[10] Because of the presumption of
authority, the burden of proving that there was no authority or that the
authority granted was exceeded is placed on the person questioning such
authority.[11] There is nothing on record to show that the prima
facie presumption created by the afore-quoted section was successfully refuted
by the spouses. Therefore, the couple's stance that they cannot be held liable
for the check because they were not the ones who wrote the date, the name of
the payee and the amount, is untenable.
On the second issue, it appears that an urgent motion to file a separate
civil action was filed by Orbeta on October 11, 1990, which motion was
correspondingly noted by the Regional Trial Court in its decision.[12] Since the
civil liability involved in this case is one that arises from a crime, the rule is that
the same is impliedly instituted with the criminal action unless the offended
party expressly waives the civil action; reserves his right to institute it
separately; or institutes the civil action prior to the filing of the criminal
case.[13] The purpose of the rule requiring reservation is to prevent the
offended party from recovering damages twice for the same act or omission.[14]
Orbeta's intention to reserve her right to recover the civil liability arising
from the BP 22 case is clear from the time she filed the urgent motion.[15] The
fact that the Regional Trial Court did not provide for an award of damages in its
decision is also a clear recognition of Orbeta's reservation.
Contrary to the spouses' argument, an order by the Regional Trial Court
granting the urgent motion to file a separate civil action is not necessary since
the rules only require that the offended party make the reservation before the
prosecution starts to present its evidence and under circumstances affording
the offended party a reasonable opportunity to make such reservation.
Lastly, we agree with respondent that it is now too late for the spouses
to question the institution of the civil case separately from the BP 22 case. A
full blown trial was conducted in the civil case with the participation of the
spouses, but they never raised any objection thereto, and they cannot be
allowed here and now to raise this issue for the first time.
WHEREFORE, the instant petition is DENIED. The February 24, 2000
Decision of the Court of Appeals sustaining the February 23, 1995 Decision of
the Regional Trial Court is AFFIRMED.
Costs against petitioners.
SO ORDERED.
[1] Rollo, pp. 12-24. Penned by Associate Justice Renato C. Dacudao, with
Associate Justices Quirino D. Abad Santos, Jr., and B.A. Adefuin-De la Cruz
concurring.
[2]
Id. at 25-31.
[3] Id. at 19.
[4] Id. at 18.
[5] Id. at 16.
[6] Id. at 51-52.
[7]
Id. at 31.
[8] Id. at 23.
[9] Id. at 45-46.
[10]
A-F. Agbayani, COMMENTARIES AND JURISPRUDENCE ON THE
COMMERCIAL LAWS OF THE PHILIPPINES, Vol. I, 168 (1987 ed.).
[11]
J.C. Campos, Jr. & M.C. Lopez-Campos, NOTES AND SELECTED CASES ON
NEGOTIABLE INSTRUMENTS Law, 351 (3rd ed., 1971) (citations omitted).
[12]
Rollo, p. 52.
[13] The Rules of Criminal Procedure prevailing then provides:
SECTION 1. Institution of criminal and civil actions. - When a criminal
action is instituted, the civil action for the recovery of civil liability is impliedly
instituted with the criminal action, unless the offended party waives the civil
action, reserves his right to institute it separately, or institutes the civil action
prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal
Code, and damages under Articles 32, 33, 34 and 2176 of the Civil Code of
the Philippinesarising from the same act or omission of the accused.
A waiver of any of the civil actions extinguishes the others. The institution
of, or the reservation of the right to file, any of said civil actions separately
waives the others.
The reservation of the right to institute the separate civil actions shall be
made before the prosecution starts to present its evidence and under
circumstances affording the offended party a reasonable opportunity to make
such reservation.
In no case may the offended party recover damages twice for the same
act or omission of the accused.
When the offended party seeks to enforce civil liability against the
accused by way of moral, nominal, temperate or exemplary damages, the filing
fees for such civil action as provided in these Rules shall constitute a first lien on
the judgment except in an award for actual damages.
In cases wherein the amount of damages, other than actual, is alleged in
the complaint or information, the corresponding filing fees shall be paid by the
offended party upon the filing thereof in court for trial.
[14] Yakult Philippines v. Court of Appeals, G.R. No. 91856, October 5, 1990, 190
SCRA 357, 361.
[15]
Under the present Section 1(b), Rule 111 of the Revised Rules of Criminal
Procedure:
(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be
deemed to include the corresponding civil action. No reservation to file such
civil action separately shall be allowed.
Case Title : SAMSON CHING, petitioner, vs. CLARITA NICDAO and HON. COURT
OF APPEALS, respondents.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Actions|Burden of Proof|Interests|Criminal Procedure|Civil
Liability|Appeals|Estoppel
Syllabi:
1. Actions; Criminal Procedure; Civil Liability; The civil liability is not
extinguished by acquittal: (a) where the acquittal is based on reasonable
doubt; (b) where the court expressly declares that the liability of the accused is
not criminal but only civil in nature; and (c) where the civil liability is not
derived from or based on the criminal act of which the accused is acquitted.-
—In Sapiera v. Court of Appeals, 314 SCRA 370 (1999), the Court enunciated
that the civil liability is not extinguished by acquittal: (a) where the acquittal is
based on reasonable doubt; (b) where the court expressly declares that the
liability of the accused is not criminal but only civil in nature; and (c) where the
civil liability is not derived from or based on the criminal act of which the
accused is acquitted. Thus, under Article 29 of the Civil Code—ART. 29. When the
accused in a criminal prosecution is acquitted on the ground that his guilt has
not been proved beyond reasonable doubt, a civil action for damages for the
same act or omission may be instituted. Such action requires only a
preponderance of evidence. Upon motion of the defendant, the court may
require the plaintiff to file a bond to answer for damages in case the complaint
should be found to be malicious. If in a criminal case the judgment of acquittal is
based upon reasonable doubt, the court shall so declare. In the absence of any
declaration to that effect, it may be inferred from the text of the decision
whether or not the acquittal is due to that ground.
2. Same; Estoppel; Estoppel cannot give validity to an act that is prohibited by
law or one that is against public policy-
—clearly, the collection of interests without any stipulation therefor in writing is
prohibited by law.—Neither could respondent Nicdao be considered to be
estopped from denying the validity of these interests. Estoppel cannot give
validity to an act that is prohibited by law or one that is against public policy.
Clearly, the collection of interests without any stipulation therefor in writing is
prohibited by law. Consequently, the daily payments made by respondent
Nicdao amounting to P5,780,000.00 were properly considered by the CA as
applying to the principal amount of her loan obligations.
3. Interests; Under Article 1956 of the Civil Code, “no interest shall be due unless
it has been expressly stipulated in writing.”-
—The Court agrees with the CA that the daily payments made by respondent
Nicdao amounting to P5,780,000.00 cannot be considered as interest payments
only. Even respondent Nicdao testified that the daily payments that she made to
Nuguid were for the interests due. However, as correctly ruled by the CA, no
interests could be properly collected in the loan transactions between petitioner
Ching and respondent Nicdao because there was no stipulation therefor in
writing. To reiterate, under Article 1956 of the Civil Code, “no interest shall be
due unless it has been expressly stipulated in writing.”
4. Burden of Proof; It is a basic rule in evidence that the burden of proof lies on
the party who makes the allegations-
—et incumbit probatio, qui dicit, non qui negat; cum per rerum naturam factum
negantis probatio nulla sit (The proof lies upon him who affirms, not upon him
who denies; since, by the nature of things, he who denies a fact cannot produce
any proof).—It is a basic rule in evidence that the burden of proof lies on the
party who makes the allegations—Et incumbit probatio, qui dicit, non qui negat;
cum per rerum naturam factum negantis probatio nulla sit (The proof lies upon
him who affirms, not upon him who denies; since, by the nature of things, he
who denies a fact cannot produce any proof). In civil cases, the party having the
burden of proof must establish his case by a preponderance of evidence.
Preponderance of evidence is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the
term “greater weight of evidence” or “greater weight of the credible evidence.”
Preponderance of evidence is a phrase which, in the last analysis, means
probability of the truth. It is evidence which is more convincing to the court as
worthy of belief than that which is offered in opposition thereto. Section 1, Rule
133 of the Revised Rules of Court offers the guidelines in determining
preponderance of evidence: SEC. 1. Preponderance of evidence, how
determined.—In civil cases, the party having the burden of proof must establish
his case by a preponderance of evidence. In determining where the
preponderance or superior weight of evidence on the issues involved lies, the
court may consider all the facts and circumstances of the case, the witnesses’
manner of testifying, their intelligence, their means and opportunity of knowing
the facts to which they are testifying, the nature of the facts to which they
testify, the probability or improbability of their testimony, their interest or want
of interest, and also their personal credibility so far as the same may
legitimately appear upon the trial. The court may also consider the number of
witnesses, though the preponderance is not necessarily with the greater
number.
5. Same; Same; Same; Appeals; The appeal period accorded to the accused
should also be available to the offended party who seeks redress of the civil
aspect of the decision-
—the period to appeal granted to the offended party is the same as that
granted to the accused.—Following the long recognized rule that “the appeal
period accorded to the accused should also be available to the offended party
who seeks redress of the civil aspect of the decision,” the period to appeal
granted to petitioner Ching is the same as that granted to the accused. With
petitioner Ching’s timely filing of the instant petition for review of the civil
aspect of the CA’s decision, the Court thus has the jurisdiction and authority to
determine the civil liability of respondent Nicdao notwithstanding her acquittal.
In order for the petition to prosper, however, it must establish that the judgment
of the CA acquitting respondent Nicdao falls under any of the three categories
enumerated in Salazar and Sapiera, to wit: (a) where the acquittal is based on
reasonable doubt as only preponderance of evidence is required; (b) where the
court declared that the liability of the accused is only civil; and (c) where the civil
liability of the accused does not arise from or is not based upon the crime of
which the accused is acquitted.
Division: THIRD DIVISION
Docket Number: G.R. No. 141181
Counsel: Abaño, Pamfilo, Paras, Pineda and Agustin Law Offices, Villaraza and
Angangco
Ponente: CALLEJO, SR.
Dispositive Portion:
WHEREFORE, premises considered, the Petition is DENIED for lack of merit.
Case Title : RAFAEL P. LUNARIA, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondentCase Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Criminal Law ; Bouncing Checks Law ; Checks ; Penalties ;
Syllabi:
1. Remedial Law; Appeals; Certiorari; The jurisdiction of the Supreme Court is
confined to reviews of errors of law ascribed to the Court of Appeals (CA).-
—At the outset, the first and second grounds raised by petitioner are essentially
factual in nature, impugning the finding of guilt by both the CA and the RTC.
Petitioner would have this court re-evaluate and re-assess the facts, when it is
beyond cavil that in an appeal by certiorari, the jurisdiction of this Court is
confined to reviews of errors of law ascribed to the CA. This Court is not a trier of
facts, and the findings of fact by the CA are conclusive, more so when it concurs
with the factual findings of the RTC. Absent any showing that such findings are
devoid of any substantiation on record, the finding of guilt is conclusive on us.
2. Same; Same; Same; Penalties; Supreme Court Administrative Circular No.
12-2000, authorizing the non-imposition of the penalty of imprisonment in
B.P. 22 cases; Court has not decriminalized B.P. 22 violations, nor have removed
imprisonment as an alternative penalty.-
—Since 1998, this Court has held that it would best serve the ends of criminal
justice if, in fixing the penalty to be imposed for violation of B.P. 22, the same
philosophy underlying the Indeterminate Sentence Law be observed, i.e., that of
redeeming valuable human material and preventing unnecessary deprivation of
personal liberty and economic usefulness with due regard to the protection of
the social order. This policy was embodied in Supreme Court Administrative
Circular No. 12-2000, authorizing the non-imposition of the penalty of
imprisonment in B.P. 22 cases. We also clarified in Administrative Circular No.
13-2001, as explained in Tan v. Mendez, 383 SCRA 202 (2002), that we are not
decriminalizing B.P. 22 violations, nor have we removed imprisonment as an
alternative penalty. Needless to say, the determination of whether the
circumstances warrant the imposition of a fine alone rests solely upon the judge.
Should the judge decide that imprisonment is the more appropriate penalty,
Administrative Circular No. 12-2000 ought not to be deemed a hindrance.
3. Same; Same; Checks; The lack of criminal intent on the part of the accused is
irrelevant; The law has made the mere act of issuing a worthless check a
malum prohibitum; The gravamen of the offense under this law is the act of
issuing a worthless check or a check that is dishonored upon its presentment for
payment, not the nonpayment of the obligation.-
—It bears repeating that the lack of criminal intent on the part of the accused is
irrelevant. The law has made the mere act of issuing a worthless check a malum
prohibitum, an act proscribed by legislature for being deemed pernicious and
inimical to public welfare. In fact, even in cases where there had been payment,
through compensation or some other means, there could still be prosecution for
violation of B.P. 22. The gravamen of the offense under this law is the act of
issuing a worthless check or a check that is dishonored upon its presentment for
payment, not the nonpayment of the obligation.
4. Criminal Law; Bouncing Checks Law; Elements of the Crime.-
— We have gone over the records and find no error in the decision ofthe
appellate court holding that the elements of the crime have been established by
the prosecution, i.e., (1) the making, drawing, and issuance of any check to
apply for account or for value; (2) the knowledge of the maker, drawer, or issuer
that at the time of issue he does not have sufficient funds in or credit with the
drawee bank for the payment of the check in full upon its presentment; and (3)
the subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit or dishonor for the same reason had not the drawer, without any
valid cause, ordered the bank to stop payment.
Division: FIRST DIVISION
Docket Number: G.R. No. 160127
Counsel: Benjamin C. Santos & Ray Montri C. Santos Law Offices
PonenteC.J. : PUNO,
Dispositive Portion:
IN VIEW WHEREOF, the petition is DENIED and the Decision of the Court of
Appeals in CA-G.R. CR No. 20343 is AFFIRMED with MODIFICATION. Petitioner is
ordered to indemnify Nemesio Artaiz in the amount of P844,000.00 and the
cost of suit, with legal interest from date of judicial demand. The sentence of
imprisonment of one (1) year is SET ASIDE and, in lieu thereof, a FINE in the
amount of P200,000.00 is imposed upon petitioner, with subsidiary
imprisonment not to exceed six months in case of insolvency or nonpayment.
Case Title : JOHN DY, petitioner, vs. PEOPLE OF THE PHILIPPINES and The
HONORABLE COURT OF APPEALS, respondents.Case Nature : PETITION for
review on certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Criminal Law ; Estafa (Art. 315, 2[d]) ; Penalties ;
Syllabi:
1. Estafa; Bouncing Checks Law; Negotiable Instruments Law; Words and
Phrases; Elements of Estafa under Art. 315, par. 2(d) of the Rev. Penal
Code; Section 191 of the Negotiable Instruments Law defines “issue” as the
first delivery of an instrument, complete in form, to a person who takes it as a
holder; Delivery denotes physical transfer of the instrument by the maker or
drawer coupled with an intention to convey title to the payee and recognize him
as a holder.-
—Before an accused can be held liable for estafa under Article 315, paragraph
2(d) of the Revised Penal Code, as amended by Republic Act No. 4885, the
following elements must concur: (1) postdating or issuance of a check in
payment of an obligation contracted at the time the check was issued; (2)
insufficiency of funds to cover the check; and (3) damage to the payee thereof.
These elements are present in the instant case. Section 191 of the Negotiable
Instruments Law defines “issue” as the first delivery of an instrument, complete
in form, to a person who takes it as a holder. Significantly, delivery is the final
act essential to the negotiability of an instrument. Delivery denotes physical
transfer of the instrument by the maker or drawer coupled with an intention to
convey title to the payee and recognize him as a holder. It means more than
handing over to another; it imports such transfer of the instrument to another
as to enable the latter to hold it for himself.
2. Criminal Law; Estafa (Art. 315, 2[d]); Penalties; If the amount of the fraud
exceeds 22,000, the penalty of reclusión temporal is imposed in its maximum
period, adding one year for each additional P10,000 but the total penalty shall
not exceed thirty (30) years, which shall be termed reclusión perpetua, merely to
describe the penalty actually imposed on account of the amount of the fraud
involved.-
—Under Section 1 of P.D. No. 818, if the amount of the fraud exceeds P22,000,
the penalty of reclusión temporal is imposed in its maximum period, adding one
year for each additional P10,000 but the total penalty shall not exceed thirty
(30) years, which shall be termed reclusión perpetua. Reclusión perpetua is not
the prescribed penalty for the offense, but merely describes the penalty actually
imposed on account of the amount of the fraud involved.
3. Same; Same; Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also
speaks only of insufficiency of funds and does not treat of uncollected deposits.-
—Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also speaks only of
insufficiency of funds and does not treat of uncollected deposits. To repeat, we
cannot interpret the law in such a way as to expand its provision to encompass
the situation of uncollected deposits because it would make the law more
onerous on the part of the accused. Again, criminal statutes are strictly
construed against the Government and liberally in favor of the accused.
4. Same; Same; To be liable under Section 1 of B.P. Blg. 22, the check must be
dishonored by the drawee bank for insufficiency of funds or credit or dishonored
for the same reason had not the drawer, without any valid cause, ordered the
bank to stop payment.-
—In Tan v. People, 349 SCRA 777 (2001), this Court acquitted the petitioner
therein who was indicted under B.P. Blg. 22, upon a check which was dishonored
for the reason DAUD, among others. We observed that: In the second place,
even without relying on the credit line, petitioner’s bank account covered the
check she issued because even though there were some deposits that were still
uncollected the deposits became “good” and the bank certified that the check
was “funded.” To be liable under Section 1 of B.P. Blg. 22, the check must be
dishonored by the drawee bank for insufficiency of funds or credit or dishonored
for the same reason had not the drawer, without any valid cause, ordered the
bank to stop payment.
5. Same; Same; Estafa; What the law punishes is simply the issuance of a
bouncing check and not the purpose for which it was issued nor the terms and
conditions relating thereto-
—the only valid query, then, is whether the law has been breached, i.e., by the
mere act of issuing a bad check, without so much regard as to the criminal
intent of the issuer.—During the joint pre-trial conference of this case, Dy
admitted that he issued the checks, and that the signatures appearing on them
were his. The facts reveal that the checks were issued in blank because of the
uncertainty of the volume of products to be retrieved, the discount that can be
availed of, and the deduction for bad orders. Nevertheless, we must stress that
what the law punishes is simply the issuance of a bouncing check and not the
purpose for which it was issued nor the terms and conditions relating thereto. If
inquiry into the reason for which the checks are issued, or the terms and
conditions of their issuance is required, the public’s faith in the stability and
commercial value of checks as currency substitutes will certainly erode.
Moreover, the gravamen of the offense under B.P. Blg. 22 is the act of making or
issuing a worthless check or a check that is dishonored upon presentment for
payment. The act effectively declares the offense to be one of malum
prohibitum. The only valid query, then, is whether the law has been breached,
i.e., by the mere act of issuing a bad check, without so much regard as to the
criminal intent of the issuer. Indeed, non-fulfillment of the obligation is
immaterial. Thus, petitioner’s defense of failure of consideration must likewise
fall. This is especially so since as stated above, Dy has acknowledged receipt of
the goods.
6. Batas Pambansa Blg. 22; Bouncing Checks Law; Elements.-
—The elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the
making, drawing and issuance of any check to apply to account or for value; (2)
the knowledge of the maker, drawer or issuer that at the time of issue he does
not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment; and (3) subsequent dishonor of the
check by the drawee bank for insufficiency of funds or credit or dishonor for the
same reason had not the drawer, without any valid cause, ordered the bank to
stop payment. The case at bar satisfies all these elements.
7. Same; Same; Same; Uncollected deposits are not the same as insufficient
funds-
—the prima facie presumption of deceit arises only when a check has been
dishonored for lack or insufficiency of funds; Clearly, the estafa punished under
Article 315, paragraph 2(d) of the Revised Penal Code is committed when a
check is dishonored for being drawn against insufficient funds or closed account,
and not against uncollected deposit.—The same, however, does not hold true
with respect to FEBTC Check No. 553602 for P106,579.60. This check was
dishonored for the reason that it was drawn against uncollected deposit.
Petitioner had P160,659.39 in his savings deposit account ledger as of July 22,
1992. We disagree with the conclusion of the RTC that since the balance
included a regional clearing check worth P55,000 deposited on July 20, 1992,
which cleared only five (5) days later, then petitioner had inadequate funds in
this instance. Since petitioner technically and retroactively had sufficient funds
at the time Check No. 553602 was presented for payment then the second
element (insufficiency of funds to cover the check) of the crime is absent. Also
there is no prima facie evidence of deceit in this instance because the check was
not dishonored for lack or insufficiency of funds. Uncollected deposits are not
the same as insufficient funds. The prima facie presumption of deceit arises only
when a check has been dishonored for lack or insufficiency of funds. Notably, the
law speaks of insufficiency of funds but not of uncollected deposits.
Jurisprudence teaches that criminal laws are strictly construed against the
Government and liberally in favor of the accused. Hence, in the instant case, the
law cannot be interpreted or applied in such a way as to expand its provision to
encompass the situation of uncollected deposits because it would make the law
more onerous on the part of the accused. Clearly, the estafa punished under
Article 315, paragraph 2(d) of the Revised Penal Code is committed when a
check is dishonored for being drawn against insufficient funds or closed account,
and not against uncollected deposit. Corollarily, the issuer of the check is not
liable for estafa if the remaining balance and the uncollected deposit, which was
duly collected, could satisfy the amount of the check when presented for
payment.
8. Same; Same; Same; Words and Phrases; Deceit as an element of estafa is a
specie of fraud-
—it is actual fraud which consists in any misrepresentation or contrivance where
a person deludes another, to his hurt.—We are not swayed by petitioner’s
arguments that the single incident of dishonor and his absence when the checks
were delivered belie fraud. Indeed damage and deceit are essential elements of
the offense and must be established with satisfactory proof to warrant
conviction. Deceit as an element of estafa is a specie of fraud. It is actual fraud
which consists in any misrepresentation or contrivance where a person deludes
another, to his hurt. There is deceit when one is misled—by guile, trickery or by
other means—to believe as true what is really false.
9. Same; Same; Same; Even if the checks were given to the payee in blank, this
alone did not make their issuance invalid.-
—In this case, even if the checks were given to W.L. Foods in blank, this alone
did not make its issuance invalid. When the checks were delivered to Lim,
through his employee, he became a holder with prima facie authority to fill the
blanks. This was, in fact, accomplished by Lim’s accountant. The pertinent
provisions of Section 14 of the Negotiable Instruments Law are instructive: SEC.
14. Blanks; when may be filled.—Where the instrument is wanting in any
material particular, the person in possession thereof has a prima facie authority
to complete it by filling up the blanks therein. And a signature on a blank paper
delivered by the person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie authority to fill
it up as such for any amount. …. (Emphasis supplied.) Hence, the law merely
requires that the instrument be in the possession of a person other than the
drawer or maker. From such possession, together with the fact that the
instrument is wanting in a material particular, the law presumes agency to fill
up the blanks. Because of this, the burden of proving want of authority or that
the authority granted was exceeded, is placed on the person questioning such
authority. Petitioner failed to fulfill this requirement.
Division: SECOND DIVISION
Docket Number: G.R. No. 158312
Counsel: M.A. Obias & Associates
Ponente Actg. C.J. : QUISUMBING,
Dispositive Portion:
Notes.—B.P. Blg. 22 does not appear to concern itself with what might actually
be envisioned by the parties, its primordial intention being to instead ensure
the stability and commercial value of checks as being vital substitutes for
currency. (Meriz vs. People, 368 SCRA 524 [2001]) Conviction for violation of
B.P. Blg. 22 “imports deceit” and “certainly relates to and affects the good
moral character of a person”—a drawer who issues an unfunded check
deliberately reneges on his private duties he owes his fellow men or society in a
manner contrary to accepted and customary rule of right and duty, justice,
honesty or good morals. (Villaber vs. Commission on Elections, 369 SCRA 126
[2001])
Case Title : BANK OF AMERICA NT & SA, petitioner, vs. PHILIPPINE RACING
CLUB, respondent.Case Nature : PETITION for review on certiorari of the
decision and resolution of the Court of Appeals.
Syllabi Class : Attorney’s Fees
Syllabi:
1. Banks and Banking; Negotiable Instruments Law; If the signatures are
genuine, the bank has the unavoidable legal and contractual duty to pay.-
—Petitioner insists that it merely fulfilled its obligation under law and contract
when it encashed the aforesaid checks. Invoking Sections 126 and 185 of the
Negotiable Instruments Law (NIL), petitioner claims that its duty as a drawee
bank to a drawer-client maintaining a checking account with it is to pay orders
for checks bearing the drawer-client’s genuine signatures. The genuine
signatures of the client’s duly authorized signatories affixed on the checks signify
the order for payment. Thus, pursuant to the said obligation, the drawee bank
has the duty to determine whether the signatures appearing on the check are
the drawer-client’s or its duly authorized signatories. If the signatures are
genuine, the bank has the unavoidable legal and contractual duty to pay. If the
signatures are forged and falsified, the drawee bank has the corollary, but
equally unavoidable legal and contractual, duty not to pay.
2. Attorney’s Fees; An adverse decision does not ipso facto justify an award of
attorney’s fees to the winning party.-
—We find that the awards of attorney’s fees and litigation expenses in favor of
respondent are not justified under the circumstances and, thus, must be deleted.
The power of the court to award attorney’s fees and litigation expenses under
Article 2208 of the NCC demands factual, legal, and equitable justification. An
adverse decision does not ipso facto justify an award of attorney’s fees to the
winning party. Even when a claimant is compelled to litigate with third persons
or to incur expenses to protect his rights, still attorney’s fees may not be
awarded where no sufficient showing of bad faith could be reflected in a party’s
persistence in a case other than an erroneous conviction of the righteousness of
his cause.
3. Damages; Following established jurisprudential precedents, we believe the
allocation of sixty percent (60%) of the actual damages, involved in this case
(represented by the amount of the checks with legal interest) to petitioner is
proper under the premises.-
—Following established jurisprudential precedents, we believe the allocation of
sixty percent (60%) of the actual damages involved in this case (represented by
the amount of the checks with legal interest) to petitioner is proper under the
premises. Respondent should, in light of its contributory negligence, bear forty
percent (40%) of its own loss.
4. Same; Doctrine of Last Clear Chance; In instances where both parties are at
fault, this Court has consistently applied the doctrine of last clear chance in
order to assign liability.-
—Even if we assume that both parties were guilty of negligent acts that led to
the loss, petitioner will still emerge as the party foremost liable in this case. In
instances where both parties are at fault, this Court has consistently applied the
doctrine of last clear chance in order to assign liability. In Westmont Bank v.
Ong, 375 SCRA 212 (2002), we ruled: …[I]t is petitioner [bank] which had the last
clear chance to stop the fraudulent encashment of the subject checks had it
exercised due diligence and followed the proper and regular banking procedures
in clearing checks. As we had earlier ruled, the one who had a last clear
opportunity to avoid the impending harm but failed to do so is chargeable with
the consequences thereof.
5. Same; Every client should be treated equally by a banking institution
regardless of the amount of his deposits and each client has the right to expect
that every centavo he entrusts to a bank would be handled with the same
degree of care as the accounts of other clients.-
—Taking this with the testimony of petitioner’s operations manager that in case
of an irregularity on the face of the check (such as when blanks were not
properly filled out) the bank may or may not call the client depending on how
busy the bank is on a particular day, we are even more convinced that
petitioner’s safeguards to protect clients from check fraud are arbitrary and
subjective. Every client should be treated equally by a banking institution
regardless of the amount of his deposits and each client has the right to expect
that every centavo he entrusts to a bank would be handled with the same
degree of care as the accounts of other clients. Perforce, we find that petitioner
plainly failed to adhere to the high standard of diligence expected of it as a
banking institution.
6. Same; It is well-settled that banks are engaged in a business impressed with
public interest, and it is their duty to protect in return their many clients and
depositors who transact business with them.-
—It is well-settled that banks are engaged in a business impressed with public
interest, and it is their duty to protect in return their many clients and depositors
who transact business with them. They have the obligation to treat their client’s
account meticulously and with the highest degree of care, considering the
fiduciary nature of their relationship. The diligence required of banks, therefore,
is more than that of a good father of a family.
7. Same; Same; A material alteration is defined in Section 125 of the Negotiable
Instruments Law (NIL) to be one which changes the date, the sum payable, the
time or place of payment, the number or relations of the parties, the currency in
which payment is to be made or one which adds a place of payment where no
place of payment is specified, or any change or addition which alters the effect
of the instrument in any respect.-
—Petitioner maintains that there exists a duty on the drawee bank to inquire
from the drawer before encashing a check only when the check bears a material
alteration. A material alteration is defined in Section 125 of the NIL to be one
which changes the date, the sum payable, the time or place of payment, the
number or relations of the parties, the currency in which payment is to be made
or one which adds a place of payment where no place of payment is specified, or
any other change or addition which alters the effect of the instrument in any
respect. With respect to the checks at issue, petitioner points out that they do
not contain any material alteration. This is a fact which was affirmed by the trial
court itself.
Division: FIRST DIVISION
Docket Number: G.R. No. 150228
Counsel: Sycip, Salazar, Hernandez & Gatmaitan
Ponente: LEONARDO-DE CASTRO
Dispositive Portion:
WHEREFORE, the Decision of the Court of Appeals dated July 16, 2001 and its
Resolution dated September 28, 2001 are AFFIRMED with the following
MODIFICATIONS: (a) petitioner Bank of America NT & SA shall pay to
respondent Philippine Racing Club sixty percent (60%) of the sum of Two
Hundred Twenty Thousand Pesos (P220,000.00) with legal interest as awarded
by the trial court and (b) the awards of attorney’s fees and litigation expenses in
favor of respondent are deleted. Proportionate costs.
Case Title : PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. MARTIN L.
ROMERO and ERNESTO C. RODRIGUEZ, accused-appellants.Case Nature :
APPEAL from a decision of the Regional Trial Court of Butuan City, Br. 2.
Syllabi Class : Criminal Law|Estafa
Syllabi:
1. Criminal Law; Estafa; Elements of Estafa.-
Under paragraph 2 (d) of Article 315, as amended by R.A. 4885, the elements of
estafa are: (1) a check was postdated or issued in payment of an obligation
contracted at the time it was issued; (2) lack or insufficiency of funds to cover
the check; (3) damage to the payee thereof. The prosecution has satisfactorily
established all these elements.
2. Criminal Law; Estafa; What fraud deem to comprise.-
Fraud, in its general sense, is deemed to comprise anything calculated to
deceive, including all acts, omissions, and concealment involving a breach of
legal or equitable duty, trust, or confidences justly reposed, resulting in damage
to another, or by which an undue and unconscientious advantage is taken of
another. It is a generic term embracing all multifarious means which human
ingenuity can device, and which are resorted to by one individual to secure an
advantage over another by false suggestions or by suppression of truth and
includes all surprise, trick, cunning, dissembling and any unfair way by which
another is cheated.
3. Criminal Law; Estafa; There is deceit when one is misled, either by guide or
trickery or by other means, to believe to be true what is really false.-
Deceit is a specie of fraud. It is actual fraud, and consists in any false
representation or contrivance whereby one person overreaches and misleads
another, to his hurt. Deceit excludes the idea of mistake. There is deceit when
one is misled, either by guide or trickery or by other means, to believe to be true
what is really false. In this case, there was deception when accused fraudulently
represented to complainant that his investment with the corporation would
have an 800% return in 15 or 21 days.
4. Criminal Law; Estafa; Failure to cover the amount of the check within three
days after notice creates a rebuttable presumption of fraud.-
Even assuming for the sake of argument that the check was dishonored without
any fraudulent pretense or fraudulent act of the drawer, the latter’s failure to
cover the amount within three days after notice creates a rebuttable
presumption of fraud.
Division: FIRST DIVISION
Docket Number: G.R. No. 112985
Counsel: The Solicitor General, Public Attorney’s Office
Ponente: PARDO
Dispositive Portion:
WHEREFORE, the Court hereby AFFIRMS WITH MODIFICATION the appealed
judgment. The Court hereby sentences accused-appellant Martin Romero to
suffer an indeterminate penalty of ten (10) years and one (1) day of prision
mayor, as minimum, to sixteen (16) years and one (1) day of reclusion temporal,
as maximum, to indemnify Ernesto A. Ruiz in the amount of one hundred fifty
thousand pesos (P150,000.00) with interest thereon at six (6%) per centum per
annum from September 14, 1989, until fully paid, to pay twenty thousand pesos
(P20,000.00) as moral damages and fifteen thousand pesos (P15,000.00), as
exemplary damages, and the costs.
Case Title : REMEDIOS NOTA SAPIERA, petitioner, vs. COURT OF APPEALS and
RAMON SUA, respondents.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Actions|Negotiable Instruments Law|Criminal
Law|Damages|Criminal Procedure|Criminal Law|Estafa
Syllabi:
1. Actions; Damages; Criminal Procedure; The civil liability is not extinguished
by acquittal where: (a) the acquittal is based on reasonable doubt; (b) where the
court expressly declares that the liability of the accused is not criminal but only
civil in nature; and, (c) where the civil liability is not derived from or based on the
criminal act of which the accused is acquitted.-
The judgment of acquittal extinguishes the liability of the accused for damages
only when it includes a declaration that the fact from which the civil liability
might arise did not exist. Thus, the civil liability is not extinguished by acquittal
where: (a) the acquittal is based on reasonable doubt; (b) where the court
expressly declares that the liability of the accused is not criminal but only civil in
nature; and, (c) where the civil liability is not derived from or based on the
criminal act of which the accused is acquitted.
2. Negotiable Instruments Law; Where a signature is so placed upon the
instrument that it is not clear in what capacity the person making the same
intended to sign, he is deemed an indorser.-
We affirm the findings of the Court of Appeals that despite the conflicting
versions of the parties, it is undisputed that the four (4) checks issued by de
Guzman were signed by petitioner at the back without any indication as to how
she should be bound thereby and, therefore, she is deemed to be an indorser
thereof. The Negotiable Instruments Law clearly provides—Sec. 17. Construction
where instrument is ambiguous.—Where the language of the instrument is
ambiguous, or there are admissions therein, the following rules of construction
apply: x x x x (f) Where a signature is so placed upon the instrument that it is not
clear in what capacity the person making the same intended to sign, he is
deemed an indorser. x x x x
3. Negotiable Instruments Law; Damages; Criminal Law; Estafa; An accused
acquitted of estafa may nevertheless be held civilly liable where the facts
established by the evidence so warrant—she may be adjudged liable for the
unpaid value of the checks signed by her in favor of the complainant.-
The dismissal of the criminal cases against petitioner did not erase her civil
liability since the dismissal was due to insufficiency of evidence and not from a
declaration from the court that the fact from which the civil action might arise
did not exist. An accused acquitted of estafa may nevertheless be held civilly
liable where the facts established by the evidence so warrant. The accused
should be adjudged liable for the unpaid value of the checks signed by her in
favor of the complainant.
4. Criminal Law; Damages; Rationale behind the award of civil indemnity
despite a judgment of acquittal when evidence is sufficient to sustain the
award.-
The rationale behind the award of civil indemnity despite a judgment of
acquittal when evidence is sufficient to sustain the award was explained by the
Code Commission in connection with Art. 29 of the Civil Code, to wit: The old rule
that the acquittal of the accused in a criminal case also releases him from civil
liability is one of the most serious flaws in the Philippine legal system. It has
given rise to numberless instances of miscarriage of justice, where the acquittal
was due to a reasonable doubt in the mind of the court as to the guilt of the
accused. The reasoning fol- lowed is that inasmuch as the civil responsibility is
derived from the criminal offense, when the latter is not proved, civil liability
cannot be demanded. This is one of those cases where confused thinking leads
to unfortunate and deplorable consequences. Such reasoning fails to draw a
clear line of demarcation between criminal liability and civil responsibility, and
to determine the logical result of the distinction. The two liabilities are separate
and distinct from each other. One affects the social order and the other private
rights. One is for punishment or correction of the offender while the other is for
reparation of damages suffered by the aggrieved party x x x x It is just and
proper that for the purposes of imprisonment of or fine upon the accused, the
offense should be proved beyond reasonable doubt. But for the purpose of
indemnifying the complaining party, why should the offense also be proved
beyond reasonable doubt? Is not the invasion or violation of every private right
to be proved only by preponderance of evidence? Is the right of the aggrieved
person any less private because the wrongful act is also punishable by the
criminal law?
Division: SECOND DIVISION
Docket Number: G.R. No. 128927
Counsel: Tanopo & Serafica, Hermogenes S. Decano
Ponente: BELLOSILLO
Dispositive Portion:
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
22 January 1996 as amended by its Resolution dated 19 March 1997 ordering
petitioner Remedios Nota Sapiera to pay private respondent Ramon Sua the
remaining amount of P210,150.00 as civil liability, is AFFIRMED. Costs against
petitioners.
Case Title : SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA,
petitioners, vs. MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMEC’S REALTY
AND DEVELOPMENT CORP. and the REGISTER OF DEEDS OF BULACAN,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Civil Procedure|Civil Law|Motions|Summary Judgment|“Genuine
Issue”|Contracts|Suretyship|Liability
Syllabi:
1. Civil Procedure; Motions; Summary Judgment; The crucial question in a
motion for summary judgment is where the issues raised in the pleadings are
genuine or fictitious.-
Summary judgment “is a procedural technique aimed at weeding out sham
claims or defenses at an early stage of the litigation.” The crucial question in a
motion for summary judgment is whether the issues raised in the pleadings are
genuine or fictitious, as shown by affidavits, depositions or admissions
accompanying the motion.
2. Civil Procedure; Motions; Summary Judgment; “Genuine Issue”; The proper
inquiry would therefore be whether the affirmative defenses offered by
petitioners constitute genuine issue of fact requiring a full-blown trial.-
A genuine issue means “an issue of fact which calls for the presentation of
evidence, as distinguished from an issue which is fictitious or contrived so as not
to constitute a genuine issue for trial.” To forestall summary judgment, it is
essential for the non-moving party to confirm the existence of genuine issues
where he has substantial, plausible and fairly arguable defense, i.e., issues of
fact calling for the presentation of evidence upon which a reasonable finding of
fact could return a verdict for the non-moving party. The proper inquiry would
therefore be whether the affirmative defenses offered by petitioners constitute
genuine issue of fact requiring a full-blown trial.
3. Civil Law; Contracts; Suretyship; Liability; A surety is bound by the same
consideration that makes the contract effective between the parties thereto.-
A surety is one who is solidarily liable with the principal. Petitioners cannot claim
that they did not personally receive any consideration for the contract for well-
entrenched is the rule that the consideration necessary to support a surety
obligation need not pass directly to the surety, a consideration moving to the
principal alone being sufficient. A surety is bound by the same consideration that
makes the contract effective between the principal parties thereto.
Division: THIRD DIVISION
Docket Number: G.R. No. 148864
Counsel: Wilfredo O. Arceo, Cases, Corpus and Associates Law Offices, Evelyn B.
Esparrago Piollo
Ponente: PUNO
Dispositive Portion:
IN VIEW WHEREOF, the petition is dismissed. Treble costs against the
petitioners.
Case Title: Adalia Francisco vs. CA
Case Nature : PETITION for review on certiorari of a decision of the Court of
Appeals.
Syllabi Class : Remedial Law|Negotiable Instruments Law|Civil
Law|Evidence|Indorsement|Damages
Syllabi:
1. Remedial Law; Evidence; Well-entrenched is the rule that findings of trial
courts which are factual in nature, especially when affirmed by the Court of
Appeals, deserve to be respected and affirmed by the Supreme Court, provided it
is supported by substantial evidence on record.-
As regards the forgery, we concur with the lower courts’ finding that Francisco
forged the signature of Ong on the checks to make it appear as if Ong had
indorsed said checks and that, after indorsing the checks for a second time by
signing her name at the back of the checks, Francisco deposited said checks in
her savings account with IBAA. The forgery was satisfactorily established in the
trial court upon the strength of the findings of the NBI handwriting expert. Other
than petitioner’s self-serving denials, there is nothing in the records to rebut the
NBI’s findings. Well-entrenched is the rule that findings of trial courts which are
factual in nature, especially when affirmed by the Court of Appeals, deserve to
be respected and affirmed by the Supreme Court, provided it is supported by
substantial evidence on record, as it is in the case at bench.
2. Negotiable Instruments Law; Indorsement; The Negotiable Instruments Law
provides that where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as to negative personal
liability.-
Petitioner claims that she was, in any event, authorized to sign Ong’s name on
the checks by virtue of the Certification executed by Ong in her favor giving her
the authority to collect all the receivables of HCCC from the GSIS, including the
questioned checks. Petitioner’s alternative defense must similarly fail. The
Negotiable Instruments Law provides that where any person is under obligation
to indorse in a representative capacity, he may indorse in such terms as to
negative personal liability. An agent, when so signing, should indicate that he is
merely signing in behalf of the principal and must disclose the name of his
principal; otherwise he shall be held personally liable. Even assuming that
Francisco was authorized by HCCC to sign Ong’s name, still, Fran- cisco did not
indorse the instrument in accordance with law. Instead of signing Ong’s name,
Francisco should have signed her own name and expressly indicated that she
was signing as an agent of HCCC. Thus, the Certification cannot be used by
Francisco to validate her act of forgery.
3. Civil Law; Damages; Every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.-
Every person who, contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.Due to her forgery of Ong’s
signature which enabled her to deposit the checks in her own account, Francisco
deprived HCCC of the money due it from the GSIS pursuant to the Land
Development and Construction Contract. Thus, we affirm respondent court’s
award of compensatory damages in the amount of P370,475.00, but with a
modification as to the interest rate which shall be six percent (6%) per annum, to
be computed from the date of the filing of the complaint since the amount of
damages was alleged in the complaint;however, the rate of interest shall be
twelve percent (12%) per annum from the time the judgment in this case
becomes final and executory until its satisfaction and the basis for the
computation of this twelve percent (12%) rate of interest shall be the amount of
P370,475.00.
4. Civil Law; Damages; Court sustains the award of exemplary damages in the
amount of P50,000.00.-
We also sustain the award of exemplary damages in the amount of P50,000.00.
Under Article 2229 of the Civil Code, exemplary damages are imposed by way of
example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages. Considering petitioner’s fraudulent act,
we hold that an award of P50,000.00 would be adequate, fair and reasonable.
The grant of exemplary damages justifies the award of attorney’s fees in the
amount of P50,000.00, and the award of P5,000.00 for litigation expenses.
5. Civil Law; Damages; Appellate court’s award of P50,000.00 in moral damages
is warranted.-
The appellate court’s award of P50,000.00 in moral damages is warranted.
Under Article 2217 of the Civil Code, moral damages may be granted upon proof
of physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation and similar injury.
Ong testitified that he suffered sleepless nights, embarrassment, humiliation
and anxiety upon discovering that the checks due his company were forged by
petitioner and that petitioner had filed baseless criminal complaints against him
before the fiscal’s office of Quezon City which disrupted HCCC’s business
operations.
Division: THIRD DIVISION
Docket Number: G.R. No. 116320
Counsel: Enrique Agana & Associates, Nelson A. Loyola, Eliseo P. Vencer II
Ponente: GONZAGA-REYES
Dispositive Portion:
WHEREFORE, we AFFIRM the respondent court’s decision promulgated on June
29, 1992, upholding the February 16, 1988 decision of the trial court in favor of
private respondents, with the modification that the interest upon the actual
damages awarded shall be at six percent (6%) per annum, which interest rate
shall be computed from the time of the filing of the complaint on November 19,
1979. However, the interest rate shall be twelve percent (12%) per annum from
the time the judgment in this case becomes final and executory and until such
amount is fully paid. The basis for computation of the six percent and twelve
percent rates of interest shall be the amount of P370,475.00. No
pronouncement as to costs.
Case Title : SOLIDBANK CORPORATION, petitioner, vs. MINDANAO FERROALLOY
CORPORATION, Spouses JONG-WON HONG and SOO-OK KIM HONG, TERESITA
CU, and RICARDO P. GUEVARA and Spouse, respondents.Case Nature :
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
Syllabi Class : Corporation Law|Civil Law|Piercing the Veil of Corporate
Fiction|Obligations and Contracts|Damages|Fraud|Malicious
Prosecution|Attorney’s Fees
Syllabi:
1. Corporation Law; Corporate officers cannot be held personally liable for the
consequences of their acts, for as long as these are for and on behalf of the
corporation, within the scope of their authority and in good faith.-
Basic is the principle that a corporation is vested by law with a personality
separate and distinct from that of each person composing or representing it.
Equally fundamental is the general rule that corporate officers cannot be held
personally liable for the consequences of their acts, for as long as these are for
and on behalf of the corporation, within the scope of their authority and in good
faith. The separate corporate personality is a shield against the personal liability
of corporate officers, whose acts are properly attributed to the corporation.
2. Corporation Law; Piercing the Veil of Corporate Fiction; To disregard the
separate juridical personality of a corporation, the wrongdoing must be clearly
and convincingly established; it cannot be presumed.-
Under certain circumstances, courts may treat a corporation as a mere
aggroupment of persons, to whom liability will directly attach. The distinct and
separate corporate personality may be disregarded, inter alia, when the
corporate identity is used to defeat public convenience, justify a wrong, protect
a fraud, or defend a crime. Likewise, the corporate veil may be pierced when the
corporation acts as a mere alter ego or business conduit of a person, or when it
is so organized and controlled and its affairs so conducted as to make it merely
an instrumentality, agency, conduit or adjunct of another corporation. But to
disregard the separate juridical personality of a corporation, the wrongdoing
must be clearly and convincingly established; it cannot be presumed.
3. Civil Law; Obligations and Contracts; It is axiomatic that solidary liability
cannot be lightly inferred.-
It is axiomatic that solidary liability cannot be lightly inferred. Under Article 1207
of the Civil Code, “there is a solidary liability only when the obligation expressly
so states, or when the law or the nature of the obligation requires solidarity.”
Since solidary liability is not clearly expressed in the Promissory Note and is not
required by law or the nature of the obligation in this case, no conclusion of
solidary liability can be made.
4. Civil Law; Damages; Fraud; Fraud must be established by clear and
convincing evidence, mere preponderance of evidence is not adequate.-
Fraud must be established by clear and convincing evidence; mere
preponderance of evidence is not adequate. Bad faith, on the other hand,
imports a dishonest purpose or some moral obliquity and conscious doing of a
wrong, not simply bad judgment or negligence. It is synonymous with fraud, in
that it involves a design to mislead or deceive another.
5. Civil Law; Damages; The exercise of a right, though legal by itself, must
nonetheless be done in accordance with the proper norm; When the right is
exercised arbitrarily, unjustly or excessively and results in damage to another, a
legal wrong is committed for which the wrongdoer must be held responsible.-
Article 19 of the Civil Code expresses the fundamental principle of law on human
conduct that a person “must, in the exercise of his rights and in the performance
of his duties, act with justice, give every one his due, and observe honesty and
good faith.” Under this basic postulate, the exercise of a right, though legal by
itself, must nonetheless be done in accordance with the proper norm. When the
right is exercised arbitrarily, unjustly or excessively and results in damage to
another, a legal wrong is committed for which the wrongdoer must be held
responsible.
6. Civil Law; Damages; Elements to be Liable under the Abuse-of-Rights
Principle.-
To be liable under the abuse-of-rights principle, three elements must concur: a)
a legal right or duty, b) its exercise in bad faith, and c) the sole intent of
prejudicing or injuring another. Needless to say, absence of good faith must be
sufficiently established.
7. Civil Law; Damages; Malicious Prosecution; To justify an award of damages
for malicious prosecution, one must prove two elements: malice or sinister
design to vex or humiliate and want of probable cause.-
For damages to be properly awarded under the above provisions, it is necessary
to demonstrate by clear and convincing evidence that the action instituted by
petitioner was clearly so unfounded and untenable as to amount to gross and
evident bad faith. To justify an award of damages for malicious prosecution, one
must prove two elements: malice or sinister design to vex or humiliate and want
of probable cause.
8. Civil Law; Damages; Attorney’s Fees; In the absence of a stipulation,
attorney’s fees cannot be recovered, exceptions.-
For the same reason, attorney’s fees cannot be granted. Article 2208 of the Civil
Code states that in the absence of a stipulation, attorney’s fees cannot be
recovered, except in any of the following circumstances: “(1) When exemplary
damages are awarded; (2) When the defendant’s act or omission has compelled
the plaintiff to litigate with third persons or to incur expenses to protect his
interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In
case of a clearly unfounded civil action or proceeding against the plaintiff; (5)
Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff’s plainly valid, just and demandable claim; (6) In actions for legal
support; (7) In actions for the recovery of wages of household helpers, laborers
and skilled workers; (8) In actions for indemnity under workmen’s compensation
and employer’s liability laws; (9) In a separate civil action to recover civil liability
arising from a crime; (10) When at least double judicial costs are awarded; (11)
In any other case where the court deems it just and equitable that attorney’s
fees and expenses of litigation should be recovered.”
Division: THIRD DIVISION
Docket Number: G.R. No. 153535
Counsel: De los Reyes, Banaga, Briones & Associates, Quasha, Ancheta, Pena &
Nolasco, Pacis & Reyes
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, this Petition is PARTIALLY GRANTED. The assailed Decision is
AFFIRMED, but the award of moral and exemplary damages as well as
attorney’s fees is DELETED. No costs.
Case Title : ATRIUM MANAGEMENT CORPORATION, petitioner, vs. COURT OF
APPEALS, E.T. HENRY AND CO., LOURDES VICTORIA M. DE LEON, RAFAEL DE
LEON, JR., AND HI-CEMENT CORPORATION, respondents., LOURDES M. DE
LEON, petitioner, vs. COURT OF APPEALS, ATRIUM MANAGEMENT
CORPORATION, AND HI-CEMENT CORPORATION, respondents.Case Nature :
PETITION for review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Corporation Law|Negotiable Instrument Law|Ultra Vires
Acts|Checks|Words and Phrases
Syllabi:
1. Corporation Law; Ultra Vires Acts; Checks; The act of issuing checks for the
purpose of securing a loan to finance the activities of the corporation is well
within the ambit of a valid corporate act, hence, not an ultra vires act.-
Hi-Cement, however, maintains that the checks were not issued for
consideration and that Lourdes and E.T. Henry engaged in a “kiting operation”
to raise funds for E.T. Henry, who admittedly was in need of financial assistance.
The Court finds that there was no sufficient evidence to show that such is the
case. Lourdes M. de Leon is the treasurer of the corporation and is authorized to
sign checks for the corporation. At the time of the issuance of the checks, there
were sufficient funds in the bank to cover payment of the amount of P2 million
pesos. It is, however, our view that there is basis to rule that the act of issuing
the checks was well within the ambit of a valid corporate act, for it was for
securing a loan to finance the activities of the corporation, hence, not an ultra
vires act.
2. Corporation Law; Ultra Vires Acts; Words and Phrases; “Ultra Vires Acts,”
Explained.-
“An ultra vires act is one committed outside the object for which a corporation is
created as defined by the law of its organization and therefore beyond the
power conferred upon it by law.” The term “ultra vires” is “distinguished from an
illegal act for the former is merely voidable which may be enforced by
performance, ratification, or estoppel, while the latter is void and cannot be
validated.”
3. Corporation Law; Ultra Vires Acts; Instances when personal liability of
corporate directors, trustees or officers may validly attach.-
The next question to determine is whether Lourdes M. de Leon and Antonio de
las Alas were personally liable for the checks issued as corporate officers and
authorized signatories of the check. “Personal liability of a corporate director,
trustee or officer along (although not necessarily) with the corporation may so
validly attach, as a rule, only when: “1. He assents (a) to a patently unlawful act
of the corporation, or (b) for bad faith or gross negligence in directing its affairs,
or (c) for conflict of interest, resulting in damages to the corporation, its
stockholders or other persons; “2. He consents to the issuance of watered down
stocks or who, having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto; “3. He agrees to hold himself
personally and solidarily liable with the corporation; or “4. He is made, by a
specific provision of law, to personally answer for his corporate action.”
4. Corporation Law; Ultra Vires Acts; Checks; A treasurer of a corporation
whose negligence in signing a confirmation letter for rediscounting of crossed
checks, knowing fully well that the checks were strictly endorsed for deposit only
to the payee’s account and not to be further negotiated, resulting in damage to
the corporation may be personally liable therefor.-
In the case at bar, Lourdes M. de Leon and Antonio de las Alas as treasurer and
Chairman of HiCement were authorized to issue the checks. However, Ms. de
Leon was negligent when she signed the confirmation letter requested by Mr.
Yap of Atrium and Mr. Henry of E.T. Henry for the rediscounting of the crossed
checks issued in favor of E.T. Henry. She was aware that the checks were strictly
endorsed for deposit only to the payee’s account and not to be further
negotiated. What is more, the confirmation letter contained a clause that was
not true, that is, “that the checks issued to E.T. Henry were in payment of Hydro
oil bought by Hi-Cement from E.T. Henry.” Her negligence resulted in damage to
the corporation. Hence, Ms. de Leon may be held personally liable therefor.
5. Negotiable Instrument Law; Checks; Words and Phrases; “Holder in Due
Course,” Explained.-
The next issue is whether or not petitioner Atrium was a holder of the checks in
due course. The Negotiable Instruments Law, Section 52 defines a holder in due
course, thus: “A holder in due course is a holder who has taken the instrument
under the following conditions: (a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice
that it had been previously dishonored, if such was the fact; (c) That he took it in
good faith and for value; (d) That at the time it was negotiated to him he had no
notice of any infirmity in the instrument or defect in the title of the person
negotiating it.”
6. Negotiable Instrument Law; Checks; A person to whom a crossed check was
endorsed by the payee of said check could not be considered a holder in due
course.-
In the instant case, the checks were crossed checks and specifically indorsed for
deposit to payee’s account only. From the beginning, Atrium was aware of the
fact that the checks were all for deposit only to payee’s account, meaning E.T.
Henry. Clearly, then, Atrium could not be considered a holder in due course.
7. Negotiable Instrument Law; Checks; A holder not in due course may still
recover on the instrument.-
It does not follow as a legal proposition that simply because petitioner Atrium
was not a holder in due course for having taken the instruments in question with
notice that the same was for deposit only to the account of payee E.T. Henry
that it was altogether precluded from recovering on the instrument. The
Negotiable Instruments Law does not provide that a holder not in due course
can not recover on the instrument.
8. Negotiable Instrument Law; Checks; The disadvantage of a holder not in due
course is that the negotiable instrument is subject to defenses as if it were non-
negotiable, such as absence or failure of consideration.-
The disadvantage of Atrium in not being a holder in due course is that the
negotiable instrument is subject to defenses as if it were non-negotiable. One
such defense is absence or failure of consideration.
Division: FIRST DIVISION
Docket Number: G.R. No. 109491, G.R. No. 121794
Counsel: Meer, Meer & Meer, Castillo, Laman, Tan, Pantaleon & San Jose
Ponente: PARDO
Dispositive Portion:
WHEREFORE, the petitions are hereby DENIED. The decision and resolution of
the Court of Appeals in CA-G.R. CV No. 26686, are hereby AFFIRMED in toto.
Case Title : ASSOCIATED BANK, petitioner, vs. HON. COURT OF APPEALS,
PROVINCE OF TARLAC and PHILIPPINE NATIONAL BANK, respondents.,
PHILIPPINE NATIONAL BANK, petitioner, vs. HONORABLE COURT OF APPEALS,
PROVINCE OF TARLAC, and ASSOCIATED BANK, respondents.Case Nature :
PETITIONS for review of a decision of the Court of Appeals.
Syllabi Class : Commercial Law|Negotiable Instruments Law|Forgery
Syllabi:
1. Commercial Law; Negotiable Instruments Law; Forgery; A person whose
signature to an instrument was forged was never a party and never consented
to the contract which allegedly gave rise to such instrument.-
—A forged signature, whether it be that of the drawer or the payee, is wholly
inoperative and no one can gain title to the instrument through it. A person
whose signature to an instrument was forged was never a party and never
consented to the contract which allegedly gave rise to such instrument. Section
23 does not avoid the instrument but only the forged signature. Thus, a forged
indorsement does not operate as the payee’s indorsement.
2. Same; Same; Same; Rule mandates that the checks be returned within
twenty-four hours after discovery of the forgery but in no event beyond the
period fixed by law for filing a legal action.-
—The rule mandates that the checks be returned within twenty-four hours after
discovery of the forgery but in no event beyond the period fixed by law for filing
a legal action. The rationale of the rule is to give the collecting bank (which
indorsed the check) adequate opportunity to proceed against the forger. If
prompt notice is not given, the collecting bank may be prejudiced and lose the
opportunity to go after its depositor.
3. Same; Same; Same; Drawee bank has the duty to promptly inform the
presentor of the forgery upon discovery.-
—Hence, the drawee bank can recover the amount paid on the check bearing a
forged indorsement from the collecting bank. However, a drawee bank has the
duty to promptly inform the presentor of the forgery upon discovery. If the
drawee bank delays in informing the presentor of the forgery, thereby depriving
said presentor of the right to recover from the forger, the former is deemed
negligent and can no longer recover from the presentor.
4. Same; Same; Same; Drawee banks not similarly situated as the collecting
bank.-
—The drawee bank is not similarly situated as the collecting bank because the
former makes no warranty as to the genuineness of any indorsement. The
drawee bank’s duty is but to verify the genuineness of the drawer’s signature
and not of the indorsement because the drawer is its client.
5. Same; Same; Same; A collecting bank which indorses a check bearing a
forged indorsement and presents it to the drawee bank guarantees all prior
indorsements including the forged indorsement.-
—More importantly, by reason of the statutory warranty of a general indorser in
Section 66 of the Negotiable Instruments Law, a collecting bank which indorses
a check bearing a forged indorsement and presents it to the drawee bank
guarantees all prior indorsements, including the forged indorsement. It warrants
that the instrument is genuine, and that it is valid and subsisting at the time of
his indorsement. Because the indorsement is a forgery, the collecting bank
commits a breach of this warranty and will be accountable to the drawee bank.
6. Same; Same; Same; Drawee bank can seek reimbursement or a return of the
amount it paid from the presentor bank or person.-
—In cases involving checks with forged indorsements, such as the present
petition, the chain of liability does not end with the drawee bank. The drawee
bank may not debit the account of the drawer but may generally pass liability
back through the collection chain to the party who took from the forger and, of
course, to the forger himself, if available. In other words, the drawee bank can
seek reimbursement or a return of the amount it paid from the presentor bank
or person. Theoretically, the latter can demand reimbursement from the person
who indorsed the check to it and so on. The loss falls on the party who took the
check from the forger, or on the forger himself.
7. Same; Same; Same; Drawer is precluded from asserting forgery where the
drawee bank can prove a failure by the customer/drawer to exercise ordinary
care that substantially contributed to the making of the forged signature.-
—However, if the drawee bank can prove a failure by the customer/drawer to
exercise ordinary care that substantially contributed to the making of the forged
signature, the drawer is precluded from asserting the forgery.
8. Same; Same; Same; Payment under a forged indorsement is not to the
drawer’s order.-
—The bank on which a check is drawn, known as the drawee bank, is under
strict liability to pay the check to the order of the payee. The drawer’s
instructions are reflected on the face and by the terms of the check. Payment
under a forged indorsement is not to the drawer’s order. When the drawee bank
pays a person other than the payee, it does not comply with the terms of the
check and violates its duty to charge its customer’s (the drawer) account only for
properly payable items. Since the drawee bank did not pay a holder or other
person entitled to receive payment, it has no right to reimbursement from the
drawer. The general rule then is that the drawee bank may not debit the
drawer’s account and is not entitled to indemnification from the drawer. The risk
of loss must perforce fall on the drawee bank.
9. Same; Same; Same; A collecting bank where a check is deposited and which
indorses the check upon presentment with the drawee bank is such an indorser.-
—A collecting bank where a check is deposited and which indorses the check
upon presentment with the drawee bank, is such an indorser. So even if the
indorsement on the check deposited by the bank’s client is forged, the collecting
bank is bound by his warranties as an indorser and cannot set up the defense of
forgery as against the drawee bank.
10. Same; Same; Same; Indorser cannot interpose the defense that signatures
prior to him are forged.-
—An indorser of an order instrument warrants “that the instrument is genuine
and in all respects what it purports to be; that he has a good title to it; that all
prior parties had capacity to contract; and that the instrument is at the time of
his indorsement valid and subsisting.” He cannot interpose the defense that
signatures prior to him are forged.
11. Same; Same; Same; When the holder’s indorsement is forged, all parties
prior to the forgery may raise the real defense of forgery against all parties
subsequent thereto.-
—Where the instrument is payable to order at the time of the forgery, such as
the checks in this case, the signature of its rightful holder (here, the payee
hospital) is essential to transfer title to the same instrument. When the holder’s
indorsement is forged, all parties prior to the forgery may raise the real defense
of forgery against all parties subsequent thereto.
12. Same; Same; Same; When the indorsement is a forgery, only the person
whose signature is forged can raise the defense of forgery against a holder in
due course.-
—In bearer instruments, the signature of the payee or holder is unnecessary to
pass title to the instrument. Hence, when the indorsement is a forgery, only the
person whose signature is forged can raise the defense of forgery against a
holder in due course.
13. Same; Same; Same; Parties who warrant or admit the genuineness of the
signature in question and those who, by their acts, silence or negligence are
estopped from setting up the defense of forgery, are precluded from using this
defense.-
—The exception to the general rule in Section 23 is where “a party against
whom it is sought to enforce a right is precluded from setting up the forgery or
want of authority.” Parties who warrant or admit the genuineness of the
signature in question and those who, by their acts, silence or negligence are
estopped from setting up the defense of forgery, are precluded from using this
defense. Indorsers, persons negotiating by delivery and acceptors are
warrantors of the genuineness of the signatures on the instrument.
Division: SECOND DIVISION
Docket Number: G.R. No. 107382, G.R. No. 107612
Counsel: Jose A. Soluta, Jr. and Associates, Santiago, Jr., Vidad, Corpus &
Associates
Ponente: ROMERO
Dispositive Portion:
IN VIEW OF THE FOREGOING, the petition for review filed by the Philippine
National Bank (G.R. No. 107612) is hereby PARTIALLY GRANTED. The petition for
review filed by the Associated Bank (G.R. No. 107382) is hereby DENIED. The
decision of the trial court is MODIFIED. The Philippine National Bank shall pay
fifty percent (50%) of P203,300.00 to the Province of Tarlac, with legal interest
from March 20, 1981 until the payment thereof. Associated Bank shall pay fifty
percent (50%) of P203,300.00 to the Philippine National Bank, likewise, with
legal interest from March 20, 1981 until payment is made.
[G.R. No. 140980. March 1, 2000]
SPS. FRANCISCO S. ANTONIO, et al. vs. SPS. TEODORICO C. OMNES, et al.
SECOND DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated MAR
1 2000.
G.R. No. 140980 (SPS. Francisco S. Antonio and Amor W. Antonio vs.
Sps. Teodorico C. Omnes and Alice Omnes and the Standard Chartered Bank.)
This is a petition for review on certiorari of the decision, dated
February 26, 1999, of the Court of Appeals. It appears that in 1988, Rarecrafts
Philippines (Rarecrafts), a handicrafts export business owned by petitioners,
hired respondent Alice Omnes as its accountant-bookkeeper. Her duties
included the preparation of checks for the payment of bills to the suppliers of
rarecrafts.
Sometime in July 1991, petitioner Francisco S. Antonio received a
telephone call from respondent Standard Chartered Bank seeking confirmation
of the issuance of a check for P105,750.00 payable to cash. He then asked Mrs.
Omnes about the check in question, after which he went back to his office,
while she went to her desk, presumably to verify the issuance of the check from
the records. When Mrs. Omnes failed to return after some time, Mr. Antonio
decided to follow up the matter with her. As he was going out of his office, Mr.
Antonio saw Mrs. Omnes crossing the street and taking a jeepney bound for
Pasig. Alarmed, Mr. Antonio looked for the stub to the check, which he found
and saw that the amount indicated therein was P335.15.
Later on the same day, respondent bank called Mr. Antonio
regarding a check for P97,500.00 payable to cash. Upon verification, Mr.
Antonio found that the stub of the check indicated a different amount.
It was found that the two checks were credited to the savings
account of Mrs. Omnes at the Far East Bank and Trust Company, Tanay Branch.
At the request of Mr. Antonio, respondent bank furnished him with photocopies
of the two checks, which he denied having signed.
Subsequently, Mr. Antonio conducted an examination of the records
pertaining to the issuance of checks from the time Mrs. Omnes was employed
by Rarecrafts. He found that 70 checks, involving a total amount of
P4,720,600.00, were issued for amounts different from those indicated in the
corresponding stubs. Petitioners (Mr. Antonio and his wife Amor) filed an action
against respondents with the trial court, and judgment was rendered in their
favor. The dispositive portion of the trial court's decision reads:
WHEREFORE, appreciating the
preponderance of evidence sufficient to warrant
favorable action on plaintiffs-spouses Francisco and
Amor Antonio's stand, defendants Alice Omnes and
the Standard Chartered Bank are hereby ordered to
pay unto the herein plaintiffs, jointly and severally:
1. The amount of
P3,349,550.00 with 12% interest
thereon computed from the date
of filing of the complaint, i.e.,
July 29, 1991 until the said sum is
fully paid;
2. The sum of P200,000.00 as
moral damages;
3. The sum of P100,000.00 as
exemplary damages;
4. The sum of P100,000.00 as
attorney's fees; and
5. Costs of suit.
On the cross-claim, cross-defendant
Spouses Teodoro and Alice Omnes are hereby ordered
to pay cross-plaintiff the Standard Chartered Bank the
above-enumerated amounts.
The counterclaims at the bar are hereby
ordered DISMISSED for lack of factual basis.
The writ of attachment is hereby made
permanent. The 'Motion and Claim for Damages
Against The Bond' filed by defendant Teodoro Omnes
through counsel is hereby DENIED for lack of merit.
On appeal, however, the Court of Appeals reversed the decision on
the following grounds: (a) in concluding that the signatures in the checks and
the standard signatures of Mr. Antonio were written by the same person, the
handwriting expert presented by respondent bank, Atty. Desiderio Paqui,
specified the similarities and the difference between the signatures in the
checks and the standard signatures, while the handwriting experts of
petitioners confined themselves to general statements regarding their alleged
differences; and (b) the negligence of petitioners was the proximate cause of
the loss.
Petitioners now raise the following assignment of errors:
a. The Court of Appeals had committed grave
abuse of discretion in its appreciation of facts in the
instant case.
b. The findings of facts of the Court of Appeals,
especially on the question of forgery of the drawer's
signature on the questioned checks, are at variance
with that [of] the lower court, calling for review of the
evidence to arrive at the correct findings based on the
record, pursuant to the rule enunciated in the case of
Roblesa v. Court of Appeals, 174 SCRA 354, 362 (1989),
as an exception to the rule that findings of fact of the
Court of Appeals are generally not subject to review on
certiorari.
c. And on the assumption that there was forgery,
the Court of Appeals erred in its conclusion that
respondent drawee bank was not liable when it
honored the forged checks of petitioner Francisco
Antonio as drawer therein under Section 23 of the
Negotiable Instruments Law and pertinent
jurisprudence in relation thereto.
The petition is without merit.
First. The Court of Appeals properly gave credence to Atty. Desiderio
Paqui, the handwriting expert of respondent bank, rather than to the
handwriting experts of petitioners. In his report, Atty. Paqui indicated in detail
the similarities and the difference between the signatures in the checks and the
standard signatures of Mr. Antonio. He cited eight important similarities and
only one significant difference between the signatures in the checks and the
standard signatures of Mr. Antonio. In contrasts, the handwriting experts of
petitioners supported their finding that the signatures in the checks and the
standard signatures of Mr. Antonio were written by different persons with mere
generalizations, such as alleged differences in "manner of execution of strokes,"
"structural patterns of letters," and "minute identifying details." Thus,
petitioners failed to meet the quantum of proof necessary to establish forgery,
the existence of which cannot be presumed. (Metropolitan Waterworks and
Sewerage System v. Court of Appeals, 143 SCRA 20 (1986))
Second. The Court of Appeals correctly observed that the failure of
Mr. Antonio for over three years to detect the repeated commission of fraud
within his business, which he claims eventually involved the total amount of
P4,720,600.00, despite the fact that respondent bank sent monthly statements
to Rarecrafts, is indicative of his extreme negligence. It appears that Mr.
Antonio completely left to Mrs. Omnes the management of such an important
aspect of his business. While the general rule is that a drawee bank which clears
a forged check for payment should reimburse the drawer, this does not apply
when the failure of the latter to exercise ordinary care made the loss possible.
Hence, even is the signatures in the checks were forged, petitioners have no
right of recourse against respondent bank. (Associated Bank v. Court of Appeals,
252 SCRA 620 (1996))
It is settled that if the factual conclusions of the Court of Appeals are
borne out by the records, the same are binding on this Court, even when such
are contrary to the findings of the trial court. (Uniland Resources v.
Development Bank of the Philippines, 200 SCRA 751 (1991)) In the instant case,
petitioners failed to show that the Court of Appeals committed a reversible
error in the appreciation of the evidence presented by the parties.
WHEREFORE, the petition is DENIED for lack of showing that the
Court of Appeals committed a reversible error.
[G.R. No. 145916. January 29, 2001]
MBTC vs. SANVAR DEV’T CORP.
SECOND DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court dated JAN
29 2001.
G.R. No. 145916 (Metropolitan Bank & Trust Company vs. Sanvar
Development Corp.)
Isabela State University issued two Development Bank of the
Philippines (DBP) checks to respondent Sanvar Development Corp. (“Sanvar c/o
Engineer Jesus Urrea”) as final payment for respondent’s construction of the
school’s farm structures in Cabagan, Isabela. The two checks, amounting
to P207,428.26 andP161,567.80, dated July 8, 1992 and July 10, 1992
respectively, were given to respondent’s representative, Engr. Jesus Urrea, who
in turn entrusted them to one Eduardo Talaue. Talaue was supposed to bring
the two checks to respondent in order to enable him (Talaue) to clarify the
alleged obligation one Isidro Calueng (respondent’s sub-contractor) owed him.
However, instead of forwarding the checks to respondent, Eduardo Talaue
forged the indorsements of Engr. Jesus Urrea and deposited the checks with
petitioner Metropolitan Bank & Trust Company (Metrobank) under the account
of Lily Ballesteros.
For failure of petitioner to pay the two checks amounting
to P368,996.06, respondent filed a case for collection against petitioner and
Eduardo Talaue with the Regional Trial Court, Branch 92, Quezon City.
Respondent prayed that petitioner and Talaue be held jointly and severally
liable for the amounts of P368,996.06, with interest thereon from September
1992 until fully paid, P50,000.00 as attorney’s fees, and P100,000.00 as
exemplary damages.
Petitioner moved to dismiss respondent’s complaint on the ground
that it did not state a cause of action against it (petitioner bank). The trial court
granted the motion, holding that petitioner credited the two checks to the
account of Lily Ballesteros only after DBP (drawee bank) had accepted, cleared,
and honored the same and that, under §62 of the Negotiable Instruments Law,
DBP, as the acceptor/drawee bank, was primarily liable for accepting the
checks. However, on appeal to the Court of Appeals, the decision was reversed
and the case was remanded to the trial court for further proceedings.
Hence, this present petition for review on certiorari. The issue in this
case is whether respondent’s complaint states a cause of action against
petitioner bank, the collecting bank, as to the two checks.
The answer is in the affirmative. Respondent’s complaint alleges that
Eduardo Talaue, instead of bringing the same to respondent’s office in Quezon
City and contrary to his representation, deposited the checks to Account No. 68-
0867803-0 (account of Lily Ballesteros) with petitioner bank, by falsifying the
indorsements of Engr. Urrea; that petitioner bank, despite the falsification of
the indorsements of Engr. Urrea and the obvious irregularity of his alleged
indorsements, accepted the deposit of the two checks to the account of Lily
Ballesteros; and that by virtue of the negligent acts of petitioner bank, together
with that of Eduardo Talaue, respondent had been damaged and prejudiced in
the total amount of P368,996.06.
Petitioner contends that respondent’s complaint does not state a
cause of action against it, since the same does not allege that petitioner
committed any wrongdoing or fraud but only alleges that petitioner agreed to
act as collecting bank and did not honor the checks.
This contention is without merit. Section 23 of the Negotiable
Instruments Law provides that when a signature is forged or made without
authority of the person whose signature it purports to be, it is wholly
inoperative and no right to retain the instrument or to give a discharge therefor
or to enforce payment thereof against any party thereto can be acquired
through or under such signature unless the party against whom it is sought to
enforce such right is precluded from setting up the forgery or want of authority.
In this case, it appears that Isabela State University issued two checks to
“Sanvar c/o Engineer Jesus Urrea” which were later entrusted to Eduardo
Talaue by Engr. Jesus Urrea. Eduardo Talaue, however, forged the indorsements
of Engr. Urrea which allowed the former to deposit the checks to the account of
Lily Ballesteros. The checks were then indorsed by petitioner Metrobank (as
collecting bank) to DBP, as drawee bank. Petitioner acted as a general indorser
when it stamped “all prior indorsements and/or lack of indorsements
guaranteed” because it thereby warranted the genuineness of all prior
indorsenients. Petitioner is thus liable to DBP for the two checks as a forged
indorsement does not operate as the payee’s indorsement. The appellate court
correctly relied on Associated Bank v. Court of Appeals, 252 SCRA 620 (1996) in
which it was held:
By reason of the statutory warranty of a general indorser in Section
66 of the Negotiable Instruments Law, a collecting bank which indorses a check
bearing a forged indorsement and presents it to the drawee bank guarantees all
prior indorsements, including the forged indorsement. It warrants that the
instrument is genuine, and that it is valid and subsisting at the time of his
indorsement. Because the indorsement is a forgery, the collecting bank
commits a breach of this warranty and will be accountable to the drawee bank.
This liability scheme operates without regard to fault on the part of the
collecting/presenting bank. Even if the latter bank was not negligent, it would
still be liable to the drawee bank because of its indorsement.
The Court has consistently ruled that "the collecting bank or last
indorser generally suffers the loss because it has the duty to ascertain the
genuineness of all prior indorsements considering that the act of presenting the
check for payment to the drawee is an assertion that the party making the
presentment had done its duty to ascertain the genuineness of the
indorsements.”
The drawee bank is not similarly situated as the collecting bank
because the former makes no warranty as to the genuineness of any
indorsement. The drawee bank’s duty is but to verify the genuineness of the
drawer’s signature and not of the indorsement because the drawer is its client.
Moreover, the collecting bank is made liable because it is privy to the
depositor who negotiated the check. The bank knows him, his address and
history because he is a client. It has taken a risk on his deposit. The bank is also
in a better position to detect forgery, fraud or irregularity in the indorsement.
Petitioner alleges that the foregoing ruling does not apply where, as
in this case, DBP, the drawee bank, failed to return the checks with the forged
indorsements within the 24-hour clearing period. By reason thereof, petitioner
should be absolved from liability pursuant to §4(c) of Central Bank Circular No.
9. The argument, however, is a matter of defense which is better threshed out
in the proceedings before the trial court.
For the foregoing reasons, the petition is DENIED for lack of showing
that the Court of Appeals committed reversible error.
Case Title : WESTMONT BANK (formerly ASSOCIATED BANKING CORP.),
petitioner, vs. EUGENE ONG, respondent.Case Nature : PETITION for review on
certiorari of a decision of the Court of Appeals.
Syllabi Class : Remedial Law|Banks and Banking|Civil Law|Action|Definition of
a cause of action|Laches
Syllabi:
1. Remedial Law; Action; Definition of a cause of action; Essential elements of
a cause of action.-
As defined, a cause of action is the act or omission by which a party violates a
right of another. The essential elements of a cause of action are: (a) a legal right
or rights of the plaintiff, (b) a correlative obligation of the defendant, and (c) an
act or omission of the defendant in violation of said legal right.
2. Banks and Banking; The collecting bank is liable to the payee and must bear
the loss because it is its legal duty to ascertain that the payee’s endorsement
was genuine before the check.-
The collecting bank is liable to the payee and must bear the loss because it is its
legal duty to ascertain that the payee’s endorsement was genuine before
cashing the check. As a general rule, a bank or corporation who has obtained
possession of a check upon an unauthorized or forged indorsement of the
payee’s signature and who collects the amount of the check other from the
drawee, is liable for the proceeds thereof to the payee or other owner,
notwithstanding that the amount has been paid to the person from whom the
check was obtained.
3. Banks and Banking; The position of the bank taking the check on the forged
or unauthorized indorsement is the same as if it had taken the check and
collected the money without indorsement at all and the act of the bank amounts
to conversion of the check.-
The theory of the rule is that the possession of the check on the forged or
unauthorized indorsement is wrongful, and when the money had been collected
on the check, the bank or other person or corporation can be held as for moneys
had and received, and the proceeds are held for the rightful owners who may
recover them. The position of the bank taking the check on the forged or
unauthorized indorsement is the same as if it had taken the check and collected
the money without indorsement at all and the act of the bank amounts to
conversion of the check.
4. Banks and Banking; Banks are engaged in a business impressed with public
interest, and it is their duty to protect in return their many clients and depositors
who transact business with them.-
Admittedly, respondent Eugene Ong at the time the fraudulent transaction took
place was a depositor petitioner bank. Banks are engaged in a business
impressed with public interest, and it is their duty to protect in return their many
clients and depositors who transact business with them. They have the
obligation to treat their client’s account meticulously and with the highest
degree of care, considering the fiduciary nature of their relationship. The
diligence required of banks, therefore, is more than that of a good father of a
family.
5. Civil Law; Laches; Laches is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled thereto has
either abandoned or declined to assert it.-
Laches may be defined as the failure or neglect for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence, could
or should have been done earlier. It is negligence or omission to assert a right
within a reasonable time, warranting a presumption that the party entitled
thereto has either abandoned or declined to assert it. It concerns itself with
whether or not by reason of long inaction or inexcusable neglect, a person
claiming a right should be barred from asserting the same, because to allow him
to do so would be unjust to the person against whom such right is sought to be
enforced.
Division: SECOND DIVISION
Docket Number: G.R. No. 132560
Counsel: Villanueva, Caña & Associates Law Offices, Alberto, Salazar &
Associates
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed
decision of the Court of Appeals, sustaining the judgment of the Regional Trial
Court of Manila, is AFFIRMED.
Case Title : TRADERS ROYAL BANK, petitioner, vs. RADIO PHILIPPINES
NETWORK, INC., INTERCONTINENTAL BROADCASTING CORPORATION and
BANAHAW BROADCASTING CORPORATION, through the BOARD OF
ADMINISTRATORS, and SECURITY BANK AND TRUST COMPANY,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Banks and Banking|Negotiable Instruments|Checks|Crossed
Checks|The crossing of a check should put a bank on guard
Syllabi:
1. Banks and Banking; Negotiable Instruments; Checks; When a bank pays a
forged check, it must be considered as paying out of its funds and cannot charge
the amount so paid to the account of the depositor.-
“When a signature is forged or made without the authority of the person whose
signature it purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof
against any party thereto, can be acquired through or under such signature.”
Consequently, if a bank pays a forged check, it must be considered as paying out
of its funds and cannot charge the amount so paid to the account of the
depositor.
2. Banks and Banking; Negotiable Instruments; Checks; Where a check is
drawn payable to the order of one person and is presented for payment by
another and purports upon its face to have been duly indorsed by the payee of
the check, it is the primary duty of the bank to know that the check was duly
indorsed by the original payee and, where it pays the amount of the check to a
third person who has forged the signature of the payee, the loss falls on such
bank who cashed the check.-
In the instant case, the 3 checks were payable to the BIR. It was established,
however, that said checks were never delivered or paid to the payee BIR but
were in fact presented for payment by some unknown persons who, in order to
receive payment therefor, forged the name of the payee. Despite this fraud,
petitioner TRB paid the 3 checks in the total amount of P9,790,716.87. Petitioner
ought to have known that, where a check is drawn payable to the order of one
person and is presented for payment by another and purports upon its face to
have been duly indorsed by the payee of the check, it is the primary duty of
petitioner to know that the check was duly indorsed by the original payee and,
where it pays the amount of the check to a third person who has forged the
signature of the payee, the loss falls upon petitioner who cashed the check. Its
only remedy is against the person to whom it paid the money.
3. Banks and Banking; Negotiable Instruments; Checks; Crossed Checks; The
crossing of a check should put a bank on guard; The effects of a crossed check
are that (a) the check may not be encashed but only deposited in the bank, (b)
the check may be negotiated only once to one who has an account with a bank,
and, (c) the act of crossing the check serves as a warning to the holder that the
check has been issued for a definite purpose so that he must inquire if he has
received the check pursuant to that purpose, otherwise, he is not a holder in due
course.-
It should be noted further that one of the subject checks was crossed. The
crossing of one of the subject checks should have put petitioner on guard; it was
duty-bound to ascertain the indorser’s title to the check or the nature of his
possession. Petitioner should have known the effects of a crossed check: (a) the
check may not be encashed but only deposited in the bank; (b) the check may be
negotiated only once to one who has an account with a bank and (c) the act of
crossing the check serves as a warning to the holder that the check has been
issued for a definite purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a holder in due course. By
encashing in favor of unknown persons checks which were on their face payable
to the BIR, a government agency which can only act only through its agents,
petitioner did so at its peril and must suffer the consequences of the
unauthorized or wrongful endorsement. In this light, petitioner TRB cannot
exculpate itself from liability by claiming that respondent networks were
themselves negligent.
4. Banks and Banking; Negotiable Instruments; Checks; A bank is engaged in a
business impressed with public interest and it is its duty to protect its many
clients and depositors who transact business with it.-
A bank is engaged in a business impressed with public interest and it is its duty
to protect its many clients and depositors who transact business with it. It is
under the obligation to treat the accounts of the depositors and clients with
meticulous care, whether such accounts consist only of a few hundreds or
millions of pesos.
5. Banks and Banking; Negotiable Instruments; Checks; A collecting bank which
indorses a check bearing a forged indorsement and presents it to the drawee
bank guarantees all prior indorsements, including the forged indorsement itself,
and ultimately should be held liable therefor.-
A collecting bank which indorses a check bearing a forged indorsement and
presents it to the drawee bank guarantees all prior indorsements, including the
forged indorsement itself, and ultimately should be held liable therefor.
However, it is doubtful if the subject checks were ever presented to and
accepted by SBTC so as to hold it liable as a collecting bank, as held by the Court
of Appeals.
6. Banks and Banking; Negotiable Instruments; Checks; A bank who did not pay
the rightful holder or other person or entity entitled to receive payment has no
right to reimbursement.-
Since TRB did not pay the rightful holder or other person or entity entitled to
receive payment, it has no right to reimbursement. Petitioner TRB was remiss in
its duty and obligation, and must therefore suffer the consequences of its own
negligence and disregard of established banking rules and procedures.
Division: THIRD DIVISION
Docket Number: G.R. No. 138510
Counsel: Herrera, Teehankee, Faylona, Cabrera Law Offices, Mercado,
Aguillardo & Aceron Law Firm, Castro, Yan, Biñas, Ortile, Samillano &
Mangrobang
Ponente: CORONA
Dispositive Portion:
WHEREFORE, the appealed decision is MODIFIED by deleting the award of
exemplary damages. Further, respondent networks are granted the amount of
P100,000 as attorney’s fees. In all other respects, the Court of Appeals’ decision
is hereby AFFIRMED.
Case Title : RAMON K. ILUSORIO, petitioner, vs. HON. COURT OF APPEALS, and
THE MANILA BANKING CORPORATION, respondents.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Civil Law|Damages|Negligence|Criminal Law|Forgery|Estoppel
Syllabi:
1. Civil Law; Damages; Negligence; To be entitled to damages, petitioner has
the burden of proving negligence on the part of the bank for failure to detect the
discrepancy in the signatures on the checks.-
On the first issue, we find that petitioner has no cause of action against Manila
Bank. To be entitled to damages, petitioner has the burden of proving
negligence on the part of the bank for failure to detect the discrepancy in the
signatures on the checks. It is incumbent upon petitioner to establish the fact of
forgery, i.e., by submitting his specimen signatures and comparing them with
those on the questioned checks. Curiously though, petitioner failed to submit
additional specimen signatures as requested by the National Bureau of
Investigation from which to draw a conclusive finding regarding forgery. The
Court of Appeals found that petitioner, by his own inaction, was precluded from
setting up forgery.
2. Civil Law; Damages; Negligence; Negligence is the omission to do something
which a reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs would do, or the doing of something
which a prudent and reasonable man would do.-
As borne by the records, it was petitioner, not the bank, who was negligent.
Negligence is the omission to do something which a reasonable man, guided by
those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man
would do.In the present case, it appears that petitioner accorded his secretary
unusual degree of trust and unrestricted access to his credit cards, passbooks,
check books, bank statements, including custody and possession of cancelled
checks and reconciliation of accounts.
3. Civil Law; Damages; Negligence; Petitioner’s failure to examine his bank
statements appears as the proximate cause of his own damage; Proximate
Cause Defined.-
Petitioner’s failure to examine his bank statements appears as the proximate
cause of his own damage. Proximate cause is that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred. In the instant
case, the bank was not shown to be remiss in its duty of sending monthly bank
statements to petitioner so that any error or discrepancy in the entries therein
could be brought to the bank’s attention at the earliest opportunity. But,
petitioner failed to examine these bank statements not because he was
prevented by some cause in not doing so, but because he did not pay sufficient
attention to the matter. Had he done so, he could have been alerted to any
anomaly committed against him.
4. Civil Law; Criminal Law; Forgery; When a signature is forged or made
without the authority of the person whose signature it purports to be, the check
is wholly inoperative unless the party against whom it is sought to enforce such
right is precluded from setting up the forgery or want of authority.-
True, it is a rule that when a signature is forged or made without the authority
of the person whose signature it purports to be, the check is wholly inoperative.
No right to retain the instrument, or to give a discharge therefor, or to enforce
payment thereof against any party, can be acquired through or under such
signature. However, the rule does provide for an exception, namely: “unless the
party against whom it is sought to enforce such right is precluded from setting
up the forgery or want of authority.” In the instant case, it is the exception that
applies. In our view, petitioner is precluded from setting up the forgery,
assuming there is forgery, due to his own negligence in entrusting to his
secretary his credit cards and checkbook including the verification of his
statements of account.
5. Civil Law; Estoppel; Petitioner cannot hold private respondent in estoppel for
the latter is not the actual party to the criminal action.-
On the second issue, the fact that Manila Bank had filed a case for estafa
against Eugenio would not estop it from asserting the fact that forgery has not
been clearly established. Petitioner cannot hold private respondent in estoppel
for the latter is not the actual party to the criminal action. In a criminal action,
the State is the plaintiff, for the commission of a felony is an offense against the
State. Thus, under Section 2, Rule 110 of the Rules of Court the complaint or
information filed in court is required to be brought in the name of the “People of
the Philippines.”
Division: SECOND DIVISION
Docket Number: G.R. No. 139130
Counsel: People’s Law Office, Puyat, Jacinto & Santos, Asedillo and Associates
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed
decision of the Court of Appeals dated January 28, 1999 in CA-G.R. CV No.
47942, is AFFIRMED.
Case Title : MICHAEL A. OSMEÑA, petitioner, vs. CITIBANK, N.A., ASSOCIATED
BANK and FRANK TAN, respondents.Case Nature : PETITION for review on
certiorari of a decision of the Court of Appeals.
Syllabi Class : Commercial Law|Banks and Banking|Negotiable Instruments Law
Syllabi:
1. Commercial Law; Banks and Banking; Negotiable Instruments Law; The
Negotiable Instruments Law was enacted for the purpose of facilitating, not
hindering or hampering transactions in commercial paper.-
—The petitioner cites the ruling of the Court in Associated Bank v. Court of
Appeals, in which we outlined the respective responsibilities and liabilities of a
drawee bank, such as the respondent Citibank, and a collecting bank, such as
the defendant Associated Bank, in the event that payment of a check to a
person not designated as the payee, or who is not a holder in due course, had
been made. However, the ruling of the Court therein does not apply to the
present case for, as has been amply demonstrated, the petitioner failed to
establish that the proceeds of the check was indeed wrongfully paid by the
respondents Banks to a person other than the intended payee. In addition, the
Negotiable Instruments Law was enacted for the purpose of facilitating, not
hindering or hampering transactions in commercial paper. Thus, the said statute
should not be tampered with haphazardly or lightly. Nor should it be brushed
aside in order to meet the necessities in a single case.
Division: SECOND DIVISION
Docket Number: G.R. No. 141278
Counsel: Castillo, Laman, Tan, Pantaleon & San Jose, Agcaoili and Associates,
Guerrero, Cabalum, Rabuya, Divina & Associates
Ponente: CALLEJO, SR.
Dispositive Portion:
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision dated
November 26, 1999 of the Court of Appeals in CA-G.R. CV No. 49529 is hereby
AFFIRMED. Costs against the petitioner.
Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA
MONTESSORI INTERNATIONALE and LEONARDO T. YABUT, respondents., CASA
MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE PHILIPPINE
ISLANDS, respondents.Case Nature : PETITION for review on certiorari of the
decision and resolution of the Court of Appeals.
Syllabi Class : Negotiable Instruments Law|Administrative Investigations|Banks
and Banking|Accountants and Auditors|Damages|Rights of Suspects|Self-
Incrimination|Bill of Rights|Checks|Evidence|Best Evidence Rule|Audit
Procedures|Estoppel|Words and Phrases|Proximate
Cause|Negligence|Forgery|Negligence is not presumed|but proven by whoever
alleges it|Attorney’s Fees|Interest Rates|Negotiable Instruments Law|Code of
Commerce
Syllabi:
1. Negotiable Instruments Law; A forged signature is a real or absolute defense,
and a person whose signature on a negotiable instrument is forged is deemed to
have never become a party thereto and to have never consented to the contract
that allegedly gave rise to it.-
Section 23 of the NIL provides: “Section 23. Forged signature; effect of.—When a
signature is forged or made without the authority of the person whose signature
it purports to be, it is wholly inoperative, and no right x x x to enforce payment
thereof against any party thereto, can be acquired through or under such
signature, unless the party against whom it is sought to enforce such right is
precluded from setting up the forgery or want of authority.” Under this
provision, a forged signature is a real or absolute defense, and a person whose
signature on a negotiable instrument is forged is deemed to have never become
a party thereto and to have never consented to the contract that allegedly gave
rise to it. The counterfeiting of any writing, consisting in the signing of another’s
name with intent to defraud, is forgery.
2. Administrative Investigations; Rights of Suspects; The mantle of protection
under Section 12 of Article III of the 1987 Constitution covers only the period
“from the time a person is taken into custody for investigation of his possible
participation in the commission of a crime or from the time he is singled out as a
suspect in the commission of a crime although not yet in custody”—to fall within
the ambit of Section 12, there must be an arrest or a deprivation of freedom,
with “questions propounded on him by the police authorities for the purpose of
eliciting admissions, confessions, or any information.”-
In the first place, he was not under custodial investigation. His Affidavit was
executed in private and before private individuals. The mantle of protection
under Section 12 of Article III of the 1987 Constitution covers only the period
“from the time a person is taken into custody for investigation of his possible
participation in the commission of a crime or from the time he is singled out as a
suspect in the commission of a crime although not yet in custody.” Therefore, to
fall within the ambit of Section 12, quoted above, there must be an arrest or a
deprivation of freedom, with “questions propounded on him by the police
authorities for the purpose of eliciting admissions, confessions, or any
information.” The said constitutional provision does “not apply to spontaneous
statements made in a voluntary manner” whereby an individual orally admits to
authorship of a crime. “What the Constitution proscribes is the compulsory or
coercive disclosure of incriminating facts.”
3. Administrative Investigations; Self-Incrimination; The right against self-
incrimination, which is ordinarily available only in criminal prosecutions, extends
to all other government proceedings—including civil actions, legislative
investigations, and administrative proceedings that possess a criminal or penal
aspect—but not to private investigations done by private individuals.-
The right against self-incrimination under Section 17 of Article III of the
Constitution, which is ordinarily available only in criminal prosecutions, extends
to all other government proceedings—including civil actions, legislative
investigations, and administrative proceedings that possess a criminal or penal
aspect—but not to private investigations done by private individuals. Even in
such government proceedings, this right may be waived, provided the waiver is
certain; unequivocal; and intelligently, understanding and willingly made. If in
these government proceedings waiver is allowed, all the more is it so in private
investigations. It is of no moment that no criminal case has yet been filed
against Yabut. The filing thereof is entirely up to the appropriate authorities or
to the private individuals upon whom damage has been caused. As we shall also
explain later, it is not mandatory for CASA—the plaintiff below—to implead
Yabut in the civil case before the lower court.
4. Administrative Investigations; Bill of Rights; The Bill of Rights does not
concern itself with the relation between a private individual and another
individual—the Bill of Rights “is a charter of liberties for the individual and a
limitation upon the power of the State.”-
Under these two constitutional provisions, “[t]he Bill of Rights does not concern
itself with the relation between a private individual and another individual. It
governs the relationship between the individual and the State.” Moreover, the
Bill of Rights “is a charter of liberties for the individual and a limitation upon the
power of the [S]tate.” These rights are guaranteed to preclude the slightest
coercion by the State that may lead the accused “to admit something false, not
prevent him from freely and voluntarily telling the truth.”
5. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Under
the best evidence rule as applied to documentary evidence, like the checks in
question, no secondary evidence or substitutionary evidence may inceptively be
introduced, as the original writing itself must be produced in court, but when,
without bad faith on the part of the offeror, the original checks have already
been destroyed or cannot be produced in court, secondary evidence, like
microfilm copies, may be produced.-
Forgery “cannot be presumed.” It must be established by clear, positive and
convincing evidence. Under the best evidence rule as applied to documentary
evidence like the checks in question, no secondary or substitutionary evidence
may inceptively be introduced, as the original writing itself must be produced in
court. But when, without bad faith on the part of the offeror, the original checks
have already been destroyed or cannot be produced in court, secondary
evidence may be produced. Without bad faith on its part, CASA proved the loss
or destruction of the original checks through the Affidavit of the one person who
knew of that fact—Yabut. He clearly admitted to discarding the paid checks to
cover up his misdeed. In such a situation, secondary evidence like microfilm
copies may be introduced in court.
6. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Even
with respect to documentary evidence, the best evidence rule applies only when
the contents of the document—such as the drawer’s signature on a check—is
the subject of inquiry.-
Even with respect to documentary evidence, the best evidence rule applies only
when the contents of a document—such as the drawer’s signature on a check—
is the subject of inquiry. As to whether the document has been actually
executed, this rule does not apply; and testimonial as well as any other
secondary evidence is admissible. Carina Lebron herself, the drawer’s authorized
signatory, testified many times that she had never signed those checks. Her
testimonial evidence is admissible; the checks have not been actually executed.
The genuineness of her handwriting is proved, not only through the court’s
comparison of the questioned hand-writings and admittedly genuine specimens
thereof, but above all by her.
7. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Of no
consequence is the fact that the depositor did not present the signature card
containing the signatures with which those on the checks were compared—
specimens of standard signatures are not limited to such a card.-
The failure of CASA to produce the original checks neither gives rise to the
presumption of suppression of evidence nor creates an unfavorable inference
against it. Such failure merely authorizes the introduction of secondary evidence
in the form of microfilm copies. Of no consequence is the fact that CASA did not
present the signature card containing the signatures with which those on the
checks were compared. Specimens of standard signatures are not limited to such
a card. Considering that it was not produced in evidence, other documents that
bear the drawer’s authentic signature may be resorted to. Besides, that card
was in the possession of BPI—the adverse party.
8. Banks and Banking; Checks; Since the banking business is impressed with
public interest, of paramount importance thereto is the trust and confidence of
the public in general—the highest degree of diligence is expected, and high
standards of integrity and performance are even required of it; A bank is bound
to know the signatures of its customers, and if it pays a forged check, it must be
considered as making the payment out of its own funds, and cannot ordinarily
charge the amount so paid to the account of the depositor whose name was
forged.-
We have repeatedly emphasized that, since the banking business is impressed
with public interest, of paramount importance thereto is the trust and
confidence of the public in general. Consequently, the highest degree of
diligence is expected, and high standards of integrity and performance are even
required, of it. By the nature of its functions, a bank is “under obligation to treat
the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.” BPI contends that it has a signature
verification procedure, in which checks are honored only when the signatures
therein are verified to be the same with or similar to the specimen signatures on
the signature cards. Nonetheless, it still failed to detect the eight instances of
forgery. Its negligence consisted in the omission of that degree of diligence
required of a bank. It cannot now feign ignorance, for very early on we have
already ruled that a bank is “bound to know the signatures of its customers; and
if it pays a forged check, it must be considered as making the payment out of its
own funds, and cannot ordinarily charge the amount so paid to the account of
the depositor whose name was forged.” In fact, BPI was the same bank involved
when we issued this ruling seventy years ago.
9. Banks and Banking; Checks; Audit Procedures; The notice in the monthly
statements issued by the bank that if no error is reported in ten (10) days, the
account will be correct cannot be considered a waiver, even if the depositor
failed to report the error, and neither is it estopped from questioning the
mistake after the lapse of the ten-day period—such notice is a simple
confirmation or “circularization,”—in accounting parlance, that requests client-
depositors to affirm the accuracy of items recorded by the banks.-
The monthly statements issued by BPI to its clients contain a notice worded as
follows: “If no error is reported in ten (10) days, account will be correct.” Such
notice cannot be considered a waiver, even if CASA failed to report the error.
Neither is it estopped from questioning the mistake after the lapse of the ten-
day period. This notice is a simple confirmation or “circularization”—in
accounting parlance—that requests client-depositors to affirm the accuracy of
items recorded by the banks. Its purpose is to obtain from the depositors a direct
corroboration of the correctness of their account balances with their respective
banks. Internal or external auditors of a bank use it as a basic audit procedure—
the results of which its client-depositors are neither interested in nor privy to—to
test the details of transactions and balances in the bank’s records. Evidential
matter obtained from independent sources outside a bank only serves to provide
greater assurance of reliability than that obtained solely within it for purposes of
an audit of its own financial statements, not those of its client-depositors.
10. Banks and Banking; Checks; Audit Procedures; Banks have no right to
impose a condition unilaterally and thereafter consider failure to meet such
condition a waiver, and neither may a depositor renounce a right it never
possessed.-
There is always the audit risk that errors would not be detected for various
reasons. One, materiality is a consideration in audit planning; and two, the
information obtained from such a substantive test is merely presumptive and
cannot be the basis of a valid waiver. BPI has no right to impose a condition
unilaterally and thereafter consider failure to meet such condition a waiver.
Neither may CASA renounce a right it has never possessed.
11. Banks and Banking; Checks; Audit Procedures; Every right has subjects—
active and passive, the active subject being entitled to demand its enforcement
while the passive one being duty-bound to suffer such enforcement; The bank
could not have been an active subject, because it could not have demanded
from the depositor a response to its notice, while, on the other hand, the
depositor could not have been a passive subject because it had no obligation to
respond.-
Every right has subjects—active and passive. While the active subject is entitled
to demand its enforcement, the passive one is duty-bound to suffer such
enforcement. On the one hand, BPI could not have been an active subject,
because it could not have demanded from CASA a response to its notice.
Besides, the notice was a measly request worded as follows: “Please examine x x
x and report x x x.” CASA, on the other hand, could not have been a passive
subject, either, because it had no obligation to respond. It could—as it did—
choose not to respond.
12. Banks and Banking; Checks; Estoppel; Words and Phrases; Estoppel
precludes individuals from denying or asserting, by their own deed or
representation, anything contrary to that established as the truth, in legal
contemplation; Estoppel will not arise from a conduct due to ignorance founded
upon an innocent mistake.-
Estoppel precludes individuals from denying or asserting, by their own deed or
representation, anything contrary to that established as the truth, in legal
contemplation. Our rules on evidence even make a juris et de jure presumption
that whenever one has, by one’s own act or omission, intentionally and
deliberately led another to believe a particular thing to be true and to act upon
that belief, one cannot—in any litigation arising from such act or omission—be
permitted to falsify that supposed truth. In the instant case, CASA never made
any deed or representation that misled BPI. The former’s omission, if any, may
only be deemed an innocent mistake oblivious to the procedures and
consequences of periodic audits. Since its conduct was due to such ignorance
founded upon an innocent mistake, estoppel will not arise. A person who has no
knowledge of or consent to a transaction may not be estopped by it. “Estoppel
cannot be sustained by mere argument or doubtful inference x x x.” CASA is not
barred from questioning BPI’s error even after the lapse of the period given in
the notice.
13. Banks and Banking; Checks; For allowing payment on the checks to a
wrongful and fictitious payee, the drawee bank becomes liable to its depositor-
drawer.-
For allowing payment on the checks to a wrongful and fictitious payee, BPI—the
drawee bank—becomes liable to its depositor-drawer. Since the encashing bank
is one of its branches, BPI can easily go after it and hold it liable for
reimbursement. It “may not debit the drawer’s account and is not entitled to
indemnification from the drawer.” In both law and equity, when one of two
innocent persons “must suffer by the wrongful act of a third person, the loss
must be borne by the one whose negligence was the proximate cause of the loss
or who put it into the power of the third person to perpetrate the wrong.”
14. Banks and Banking; Checks; Proximate Cause; Words and
Phrases; Proximate cause is that cause which, in natural and continuous
sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred.-
Proximate cause is determined by the facts of the case. “It is that cause which, in
natural and continuous sequence, unbroken by any efficient intervening cause,
produces the injury, and without which the result would not have occurred.”
Pursuant to its prime duty to ascertain well the genuineness of the signatures of
its client-depositors on checks being encashed, BPI is “expected to use
reasonable business prudence.” In the performance of that obligation, it is
bound by its internal banking rules and regulations that form part of the
contract it enters into with its depositors.
15. Banks and Banking; Checks; Proximate Cause; Negligence; Forgery; In this
jurisdiction, the negligence of the party invoking forgery is recognized as an
exception to the general rule that a forged signature is wholly inoperative.-
In this jurisdiction, the negligence of the party invoking forgery is recognized as
an exception to the general rule that a forged signature is wholly inoperative.
Contrary to BPI’s claim, however, we do not find CASA negligent in han- dling its
financial affairs. CASA, we stress, is not precluded from setting up forgery as a
real defense.
16. Accountants and Auditors; The major purpose of an independent audit is to
investigate and determine objectively if the financial statements submitted for
audit by a corporation have been prepared in accordance with the appropriate
financial reporting practices of private entities.-
The major purpose of an independent audit is to investigate and determine
objectively if the financial statements submitted for audit by a corporation have
been prepared in accordance with the appropriate financial reporting practices
of private entities. The relationship that arises therefrom is both legal and
moral. It begins with the execution of the engagement letter that embodies the
terms and conditions of the audit and ends with the fulfilled expectation of the
auditor’s ethical and competent performance in all aspects of the audit. The
financial statements are representations of the client; but it is the auditor who
has the responsibility for the accuracy in the recording of data that underlies
their preparation, their form of presentation, and the opinion expressed therein.
The auditor does not assume the role of employee or of management in the
client’s conduct of operations and is never under the control or supervision of
the client.
17. Accountants and Auditors; Negligence; Nothing could be more horrible to a
client than to discover later on that the person tasked to detect fraud was the
same one who perpetrated it.-
Yabut was an independent auditor hired by CASA. He handled its monthly bank
reconciliations and had access to all relevant documents and checkbooks. In him
was reposed the client’s trust and confidence that he would perform precisely
those functions and apply the appropriate procedures in accordance with
generally accepted auditing standards. Yet he did not meet these expectations.
Nothing could be more horrible to a client than to discover later on that the
person tasked to detect fraud was the same one who perpetrated it.
18. Accountants and Auditors; Negligence; Awareness is not equipollent with
discernment.-
It is a non sequitur to say that the person who receives the monthly bank
statements, together with the cancelled checks and other debit/credit
memoranda, shall examine the contents and give notice of any discrepancies
within a reasonable time. Awareness is not equipollent with discernment.
19. Accountants and Auditors; Negligence; A preschool teacher charged with
molding the minds of the youth cannot be burdened with the intricacies or
complexities of corporate existence.-
Moreover, there was a time gap between the period covered by the bank
statement and the date of its actual receipt. Lebron personally received the
December 1990 bank statement only in January 1991—when she was also
informed of the forgery for the first time, after which she immediately requested
a “stop payment order.” She cannot be faulted for the late detection of the
forged December check. After all, the bank account with BPI was not personal
but corporate, and she could not be expected to monitor closely all its finances.
A preschool teacher charged with molding the minds of the youth cannot be
burdened with the intricacies or complexities of corporate existence.
20. Accountants and Auditors; Negligence; The depositor could only be blamed,
if at all, for its unintelligent choice in the selection and appointment of an
auditor—a fault that is not tantamount to negligence.-
There is also a cutoff period such that checks issued during a given month, but
not presented for payment within that period, will not be reflected therein. An
experienced auditor with intent to defraud can easily conceal any devious
scheme from a client unwary of the accounting processes involved by
manipulating the cash balances on record—especially when bank transactions
are numerous, large and frequent. CASA could only be blamed, if at all, for its
unintelligent choice in the selection and appointment of an auditor—a fault that
is not tantamount to negligence.
21. Accountants and Auditors; Negligence; Negligence is not presumed, but
proven by whoever alleges it; The Professional Regulation Commission, through
the Board of Accountancy, now requires not only accreditation for the practice
of public accountancy, but also the registration of firms in the practice thereof.-
Negligence is not presumed, but proven by whoever alleges it. Its mere existence
“is not sufficient without proof that it, and no other cause,” has given rise to
damages. In addition, this fault is common to, if not prevalent among, small and
medium-sized business entities, thus leading the Professional Regulation
Commission (PRC), through the Board of Accountancy (BOA), to require today
not only accreditation for the practice of public accountancy, but also the
registration of firms in the practice thereof. In fact, among the attachments now
required upon registration are the code of good governance and a sworn
statement on adequate and effective training.
22. Accountants and Auditors; Negligence; If auditors may be held liable for
breach of contract and negligence, with all the more reason may they be
charged with the perpetration of fraud upon an unsuspecting client.-
Clearly then, Yabut was able to perpetrate the wrongful act through no fault of
CAS A. If auditors may be held liable for breach of contract and negligence, with
all the more reason may they be charged with the perpetration of fraud upon an
unsuspecting client. CASA had the discretion to pursue BPI alone under the NIL,
by reason of expediency or munificence or both. Money paid under a mistake
may rightfully be recovered, and under such terms as the injured party may
choose.
23. Damages; The adverse result of an action does not per se make the action
wrongful, or the party liable for it.-
In the absence of a wrongful act or omission, or of fraud or bad faith, moral
damages cannot be awarded. The adverse result of an action does not per se
make the action wrongful, or the party liable for it. One may err, but error alone
is not a ground for granting such damages. While no proof of pecuniary loss is
necessary therefor—with the amount to be awarded left to the court’s
discretion—the claimant must nonetheless satisfactorily prove the existence of
its factual basis and causal relation to the claimant’s act or omission.
24. Damages; As a general rule, a corporation is not entitled to moral damages
because it cannot experience physical suffering and mental anguish, but, for
breach of the fiduciary duty required of a bank, a corporate client may claim
such damages when its good reputation is besmirched by such breach, and
social humiliation results therefrom.-
As a general rule, a corporation—being an artificial person without feelings,
emotions and senses, and having existence only in legal contemplation—is not
entitled to moral damages, because it cannot experience physical suffering and
mental anguish. However, for breach of the fiduciary duty required of a bank, a
corporate client may claim such damages when its good reputation is
besmirched by such breach, and social humiliation results therefrom. CASA was
unable to prove that BPI had debased the good reputation of, and consequently
caused incalculable embarrassment to, the former. CASA’s mere allegation or
supposition thereof, without any sufficient evidence on record, is not enough.
25. Damages; Attorney’s Fees; When the act or omission of the defendant has
compelled the plaintiff to incur expenses to protect the latter’s interest, or
where the court deems it just and equitable, attorney’s fees may be recovered.-
Although it is a sound policy not to set a premium on the right to litigate, we
find that CASA is entitled to reasonable attorney’s fees based on “factual, legal,
and equitable justification.” When the act or omission of the defendant has
compelled the plaintiff to incur expenses to protect the latter’s interest, or
where the court deems it just and equitable, attorney’s fees may be recovered.
In the present case, BPI persistently denied the claim of CASA under the NIL to
recredit the latter’s account for the value of the forged checks. This denial
constrained CASA to incur expenses and exert effort for more than ten years in
order to protect its corporate interest in its bank account. Besides, we have
already cautioned BPI on a similar act of negligence it had committed seventy
years ago, but it has remained unrelenting. Therefore, the Court deems it just
and equitable to grant ten percent (10%) of the total value adjudged to CASA as
attorney’s fees.
26. Damages; Interest Rates; Since a court judgment is not a loan or a
forbearance of recovery, the legal interest shall be at six percent (6%) per
annum.-
For the failure of BPI to pay CASA upon demand and for compelling the latter to
resort to the courts to obtain payment, legal interest may be adjudicated at the
discretion of the Court, the same to run from the filing of the Complaint. Since a
court judgment is not a loan or a forbearance of recovery, the legal interest shall
be at six percent (6%) per annum. “If the obligation consists in the payment of a
sum of money, and the debtor incurs in delay, the indemnity for damages, there
being no stipulation to the contrary, shall be the payment of x x x legal interest,
which is six percent per annum.” The actual base for its computation shall be
“on the amount finally adjudged,” compounded annually to make up for the cost
of money already lost to CASA.
27. Damages; Negotiable Instruments Law; Code of Commerce; Under Section
196 of the NIL, any case not provided for shall be “governed by the provisions of
existing legislation or, in default thereof, by the rules of the law merchant,” and,
since damages are not provided for in the NIL, resort is had to the Code of
Commerce and the Civil Code.-
Moreover, the failure of the CA to award interest does not prevent us from
granting it upon damages awarded for breach of contract. Because BPI evidently
breached its contract of deposit with CASA, we award interest in addition to the
total amount adjudged. Under Section 196 of the NIL, any case not provided for
shall be “governed by the provisions of existing legislation or, in default thereof,
by the rules of the law merchant.” Damages are not provided for in the NIL.
Thus, we resort to the Code of Commerce and the Civil Code. Under Article 2 of
the Code of Commerce, acts of commerce shall be governed by its provisions
and, “in their absence, by the usages of commerce generally observed in each
place; and in the absence of both rules, by those of the civil law.” This law being
silent, we look at Article 18 of the Civil Code, which states: “In matters which are
governed by the Code of Commerce and special laws, their deficiency shall be
supplied” by its provisions. A perusal of these three statutes unmistakably shows
that the award of interest under our civil law is justified.
Division: FIRST DIVISION
Docket Number: G.R. No. 149454, G.R. No. 149507
Counsel: Benedicto, Verzosa, Geslogo, Burkley & Associates, Oscar F. Martinez,
Mauricio Law Office
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the Petition in G.R. No. 149454 is hereby DENIED, and that in G.R.
No. 149507 PARTLY GRANTED. The assailed Decision of the Court of Appeals is
AFFIRMED with modification: BPI is held liable for P547,115, the total value of
the forged checks less the amount already recovered by CASA from Leonardo T.
Yabut, plus interest at the legal rate of six percent (6%) per annum—
compounded annually, from the filing of the complaint until paid in full; and
attorney’s fees of ten percent (10%) thereof, subject to reimbursement from
Respondent Yabut for the entire amount, excepting attorney’s fees. Let a copy
of this Decision be furnished the Board of Accountancy of the Professional
Regulation Commission for such action as it may deem appropriate against
Respondent Yabut. No costs.
Case Title : SAMSUNG CONSTRUCTION COMPANY PHILIPPINES, INC., petitioner,
vs. FAR EAST BANK AND TRUST COMPANY AND COURT OF APPEALS,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Negotiable Instruments Law|Checks|Forgery|Negligence
Syllabi:
1. Negotiable Instruments Law; Checks; A forged signature is “wholly
inoperative” and payment made “through or under such signature” is ineffectual
or does not discharge the instrument.-
The general rule is to the effect that a forged signature is “wholly inoperative,”
and payment made “through or under such signature” is ineffectual or does not
discharge the instrument. If payment is made, the drawee cannot charge it to
the drawer’s account. The traditional justification for the result is that the
drawee is in a superior position to detect a forgery because he has the maker’s
signature and is expected to know and compare it. The rule has a healthy
cautionary effect on banks by encouraging care in the comparison of the
signatures against those on the signature cards they have on file. Moreover, the
very opportunity of the drawee to insure and to distribute the cost among its
customers who use checks makes the drawee an ideal party to spread the risk to
insurance.
2. Negotiable Instruments Law; Checks; Forgery; Forgery is a real or absolute
defense by the party whose signature is forged.-
Under Section 23 of the Negotiable Instruments Law, forgery is a real or
absolute defense by the party whose signature is forged. On the premise that
Jong’s signature was indeed forged, FEBTC is liable for the loss since it
authorized the discharge of the forged check. Such liability attaches even if the
bank exerts due diligence and care in preventing such faulty discharge. Forgeries
often deceive the eye of the most cautious experts; and when a bank has been
so deceived, it is a harsh rule which compels it to suffer although no one has
suffered by its being deceived. The forgery may be so near like the genuine as to
defy detection by the depositor himself, and yet the bank is liable to the
depositor if it pays the check.
3. Negotiable Instruments Law; Checks; Forgery; A document formally
presented is presumed to be genuine until it is proved to be fraudulent.-
Thus, the first matter of inquiry is into whether the check was indeed forged. A
document formally presented is presumed to be genuine until it is proved to be
fraudulent. In a forgery trial, this presumption must be overcome but this can
only be done by convincing testimony and effective illustrations.
4. Negotiable Instruments Law; Checks; Forgery; Bare fact that the forgery was
committed by an employee of the party whose signature was forged cannot
necessarily imply that such party’s negligence was the cause for the forgery.-
The bare fact that the forgery was committed by an employee of the party
whose signature was forged cannot necessarily imply that such party’s
negligence was the cause for the forgery. Employers do not possess the
preternatural gift of cognition as to the evil that may lurk within the hearts and
minds of their employees.
5. Negotiable Instruments Law; Checks; Forgery; If a bank pays a forged check,
it must be considered as paying out of its funds and cannot charge the amount
so paid to the account of the depositor.-
Still, even if the bank performed with utmost diligence, the drawer whose
signature was forged may still recover from the bank as long as he or she is not
precluded from setting up the defense of forgery. After all, Section 23 of the
Negotiable Instruments Law plainly states that no right to enforce the payment
of a check can arise out of a forged signature. Since the drawer, Samsung
Construction, is not precluded by negligence from setting up the forgery, the
general rule should apply. Consequently, if a bank pays a forged check, it must
be considered as paying out of its funds and cannot charge the amount so paid
to the account of the depositor. A bank is liable, irrespective of its good faith, in
paying a forged check.
6. Negotiable Instruments Law; Checks; Forgery; Negligence; The presumption
remains that every person takes ordinary care of his concerns, and that the
ordinary course of business has been followed; Negligence is not presumed but
must be proven by him who alleges it.-
Still, in the absence of evidence to the contrary, we can conclude that there was
no negligence on Samsung Construction’s part. The presumption remains that
every person takes ordinary care of his concerns, and that the ordinary course of
business has been followed. Negligence is not presumed, but must be proven by
him who alleges it. While the complaint was lodged at the instance of Samsung
Construction, the matter it had to prove was the claim it had alleged—whether
the check was forged. It cannot be required as well to prove that it was not
negligent, because the legal presumption remains that ordinary care was
employed.
Division: SECOND DIVISION
Docket Number: G.R. No. 129015
Counsel: Alan A. Leynes, Angara, Abello, Concepcion, Regala & Cruz
Ponente: TINGA
Dispositive Portion:
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals
dated 28 November 1996 is REVERSED, and the Decision of the Regional Trial
Court of Manila, Branch 9, dated 25 April 1994 is REINSTATED. Costs against
respondent.
Case Title : BPI FAMILY BANK, petitioner, vs. EDGARDO BUENAVENTURA,
MYRNA LIZARDO and YOLANDA TICA, respondents., EDGARDO
BUENAVENTURA, MYRNA LIZARDO and YOLANDA TICA, petitioners, vs. BPI
FAMILY BANK, respondent.Case Nature : PETITIONS for review on certiorari of
the decision and resolution of the Court of Appeals.
Syllabi Class : Remedial Law|Civil Law|Actions|Party-in-Interest|Banks|Forgery
Syllabi:
1. Remedial Law; Actions; Party-in-Interest; It is elementary that it is only in the
name of a real party-in-interest that a civil suit may be prosecuted; To qualify a
person to be a real party-in-interest in whose name an action must be
prosecuted, he must appear to be the present real owner of the right sought to
be enforced.-
It is elementary that it is only in the name of a real party-in-interest that a civil
suit may be prosecuted. Under Section 2, Rule 3 of the Rules of Civil Procedure, a
real party-in-interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. “Interest”
within the meaning of the rule means material interest, an interest in issue and
to be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. One having no right or interest to protect
cannot invoke the jurisdiction of the court as a party plaintiff in an action. To
qualify a person to be a real party-in-interest in whose name an action must be
prosecuted, he must appear to be the present real owner of the right sought to
be enforced. Since a contract may be violated only by the parties thereto as
against each other, in an action upon that contract, the real parties-in-interest,
either as plaintiff or as defendant, must be parties to the said contract.
2. Remedial Law; Actions; A court may grant relief to a party even if the party
awarded did not pray for it in his pleadings.-
There is no merit to the claim that the CA erred in affirming the RTC’s order
directing BPI-FB to pay the balance of their account plus interest although the
prayer was only to reinstate their Current Account. The complaint does contain a
general prayer “for such other relief as may be just and equitable in the
premises.” And this general prayer is broad enough “to justify extension of a
remedy different from or together with the specific remedy sought.” Indeed, a
court may grant relief to a party, even if the party awarded did not pray for it in
his pleadings.
3. Civil Law; Banks; The contract between a bank and its depositors is governed
by the provisions of the Civil Code on simple loan.-
The contract between a bank and its depositor is governed by the provisions of
the Civil Code on simple loan. Thus, there is a debtor-creditor relationship
between a bank and its depositor. The bank is the debtor and the depositor is
the creditor. The depositor lends the bank money and the bank agrees to pay
the depositor on demand. The savings or current deposit agreement between
the bank and the depositor is the contract that determines the rights and
obligations of the parties.
4. Civil Law; Banks; Forgery; Unless a forgery or alteration is attributable to the
fault or negligence of the drawer himself, the remedy of the drawee bank that
negligently clears a forged and/or altered check for payment is against the party
responsible for the forgery or alteration, otherwise it bears the loss.-
Every bank that issues checks for the use of its customers should know whether
or not the drawer’s signature thereon is genuine, whether there are sufficient
funds in the drawers account to cover checks issued, and it should be able to
detect alterations, erasures, superimpositions or intercalations thereon, for
these instruments are prepared, printed and issued by itself, it has control of the
drawer’s account, and it is supposed to be familiar with the drawer’s signature.
It should possess appropriate detecting devices for uncovering forgeries and/or
alterations on these instruments. Unless a forgery or alteration is attributable to
the fault or negligence of the drawer himself, the remedy of the drawee bank
that negligently clears a forged and/or altered check for payment is against the
party responsible for the forgery or alteration, otherwise, it bears the loss.
Division: SECOND DIVISION
Docket Number: G.R. No. 148196, G.R. No. 148259
Counsel: Bargas, Benedicto, Tale, Verzosa & Associates, Ernesto L. Pineda
Ponente: AUSTRIA-MARTINEZ
Dispositive Portion:
WHEREFORE, the petition in G.R. No. 148196 is DENIED and the petition in G.R.
No. 148259 is GRANTED. The assailed Decision dated November 27, 2000 and
Resolution dated May 3, 2001 of the Court of Appeals in CA-G.R. CV No. 53962,
which affirmed with modification the Decision ren- dered by the Regional Trial
Court, Branch 25, Manila, dated August 11, 1995 in Civil Case No. 90-53154, are
hereby AFFIRMED with the MODIFICATION that BPI Family Bank is directed to
pay Buenaventura, et al. the amount of P50,000.00 as exemplary damages.
Costs against BPI Family Bank.

Case Title : ALLIED BANKING CORPORATION, petitioner, vs. LIM SIO WAN,
METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents
Case Nature : PETITION for review on certiorari of a decision of the Court of
Appeals.
Syllabi Class :Banks and Banking ; Unjust Enrichment ; Words and Phrases ;
Division: SECOND DIVISION
Docket Number: G.R. No. 133179
Counsel: Ocampo, Tejada, Guevarra & Associates
Ponente: VELASCO, JR.
Dispositive Portion:
“WHEREFORE, premises considered, the decision appealed from is MODIFIED.
Judgment is rendered ordering and sentencing defendant-appellant Allied
Banking Corporation to pay sixty (60%) percent and defendant-appellee
Metropolitan Bank and Trust Company forty (40%) of the amount of
P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully
paid. The moral damages, attorney’s fees and costs of suit adjudged shall
likewise be paid by defendant-appellant Allied Banking Corporation and
defendant-appellee Metropolitan Bank and Trust Company in the same
proportion of 60-40. Except as thus modified, the decision appealed from is
AFFIRMED.
Banks and Banking; Fundamental and familiar is the doctrine that the
relationship between a bank and a client is one of debtor-creditor.—As to the
liability of the parties, we find that Allied is liable to Lim Sio Wan. Fundamental
and familiar is the doctrine that the relationship between a bank and a client is
one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide: Art.
1953. A person who receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay to the creditor an equal
amount of the same kind and quality. Art. 1980. Fixed, savings, and current
deposits of money in banks and similar institutions shall be governed by the
provisions concerning simple loan.
Same; Money Market Transactions; Words and Phrases; A money market is a
market dealing in standardized short-term credit instruments (involving large
amounts) where lenders and borrowers do not deal directly with each other but
through a middle man or dealer in open market—in a money market
transaction, the investor is a lender who loans his money to a borrower through
a middleman or dealer; The creditor of the bank for her money market
placement is entitled to payment upon her request, or upon the maturity of the
placement, or until the bank is released from its obligation as debtor.—We have
ruled in a line of cases that a bank deposit is in the nature of a simple loan or
mutuum. More succinctly, in Citibank, N.A. (Formerly First National City Bank) v.
Sabeniano, 504 SCRA 378 (2006), this Court ruled that a money market
placement is a simple loan or mutuum. Further, we defined a money market in
Cebu International Finance Corporation v. Court of Appeals, 316 SCRA 488
(1999), as follows: [A] money market is a market dealing in standardized short-
term credit instruments (involving large amounts) where lenders and borrowers
do not deal directly with each other but through a middle man or dealer in open
market. In a money market transaction, the investor is a lender who loans his
money to a borrower through a middleman or dealer. In the case at bar, the
money market transaction between the petitioner and the private respondent
is in the nature of a loan. Lim Sio Wan, as creditor of the bank for her money
market placement, is entitled to payment upon her request, or upon maturity of
the placement, or until the bank is released from its obligation as debtor. Until
any such event, the obligation of Allied to Lim Sio Wan remains unextinguished.
Same; Same; Payment made by the debtor to a wrong party does not extinguish
the obligation as to the creditor, if there is no fault or negligence which can be
imputed to the latter.—From the factual findings of the trial and appellate
courts that Lim Sio Wan did not authorize the release of her money market
placement to Santos and the bank had been negligent in so doing, there is no
question that the obligation of Allied to pay Lim Sio Wan had not been
extinguished. Art. 1240 of the Code states that “payment shall be made to the
person in whose favor the obligation has been constituted, or his successor in
interest, or any person authorized to receive it.” As commented by Arturo
Tolentino: Payment made by the debtor to a wrong party does not extinguish
the obligation as to the creditor, if there is no fault or negligence which can be
imputed to the latter. Even when the debtor acted in utmost good faith and by
mistake as to the person of his creditor, or through error induced by the fraud
of a third person, the payment to one who is not in fact his creditor, or
authorized to receive such payment, is void, except as provided in Article 1241.
Such payment does not prejudice the creditor, and accrual of interest is not
suspended by it. (Emphasis supplied.)
Same; Proximate Cause; Words and Phrases; Proximate cause is “that cause,
which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury and without which the result would not
have occurred”; To determine the proximate cause of a controversy, the
question that needs to be asked is: If the event did not happen, would the injury
have resulted? If the answer is NO, then the event is the proximate cause.—
Proximate cause is “that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred.” Thus, there is an efficient
supervening event if the event breaks the sequence leading from the cause to
the ultimate result. To determine the proximate cause of a controversy, the
question that needs to be asked is: If the event did not happen, would the injury
have resulted? If the answer is NO, then the event is the proximate cause.
Same; Negotiable Instruments; Checks; An exception to the rule that the
collecting bank which indorses a check bearing a forged indorsement and
presents it to the drawee bank guarantees all prior indorsements, including the
forged indorsement itself, and ultimately should be held liable therefor is when
the issuance of the check itself was attended with negligence.—The warranty
“that the instrument is genuine and in all respects what it purports to be”
covers all the defects in the instrument affecting the validity thereof, including a
forged indorsement. Thus, the last indorser will be liable for the amount
indicated in the negotiable instrument even if a previous indorsement was
forged. We held in a line of cases that “a collecting bank which indorses a check
bearing a forged indorsement and presents it to the drawee bank guarantees all
prior indorsements, including the forged indorsement itself, and ultimately
should be held liable therefor.” However, this general rule is subject to
exceptions. One such exception is when the issuance of the check itself was
attended with negligence. Thus, in the cases cited above where the collecting
bank is generally held liable, in two of the cases where the checks were
negligently issued, this Court held the institution issuing the check just as liable
as or more liable than the collecting bank.
Same; Same; Same; Given the relative participation of two banks to the instant
case, both banks cannot be adjudged as equally liable—hence, the 60:40 ratio
of the liabilities.—In the instant case, the trial court correctly found Allied
negligent in issuing the manager’s check and in transmitting it to Santos without
even a written authorization. In fact, Allied did not even ask for the certificate
evidencing the money market placement or call up Lim Sio Wan at her
residence or office to confirm her instructions. Both actions could have
prevented the whole fraudulent transaction from unfolding. Allied’s negligence
must be considered as the proximate cause of the resulting loss. To reiterate,
had Allied exercised the diligence due from a financial institution, the check
would not have been issued and no loss of funds would have resulted. In fact,
there would have been no issuance of indorsement had there been no check in
the first place. The liability of Allied, however, is concurrent with that of
Metrobank as the last indorser of the check. When Metrobank indorsed the
check in compliance with the PCHC Rules and Regulations without verifying the
authenticity of Lim Sio Wan’s indorsement and when it accepted the check
despite the fact that it was cross-checked payable to payee’s account only, its
negligent and cavalier indorsement contributed to the easier release of Lim Sio
Wan’s money and perpetuation of the fraud. Given the relative participation of
Allied and Metrobank to the instant case, both banks cannot be adjudged as
equally liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank,
as ruled by the CA, must be upheld.
Same; Quasi-Delicts; Art. 2180 of the Civil Code pertains to the vicarious liability
of an employer for quasi-delicts that an employee has committed—such
provision of law does not apply to civil liability arising from delict.—As to
Producers Bank, Allied Bank’s argument that Producers Bank must be held liable
as employer of Santos under Art. 2180 of the Civil Code is erroneous. Art. 2180
pertains to the vicarious liability of an employer for quasi-delicts that an
employee has committed. Such provision of law does not apply to civil liability
arising from delict. One also cannot apply the principle of subsidiary liability in
Art. 103 of the Revised Penal Code in the instant case. Such liability on the part
of the employer for the civil aspect of the criminal act of the employee is based
on the conviction of the employee for a crime. Here, there has been no
conviction for any crime.
Same; Unjust Enrichment; Words and Phrases; There is unjust enrichment when
a person unjustly retains a benefit to the loss of another, or when a person
retains money or property of another against the fundamental principles of
justice, equity and good conscience.—As to the claim that there was unjust
enrichment on the part of Producers Bank, the same is correct. Allied correctly
claims in its petition that Producers Bank should reimburse Allied for whatever
judgment that may be rendered against it pursuant to Art. 22 of the Civil Code,
which provides: “Every person who through an act of performance by another,
or any other means, acquires or comes into possession of something at the
expense of the latter without just cause or legal ground, shall return the same
to him.” The above provision of law was clarified in Reyes v. Lim, 408 SCRA 560
(2003), where we ruled that “[t]here is unjust enrichment when a person
unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice,
equity and good conscience.” In Tamio v. Ticson, 443 SCRA 44 (2004), we
further clarified the principle of unjust enrichment, thus: “Under Article 22 of
the Civil Code, there is unjust enrichment when (1) a person is unjustly
benefited, and (2) such benefit is derived at the expense of or with damages to
another.” [Allied Banking Corporation vs. Lim Sio Wan, 549 SCRA 504(2008)]
Excerpt : 1. SCRA 360 [2007]) ——o0o—— G.R. No. 133179. March 27, 2008.
[*] ALLIED BANKING CORPORATION, petitioner, vs . LIM SIO WAN ,
METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents.
Banks and Banking ; Fundamental and familiar is the doctrine that the
relationship between a bank and a client is one of debtor-creditor.—As to the
liability of the parties, we find that Allied is liable to Lim Sio Wan . Fundamental
and familiar is the doctrine that the relationship between a bank and a client is
one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide: Art.
1953. A person who receives a loan of money or any other fungible thing
acquires the ownership thereof, and is bound to pay
2. middle man or dealer in open market. In a money market transaction, the
investor is a lender who loans his money to a borrower through a middleman or
dealer. In the case at bar, the money market transaction between the petitioner
and the private respondent is in the nature of a loan. Lim Sio Wan , as creditor
of the bank for her money market placement, is entitled to payment upon her
request, or upon maturity of the placement, or until the bank is released from
its obligation as debtor. Until any such event, the obligation
of Allied to Lim Sio Wan remains unextinguished. Same; Same; Payment made
by the debtor to a wrong party does not extinguish the obligation as to the
creditor, if there is no
3. fault or negligence which can be imputed to the latter.—From the factual
findings of the trial and appellate courts that Lim Sio Wan did not authorize the
release of her money market placement to Santos and the bank had been
negligent in so doing, there is no question that the obligation of Allied to
pay Lim Sio Wan had not been extinguished. Art. 1240 of the Code states that
“payment shall be made to the person in whose favor the obligation has been
constituted, or his successor in interest, or any person authorized to receive it.”
As commented by Arturo Tolentino: Payment made by the debtor to a wrong
party does not extinguish the obligation as to the creditor, if there is no fault or
4. ...Page Edit Line Top SO ORDERED. Quisumbing (Chairperson), Carpio-
Morales, Chico-Nazario and Velasco, Jr., JJ., concur. Judgment modified.
Notes.—Prosecutors designated by the COMELEC to prosecute the cases act as
its deputies. They derive their authority from it and not from their offices.
(Commission on Elections vs . Silva, Jr., 286 SCRA 177 [1998]) It is a
jurisprudential rule that the testimony of a self-confessed accomplice or co-
conspirator imputing the blame to or implicating his co-accused cannot, by itself
and without corroboration, be regarded as proof with a moral certainty that the
latter committed or participated in the commission of the crime. (People vs .
Farjardo, Jr., 512
5. request, or upon the maturity of the placement, or until the bank is released
from its obligation as debtor.—We have ruled in a line of cases that a bank
deposit is in the nature of a simple loan or mutuum. More succinctly, in
Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, 504 SCRA 378
(2006), this Court ruled that a money market placement is a simple loan or
mutuum. Further, we defined a money market in Cebu International
FinanceCorporation v. Court of Appeals, 316 SCRA 488 (1999), as follows: [A]
money market is a market dealing in standardized short-term credit
instruments (involving large amounts) where lenders and borrowers do not deal
directly with each other but through a
6. The above provision of law was clarified in Reyes v. Lim , where we ruled that
“[t]here is unjust enrichment when a person unjustly retains a benefit to the
loss of another, or when a person retains money or property of another against
the fundamental principles of justice, equity and good conscience.” [58] In
Tamio v. Ticson, we further clarified the principle of unjust enrichment, thus:
“Under Article 22 of the Civil Code, there is unjust enrichment when (1) a
person is unjustly benefited, and (2) such benefit is derived at the expense of or
with damages to another.” [59] In the instant case, Lim Sio Wan ’s money
market placement in Allied Bank was pre-terminated and withdrawn without
her
7. consent. Moreover, the proceeds of the placement were deposited in
Producers Bank’s account in Metrobank without any justification. In other
words, there is no reason that the proceeds of Lim Sio Wans’ placement should
be deposited in FCC’s account purportedly as payment for FCC’s money market
placement and interest in Producers Bank. With such payment, Producers
Bank’s indebtedness to FCC was extinguished, thereby benefitting the former.
Clearly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan .
Based on the facts and circumstances of the case, Producers Bank should
reimburse Allied and Metrobank for the amounts the two latter banks are
ordered to pay Lim Sio Wan . It cannot be
8. jurisdiction over her. [60] We, therefore, cannot ascribe to her liability in the
instant case. Clearly, Producers Bank must be held liable to Allied and
Metrobank for the amount of the check plus 12% interest per annum, moral
damages, attorney’s fees, and costs of suit which Allied and Metrobank are
adjudged to pay Lim Sio Wan based on a proportion of 60:40. WHEREFORE, the
petition is PARTLY GRANTED. The March 18, 1998 CA Decision in CA-G.R. CV No.
46290 and the November 15, 1993 RTC Decision in Civil Case No. 6757 are
AFFIRMED with MODIFICATION. Thus, the CA Decision is AFFIRMED, the fallo of
which is reproduced, as follows: “WHEREFORE, premises considered, the
decision appealed from is MODIFIED
9. . Judgment is rendered ordering and sentencing defendant-
appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-
appellee Metropolitan Bank and Trust Company forty (40%) of the amount of
P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully
paid. The moral damages, attorney’s fees and costs of suit adjudged shall
likewise be paid by defendant-appellant Allied Banking Corporation and
defendant-appellee Metropolitan Bank and Trust Company in the same
proportion of 60-40. Except as thus modified, the decision appealed from is
AFFIRMED. SO ORDERED.” Additionally and by way of MODIFICATION,
Producers Bank is hereby ordered to pay Allied and Metrobank the
10. aforementioned amounts. The liabilities of the parties are concurrent and
independent of each other. SO ORDERED. Quisumbing (Chairperson), Carpio-
Morales, Tinga and Chico-Nazario, [**] JJ., concur. Petition partly granted,
judgment affirmed with modification. Notes.—A money market transaction
partakes of the nature of a loan and nonpayment thereof would not give rise to
criminal liability for estafa through misappropriation or conversion.
(Sesbreno vs . Court of Appeals, 240 SCRA 606 [1995]) The quasi-contract of
solutio indebiti harks back to the ancient principle that no one shall enrich
himself unjustly at the expense of another. (MoreÑo-Lentfer vs . Wolff, 441
SCRA 584 [2004])
Case Title : TERESITA VILLALUZ, CHIT ILAGAN, Spouses ADOR and TESS TABERNA
and MARIO LLAMAS, petitioners, vs. THE HONORABLE COURT OF APPEALS and
SPOUSES REYNALDO AND ZENAIDA ANZURES, respondents.Case Nature :
PETITION for review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Criminal Law|Remedial Law|B.P. 22|Appeal|Ejectment
Syllabi:
1. Criminal Law; B.P. 22; Appeal; It is well-settled that cases brought to the
Supreme Court from the CA are limited to a review of questions of law, as the
factual findings thereon are conclusive on the Court.-
—The contention of petitioner Villaluz essentially strikes at a factual question. It
is well-settled, however, that cases brought to this Court from the CA are limited
to a review of questions of law, as the factual findings thereon are conclusive on
this Court. In addition, it is also well-settled that the factual findings of the trial
court if supported by substantial evidence on record are likewise conclusive on
this Court and even carries more weight when affirmed by the CA. These
doctrines find applicability in this case considering that the assailed findings do
not fall under any of the recognized exceptions where the lower courts’ factual
findings are not binding on this Court.
2. Same; Same; Petitioners are not lessees but their status is analogous to that
of a lessee or tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner.-
—In this case, although possession by petitioners (other than Villaluz) lasted
beyond March 31, 1988 (the date they were supposed to vacate the premises in
accordance with the agreement between petitioner Villaluz and private
respondents), nevertheless their continued possession from April 1, 1988 up to
the time they received the demand to vacate on February 23, 1989, is
considered as possession by tolerance. Said petitioners are not lessees but their
status is analogous to that of a lessee or tenant whose term of lease has expired
but whose occupancy continued by tolerance of the owner. Their right of
possession of the said property stems from their being employees of petitioner
Villaluz who only allowed them to occupy the premises for a certain period. As
such, their possession depends upon the possession of petitioner Villaluz. Having
merely stepped
3. Remedial Law; Ejectment; The one-year reglementary period under Section 1,
Rule 70 for filing an unlawful detainer case is counted from the time of the
unlawful deprivation or withholding of possession.-
—Anent the ejectment case, the one-year reglementary period under Section 1,
Rule 70 for filing an unlawful detainer case is counted from the time of the
“unlawful deprivation or withholding of possession.” Such unlawful deprivation
occurs upon expiration or termination of the right to hold possession. And such
right legally expires or terminates upon receipt of the last demand to vacate.
4. Same; Same; Though petitioner was acquitted of the criminal offense, she
may still be held civilly liable for the checks she issued.-
—Moreover, it is totally misleading for petitioner Villaluz’s to say that the trial
court found that she has no liability to private respondents. The mere fact that
the trial court as affirmed by the CA ordered her to pay P2,123,400.00 to private
respondents belies her claim. In addition, it is absurd for her to issue checks in
such a huge amount to private respondents had this not been for the
satisfaction of a monetary obligation. It is well to emphasize at this point, that
though petitioner was acquitted of the criminal offense, she may still be held
civilly liable for the checks she issued. Such pronouncement as to her civil liability
is sanctioned under Section 2 of Rule 120 which provides in part: “In case of
acquittal, unless there is a clear showing that the act from which the civil
liability might arise did not exist, the judgment shall make a finding on the civil
liability of the accused in favor of the offended party.”
Division: THIRD DIVISION
Docket Number: G.R. No. 106214
Counsel: Jaime S. Linsangan, Jaime V. Villanueva
Ponente: FRANCISCO
Dispositive Portion:
WHEREFORE, premises considered, the decision of the Court of Appeals in the
assailed consolidated case is hereby AFFIRMED in toto.
Same; Same; Though petitioner was acquitted of the criminal offense, she may
still be held civilly liable for the checks she issued.—Moreover, it is totally
misleading for petitioner Villaluz’s to say that the trial court found that she has
no liability to private respondents. The mere fact that the trial court as affirmed
by the CA ordered her to pay P2,123,400.00 to private respondents belies her
claim. In addition, it is absurd for her to issue checks in such a huge amount to
private respondents had this not been for the satisfaction of a monetary
obligation. It is well to emphasize at this point, that though petitioner was
acquitted of the criminal offense, she may still be held civilly liable for the
checks she issued. Such pronouncement as to her civil liability is sanctioned
under Section 2 of Rule 120 which provides in part: “In case of acquittal, unless
there is a clear showing that the act from which the civil liability might arise did
not exist, the judgment shall make a finding on the civil liability of the accused
in favor of the offended party.”
Remedial Law; Ejectment; The one-year reglementary period under Section 1,
Rule 70 for filing an unlawful detainer case is counted from the time of the
unlawful deprivation or withholding of possession.—Anent the ejectment case,
the one-year reglementary period under Section 1, Rule 70 for filing an unlawful
detainer case is counted from the time of the “unlawful deprivation or
withholding of possession.” Such unlawful deprivation occurs upon expiration
or termination of the right to hold possession. And such right legally expires or
terminates upon receipt of the last demand to vacate.
Same; Same; Petitioners are not lessees but their status is analogous to that of a
lessee or tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner.—In this case, although possession by
petitioners (other than Villaluz) lasted beyond March 31, 1988 (the date they
were supposed to vacate the premises in accordance with the agreement
between petitioner Villaluz and private respondents), nevertheless their
continued possession from April 1, 1988 up to the time they received the
demand to vacate on February 23, 1989, is considered as possession by
tolerance. Said petitioners are not lessees but their status is analogous to that
of a lessee or tenant whose term of lease has expired but whose occupancy
continued by tolerance of the owner. Their right of possession of the said
property stems from their being employees of petitioner Villaluz who only
allowed them to occupy the premises for a certain period. As such, their
possession depends upon the possession of petitioner Villaluz. Having merely
stepped into the shoes of the latter, said petitioners cannot acquire superior
rights than that of petitioner Villaluz. It has been ruled, that “the person who
occupies the land of another at the latter’s tolerance or permission, without any
contract between them, is necessarily bound by an implied promise that he will
vacate the same upon demand,” otherwise the remedy of ejectment may be
availed to oust him from the premises. In such case, the one year prescriptive
period for filing the appropriate action to remedy the unlawful withholding of
possession is to be counted from the date of receipt of the last demand to
vacate because it is only from that time that possession becomes illegal.
Accordingly, since the complaint for ejectment was instituted on July 12, 1989,
or a mere four (4) months from the time of the last demand to vacate, the same
was timely filed within the prescriptive period. [Villaluz vs. Court of Appeals,
278 SCRA 540(1997)]
Case Title : REMIGIO S. ONG, petitioner, vs. PEOPLE OF THE PHILIPPINES and
COURT OF APPEALS (EIGHTH DIVISION), respondents.Case Nature : PETITION
for review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Criminal Law||Negotiable Instruments
Law|Witnesses|Indeterminate Sentence Law
Syllabi:
1. Criminal Law; Bouncing Checks (Batas Pambansa Blg. 22); The gravamen of
the offense punished by B.P. 22 is the act of making and issuing a worthless
check or a check that is dishonored upon its presentation for payment—it is not
the non-payment of an obligation which the law punishes.-
On petitioner’s contention that the check was not drawn on account or for
value, the law and jurisprudence is clear on this matter In the case of Cruz vs.
Court of Appeals, this Court had occasion to rule that: What the law punishes is
the issuance of a bouncing check, not the purpose for which it was issued nor
the terms and conditions relating to its issuance. The mere act of issuing a
worthless check is malum prohibitum. The gravamen of the offense punished by
B.P. 22 is the act of making and issuing a worthless check or a check that is
dishonored upon its presentation for payment. It is not the non-payment of an
obligation which the law punishes. The law is not intended or designed to coerce
a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
sanctions, the making of worthless checks and putting them in circulation.
2. Criminal Law; Negotiable Instruments Law; In actions based upon a
negotiable instrument, it is unnecessary to aver or prove consideration, for
consideration is important and presumed from the fact that it is a negotiable
instrument.—Petitioner’s argument that the subject check was issued without
consideration is inconsequential. The law invariably declares the mere act of
issuing a worthless check as malum prohibitum. We quote with approval the
appellate court’s findings on this matter: In actions based upon a negotiable
instrument, it is unnecessary to aver or prove consideration, for consideration is
important and presumed from the fact that it is a negotiable instrument. The
presumption exists whether the words “value received” appear on the
instrument or not (Agbayani, A.F Commentaries and Jurisprudence on the
Commercial Laws of the Philippines, 1989 Ed., Vol. 1, p. 227, emphasis supplied).
Furthermore, such contention is also inconsequential in Batas Pambansa Blg. 22.
x x x In Que vs. People (154 SCRA 161 [1987]), the Supreme Court stated that it is
the clear intention of the framers of Batas Pambansa Blg. 22 to make the mere
act of issuing a worthless check malum prohibitum. In prosecutions for violation
of B.P. Blg. 22, therefore, prejudice or damage is not a prerequisite for
conviction. In the more recent case of People vs. Nitafan (215 SCRA 79 [1992]),
the Supreme Court ruled that the argument surrounding the issuance of the
checks need not be first looked into, since the law clearly provides that the mere
issuance of any kind of check, regardless of the intent of the parties; i.e.,
whether the check was intended merely to serve as a guarantee or deposit, but
which check was subsequently dishonored, makes the person who issued the
check liable. The intent of the law is to curb the proliferation of worthless checks
and to protect the stability and integrity of checks as a means of payment of
obligation (Lazaro vs. Court of Appeals, 227 SCRA 723, 726-727 [1993]).-
3. Criminal Law; Witnesses; It is well-settled in criminal jurisprudence that
where the issue is one of credibility of witnesses, the appellate court will
generally not disturb the findings of the trial court.-
It is well-settled in criminal jurisprudence that where the issue is one of
credibility of witnesses, the appellate court will generally not disturb the findings
of the trial court, considering it was in a better position to settle such issue.
Indeed, the trial court has the advantage of hearing the witness and observing
his conduct during trial, circumstances which carry a great weight in
appreciating his credibility.
4. Criminal Law; Indeterminate Sentence Law; In light of the rulings in the
recent cases of Vaca v. Court of Appeals, 298 SCRA 656 (1998) and Rosa Lim v.
People, 340 SCRA 497, G.R. No. 130038, 18 September 2000, the Court deems it
best in the instant case, to limit the penalty for violation of B.P. Blg. 22 to
payment of a fine; It would best serve the ends of criminal justice if in fixing the
penalty within the range of discretion allowed by Sec. 1, par. 1, the same
philosophy underlying the Indeterminate Sentence Law is observed, namely, that
of redeeming valuable human material and preventing unnecessary deprivation
of personal liberty and economic usefulness with due regard to the protection of
the social order.-
In light, however, of the rulings in the recent cases of Vaca v. Court of Appeals
and Rosa Lim v. People, the Court deems it best in the instant case, to limit the
penalty for violation of B.P. Blg. 22 to payment of a fine in the amount of
P150,000.00. Following our rationale in the aforesaid cases, the Court believes
that it would best serve the ends of criminal justice if in fixing the penalty within
the range of discretion allowed by Sec. 1, par. 1, the same philosophy underlying
the Indeterminate Sentence Law is observed, namely, that of redeeming
valuable human material and preventing unnecessary deprivation of personal
liberty and economic usefulness with due regard to the protection of the social
order.
Division: FIRST DIVISION
Docket Number: G.R. No. 139006
Counsel: Raymundo G. Hipolito II, Melchor Monsod
Ponente: KAPUNAN
Dispositive Portion:
WHEREFORE, in view of the foregoing, we AFFIRM the decision of the Court of
Appeals WITH THE MODIFICATION that the sentence of imprisonment is
DELETED. Petitioner is hereby ordered to pay a fine of P150,000.00. He is
likewise ordered to pay civil indemnity in the amount of P130,000.00, and the
costs of the suit.
Case Title : LUIS S. WONG, petitioner, vs. COURT OF APPEALS and PEOPLE OF
THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari
of a decision of the Court of Appeals.
Syllabi Class : Criminal Law|Batas Pambansa Blg. 22|Evidence|Penalty
Syllabi:
1. Criminal Law; Batas Pambansa Blg. 22; Evidence; Findings of fact of the
Court of Appeals are generally conclusive.-
Although Manuel Limtong was the sole witness for the prosecution, his
testimony was found sufficient to prove all the elements of the offense charged.
We find no cogent reason to depart from findings of both the trial and appellate
courts. In cases elevated from the Court of Appeals, our review is confined to
alleged errors of law. Its findings of fact are generally conclusive. Absent any
showing that the findings by the respondent court are entirely devoid of any
substantiation on record, the same must stand.
2. Criminal Law; Batas Pambansa Blg. 22; Evidence; What the law punishes is
the issuance of a bouncing check and not the purpose for which it was issued nor
the terms and conditions relating to its issuance; The mere act of issuing a
worthless check is malum prohibitum.-
In Llamado v. Court of Appeals, we held that “[t]o determine the reason for
which checks are issued, or the terms and conditions for their issuance, will
greatly erode the faith the public reposes in the stability and commercial value
of checks as currency substitutes, and bring about havoc in trade and in banking
communities. So what the law punishes is the issuance of a bouncing check and
not the purpose for which it was issued nor the terms and conditions relating to
its issuance. The mere act of issuing a worthless check is malum prohibitum.”
Nothing herein persuades us to hold otherwise.
3. Criminal Law; Batas Pambansa Blg. 22; Evidence; Two (2) ways of violating
Batas Pambansa Blg. 22.-
There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and
issuing a check to apply on account or for value knowing at the time of issue
that the check is not sufficiently funded; and (2) by having sufficient funds in or
credit with the drawee bank at the time of issue but failing to keep sufficient
funds therein or credit with said bank to cover the full amount of the check when
presented to the drawee bank within a period of ninety (90) days.
4. Criminal Law; Batas Pambansa Blg. 22; Evidence; The maker’s knowledge is
presumed from the dishonor of the check for insufficiency of funds.-
As to the second element, B.P. Blg. 22 creates a presumption juris tantum that
the second element prima facie exists when the first and third elements of the
offense are present. Thus, the maker’s knowledge is presumed from the
dishonor of the check for insufficiency of funds.
5. Criminal Law; Batas Pambansa Blg. 22; Evidence; Nowhere in Section 2 of
the law does it require a maker to maintain funds in his bank account for only 90
days; That the check must be deposited within ninety (90) days is simply one of
the conditions for the prima facie presumption of knowledge of lack of funds to
arise.-
Contrary to petitioner’s assertions, nowhere in said provision does the law
require a maker to maintain funds in his bank account for only 90 days. Rather,
the clear import of the law is to establish a prima facie presumption of
knowledge of such insufficiency of funds under the following conditions (1)
presentment within 90 days from date of the check, and (2) the dishonor of the
check and failure of the maker to make arrangements for payment in full within
5 banking days after the notice thereof. That the check must be deposited within
ninety (90) days is simply one of the conditions for the prima facie presumption
of knowledge of lack of funds to arise. It is not an element of the offense.
6. Criminal Law; Batas Pambansa Blg. 22; Evidence; By current banking
practice a check becomes stale after more than six (6) months or 180 days.-
Under Section 186 of the Negotiable Instruments Law, “a check must be
presented for payment within a reasonable time after its issue or the drawer will
be discharged from liability thereon to the extent of the loss caused by the
delay.” By current banking practice, a check becomes stale after more than six
(6) months, or 180 days. Private respondent herein deposited the checks 157
days after the date of the check. Hence, said checks cannot be considered stale.
Only the presumption of knowledge of insufficiency of funds was lost, but such
knowledge could still be proven by direct or circumstantial evidence.
7. Criminal Law; Batas Pambansa Blg. 22; Penalty; Pursuant to the policy
guidelines in Administrative Circular No. 12-2000, the penalty imposed on
petitioner should now be modified to a fine of not less than but not more than
double the amount of the checks that were dishonored.-
Pursuant to the policy guidelines in Administrative Circular No. 12-2000, which
took effect on November 21, 2000, the penalty imposed on petitioner should
now be modified to a fine of not less than but not more than double the amount
of the checks that were dishonored.
Division: SECOND DIVISION
Docket Number: G.R. No. 117857
Counsel: Agapito P. Pagayanan, Jr. and Tañada, Vivo, Tan, The Solicitor General
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for
violation of Batas Pambansa Blg. 22 but the penalty imposed on him is hereby
MODIFIED so that the sentence of imprisonment is deleted. Petitioner is
ORDERED to pay a FINE of (1) P6,750.00, equivalent to double the amount of
the check involved in Criminal Case No. CBU-12057, (2) P12,820.00, equivalent
to double the amount of the check involved in Criminal Case No. CBU-12058,
and (3) P11,000.00, equivalent to double the amount of the check involved in
Criminal Case No. CBU-12055, with subsidiary imprisonment
Case Title : CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP,
RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT OF APPEALS and
PHILIPPINE BANK OF COMMUNICATIONS, respondents., MICO METALS
CORPORATION, petitioner, vs. COURT OF APPEALS and PHILIPPINE BANK OF
COMMUNICATIONS, respondents.
Syllabi Class : Civil Procedure|Commercial Law|Negotiable Instruments
Law|Essential Requisites of a Negotiable Instrument
Syllabi:
1. Civil Procedure; During the trial of an action, the party who has the burden of
proof upon an issue may be aided in establishing his claim or defense by the
operation of a presumption, or, expressed differently, by the probative value
which the law attaches to a specific state of facts; A presumption may operate
against his adversary who has not introduced proof to rebut the presumption.-
During the trial of an action, the party who has the burden of proof upon an
issue may be aided in establishing his claim or defense by the operation of a
presumption, or, expressed differently, by the probative value which the law
attaches to a specific state of facts. A presumption may operate against his
adversary who has not introduced proof to rebut the presumption. The effect of
a legal presumption upon a burden of proof is to create the necessity of
presenting evidence to meet the legal presumption or the prima facie case
created thereby, and which if no proof to the contrary is presented and offered,
will prevail. The burden of proof remains where it is, but by the presumption the
one who has that burden is relieved for the time being from introducing
evidence in support of his averment, because the presumption stands in the
place of evidence unless rebutted.
2. Commercial Law; Negotiable Instruments Law; Essential Requisites of a
Negotiable Instrument;Letters of credit and trust receipts are not negotiable
instruments.-
Negotiable instruments which are meant to be substitutes for money, must
conform to the following requisites to be considered as such a) it must be in
writing; b) it must be signed by the maker or drawer; c) it must contain an
unconditional promise or order to pay a sum certain in money; d) it must be
payable on demand or at a fixed or determinable future time; e) it must be
payable to order or bearer; and f) where it is a bill of exchange, the drawee must
be named or otherwise indicated with reasonable certainty. Negotiable
instruments include promissory notes, bills of exchange and checks. Letters of
credit and trust receipts are, however, not negotiable instruments. But drafts
issued in connection with letters of credit are negotiable instruments.
3. Commercial Law; Negotiable Instruments Law; Essential Requisites of a
Negotiable Instrument; A trust receipt is a document of security pursuant to
which a bank acquires a “security interest” in the goods under trust receipt.-
A trust receipt is considered as a security transaction intended to aid in financing
importers and retail dealers who do not have sufficient funds or resources to
finance the importation or purchase of merchandise, and who may not be able
to acquire credit except through utilization, as collateral of the merchandise
imported or purchased. A trust receipt, therefor, is a document of security
pursuant to which a bank acquires a “security interest” in the goods under trust
receipt. Under a letter of credit-trust receipt arrangement, a bank extends a
loan covered by a letter of credit, with the trust receipt as a security for the loan.
The transaction involves a loan feature represented by a letter of credit, a
security feature which is in the covering trust receipt which secures an
indebtedness.
Division: SECOND DIVISION
Docket Number: G.R. No. 117913, G.R. No. 117914
Counsel: Lim, Duran & Associates, Silvestre J. Acejas & Associates, Laogan, Silva,
Baeza & Llantino Law Office
Ponente: DE LEON, JR.
Dispositive Portion:
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No.
27480 entitled, “Philippine Bank of Communications vs. Mico Metals
Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard
Velasco and Alfonso Co,” is AFFIRMED in toto.
Case Title : FELICITO G. SANSON, CELEDONIA SANSON-SAQUIN, ANGELES A.
MONTINOLA, EDUARDO A. MONTINOLA, JR., petitioners-appellants, vs.
HONORABLE COURT OF APPEALS, FOURTH DIVISION and MELECIA T. SY, As
Administratrix of the Intestate Estate of the Late Juan Bon Fing Sy, respondents-
appellees.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Evidence|Witnesses|Relationship|Documentary
Evidence|Genuineness of Signature|Testimonial Evidence|Hearsay
Rule|Exception|Dead Man’s Statute
Syllabi:
1. Evidence; Witnesses; Relationship; Relationship to a party has never been
recognized as an adverse factor in determining either the credibility of the
witness or the admissibility of the testimony.-
Relationship to a party has never been recognized as an adverse factor in
determining either the credibility of the witness or—subject only to well
recognized exceptions none of which is here present—the admissibility of the
testimony. At most, closeness of relationship to a party, or bias, may indicate
the need for a little more caution in the assessment of a witness’ testimony but
is not necessarily a negative element which should be taken as diminishing the
credit otherwise accorded to it.
2. Evidence; Documentary Evidence; Genuineness of Signature; Deceased
presumed to be a party to the check for value by proof of the genuineness of the
deceased’s signature.-
The genuineness of the deceased’s signature having been shown, he is prima
facie presumed to have become a party to the check for value, following Section
24 of the Negotiable Instruments Law which reads: Section 24. Presumption of
Consideration.—Every negotiable instrument is deemed prima facie to have
been issued for a valuable consideration; and every person whose signature
appears thereon to have become a party thereto for value.
3. Evidence; Testimonial Evidence; Hearsay Rule; Exception; Dead Man’s
Statute; The Dead Man’s Statute renders incompetent certain persons from
testifying.-
As for the administratrix’s invocation of the Dead Man’s Stat- ute, the same
does not likewise lie. The rule renders incompetent: 1) parties to a case; 2) their
assignors; or 3) persons in whose behalf a case is prosecuted. x x x The rule is
exclusive and cannot be construed to extend its scope by implication so as to
disqualify persons not mentioned therein. Mere witnesses who are not included
in the above enumeration are not prohibited from testifying as to a conversation
or transaction between the deceased and a third person, if he took no active
part therein. x x x
4. Evidence; Testimonial Evidence; Hearsay Rule; Exception; Dead Man’s
Statute; What the Dead Man’s Statute proscribes is the admission of testimonial
evidence upon a claim which arose before the death of the deceased.-
In any event, what the Dead Man’s Statute proscribes is the admission of
testimonial evidence upon a claim which arose before the death of the
deceased. The incompetency is confined to the giving of testimony. Since the
separate claims of Sanson and Celedonia are supported by checks-documentary
evidence, their claims can be prosecuted on the bases of said checks.
Division: THIRD DIVISION
Docket Number: G.R. No. 127745
Counsel: Jerry P. Trenas, Efrain B. Trenas, Tirol
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the impugned May 31, 1996 Decision of the Court of Appeals is
hereby SET ASIDE and another rendered ordering the intestate estate of the
late Juan Bon Fing Sy, through Administratrix Melecia T. Sy, to pay:
Case Title : LEODEGARIO BAYANI, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of the decision of
the Court of Appeals.
Syllabi Class : Commercial Law|Criminal Law|Negotiable Instruments
Law|Holder in Due Course|Special Law
Syllabi:
1. Commercial Law; Negotiable Instruments Law; Holder in Due Course; The
evidence on record shows that Evangelista rediscounted the check and gave
P55,000.00 to Rubia after the latter endorsed the same—as such, Evangelista is
a holder of the check in due course; Under Section 28 of the Negotiable
Instruments Law, absence or failure of consideration is a matter of defense only
as against any person not a holder in due course.-
The evidence on record shows that Evangelista rediscounted the check and gave
P55,000.00 to Rubia after the latter endorsed the same. As such, Evangelista is a
holder of the check in due course. Under Section 28 of the Negotiable
Instruments Law (NIL), absence or failure of consideration is a matter of defense
only as against any person not a holder in due course, thus: SECTION 28. Effect
of want of consideration.—Absence or failure of consideration is a matter of
defense as against any person not a holder in due course; and partial failure of
consideration is a defense pro tanto, whether the failure is an ascertained and
liquidated amount or otherwise.
2. Criminal Law; Special Law; Violation of B.P. Blg. 22; For the accused to be
guilty of violation of Section 1 of B.P. Blg. 22, the prosecution is mandated to
prove the essential elements thereof, to wit: (1) that a person makes or draws
and issues any check; (2) that the check is made or drawn and issued to apply on
account or for value; (3) that the person who makes or draws and issues the
check knows at the time of issue that he does not have sufficient funds in or
credit with the drawee bank for the payment of such check in full upon its
presentment; (4) that the check is subsequently dishonored by the drawee bank
for insufficiency of funds or credit, or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the bank to stop
payment.-
For the accused to be guilty of violation of Section 1 of B.P. Blg. 22, the
prosecution is mandated to prove the essential elements thereof, to wit: 1. That
a person makes or draws and issues any check; 2. That the check is made or
drawn and issued to apply on account or for value; 3. That the person who
makes or draws and issues the check knows at the time of issue that he does not
have sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment; 4. That the check is subsequently dishonored
by the drawee bank for insufficiency of funds or credit, or would have been
dishonored for the same reason had not the drawer, without any valid reason,
ordered the bank to stop payment.
Division: SECOND DIVISION
Docket Number: G.R. No. 154947
Counsel: Emmanuel C. Velasco, The Solicitor General
Ponente: CALLEJO, SR.
Dispositive Portion:
IN LIGHT OF ALL THE FOREOING, the petition is DENIED DUE COURSE. The
decision of the Court of Appeals is AFFIRMED.
Case Title : VICKY C. TY, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Exempting Circumstances|Defense of
Uncontrollable Fear|Justifying Circumstances|State of Necessity|Bouncing
Checks Law|Evidence|Penalty
Syllabi:
1. Criminal Law; Exempting Circumstances; Defense of Uncontrollable
Fear; Requisites for the defense of acting under an uncontrollable fear to be
invoked.-
The only question of law raised—whether the defense of uncontrollable fear is
tenable to warrant her exemption from criminal liability—has to be resolved in
the negative. For this exempting circumstance to be invoked successfully, the
following requisites must concur: (1) existence of an uncontrollable fear; (2) the
fear must be real and imminent; and (3) the fear of an injury is greater than or
at least equal to that committed.
2. Criminal Law; Exempting Circumstances; Defense of Uncontrollable Fear; A
person invoking uncontrollable fear must show that the compulsion was such
that it reduced him to a mere instrument acting not only without will but
against his will as well.-
It must appear that the threat that caused the uncontrollable fear is of such
gravity and imminence that the ordinary man would have succumbed to it. It
should be based on a real, imminent or reasonable fear for one’s life or limb. A
mere threat of a future injury is not enough. It should not be speculative,
fanciful, or remote. A person invoking uncontrollable fear must show therefore
that the compulsion was such that it reduced him to a mere instrument acting
not only without will but against his will as well. It must be of such character as
to leave no opportunity to the accused for escape.
3. Criminal Law; Justifying Circumstances; State of Necessity; Requisites to
exempt the actor from liability under par. 4, Art. II of the Revised Penal Code.-
The law prescribes the presence of three requisites to exempt the actor from
liability under this paragraph: (1) that the evil sought to be avoided actually
exists; (2) that the injury feared be greater than the one done to avoid it; (3)
that there be no other practical and less harmful means of preventing it.
4. Criminal Law; Justifying Circumstances; State of Necessity; If the evil sought
to be avoided is merely expected or anticipated or may happen in the future, this
defense is not applicable.-
In the instant case, the evil sought to be avoided is merely expected or
anticipated. If the evil sought to be avoided is merely expected or anticipated or
may happen in the future, this defense is not applicable. Ty could have taken
advantage of an available option to avoid committing a crime. By her own
admission, she had the choice to give jewelry or other forms of security instead
of postdated checks to secure her obligation.
5. Criminal Law; Justifying Circumstances; State of Necessity; For the defense
of state of necessity to be availing, the greater injury feared should not have
been brought about by the negligence or imprudence, more so, the willful
inaction of the actor.-
For the defense of state of necessity to be availing, the greater injury feared
should not have been brought about by the negligence or imprudence, more so,
the willful inaction of the actor. In this case, the issuance of the bounced checks
was brought about by Ty’s own failure to pay her mother’s hospital bills.
6. Criminal Law; Bouncing Checks Law; Evidence; It is presumed, upon the
issuance of the checks, in the absence of evidence to the contrary, that the same
was issued for valuable consideration.-
As to the issue of consideration, it is presumed, upon issuance of the checks, in
the absence of evidence to the contrary, that the same was issued for valuable
consideration. Section 24 of the Negotiable Instruments Law creates a
presumption that every party to an instrument acquired the same for a
consideration or for value. In alleging otherwise, Ty has the onus to prove that
the checks were issued without consideration. She must present convincing
evidence to overthrow the presumption.
7. Criminal Law; Bouncing Checks Law; Evidence; The law punishes the mere
act of issuing a bouncing check, not the purpose for which it was issued nor the
terms and conditions relating to its issuance.-
The law punishes the mere act of issuing a bouncing check, not the purpose for
which it was issued nor the terms and conditions relating to its issuance. B.P. 22
does not make any distinction as to whether the checks within its contemplation
are issued in payment of an obligation or to merely guarantee the obligation.
The thrust of the law is to prohibit the making of worthless checks and putting
them into circulation. As this Court held in Lim v. People of the Philippines,
“what is primordial is that such issued checks were worthless and the fact of its
worthlessness is known to the appellant at the time of their issuance, a required
element under B.P. Blg. 22.”
8. Criminal Law; Bouncing Checks Law; Evidence; Knowledge of insufficiency of
funds legally presumed from the dishonor of the checks for insufficiency of
funds.-
Such knowledge is legally presumed from the dishonor of the checks for
insufficiency of funds. If not rebutted, it suffices to sustain a conviction.
9. Criminal Law; Bouncing Checks Law; Evidence; The gravamen of the offense
is the issuance of a bad check, hence, malice and intent in the issuance thereof is
inconsequential.-
The knowledge of the payee of the insufficiency or lack of funds of the drawer
with the drawee bank is immaterial as deceit is not an essential element of an
offense penalized by B.P. 22. The gravamen of the offense is the issuance of a
bad check, hence, malice and intent in the issuance thereof is inconsequential.
10. Criminal Law; Bouncing Checks Law; Penalty; Administrative Circular 12-
2000, adopting the rulings in Vaca v. Court of Appeals and Lim v. People,
authorizes the non-imposition of the penalty of imprisonment in B.P. 22 cases
subject to certain conditions.-
We agree with the Court of Appeals in deleting the penalty of imprisonment,
absent any proof that petitioner was not a first-time offender nor that she acted
in bad faith. Administrative Circular 12-2000, adopting the rulings in Vaca v.
Court of Appeals and Lim v. People, authorizes the non-imposition of the penalty
of imprisonment in B.P. 22 cases subject to certain conditions.
Division: SECOND DIVISION
Docket Number: G.R. No. 149275
Counsel: Marvin L. Herrera, The Solicitor General
Ponente: TINGA
Dispositive Portion:
WHEREFORE, the instant Petition is DENIED and the assailed Decision of the
Court of Appeals, dated 31 July 2001, finding petitioner Vicky C. Ty GUILTY of
violating Batas Pambansa Bilang 22 is AFFIRMED with MODIFICATIONS.
Petitioner Vicky C. Ty is ORDERED to pay a FINE equivalent to double the
amount of each dishonored check subject of the seven cases at bar with
subsidiary imprisonment in case of insolvency in accordance with Article 39 of
the Revised Penal Code. She is also ordered to pay private complainant, Manila
Doctors’ Hospital, the amount of Two Hundred Ten Thousand Pesos
(P210,000.00) representing the total amount of the dishonored checks. Costs
against the petitioner.
Case Title : VICTOR ONGSON, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Bouncing Checks Law (B.P. 22)|Judgments|Due
Process|Right to be Informed|Admissions|Administrative Circular Nos. 12-2000
and 13-2001|Interest Rates
Syllabi:
1. Criminal Law; Bouncing Checks Law (B.P. 22); Judgments; The absence of
relevant antecedents as well as the lack of evaluation of the evidence adduced
by the parties and justification for its conclusion render the trial court’s decision
void.-
Based on the foregoing considerations, we find that the trial court’s decision in
the case at bar did not state the material facts, i.e., the transaction that led to
the issuance of the checks, their respective amounts, the date and reason for
dishonor. The decision likewise failed to discuss the elements of B.P. 22 and
other pertinent facts. Clearly, the absence of relevant antecedents as well as the
lack of evaluation of the evidence adduced by the parties and justification for its
conclusion render the instant decision void.
2. Criminal Law; Bouncing Checks Law (B.P. 22); Elements.-
The elements of violation of B.P. 22 are: (1) making, drawing, and issuance of
any check to apply on account or for value; (2) knowledge of the maker, drawer,
or issuer that at the time of issue he does not have sufficient funds in or credit
with the drawee bank for the payment of the check in full upon its presentment;
and (3) subsequent dishonor of the check by the drawee bank for insufficiency of
funds or credit, or dishonor for the same reason had not the drawer, without
any valid cause, ordered the bank to stop payment.
3. Criminal Law; Bouncing Checks Law (B.P. 22); Due Process; Right to be
Informed; Where the date of the check and the amount thereof as stated in the
Informations vary with the exhibits submitted by the prosecution, which
inconsistencies violate the accused’s constitutional right to be informed, he
should be acquitted; Without a sufficient identification of the dishonored check
in the Information, the conviction of the accused should be set aside for being
violative of the constitutional requirement of due process.-
The first element, i.e., making, drawing, and issuance of any check, requires that
the check be properly described in the Information to inform the accused of the
nature and cause of the accusation against him. Without a sufficient
identification of the dishonored check in the Information, the conviction of the
accused should be set aside for being violative of the constitutional requirement
of due process. In the instant case, petitioner should be acquitted in Criminal
Case Nos. Q-93-43437 and Q-93-43442, because the date of the check and the
amount thereof as stated in the Informations vary with the exhibits submitted
by the prosecution, which inconsistencies violate petitioner’s constitutional right
to be informed of the nature of the offense charged.
4. Criminal Law; Bouncing Checks Law (B.P. 22); Upon issuance of a check, in
the absence of evidence to the contrary, it is presumed that the same was issued
for valuable consideration, which may consist either in some right, interest,
profit or benefit accruing to the party who makes the contract, or some
forbearance, detriment, loss or some responsibility, to act, or labor, or service
given, suffered or undertaken by the other side.-
There is no merit in petitioner’s contention that the checks were issued without
valuable consideration. We have held that upon issuance of a check, in the
absence of evidence to the contrary, it is presumed that the same was issued for
valuable consideration, which may consist either in some right, interest, profit or
benefit accruing to the party who makes the contract, or some forbearance,
detriment, loss or some responsibility, to act, or labor, or service given, suffered
or undertaken by the other side. It is an obligation to do, or not to do in favor of
the party who makes the contract, such as the maker or endorser. In the case at
bar, the prosecution established beyond reasonable doubt that petitioner
received money in various amounts from private complainant. Whether the
amounts were loans or investment in the business of petitioner, the checks were
issued for valuable consideration. Either way, petitioner is under obligation to
pay private complainant. Likewise, the prosecution proved that some of the
checks were payment for private complainant’s commission from selling the
products of petitioner. Hence, the latter cannot successfully claim that the
issuance of the checks were not for a valuable consideration.
5. Criminal Law; Bouncing Checks Law (B.P. 22); What the law punishes is the
issuance of a bum check and not the purpose for which the check was issued nor
the terms or conditions relating to its issuance.-
The gravamen of the offense punished by B.P. 22 is the act of making and
issuing a worthless check, that is, a check that is dishonored upon its
presentation for payment. The mere act of issuing a worthless check is malum
prohibitum. So also, it is not the nonpayment of the obligation that is being
punished, but the making of worthless checks. What the law punishes is such
issuance of a bum check and not the purpose for which the check was issued nor
the terms or conditions relating to its issuance. Thus, even if there had been
payment through compensation or some other means, there could still be
prosecution for violation of B.P. 22.
6. Criminal Law; Bouncing Checks Law (B.P. 22); For the prima facie
presumption that the drawer had knowledge of the insufficiency of his funds in
or credit with the bank at the time of the issuance and on the check’s
presentment for payment, the prosecution must prove that (a) the check is
presented within ninety (90) days from the date of the check, (b) the drawer or
maker of the check receives notice that such check has not been paid by the
drawee, and (c) the drawer or maker of the check fails to pay the holder of the
check the amount due thereon, or make arrange-ments for payment in full
within five (5) banking days after receiving notice that such check has not been
paid by the drawee; The presumption or prima facie evidence cannot arise, if
such notice of nonpayment by the drawee bank is not sent to the maker or
drawer, or if there is no proof as to when such notice was received by the
drawer since there would simply be no way of reckoning the crucial 5-day
period.-
As to the second element, we have held that knowledge involves a state of mind
which is difficult to establish, thus the statute itself creates a prima facie
presumption that the drawer had knowledge of the insufficiency of his funds in
or credit with the bank at the time of the issuance and on the check’s
presentment for payment if he fails to pay the amount of the check within five
(5) banking days from notice of dishonor. For this presumption to arise, the
prosecution must prove the following: (a) the check is presented within ninety
(90) days from the date of the check; (b) the drawer or maker of the check
receives notice that such check has not been paid by the drawee; and (c) the
drawer or maker of the check fails to pay the holder of the check the amount
due thereon, or make arrangements for payment in full within five (5) banking
days after receiving notice that such check has not been paid by the drawee. In
other words, the presumption is brought into existence only after it is proved
that the issuer had received a notice of dishonor and that within five days from
receipt thereof, he failed to pay the amount of the check or to make
arrangements for its payment. The presumption or prima facie evidence as
provided in this section cannot arise, if such notice of nonpayment by the
drawee bank is not sent to the maker or drawer, or if there is no proof as to
when such notice was received by the drawer, since there would simply be no
way of reckoning the crucial 5-day period. Furthermore, the notice of dishonor
must be in writing; a verbal notice is not enough.
7. Criminal Law; Bouncing Checks Law (B.P. 22); Admissions; The accused’s
admission through counsel, made during the trial, binds the client.-
In King v. People,it was held that the accused’s admission through counsel,
made during the trial, binds the client. Similarly, in Rigor v. People, the Court
ruled that the accused cannot pretend that he did not receive the notice of
dishonor of the check because the transcript of records shows that the accused
admitted knowledge of the dishonor of his check through a demand letter
received by him.
8. Criminal Law; Bouncing Checks Law (B.P. 22); The reason for dishonor as
stamped in the dorsal portion of the checks is prima facie presumptions of such
dishonor and the reasons therefor.-
The third element of violation of B.P. 22, i.e., the dishonor of the check by the
drawee bank, is also attendant in the present case as shown by the reason for
the dishonor as stamped in the dorsal portion of the checks which are also prima
facie presumptions of such dishonor and the reasons therefor. In Garcia v. Court
of Appeals, it was held that while it is true that the presumption is merely prima
facie, the accused must, nonetheless, present proof to the contrary to overcome
this presumption. Here, other than the bare allegations of petitioner, he
presented no well-grounded defense to prove that the subject checks were not
dishonored by the drawee banks.
9. Criminal Law; Bouncing Checks Law (B.P. 22); It is not required, much less
indispensable, for the prosecution to present the drawee bank’s representative
as a witness to testify on the dishonor of the checks.-
In Recuerdo v. People, the court emphasized that it is not required much less
indispensable, for the prosecution to present the drawee bank’s representative
as a witness to testify on the dishonor of the checks. The prosecution may
present, as it did in this case, only private complainant as a witness to prove all
the elements of the offense charged. Said witness is competent and qualified to
testify that upon presentment for payment, the subject checks were dishonored
by the drawee bank.
10. Criminal Law; Bouncing Checks Law (B.P. 22); Administrative Circular Nos.
12-2000 and 13-2001;Imprisonment need not be imposed on those found guilty
of violating B.P. Blg. 22—courts are vested the discretion to determine, taking
into consideration the peculiar circumstances of each case, whether the
imposition of fine would best serve the interest of justice, or whether forbearing
to impose imprisonment would depreciate the seriousness of the offense, work
violence on the social order, or otherwise contrary to the imperatives of justice;
Whether there is neither proof nor allegation that the accused is not a first time
offender, imposition of the penalty of fine instead of imprisonment is proper.-
Under Administrative Circular No. 12-2000, imprisonment need not be imposed
on those found guilty of violating B.P. Blg. 22. Administrative Circular No. 13-
2001, issued on February 14, 2001, vests in the courts the discretion to
determine, taking into consideration the peculiar circumstances of each case,
whether the imposition of fine (of not less than but not more than double the
amount of the check, but in no case exceeding P200,000.00), would best serve
the interest of justice, or whether forbearing to impose imprisonment would
depreciate the seriousness of the offense, work violence on the social order, or
otherwise contrary to the imperatives of justice. In Recuerdo v. People, and
Young v. Court of Appeals, it was held that where there is neither proof nor
allegation that the accused is not a first time offender, imposition of the penalty
of fine instead of imprisonment is proper. Likewise, in Lee v. Court of Appeals,
we ruled that the policy laid down in Vaca v. Court of Appeals, and Lim v.
People, of redeeming valuable human material and preventing unnecessary
deprivation of personal liberty and economic usefulness, should be considered in
favor of the accused who is not shown to be a habitual delinquent or a recidivist.
Said doctrines squarely apply in the instant case there being no proof or
allegation that petitioner is not a first time offender.
11. Criminal Law; Bouncing Checks Law (B.P. 22); Interest Rates; When an
obligation is breached, and it consists in the payment of a sum of money, the
interest due should be that which may have been stipulated in writing and in the
absence of such stipulation, the rate shall be 12% per annum computed from
judicial or extrajudicial demand; From the finality of this decision, the total
amount of the dishonored checks inclusive of interest shall further earn 12%
interest per annum until fully paid.-
Petitioner should be ordered to pay interest of 12% per annum pursuant to
Cabrera v. People, that when an obligation is breached, and it consists in the
payment of a sum of money, the interest due should be that which may have
been stipulated in writing. In the absence of such stipulation, the rate shall be
12% per annum computed from judicial or extrajudicial demand. In this case,
there was no stipulated interest on petitioner’s obligation to pay the value of the
dishonored checks. Demand for payment was made extrajudicially as evidenced
by petitioner’s receipt of private complainant’s demand letter with notice of
dishonor. The applicable interest rate is therefore 12% per annum from the date
of receipt of the demand letter on December 7, 1992 for Check Nos. 492666,
492482, 492581 and 492319; December 10, 1992 for Check No. 119789; and
December 18, 1992 for Check No. 492837 until finality of this decision. From the
finality of this decision, the total amount of the dishonored checks inclusive of
interest shall further earn 12% interest per annum until fully paid.
Division: FIRST DIVISION
Docket Number: G.R. No. 156169
Counsel: Llosa, Bonganciso, Ruperto, Abiera, Zerna Law Offices, The Solicitor
General
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the petition is PARTIALLY GRANTED. The June 27, 2002 decision of
the Court of Appeals in CA-G.R. CR No. 18662 is AFFIRMED with
MODIFICATIONS.In Criminal Case Nos. Q-93-43437 and Q-93-43442, petitioner
Victor Ongson is ACQUITTED of violation of B.P. Blg. 22 on the ground that his
guilt has not been proved beyond reasonable doubt.In Criminal Case Nos. Q-93-
43435, Q-93-43436, Q-93-43438, Q-93-43439, Q-93-43440 and Q-93-43441
petitioner is found guilty beyond reasonable doubt of violation of B.P. Blg. 22
and is sentenced as follows:The total amount of the dishonored checks inclusive
of interest shall further earn 12% interest per annum from the finality of the
decision until fully paid.
Case Title : LEODEGARIO BAYANI, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Bouncing Checks
Law|Jurisdictions|Evidence|Hearsay Evidence
Syllabi:
1. Criminal Law; Bouncing Checks Law; Jurisdictions; Jurisdiction of the Court
over cases elevated from the Court of Appeals is limited to reviewing or revising
errors of law ascribed to the Court of Appeals, whose factual findings are
conclusive and carry even more weight when said court affirms the findings of
the trial court, absent any showing that the findings are totally devoid of
support in the record or that they are so glaringly erroneous as to constitute
serious abuse of discretion.-
Well-settled is the rule that the factual findings and conclusions of the trial court
and the CA are entitled to great weight and respect, and will not be disturbed on
appeal in the absence of any clear showing that the trial court overlooked
certain facts or circumstances which would substantially affect the disposition of
the case. Jurisdiction of this Court over cases elevated from the CA is limited to
reviewing or revising errors of law ascribed to the CA, whose factual findings are
conclusive and carry even more weight when said court affirms the findings of
the trial court, absent any showing that the findings are totally devoid of
support in the record or that they are so glaringly erroneous as to constitute
serious abuse of discretion.
2. Criminal Law; Bouncing Checks Law; Evidence; Hearsay Evidence; Under
Section 36 of Rule 130 of the Rules of Court, any evidence—whether oral or
documentary—is hearsay if its probative value is not based on the personal
knowledge of the witness but on that of some other person who is not on the
witness stand.-
Section 36 of Rule 130 of the Rules of Court provides for the rule on hearsay
evidence, to wit: Sec. 36. Testimony generally confined to personal knowledge;
hearsay ex-cluded.—A witness can testify only to those facts which he knows of
his personal knowledge; that is, which are derived from his own perception,
except as otherwise provided in these rules. Under the above rule, any
evidence—whether oral or documentary—is hearsay if its probative value is not
based on the personal knowledge of the witness, but on that of some other
person who is not on the witness stand. Hence, information that is relayed to the
former by the latter before it reaches the court is considered hearsay.
3. Criminal Law; Bouncing Checks Law; Evidence; In failing to object to the
testimony on the ground that it was hearsay, the evidence offered may be
admitted.-
Petitioner is barred from questioning the admission of Evangelista’s testimony
even if the same is hearsay. Section 34, Rule 132 of the Rules of Court requires
that the trial court shall not consider any evidence which has not been finally
offered. Section 35 of the same Rule provides that as regards the testimony of a
witness, the offer must be made at the time the witness is asked to testify. And
under Section 36 of the same Rule, objection to a question propounded in the
course of the oral examination of a witness shall be made as soon as the ground
therefor becomes reasonably apparent. Thus, it has been held that “in failing to
object to the testimony on the ground that it was hearsay, the evidence offered
may be admitted.” Since no objection to the admissibility of Evangelista’s
testimony was timely made—from the time her testimony was offered and up to
the time her direct examination was conducted—then petitioner has effectively
waived any objection to the admissibility thereof and his belated attempts to
have her testimony excluded for being hearsay has no ground to stand on.
4. Criminal Law; Bouncing Checks Law; Evidence; Although hearsay evidence
may be admitted because of lack of objection by the adverse party’s counsel, it
is nonetheless without probative value, unless the proponent can show that the
evidence falls within the exception to the hearsay evidence rule.-
While Evangelista’s statement may be admitted in evidence, it does not
necessarily follow that the same should be given evidentiary weight.
Admissibility of evidence should not be equated with weight of evidence. In this
regard, it has been held that although hearsay evidence may be admitted
because of lack of objection by the adverse party’s counsel, it is nonetheless
without probative value, unless the proponent can show that the evidence falls
within the exception to the hearsay evidence rule.
5. Criminal Law; Bouncing Checks Law; Elements of the Offense Penalized by
Batas Pam-bansa Blg. 22; Upon the issuance of the checks and in the absence of
evidence to the contrary, it is presumed that the same was issued for valuable
consideration.-
The elements of the offense penalized by Batas Pambansa Blg. 22 are: (1) the
making, drawing, and issuance of any check to apply for account or for value; (2)
the knowledge of the maker, drawer, or issuer that at the time of issue there are
no sufficient funds in or credit with the drawee bank for the payment of such
check in full upon its presentment; and (3) the subsequent dishonor of the check
by the drawee bank for insufficiency of funds or credit or dishonor for the same
reason had not the drawer, without any valid cause, ordered the bank to stop
payment. As regards the first element, it is presumed, upon issuance of the
checks and in the absence of evidence to the contrary, that the same was issued
for valuable consideration. Under the Negotiable Instruments Law, it is
presumed that every party to an instrument acquired the same for a
consideration or for value. In alleging that there was no consideration for the
subject check, it devolved upon petitioner to present convincing evidence to
overthrow the presumption and prove that the check was issued without
consideration.
6. Criminal Law; Bouncing Checks Law; What the law punishes is the mere act
of issuing a bouncing check, not the purpose for which it was issued or the terms
and conditions relating to its issuance.-
What the law punishes is the mere act of issuing a bouncing check, not the
purpose for which it was issued or the terms and conditions relating to its
issuance. The law does not make any distinction on whether the checks within
its contemplation are issued in payment of an obligation or to merely guarantee
the obligation. The thrust of the law is to prohibit the making of worthless
checks and putting them in circulation.
Division: THIRD DIVISION
Docket Number: G.R. No. 155619
Counsel: Emmanuel Z. Velasco, Jr., The Solicitor General
Ponente: AUSTRIA-MARTINEZ
Dispositive Portion:
WHEREFORE, the petition is DENIED.
Case Title : ISIDRO PABLITO M. PALANA, petitioner, vs. PEOPLE OF THE
PHILIPPINES, respondent.Case Nature : APPEAL from a decision of the Court of
Appeals.
Syllabi Class : Remedial Law|Criminal Law|Jurisdictions|Violation of B.P. Blg.
22|Elements|Gravamen of the Offense|Criminal Procedure
Syllabi:
1. Remedial Law; Jurisdictions; It is hornbook doctrine that jurisdiction to try a
criminal action is determined by the law in force at the time of the institution of
the action and not during the arraignment of the accused.-
—It is hornbook doctrine that jurisdiction to try a criminal action is determined
by the law in force at the time of the institution of the action and not during the
arraignment of the accused. The Information charging petitioner with violation
of B.P. Blg. 22 was filed on August 19, 1991. At that time, the governing law
determinative of jurisdiction is B.P. Blg. 129.
2. Same; Criminal Procedure; The rule is that a variance between the allegation
in the information and proof adduced during trial shall be fatal to the criminal
case if it is material and prejudicial to the accused so much that it affects his
substantial rights.-
—The rule is that a variance between the allegation in the information and
proof adduced during trial shall be fatal to the criminal case if it is material and
prejudicial to the accused so much so that it affects his substantial rights. In a
prosecution for violation of B.P. 22, the time of the issuance of the subject check
is material since it forms part of the second element of the offense that at the
time of its issuance, petitioner knew of the insufficiency of funds. However, it
cannot be said that petitioner was prejudiced by such variance nor was
surprised by it. Records show that petitioner knew at the time he issued the
check that he does not have sufficient funds in the bank to cover the amount of
the check. Yet, he proceeded to issue the same claiming that the same would
only be shown to prospective suppliers, a defense which is not valid.
3. Same; Same; Gravamen of the Offense; The allegation of petitioner that the
checks were merely intended to be shown to prospective investors of her
corporation is, to say the least, not a defense;The gravamen of the offense
punished under B.P. Blg. 22 is the act of making or issuing a worthless check or a
check that is dishonored upon its presentment for payment.-
—The allegation of petitioner that the checks were merely intended to be shown
to prospective investors of her corporation is, to say the least, not a defense. The
gravamen of the offense punished under B.P. Blg. 22 is the act of making or
issuing a worthless check or a check that is dishonored upon its presentment for
payment. The law has made the mere act of issuing a bad check malum
prohibitum, an act proscribed by the legislature for being deemed pernicious
and inimical to public welfare. Considering the rule in mala prohibita cases, the
only inquiry is whether the law has been breached. Criminal intent becomes
unnecessary where the acts are prohibited for reasons of public policy, and the
defenses of good faith and absence of criminal intent are unavailing.
4. Criminal Law; Violation of B.P. Blg. 22; Elements; The elements of the
offense penalized under B.P. Blg. 22 are as follows: (1) the accused makes,
draws, or issues any check to apply on account or for value; (2) the accused
knows at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such check in full upon its
presentment; and (3) the check is subsequently dishonored by the drawee bank
for insufficiency of funds or credit or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the bank to stop
payment.-
—This Court sustains petitioner’s conviction for violation of B.P. Blg. 22. The
elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the
accused makes, draws, or issues any check to apply on account or for value; (2)
the accused knows at the time of issue that he does not have sufficient funds in
or credit with the drawee bank for the payment of such check in full upon its
presentment; and (3) the check is subsequently dishonored by the drawee bank
for insufficiency of funds or credit or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the bank to stop
payment.
5. Same; Same; Where a court has already obtained and is exercising
jurisdiction over a controversy, its jurisdiction to proceed to the final
determination of the cause is not affected by new legislation placing jurisdiction
over such proceedings in another tribunal unless the statute expressly provides,
or is construed to the effect that it is intended to operate on actions pending
before its enactment.-
—The subsequent amendment of B.P. 129 by R.A. No. 7691, “An Act Expanding
the Jurisdiction of the Municipal Trial Courts, Municipal Circuit Trial Courts and
the Metropolitan Trial Court” on June 15, 1994 cannot divest the Regional Trial
Court of jurisdiction over petitioner’s case. Where a court has already obtained
and is exercising jurisdiction over a controversy, its jurisdiction to proceed to the
final determination of the cause is not affected by new legislation placing
jurisdiction over such proceedings in another tribunal unless the statute
expressly provides, or is construed to the effect that it is intended to operate on
actions pending before its enactment. Indeed, R.A. No. 7691 contains retroactive
provisions. However, these only apply to civil cases that have not yet reached
the pre-trial stage. Neither from an express proviso nor by implication can it be
construed that R.A. No. 7691 has retroactive application to criminal cases
pending or decided by the Regional Trial Courts prior to its effectivity. The
jurisdiction of the RTC over the case attached upon the commencement of the
action by the filing of the Information and could not be ousted by the passage of
R.A. No. 7691 reapportioning the jurisdiction of inferior courts, the application of
which to criminal cases is prospective in nature.
Division: THIRD DIVISION
Docket Number: G.R. No. 149995
Counsel: Zacarias L. Canonigo, The Solicitor General
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. CR No.
21879 dated September 17, 2001, finding petitioner ISIDRO PABLITO M.
PALANA guilty of violating Batas Pambansa Blg. 22, is AFFIRMED with
MODIFICATION. Petitioner is ordered to pay private complainant the amount of
P590,000.00, representing the value of the check, with six (6%) percent interest
from date of filing of the Information until the finality of the decision, the
amount of which, inclusive of the interest, is subject to twelve percent (12%)
interest, from finality of the decision until fully paid. In lieu of imprisonment,
petitioner is ordered to pay a fine of P200,000.00.
Case Title : CARMENCITA G. CARIÑO, petitioner, vs. MERLIN DE CASTRO,
respondentCase Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Bouncing Checks ;
Syllabi:
1. Criminal Procedure; Appeals; Solicitor General; In criminal proceedings on
appeal in the Court of Appeals or in the Supreme Court, the authority to
represent the People is vested solely in the Solicitor General; The conformity of
the Assistant City Prosecutor to a petition for review before the Court of Appeals
is insufficient as the rules and jurisprudence mandate that the same should be
filed by the Solicitor General.-
—In criminal proceedings on appeal in the Court of Appeals or in the Supreme
Court, the authority to represent the People is vested solely in the Solicitor
General. Under Presidential Decree No. 478, among the specific powers and
functions of the OSG was to “represent the government in the Supreme Court
and the Court of Appeals in all criminal proceedings.” This provision has been
carried over to the Revised Administrative Code particularly in Book IV, Title III,
Chapter 12 thereof. Without doubt, the OSG is the appellate counsel of the
People of the Philippines in all criminal cases. Although the petition for review
before the Court of Appealswas filed with the conformity of the Assistant City
Prosecutor, such conformity is insufficient, as the rules and jurisprudence
mandate that the same should be filed by the Solicitor General.
2. Bouncing Checks; Checks issued to a person who was not authorized to collect
and receive the same are without valuable consideration and are also
considered issued for a non-existing account.-
—Both the Metropolitan Trial Court and the Regional Trial Court found that
petitioner was not duly authorized by the owner of the subject property to
collect and receive rentals thereon. Thus, not only were the checks without
valuable consideration; they were also issued for a non-existing account. With
these undisputed findings, we cannot reconcile petitioner’s allegation that she is
the aggrieved party. Finally, petitioner cannot validly claim that she was denied
due process considering that she availed of every opportunity to present her
case. Thus, we find no grave abuse of discretion on the part of the lower courts
in dismissing the complaints.
3. Same; Same; Same; Only the Office of the Solicitor General (OSG) can bring or
defend actions on behalf of the Republic or represent the People or state in
criminal proceedings pending in the Supreme Court and the Court of Appeals.-
—We are cognizant of our ruling in the cases of Perez v. Hagonoy, 327 SCRA 588
(2000), Mobilia Products, Inc. v. Umezawa, 452 SCRA 736 (2005), People v.
Santiago, 174 SCRA 143 (1989), and Narciso v. Sta. Romana-Cruz, 328 SCRA 505
(2000), where we held that only the OSG can bring or defend actions on behalf
of the Republic or represent the People or state in criminal proceedings pending
in the Supreme Court and the Court of Appeals. At the same time, we
acknowledged in those cases that a private offended party, in the interest of
substantial justice, and where there appears to be a grave error committed by
the judge, or where there is lack of due process, may allow and give due course
to the petition filed. However, the special circumstances prevailing in the
abovementioned cases are not present in the instant case. In those cases, the
petitioners availed of petition for certiorari under Rule 65. In the instant case,
the petition was filed under Rule 45.
4. Same; Same; Same; While a private prosecutor may be allowed to intervene
in criminal proceedings on appeal in the Court of Appeals or the Supreme Court,
his participation is subordinate to the interest of the People, hence, he cannot be
permitted to adopt a position contrary to that of the Solicitor General.-
—While a private prosecutor may be allowed to intervene in criminal
proceedings on appeal in the Court of Appeals or the Supreme Court, his
participation is subordinate to the interest of the People, hence, he cannot be
permitted to adopt a position contrary to that of the Solicitor General. To do so
would be tantamount to giving the private prosecutor the direction and control
of the criminal proceeding, contrary to the provisions of law. In the instant case,
the Solicitor General opined that petitioner had no legal standing to file the
petition for review and that the Court of Appeals correctly dismissed the
petition. As such, the Assistant City Prosecutor or the private prosecutor cannot
take a contrary view.
Division: THIRD DIVISION
Docket Number: G.R. No. 176084
Counsel: R.A. Din, Jr. & Associates Law Offices
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the petition for review is DENIED. The Decision of the Court of
Appeals dated August 18, 2006 dismissing the petition as well as the Resolution
dated December 29, 2006 denying the motion for reconsideration, are
AFFIRMED.
Case Title : SIAIN ENTERPRISES, INC., petitioner, vs. CUPERTINO REALTY CORP.
and EDWIN R. CATACUTAN, respondents.Case Nature : PETITION for review on
certiorari of a decision of the Court of Appeals.
Syllabi Class : Corporation Law|Piercing the Veil of Corporate Fiction
Syllabi:
1. Remedial Law; Appeals; Factual findings of the trial court especially when
affirmed by the appellate court are accorded the highest degree of respect
and are considered conclusive between the parties;Exceptions.-
—Well-entrenched in jurisprudence is the rule that factual findings of the trial
court, especially when affirmed by the appellate court, are accorded the highest
degree of respect and are considered conclusive between the parties. A review
of such findings by this Court is not warranted except upon a showing of highly
meritorious circumstances, such as: (1) when the findings of a trial court are
grounded entirely on speculation, surmises or conjectures; (2) when a lower
court’s inference from its factual findings is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion in the appreciation of
facts; (4) when the findings of the appellate court go beyond the issues of the
case, or fail to notice certain relevant facts which, if properly considered, will
justify a different conclusion; (5) when there is a misappreciation of facts; (6)
when the findings of fact are conclusions without mention of the specific
evidence on which they are based, are premised on the absence of evidence, or
are contradicted by evidence on record.
2. Corporation Law; Piercing the Veil of Corporate Fiction; The general rule that
a corporation will be deemed a separate legal entity until sufficient reason to
the contrary appears, but the rule is not absolute.-
—As a general rule, a corporation will be deemed a separate legal entity until
sufficient reason to the contrary appears. But therule is not absolute. A
corporation’s separate and distinct legal personality may be disregarded and
the veil of corporate fiction pierced when the notion of legal entity is used to
defeat public convenience, justify wrong, protect fraud, or defend crime.
3. Same; Evidence; Disputable Presumptions; A disputable presumption is
satisfactory if uncontradicted and not overcome by other evidence.-
—Unmistakably, from the foregoing chain of transactions, a presumption has
arisen that the loan documents were supported by a consideration. Rule 131,
Section 3 of the Rules of Court specifies that a disputable presumption is
satisfactory if uncontradicted and not overcome by other evidence.
Division: THIRD DIVISION
Docket Number: G.R. No. 170782
Counsel: Misa & Gonzales Law Offices
Ponente: NACHURA
Dispositive Portion:
WHEREFORE, premises considered, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the
petitioner.
FIRST DIVISION
ENGR. JOSE E. CAYANAN, G.R. No. 172954
Petitioner,
Present:
CORONA, C.J.,
Chairperson,
- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.
NORTH STAR INTERNATIONAL TRAVEL, Promulgated:
INC.,
Respondent. October 5, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Petitioner Engr. Jose E. Cayanan appeals the May 31, 2006 Decision[1] of
the Court of Appeals (CA) in CA-G.R. SP No. 65538 finding him civilly liable for
the value of the five checks which are the subject of Criminal Case Nos. 166549-
53.
The antecedent facts are as follows:
 North Star International Travel Incorporated (North Star) is a corporation arrangement for full payment thereof within five (5)
engaged in the travel agency business while petitioner is the owner/general banking days after receiving notice.
manager of JEAC International Management and Contractor Services, a Contrary to law.
recruitment agency. Upon arraignment, petitioner pleaded not guilty to the charges.
On March 17,[2] 1994, Virginia Balagtas, the General Manager of North After trial, the MeTC found petitioner guilty beyond reasonable doubt of
Star, in accommodation and upon the instruction of its client, petitioner herein, violation of B.P. 22. Thus:
sent the amount of US$60,000[3] to View Sea Ventures Ltd., in Nigeria from her WHEREFORE, finding the accused, ENGR. JOSE E.
personal account in Citibank Makati. On March 29, 1994, Virginia again sent CAYANAN GUILTY beyond reasonable doubt of Violation
US$40,000 to View Sea Ventures by telegraphic transfer,[4] with US$15,000 of Batas Pambansa Blg. 22 he is hereby sentenced to
coming from petitioner. Likewise, on various dates, North Star extended credit suffer imprisonment of one (1) year for each of the
to petitioner for the airplane tickets of his clients, with the total amount of such offense committed.
indebtedness under the credit extensions eventually reaching P510,035.47.[5] Accused is likewise ordered to indemnify the
To cover payment of the foregoing obligations, petitioner issued the complainant North Star International Travel, Inc.
following five checks to North Star: represented in this case by Virginia Balagtas, the sum
Check No : 246822 of TWO MILLION FIVE HUNDRED THIRTY THOUSAND
Drawn Against : Republic Planters Bank AND SEVEN HUNDRED THREE PESOS (P2,530,703.00)
Amount : P695,000.00 representing the total value of the checks in [question]
Dated/Postdated : May 15, 1994 plus FOUR HUNDRED EIGHTY[-]FOUR THOUSAND
Payable to : North Star International Travel, Inc. SEVENTY[-]EIGHT PESOS AND FORTY[-]TWO CENTAVOS
(P484,078.42) as interest of the value of the checks
Check No : 246823 subject matter of the instant case, deducting therefrom
Drawn Against : Republic Planters Bank the amount of TWO HUNDRED TWENTY THOUSAND
Amount : P278,000.00 PESOS (P220,000.00) paid by the accused as interest on
Dated/Postdated : May 15, 1994 the value of the checks duly receipted by the complainant
Payable to : North Star International Travel, Inc. and marked as Exhibit “FF” of the record.
xxxx
Check No : 246824 SO ORDERED.[10]
Drawn Against : Republic Planters Bank On appeal, the Regional Trial Court (RTC) acquitted petitioner of the
Amount : P22,703.00 criminal charges. The RTC also held that there is no basis for the imposition of
Dated/Postdated : May 15, 1994 the civil liability on petitioner. The RTC ratiocinated that:
Payable to : North Star International Travel, Inc. In the instant cases, the checks issued by the
accused were presented beyond the period of NINETY
Check No : 687803 (90) DAYS and therefore, there is no violation of the
Drawn Against : PCIB provision of Batas Pambansa Blg. 22 and the accused is
Amount : P1,500,000.00 not considered to have committed the offense. There
Dated/Postdated : April 14, 1994 being no offense committed, accused is not criminally
Payable to : North Star International Travel, Inc. liable and there would be no basis for the imposition of
the civil liability arising from the offense.[11]
Check No : 687804 Aggrieved, North Star elevated the case to the CA. On May 31, 2006,
Drawn Against : PCIB the CA reversed the decision of the RTC insofar as the civil aspect is concerned
Amount : P35,000.00 and held petitioner civilly liable for the value of the subject checks. The fallo of
Dated/Postdated : April 14, 1994 the CA decision reads:
Payable to : North Star International Travel, Inc.[6]
When presented for payment, the checks in the amount of P1,500,000 WHEREFORE, the petition is GRANTED. The
and P35,000 were dishonored for insufficiency of funds while the other three assailed Decision of the RTC insofar as Cayanan's civil
checks were dishonored because of a stop payment order from liability is concerned, is NULLIFIED and SET ASIDE. The
petitioner.[7] North Star, through its counsel, wrote petitioner on September indemnity awarded by the MeTC in its September 1, 1999
14, 1994[8] informing him that the checks he issued had been Decision is REINSTATED.
dishonored. North Star demanded payment, but petitioner failed to settle his SO ORDERED.[12]
obligations. Hence, North Star instituted Criminal Case Nos. 166549-53 The CA ruled that although Cayanan was acquitted of the criminal
charging petitioner with violation of Batas Pambansa Blg. 22, or the Bouncing charges, he may still be held civilly liable for the checks he issued since he never
Checks Law, before the Metropolitan Trial Court (MeTC) of Makati City. denied having issued the five postdated checks which were dishonored.
The Informations,[9] which were similarly worded except as to the check Petitioner now assails the CA decision raising the lone issue of whether
numbers, the dates and amounts of the checks, alleged: the CA erred in holding him civilly liable to North Star for the value of the
That on or about and during the month of March checks.[13]
1994 in the Municipality of Makati, Metro Manila, Petitioner argues that the CA erred in holding him civilly liable to
Philippines, a place within the jurisdiction of this North Star for the value of the checks since North Star did not give any valuable
Honorable Court, the above-named accused, being the consideration for the checks. He insists that the US$85,000 sent to View Sea
authorized signatory of [JEAC] Int’l Mgt & Cont. Serv. did Ventures was not sent for the account of North Star but for the account of
then and there willfully, unlawfully and feloniously make Virginia as her investment. He points out that said amount was taken from
out[,] draw and issue to North Star Int’l. Travel Inc. herein Virginia’s personal dollar account in Citibank and not from North Star’s
rep. by Virginia D. Balagtas to apply on account or for corporate account.
value the checks described below: Respondent North Star, for its part, counters that petitioner is liable
xxxx for the value of the five subject checks as they were issued for
said accused well knowing that at the time of issue value. Respondent insists that petitioner owes North Star P2,530,703 plus
thereof, did not have sufficient funds in or credit with the interest of P264,078.45, and that the P220,000 petitioner paid to North Star is
drawee bank for the payment in full of the face amount conclusive proof that the checks were issued for value.
of such check upon its presentment, which check when The petition is bereft of merit.
presented for payment within ninety (90) days from the We have held that upon issuance of a check, in the absence of
date thereof was subsequently dishonored by the drawee evidence to the contrary, it is presumed that the same was issued for valuable
bank for the reason PAYMENT STOPPED/DAIF and despite consideration which may consist either in some right, interest, profit or benefit
receipt of notice of such dishonor the accused failed to accruing to the party who makes the contract, or some forbearance, detriment,
pay the payee the face amount of said check or to make loss or some responsibility, to act, or labor, or service given, suffered or
undertaken by the other side.[14] Under the Negotiable Instruments Law, it is payee, he did so to settle his obligation with North Star for the US$85,000. And
presumed that every party to an instrument acquires the same for a since the only payment petitioner made to North Star was in the amount
consideration or for value.[15] As petitioner alleged that there was no of P220,000.00, which was applied to interest due, his liability is not
consideration for the issuance of the subject checks, it devolved upon him to extinguished. Having failed to fully settle his obligation under the checks, the
present convincing evidence to overthrow the presumption and prove that the appellate court was correct in holding petitioner liable to pay the value of the
checks were in fact issued without valuable consideration.[16] Sadly, however, five checks he issued in favor of North Star.
petitioner has not presented any credible evidence to rebut the presumption, WHEREFORE, the present appeal by way of a petition for review on
as well as North Star’s assertion, that the checks were issued as payment for the certiorari is DENIED for lack of merit. The Decision dated May 31, 2006 of the
US$85,000 petitioner owed. Court of Appeals in CA-G.R. SP No. 65538 is AFFIRMED.
Notably, petitioner anchors his defense of lack of consideration on With costs against petitioner.
the fact that he did not personally receive the US$85,000 from SO ORDERED.
Virginia. However, we note that in his pleadings, he never denied having
instructed Virginia to remit the US$85,000 to View Sea Ventures. Evidently, [1] Rollo, pp. 35-45. Penned by Associate Justice Roberto A. Barrios with
Virginia sent the money upon the agreement that petitioner will give to North Associate Justices Mario L. Guariña III and Santiago Javier Ranada
Star the peso equivalent of the amount remitted plus interest. As testified to by concurring.
Virginia, Check No. 246822 dated May 15, 1994 in the amount of P695,000.00 is [2] March 15 in some parts of the records but the date appearing on the
equivalent to US$25,000; Check No. 246823 dated May 15, 1994 in the amount telegraphic transfer receipt/money transfer slip is March 17.
[3]
of P278,000 is equivalent to US$10,000; Check No. 246824 in the amount Exh. “8”, records, p. 262.
of P22,703 represents the one month interest for P695,000 and P278,000 at the [4] Exh. “9”, id. at 263.
rate of twenty-eight (28%) percent per annum;[17] Check No. 687803 dated April [5] Id. at 35.
[6]
14, 1994 in the amount of P1,500,000 is equivalent to US$50,000 and Check No. Id. at 36, 53-54.
687804 dated 14 April 1994 in the amount of P35,000 represents the one [7] Id. at 56.
month interest for P1,500,000 at the rate of twenty-eight (28%) percent per [8] Exh. “R”, id. at 291.
annum.[18] Petitioner has not substantially refuted these averments. [9]
Id. at 1-10.
Concomitantly, petitioner’s assertion that the dollars sent to Nigeria [10] Rollo, pp. 57-58.
was for the account of Virginia Balagtas and as her own investment with View [11] Id. at 61.
Sea Ventures deserves no credence. Virginia has not been shown to have any [12] Id. at 44.
business transactions with View Sea Ventures and from all indications, she only [13] Id. at 26.
remitted the money upon the request and in accordance with petitioner’s [14] Palana v. People, G.R. No. 149995, September 28, 2007, 534 SCRA 296,
instructions. The evidence shows that it was petitioner who had a contract with 305.
View Sea Ventures as he was sending contract workers to Nigeria; Virginia [15] Section 24, Negotiable Instruments Law.
Balagtas’s participation was merely to send the money through telegraphic Sec. 24. Presumption of consideration. – Every negotiable instrument is
transfer in exchange for the checks issued by petitioner to North Star. Indeed, deemed prima facie to have been issued for a valuable consideration; and
the transaction between petitioner and North Star is actually in the nature of a every person whose signature appears thereon to have become a party
loan and the checks were issued as payment of the principal and the interest. thereto for value.
[16]
As aptly found by the trial court: See Bayani v. People, G. R. No. 155619, August 14, 2007, 530 SCRA 84, 95.
[17]
It is to be noted that the checks subject matter of TSN, July 31, 1996, p. 4; records, p. 429.
the instant case were issued in the name of North Star [18] See Exh. “DD”, records, p. 307; see also TSN, July 27, 1998, p. 4; records, p.
International Inc., represented by private complainant 544; TSN, August 17, 1998, p. 8; records, p. 563.
[19]
Virginia Balagtas in replacement of the amount of dollars Rollo, pp. 54-55.
remitted by the latter to Vie[w] Sea Ventures in Nigeria. x [20] Records, pp. 62-65.
[21]
x x But Virginia Balagtas has no business transaction with Id. at 88.
Vie[w] Sea Ventures where accused has been sending his
contract workers and the North Star provided the trip [G.R. No. 146663. March 14, 2001]
tickets for said workers sent by the accused. North Star PERPETUAL SAVINGS BANK vs. BRONDIAL, et al.
International has no participation at all in the transaction FIRST DIVISION
between accused and the Vie[w] Sea Ventures except in Gentlemen:
providing plane ticket used by the contract workers of the Quoted hereunder, for your information, is a resolution of this Court dated MAR
accused upon its understanding with the latter. The 14 2001.
contention of the accused that the dollars were sent by G.R. No. 146663 (Perpetual Savings Bank vs. Dolores Brondial, et al.)
Virginia Balagtas to Nigeria as business investment has - Petitioner Bank filed a complaint for sum of money against respondent
not been shown by any proof to set aside the foregoing Dolores Brondial and her husband. Petitioner Bank alleged that, for value
negative presumptions, thus negates accused contentions received, respondent Dolores executed a promissory note (PN) in the amount of
regarding the absence of consideration for the issuance P826,315.00 in favor of petitioner Bank payable in lump sum on 11 February
of checks. x x x[19] 1984 plus interests. The PN had allegedly long matured but respondents failed
Petitioner claims that North Star did not give any valuable to pay the amount thereon.
consideration for the checks since the US$85,000 was taken from the personal Among others, respondents raised the defense of lack of
dollar account of Virginia and not the corporate funds of North Star. The consideration for the PN. According to respondent Dolores, she was required to
contention, however, deserves scant consideration. The subject checks, bearing sign the loan instruments and execute the PN by petitioner Bank as condition to
petitioner’s signature, speak for themselves. The fact that petitioner himself her appointment as Senior Manager of Perpetual Capital Investments & Finance
specifically named North Star as the payee of the checks is an admission of his Corp. an affiliate of petitioner Bank.
liability to North Star and not to Virginia Balagtas, who as manager merely Both the RTC and CA ruled in favor of respondents upon the
facilitated the transfer of funds. Indeed, it is highly inconceivable that an following factual findings: petitioner Bank was originally named Perpetual
experienced businessman like petitioner would issue various checks in sizeable Savings Loan and Association. On 8 February 1983, it changed its name to
amounts to a payee if these are without consideration. Moreover, we note Perpetual Savings Bank under the management of Danilo Natividad, President;
that Virginia Balagtas averred in her Affidavit[20] that North Star caused the Crisanto Norofla, Executive Vice-President; Zoilo Gabriel, Vice-President for
payment of the US$60,000 and US$25,000 to View Sea Ventures to Operations. Petitioner Bank designated Metropolitan Batik, Baclaran Branch as
accommodate petitioner, which statement petitioner failed to refute. In its depository bank with Account No. 070-15004-9. Natividad, Norofla and
addition, petitioner did not question the Statement of Account No. Gabriel were the authorized check signatories. These three officers, together
8639[21] dated August 31, 1994 issued by North Star which contained itemized with Roberto and Adora Baes, also had a joint account with the same bank
amounts including the US$60,000 and US$25,000 sent through telegraphic under Account No. 070-00490-5. The authorized check signatories were the
transfer to View Sea Ventures per his instruction. Thus, the inevitable same bank officers.
conclusion is that when petitioner issued the subject checks to North Star as
 On 11 February 1983, respondent Dolores purportedly applied for a
loan and simultaneously executed the subject PN. Earlier, on 10 February 1983,
City Estate Developers, Inc. executed a real estate mortgage of several parcels
of land to secure, among others, the loan of respondent Dolores. The check
issued to respondent Dolores as proceeds of the loan was endorsed and
deposited on 14 February 1983 to Metro Bank Account No. 070-00490-5, the
personal account ofNatividad., Norofia, Gabriel and the Baeses.
The other documentary evidence further showed that the personal
account of Natividad, et al. (Account No. 070-00490-5) was used to transfer the
purported loan of respondent Dolores to petitioner Bank’s account (Account
No. 070-15004-9). Thus, the CA ruled that petitioner Bank as holder of the
check, is not a holder in due course and accordingly, not entitled to enforce or
collect payment from the maker (respondent Dolores) because of absence or
lack of consideration. Absence or lack of consideration is a valid defense against
any person not a holder in due course (Section 28, Negotiable Interests Law).
It was further held that contrary to petitioner Bank’s insistence,
respondent Dolores is not liable as an “accommodation maker.” Section 29 of
the NIL defines the term as —
x x x one who has signed the instrument as maker, drawer, acceptor,
or indorser, without receiving value therefor, and for the purpose of lending his
name to some other person. Such a person is liable on the instrument to a
holder for value, notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation party.
As held by the CA, it was petitioner Bank who was accommodated by
respondent Dolores when she executed the PN, thus, petitioner Bank cannot
collect from respondent Dolores.
In this petition, petitioner Bank avers that the CA erred in, among
others, not according the presumption of regularity in the execution by
respondent Dolores of the subject PN; the CA erred in ruling that petitioner
Bank is not a holder in due course and that respondent Dolores is not liable as
“accommodation maker;” and the CA erred in awarding the counterclaims of
respondents.
Petitioner Bank has failed to show any cogent reasons to deviate
from the general rule that factual findings of the lower court are accorded great
weight. In this case, both the RTC and CA found that there was no consideration
for the issuance by respondent Dolores of the PN. Upon appreciation of the
evidence presented by the parties, the RTC and CA found that respondent
Dolores was not indebted to petitioner Bank because the amounts
(P826,315.00) she purportedly received were returned to and received by
petitioner Bank on the very day the checks were released. Respondent Dolores
did not receive a single centavo from the loan.
Contrary to petitioner Bank’s position, the presumption of regularity
in the issuance of the PN had been sufficiently overthrown upon showing that
the checks released to respondent Dolores as proceeds of the loan were
immediately deposited to the personal account of Natividad et al, the officers of
petitioner Bank. Thereafter, the funds in this account were credited to the
account of petitioner Bank.
WHEREFORE, the petition is DENIED for lack of merit.
Case Title : SPOUSES GIL AND NOELLI GARDOSE, petitioners, vs. REYNALDO S.
TARROZA, respondent.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Actions|Obligations and Contracts|Interests|Judgments|Res
Judicata|Jurisdiction|Forum Shopping|Due Process|Speedy Disposition of
Cases|Guarantee|Surety|Accommodation Parties
Syllabi:
1. Actions; Judgments; Res Judicata; “Bar by Former Judgment,” Requisites.-
—The rule in Section 49(b) is known as “bar by former judgment” while the rule
embodied in paragraph (c) of the same section is known as “conclusiveness of
judgment.” There are four (4) requisites which must concur in order for res
judicata as a “bar by former judgment” to attach, viz.: (1) the former judgment
must be final; (2) it must have been rendered by a court having jurisdiction over
the subject matter and the parties; (3) it must be a judgment or order on the
merits; and (4) there must be between the first and second action identity of
parties, identity of subject matter and identity of causes of action.
2. Interests; If the obligation consists in the payment of a sum of money, and the
debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, should be the payment of the interest which is now 12 percent per
annum.-
—Petitioners cannot assert that the award of 12% interest and attorney’s fees
to private respondent is not justified. The Court of Appeals correctly affirmed the
trial court’s monetary award to private respondent, viz.: “x x x The lower court
was likewise correct in ordering appellants to pay interest at the legal rate of
12% per annum counted from the filing of the complaint. This is in accordance
with Article 2209 of the Civil Code which provides that if the obligation consists
in the payment of a sum of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary, should be the payment
of the interest agreed upon, and in the absence of stipulation, the legal rate of
interest which is now 12 percent per annum. (National Power Corporation vs.
Agnar, G.R. Nos. 60225-26, May 8, 1992). The trial court was likewise correct in
granting attorney’s fees in the amount of P50,000.00. As found by the court a
quo, appellants acted in gross evident bad faith in refusing to pay appellee’s just
and demandable claim (Reyes v. Zubirri, 208 SCRA 561; Maersk Line vs. Court of
Appeals, 222 SCRA 108).”
3. Obligations and Contracts; Guarantee; Surety; Accommodation Parties; An
accommodation party and the party accommodated is in effect one of principal
and surety.-
—Petitioner Noelli’s defense that she was merely an accommodation party was
rightly rejected by the Court of Appeals which ruled: “x x x “Appellants
persistently insist that when appellant Noelli Gardose issued the three (3) checks
to appellee she merely acted as a guarantor and therefore should not be held
primarily liable to appellee. We disagree, the mere fact that appellant Noelli
Gardose issued the three (3) checks to appellee make her liable to the latter
without the need for the appellee to first go after Cecilia Cacnio because the
relationship between an accommodation party and the party accommodated is
in effect one of principal and surety (Coneda, Jr. vs. Court of Appeals, 181 SCRA
673; Prudencio vs. Court of Appeals, 143 SCRA 7). In the recent case of Town
Savings & Loan Bank, Inc. vs. Court of Appeals, 223 SCRA 459, the Supreme
Court held: ‘An accommodation party is one who has signed the instrument as
maker, drawer, indorser, without receiving value therefor and for the purpose of
lending his name to some other person. Such person is liable on the instrument
to a holder for value, notwithstanding such holder, at the time of the taking of
the instrument knew him to be only an accommodation party is in effect a
surety for the latter. He lends his name to enable the accommodated party to
obtain credit or to raise money. He receives no part of the consideration for the
instrument but assumes liability to the other parties thereto because he wants
to accommodate another (The Phil. Bank of Commerce vs. Aruego, 102 SCRA
530, 539, 540).’ ”
4. Same; Due Process; Speedy Disposition of Cases; The essence of due process
is a fair opportunity to be heard; The right of one party to speedy justice is just
as valuable as the right of the other party to due process.-
—Petitioners cannot claim denial of due process. The essence of due process is a
fair opportunity to be heard. Petitioners were given all the opportunities to
cross-examine the private respondent and to present their evidence. They failed
to make use of these opportunities either through negligence or unpreparedness
of their counsel. The right of private respondent to speedy justice is just as
valuable as the right of petitioners to due process.
5. Same; Forum Shopping; Revised Circular No. 28-91, the anti-forum shopping
rule, took effect on January 1, 1992, and initially applied only to the Court of
Appeals, while Administrative Circular No. 04-94, which extended the
application of the rule to trial courts and administrative agencies, took effect
only on April 1, 1994.-
—Petitioners’ charge of forum shopping is baseless. To start with, petitioners did
not raise the issue in the trial court. Moreover, Revised Circular No. 28-91, the
anti-forum shopping rule, took effect on January 1, 1992, and it initially applied
only to the Court of Appeals. Administrative Circular No. 04-94, which extended
the application of the rule to trial courts and administrative agencies, took effect
only on April 1, 1994. The second case against petitioners, Civil Case No. Q-91-
7959, was filed on February 13, 1991 or before the effectivity of the rules on
forum shopping on trial courts.
6. Same; Same; Same; Jurisdiction; If a court did not acquire jurisdiction over a
party in a case, it cannot render any binding decision, favorable or adverse to
them, or dismiss the case with prejudice which, in effect, is an adjudication on
the merits.-
—The Court of Appeals correctly ruled that petitioners cannot rely on the
principle of bar by former judgment. Civil Case No. Q-89-3500 was dismissed for
the continuing failure of private respondent to effect service of summons by
publication on the petitioners. In other words, the dismissal was made before
the trial court acquired jurisdiction over the petitioners. In Republic Planters
Bank vs. Molina, we held: x x x “In the very order of dismissal of Civil Case No.
116028, the trial court admitted that it did not acquire jurisdiction over the
persons of private respondents and yet, it held that it was of no moment as to
the dismissal of the case. We disagree. For the court to have authority to dispose
of the case on the merits, it must acquire jurisdiction over the subject matter
and the parties. If it did not acquire jurisdiction over the private respondents as
parties to Civil Case No. 116028, it cannot render any binding decision, favorable
or adverse to them, or dismiss the case with prejudice which, in effect, is an
adjudication on the merits. The controverted orders in Civil Case No. 116028
disregarded the fundamental principles of remedial law and the meaning and
the effect of jurisdiction. A judgment, to be considered res judicata, must be
binding, and must be rendered by a court of competent jurisdiction. Otherwise,
the judgment is a nullity.
Division: SECOND DIVISION
Docket Number: G.R. No. 130570
Counsel: Cesar M. Cariño, Jose F. Manacop
Ponente: PUNO
Dispositive Portion:
IN VIEW WHEREOF, the petition is dismissed. Costs against the petitioners.
Case Title : AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners, vs.
THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class :
Contracts|Actions|Sales|Suretyships|Novation|Requisites|Words and
Phrases|Interpretation of Contracts|Parties|Pleadings and Practice
Syllabi:
1. Contracts; Sales; A contract of sale is a reciprocal transaction, the obligation
or promise of each party being the cause or consideration for the obligation or
promise of the other.-
A contract of sale is a reciprocal transaction. The obligation or promise of each
party is the cause or consideration for the obligation or promise by the other.
The vendee is obliged to pay the price, while the vendor must deliver actual
possession of the land. In the instant case the original plan was that the initial
payments would be paid in cash. Subsequently, the parties (with the
participation of respondent bank) executed an addendum providing instead,
that the petitioners would secure a loan in the name of Agro Conglomerates Inc.
for the total amount of the initial payments, while the settlement of said loan
would be assumed by Wonderland. Thereafter, petitioner Soriano signed several
promissory notes and received the proceeds in behalf of petitioner-company.
2. Contracts; Sales; Suretyships; Accommodation Parties; Words and Phrases;
An accommodation party is a person who has signed the instrument as maker,
acceptor, or indorser, without receiving value therefor, and for the purpose of
lending his name to some other person and is liable on the instrument to a
holder for value, notwithstanding such holder at the time of taking the
instrument knew (the signatory) to be an accommodation party; Suretyship is
defined as the relation which exists where one person has undertaken an
obligation and another person is also under the obligation or other duty to the
obligee, who is entitled to but one performance, and as between the two who
are bound, one rather than the other should perform.-
By this time, we note a subsidiary contract of suretyship had taken effect since
petitioners signed the promissory notes as maker and accommodation party for
the benefit of Wonderland. Petitioners became liable as accommodation party.
An accommodation party is a person who has signed the instrument as maker,
acceptor, or indorser, without receiving value therefor, and for the purpose of
lending his name to some other person and is liable on the instrument to a
holder for value, notwithstanding such holder at the time of taking the
instrument knew (the signatory) to be an accommodation party. He has the
right, after paying the holder, to obtain reimbursement from the party
accommodated, since the relation between them has in effect become one of
principal and surety, the accommodation party being the surety. Suretyship is
defined as the relation which exists where one person has undertaken an
obligation and another person is also under the obligation or other duty to the
obligee, who is entitled to but one performance, and as between the two who
are bound, one rather than the other should perform. The surety’s liability to the
creditor or promisee of the principal is said to be direct, primary and absolute; in
other words, he is directly and equally bound with the principal. And the creditor
may proceed against any one of the solidary debtors.
3. Contracts; Novation; Requisites; Words and Phrases; Novation is the
extinguishment of an obligation by the substitution or change of the obligation
by a subsequent one which extinguishes or modifies the first, either by changing
the object or principal conditions, or by substituting another in place of the
debtor, or by subrogating a third person in the rights of the creditor.-
Novation is the extinguishment of an obligation by the substitution or change of
the obligation by a subsequent one which extinguishes or modifies the first,
either by changing the object or principal conditions, or by substituting another
in place of the debtor, or by subrogating a third person in the rights of the
creditor. In order that a novation can take place, the concurrence of the
following requisites are indispensable: 1) There must be a previous valid
obligation; 2) There must be an agreement of the parties concerned to a new
contract; 3) There must be the extinguishment of the old contract; and 4) There
must be the validity of the new contract.
4. Contracts; Novation; There is no novation by “substitution” of debtor where
there is no prior obligation which is substituted by a new contract.-
In the instant case, the first requisite for a valid novation is lacking. There was
no novation by “substitution” of debtor because there was no prior obligation
which was substituted by a new contract. It will be noted that the promissory
notes, which bound the petitioners to pay were executed after the addendum.
The addendum modified the contract of sale, not the stipulations in the
promissory notes which pertain to the surety contract. At this instance,
Wonderland apparently assured the payment of future debts to be incurred by
the petitioners. Consequently, only a contract of surety arose. It was wrong for
petitioners to presume a novation had taken place. The well-settled rule is that
novation is never presumed, it must be clearly and unequivocally shown.
5. Contracts; Interpretation of Contracts; In order to judge the intention of the
parties, their contemporaneous and subsequent acts should be considered.-
It is true that the basic and fundamental rule in the interpretation of contract is
that, if the terms thereof are clear and leave no doubt as to the intention of the
contracting parties, the literal meaning shall control. However, in order to judge
the intention of the parties, their contemporaneous and subsequent acts should
be considered.
6. Actions; Parties; Pleadings and Practice; The non-inclusion of a necessary
party does not prevent the court from proceeding in the action, and the
judgment rendered therein shall be without prejudice to the rights of such
necessary party.-
Petitioners had no legal or just ground to retain the proceeds of the loan at the
expense of private respondent. Neither could petitioners excuse themselves and
hold Wonderland still liable to pay the loan upon the rescission of their sales
contract. If petitioners sustained damages as a result of the rescission, they
should have impleaded Wonderland and asked damages. The non-inclusion of a
necessary party does not prevent the court from proceeding in the action, and
the judgment rendered therein shall be without prejudice to the rights of such
necessary party. But respondent appellate court did not err in holding that
petitioners are duty-bound under the law to pay the claims of respondent bank
from whom they had obtained the loan proceeds.
Division: SECOND DIVISION
Docket Number: G.R. No. 117660
Counsel: Quiason, Makalintal, Barot, Torres, Ibarra, Cesar M. Cariño
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the petition is DENIED for lack of merit. The assailed decision of
the Court of Appeals dated October 17, 1994 is AFFIRMED. Costs against
petitioners.
[G.R. No. 147920. April 3, 2002]
MAJESTIC FINANCE CO., INC. vs. BONIFACIO
FIRST DIVISION
Gentlemen:
Quoted hereunder, for your information, is a resolution of this Court
dated 03 APR 2002.
G.R. No. 147920 (Majestic Finance & Investment Co., Inc. vs. Amelia
L. Bonifacio.)
This petition for review on certiorari assails the Decision of the Court
of Appeals in CA-G.R. CV No. 60662[1] which affirmed the Decision of the
Regional Trial Court of Pasig City in Civil Case No. 62277, and the Resolution
dated April 23, 2001 which denied petitioner Majestic Finance & Investment
Co., Inc.’s motion for reconsideration.
 On December 6, 1989, petitioner entered into a Contract of Lease
with Japanese nationals Yasutsugu Uoyama and Hiroyuki Shibutani (the
“lessees”) for the lease of Condominium Unit No. 5-K of the Legaspi Towers
located at Roxas Boulevard corner Vito Cruz St. , Manila. The term of the lease
was for one (1) year.
Respondent Amelia Bonifacio, the girlfriend of T. Sakamoto who in
turn was the friend of the lessees, actively participated in negotiating the terms
of the contract of lease because the lessees could hardly speak English or
Tagalog.
On that same day (December 6, 1989), the lessees paid petitioner
One Hundred Ninety Two Thousand Pesos (P192,000.00) to cover the deposit of
P48,000.00 and the advance rentals for the first six months of the lease period,
from December, 1989 to June, 1990 amounting to P148,000.00.
Upon request of the lessees, respondent issued in petitioner’s favor
a postdated United Coconut Planters Bank (Puyat-Bautista Branch) Check No.
PUB 285072 in the amount of One Hundred Forty Four Thousand Pesos
(P144,000.00) to guarantee the payment of the rentals for last six months of the
lease, from July to December, 1990.
On April 24, 1990, petitioner’s counsel received a letter from
respondent and the lessees that the latter were vacating the condominium by
May 1, 1990. Respondent also requested that the postdated check which she
had earlier issued in petitioner’s favor be returned to her since there was no
longer any need for the said check to be in petitioner’s possession.
However, petitioner refused to return the check and instead
deposited the same in its account with the Philippine Commercial International
Bank. The check was later dishonored and returned pursuant to the stop
payment order made by respondent.
On August 4, 1992, petitioner filed with the Regional Trial Court of
Pasig City (RTC) a complaint for collection of sum of money with prayer for the
issuance of a writ of preliminary attachment against respondent due to the
latter’s refusal to make good her check.
On September 30, 1997, the RTC issued its Decision dismissing the
case against respondent. Petitioner thereafter filed a motion for
reconsideration but the same was dismissed by the trial court in an Order dated
January 22, 1998.
Not satisfied with the decision of the trial court, petitioner filed an
appeal thereof with the Court of Appeals.
On February 13, 2001, the Court of Appeals promulgated its Decision
affirming the RTC’s Decision. The appellate court ruled that respondent is an
accommodation party and may be held solidarily liable for the amount of the
check under Section 29 of the Negotiable Instruments Law, subject to
reimbursement from the lessees. However, it ruled that the respondent was not
under any obligation to pay the P144,000.00 corresponding to advance rental
payments for the months of July to December 1990 because the lease contract
did not authorize the petitioner as lessor to automatically forfeit the advance
rentals for the last six months of the lease period should the lessees terminate
the lease before the end of said period.
The appellate court also dismissed petitioner’s motion for
reconsideration in a Resolution dated April 23, 2001.
Hence, this petition.
Petitioner contends that the Court of Appeals misapplied and
misinterpreted the real import of the automatic forfeiture clause in relation to
pars. “3.a” and “3.b” of the Contract of Lease, and that even without the
automatic forfeiture clause, it can still recover the amount of P144,000.00
corresponding to the rent of the condominium unit for the last six months of
the lease period because the lessees breached their contract with petitioner.[2]
On July 25, 2001, the Court resolved to require respondent to file her
Comment to the petition[3] but respondent failed to file the same. In a
Manifestation filed with the Court on December 13, 2001, respondent’s
counsel of record explained that he had lost contact with respondent even
while the case was still pending before the trial court. He likewise prayed that
the case be decided based on the records of the case.
There is no merit in the petition.
Both the Court of Appeals and the trial court found that what the
Contract of Lease stipulated under paragraph 4 thereof was that if the lessees
terminated the lease before the expiration of the one-year period, the lessor
may automatically forfeit the deposit of P48,000.00 and the advance rental of
P144,000.00 for the first six months of the lease period. The pertinent portions
of the Contract of Lease state:
3. RENTAL - The parties herein agree that the monthly
rental of the leased premises and the listed furnishings
and equipment shall be TWENTY FOUR THOUSAND PESOS
(P24,000.00) Philippine Currency, net of any withholding
tax (BIR’s Official receipts of which LESSEE shall furnished
the LESSOR), payable within the first five days of every
calendar month without need of demand. Failure to pay
the agreed monthly rental, the LESSOR shall forfeit the
two (2) months deposit as penalty. All furnitures and
equipments listed in Annex “A” belong to the
LESSOR. The LESSOR and the LESSEE mutually agree that
the amount of ONE HUNDRED NINETY TWO THOUSAND
PESOS (P192,000.00) Philippine Currency, which the
LESSEE now tenders and pays to the LESSOR represents
as follows:
a) ONE HUNDRED FORTY FOUR THOUSAND PESOS
(P144,000.00) as advance rental for the first six (6) months
covering the period from December 6, 1989 to June 5, 1990.
b) FORTY EIGHT THOUSAND PESOS (P48,000.00) fixed non-
interest bearing deposit applicable to Item No. 4.
4. DEPOSIT - Upon signing of this contract LESSEE
shall deposit in cash the amount of FORTY EIGHT
THOUSAND PESOS (P48,000.00) Philippine Currency
which shall be non-interest bearing guaranty for the
faithful compliance by LESSEE of all covenants and
conditions of this Contract and to answer for any unpaid
bills for association dues and special assessments, water,
gas, electricity, telephone and other utilities and damages
suffered by LESSOR, and other momentary liabilities or
obligations of LESSEE under this Contract for the leased
premises, said deposit can’t be applied by LESSEE to any
unpaid rent and shall be kept intact throughout the life of
this Contract. It shall be returned to LESSEE ninety days
after LESSEE shall have completely and satisfactorily
vacated and delivered the leased premises to LESSOR in
the same condition the unit is first delivered to the
LESSEE: less whatever amount the LESSEE may owe
LESSOR at the time of said termination or expiration.
Provided, that if LESSEE shall terminate this lease
contract before the expiration thereof, then said deposit
and advanced rental paid shall be automatically
forfeited in favor of LESSOR since the parties herein
agree that time is of the essence and the period for
payment of rent, as well as the period of this contract, as
fixed for the benefit of LESSOR, PROVIDED, further that
the LESSEE liability for any breach of this Contract or any
obligation to the amount of said deposit. (Emphasis
supplied.)[4]
There is nothing in the said contract which allows the petitioner as lessor to
automatically forfeit the advance rental for the last six months of the lease
period from July to December, 1990. Since the amount covered by respondent’s
postdated check pertained to the rentals for the last six months of the lease
period, the appellate court was correct in holding that she was under no
obligation as accommodation party of the lessees to make good her check.
Considering the foregoing, no reversible error was committed by the
Court of Appeals in affirming the decision of the trial court dismissing the
complaint for collection filed by petitioner against respondent.
WHEREFORE, the petition is hereby DENIED for lack of merit and the
assailed Decision dated February 13, 2001 and the Resolution dated April 23,
2001 in CA-G.R. CV No. 60662 are hereby AFFIRMED. PUNO, J., on official leave.
V
[1] Majestic Finance & Investment Co., Inc, Plaintiff-Appellant, vs. Amelia L.
Bonifacio, Defendant-Appellee.
[2] Petition, Rollo, pp. 17-35.
[3]
Resolution dated July 25, 2001, Id., at 72.
[4] Decision of the Court of Appeals, Id., at 46-47.
Case Title : GENEVIEVE LIM, petitioner, vs. FLORENCIO SABAN, respondent.Case
Nature : PETITION for review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Civil Law|Commercial Law|Agency|Agency Coupled with an
Interest|Negotiable Instruments Law
Syllabi:
1. Civil Law; Agency; The right of a broker to his commission for finding a
suitable buyer for the seller’s property even though the seller himself
consummated the sale with the buyer recognized by the Court.-
In Macondray Co. v. Sellner, the Court recognized the right of a broker to his
commission for finding a suitable buyer for the seller’s property even though the
seller himself consummated the sale with the buyer. The Court held that it would
be in the height of injustice to permit the principal to terminate the contract of
agency to the prejudice of the broker when he had already reaped the benefits
of the broker’s efforts.
2. Civil Law; Agency; The seller’s withdrawal in bad faith of the broker’s
authority cannot unjustly deprive the brokers of their commission as the seller’s
duly constituted agents.-
In Infante v. Cunanan, et al., the Court upheld the right of the brokers to their
commissions although the seller revoked their authority to act in his behalf after
they had found a buyer for his properties and negotiated the sale directly with
the buyer whom he met through the brokers’ efforts. The Court ruled that the
seller’s withdrawal in bad faith of the brokers’ authority cannot unjustly deprive
the brokers of their commissions as the seller’s duly constituted agents.
3. Civil Law; Agency; Agency Coupled with an Interest; An agency is deemed as
one coupled with an interest where it is established for the mutual benefit of the
principal and of the agent, or for the interest of the principal and of third
persons, and it cannot be revoked by the principal so long as the interest of the
agent or of a third person subsists.-
Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral
contract depends upon it, or if it is the means of fulfilling an obligation already
contracted, or if a partner is appointed manager of a partnership in the contract
of partnership and his removal from the management is unjustifiable. Stated
differently, an agency is deemed as one coupled with an interest where it is
established for the mutual benefit of the principal and of the agent, or for the
interest of the principal and of third persons, and it cannot be revoked by the
principal so long as the interest of the agent or of a third person subsists. In an
agency coupled with an interest, the agent’s interest must be in the subject
matter of the power conferred and not merely an interest in the exercise of the
power because it entitles him to compensation. When an agent’s interest is
confined to earning his agreed compensation, the agency is not one coupled
with an interest, since an agent’s interest in obtaining his compensation as such
agent is an ordinary incident of the agency relationship.
4. Commercial Law; Negotiable Instruments Law; Requisites of an
Accommodation Party.-
As gleaned from the text of Section 29 of the Negotiable Instruments Law, the
accommodation party is one who meets all these three requisites, viz.: (1) he
signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not
receive value for the signature; and (3) he signed for the purpose of lending his
name to some other person. In the case at bar, while Lim signed as drawer of
the checks she did not satisfy the two other remaining requisites.
Division: SECOND DIVISION
Docket Number: G.R. No. 163720
Counsel: Palermo C. Belciña, Jr., Basilio E. Duaban
Ponente: TINGA
Dispositive Portion:
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
Case Title : TOMAS ANG, petitioner, vs. ASSOCIATED BANK AND ANTONIO ANG
ENG LIONG, respondents.Case Nature : PETITION for review on certiorari of the
decision and resolution of the Court of Appeals.
Syllabi Class : Appeals|Asset Privatization Trust|Negotiable Instruments
Law|Obligations and Contracts|Assignment of Errors|Pleadings and
Practice|Actions|Parties|Accommodation Party|Requisites|Words and
Phrases|Suretyship
Syllabi:
1. Appeals; Assignment of Errors; Pleadings and Practice; It is well within the
authority of the Court of Appeals to raise, if it deems proper under the
circumstances obtaining, error/s not assigned on an appealed case-
—an appellate court has the broad discretionary power to waive the lack of
proper assignment of errors and to consider errors not assigned.—Procedurally,
it is well within the authority of the Court of Appeals to raise, if it deems proper
under the circumstances obtaining, error/s not assigned on an appealed case. In
Mendoza v. Bautista, 453 SCRA 691 (2005), this Court recognized the broad
discretionary power of an appellate court to waive the lack of proper
assignment of errors and to consider errors not assigned, thus: As a rule, no
issue may be raised on appeal unless it has been brought before the lower
tribunal for its consideration. Higher courts are precluded from entertaining
matters neither alleged in the pleadings nor raised during the proceedings
below, but ventilated for the first time only in a motion for reconsideration or on
appeal. However, as with most procedural rules, this maxim is subject to
exceptions. Indeed, our rules recognize the broad discretionary power of an
appellate court to waive the lack of proper assignment of errors and to consider
errors not assigned. Section 8 of Rule 51 of the Rules of Court provides: SEC. 8.
Questions that may be decided.—No error which does not affect the jurisdiction
over the subject matter or the validity of the judgment appealed from or the
proceedings therein will be considered, unless stated in the assignment of errors,
or closely related to or dependent on an assigned error and properly argued in
the brief, save as the court may pass upon plain errors and clerical errors. Thus,
an appellate court is clothed with ample authority to review rulings even if they
are not assigned as errors in the appeal in these instances: (a) grounds not
assigned as errors but affecting jurisdiction over the subject matter; (b) matters
not assigned as errors on appeal but are evidently plain or clerical errors within
contemplation of law; (c) matters not assigned as errors on appeal but
consideration of which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interests of justice or to avoid dispensing
piecemeal justice; (d) matters not specifically assigned as errors on appeal but
raised in the trial court and are matters of record having some bearing on the
issue submitted which the parties failed to raise or which the lower court
ignored; (e) matters not assigned as errors on appeal but closely related to an
error assigned; and (f) matters not assigned as errors on appeal but upon which
the determination of a question properly assigned is dependent.
2. Same; Same; Since the liability of an accommodation party remains not only
primary but also unconditional to a holder for value, even if the
accommodated party receives an extension of the period for payment without
the consent of the accommodation party, the latter is still liable for the whole
obligation and such extension does not release him because as far as a holder
for value is concerned, he is a solidary co-debtor; It is a recognized doctrine in
the matter of suretyship that with respect to the surety, the creditor is under no
obligation to display any diligence in the enforcement of his rights as a creditor.-
—Since the liability of an accommodation party remains not only primary but
also unconditional to a holder for value, even if the accommodated party
receives an extension of the period for payment without the consent of the
accommodation party, the latter is still liable for the whole obligation and such
extension does not release him because as far as a holder for value is concerned,
he is a solidary co-debtor. In Clark v. Sellner, 42 Phil. 384 (1921), this Court held:
x x x The mere delay of the creditor in enforcing the guaranty has not by any
means impaired his action against the defendant. It should not be lost sight of
that the defendant’s signature on the note is an assurance to the creditor that
the collateral guaranty will remain good, and that otherwise, he, the defendant,
will be personally responsible for the payment. True, that if the creditor had
done any act whereby the guaranty was impaired in its value, or discharged,
such an act would have wholly or partially released the surety; but it must be
born in mind that it is a recognized doctrine in the matter of suretyship that with
respect to the surety, the creditor is under no obligation to display any diligence
in the enforcement of his rights as a creditor. His mere inaction indulgence,
passiveness, or delay in proceeding against the principal debtor, or the fact that
he did not enforce the guaranty or apply on the payment of such funds as were
available, constitute no defense at all for the surety, unless the contract
expressly requires diligence and promptness on the part of the creditor, which is
not the case in the present action. There is in some decisions a tendency toward
holding that the creditor’s laches may discharge the surety, meaning by laches a
negligent forbearance. This theory, however, is not generally accepted and the
courts almost universally consider it essentially inconsistent with the relation of
the parties to the note. (21 R.C.L., 1032-1034)
3. Same; Same; Upon the maturity of the note, a surety may pay the debt,
demand the collateral security, if there be any, and dispose of it to his benefit,
or, if applicable, subrogate himself in the place of the creditor with the right to
enforce the guaranty against the other signers of the note for the
reimbursement of what he is entitled to recover from them.-
—Under the law, upon the maturity of the note, a surety may pay the debt,
demand the collateral security, if there be any, and dispose of it to his benefit,
or, if applicable, subrogate himself in the place of the creditor with the right to
enforce the guaranty against the other signers of the note for the
reimbursement of what he is entitled to recover from them. Regrettably, none of
these we prudently done by petitioner. When he was first notified by the bank
sometime in 1982 regarding his accountabilities under the promissory notes, he
lackadaisically relied on Antonio Ang Eng Liong, who represented that he would
take care of the matter, instead of directly communicating with the bank for its
settlement. Thus, petitioner cannot now claim that he was prejudiced by the
supposed “extension of time” given by the bank to his co-debtor.
4. Negotiable Instruments Law; Accommodation Party; Words and
Phrases; The phrase “without receiving value therefor” used in Sec. 29 of the
Negotiable Instruments Law (NIL) means “without receiving value by virtue of
the instrument” and not as it is apparently supposed to mean, “without
receiving payment for lending his name”-
—when a third person advances the face value of the note to the
accommodated party at the time of its creation, the consideration for the note
as regards its maker is the money advanced to the accommodated party.—In
issuing the two promissory notes, petitioner as accommodating party warranted
to the holder in due course that he would pay the same according to its tenor. It
is no defense to state on his part that he did not receive any value therefor
because the phrase “without receiving value therefore” used in Sec. 29 of the
NIL means “without receiving value by virtue of the instrument” and not as it is
apparently supposed to mean, “without receiving payment for lending his
name.” Stated differently, when a third person advances the face value of the
note to the accommodated party at the time of its creation, the consideration
for the note as regards its maker is the money advanced to the accommodated
party. It is enough that value was given for the note at the time of its creation.
As in the instant case, a sum of money was received by virtue of the notes,
hence, it is immaterial so far as the bank is concerned whether one of the
signers, particularly petitioner, has or has not received anything in payment of
the use of his name.
5. Obligations and Contracts; Suretyship; Article 2080 of the Civil Code does not
apply in a contract of suretyship-
—Articles 1207 up to 1222 of the Code (on joint and solidary obligations) govern
the relationship.—Contrary to petitioner’s adamant stand, however, Article
2080 of the Civil Code does not apply in a contract of suretyship. Art. 2047 of the
Civil Code states that if a person binds himself solidarily with the principal
debtor, the provisions of Section 4, Chapter 3, Title I, Book IV of the Civil Code
must be observed. Accordingly, Articles 1207 up to 1222 of the Code (on joint
and solidary obligations) shall govern the relationship of petitioner with the
bank.
6. Same; Same; Suretyship; The relation between an accommodation party and
the accommodated party is one of principal and surety-
—the accommodation party being the surety; Although a contract of suretyship
is in essence accessory or collateral to a valid principal obligation, the surety’s
liability to the creditor is immediate, primary and absolute—he is directly and
equally bound with the principal.—As petitioner acknowledged it to be, the
relation between an accommodation party and the accommodated party is one
of principal and surety—the accommodation party being the surety. As such, he
is deemed an original promisor and debtor from the beginning; he is considered
in law as the same party as the debtor in relation to whatever is adjudged
touching the obligation of the latter since their liabilities are interwoven as to be
inseparable. Although a contract of suretyship is in essence accessory or
collateral to a valid principal obligation, the surety’s liability to the creditor is
immediate, primary and absolute; he is directly and equally bound with the
principal. As an equivalent of a regular party to the undertaking, a surety
becomes liable to the debt and duty of the principal obligor even without
possessing a direct or personal interest in the obligations nor does he receive
any benefit therefrom.
7. Negotiable Instruments Law; Accommodation Party; Requisites; Words and
Phrases; An accommodation party is a person “who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving value therefor, and
for the purpose of lending his name to some other person.”-
—Notably, Section 29 of the NIL defines an accommodation party as a person
“who has signed the instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of lending his name to
some other person.” As gleaned from the text, an accommodation party is one
who meets all the three requisites, viz.: (1) he must be a party to the instrument,
signing as maker, drawer, acceptor, or indorser; (2) he must not receive value
therefor; and (3) he must sign for the purpose of lending his name or credit to
some other person. An accommodation party lends his name to enable the
accommodated party to obtain credit or to raise money; he receives no part of
the consideration for the instrument but assumes liability to the other party/ies
thereto. The accommodation party is liable on the instrument to a holder for
value even though the holder, at the time of taking the instrument, knew him or
her to be merely an accommodation party, as if the contract was not for
accommodation.
8. Same; Actions; Parties; While a bank held by the Asset Privatization Trust
may not appear to be the real party in interest at the time the action for
collection was instituted, the issue had been rendered moot with the occurrence
of a supervening event-
—the reacquisition of the bank by its former owner when the case was still
pending in the lower court, thus reclaiming its real and actual interest over the
unpaid promissory notes.—Based on the above backdrop, respondent Bank does
not appear to be the real party in interest when it instituted the collection suit
on August 28, 1990 against Antonio Ang Eng Liong and petitioner Tomas Ang. At
the time the complaint was filed in the trial court, it was the Asset Privatization
Trust which had the authority to enforce its claims against both debtors. In fact,
during the pre-trial conference, Atty. Roderick Orallo, counsel for the bank,
openly admitted that it was under the trusteeship of the Asset Privatization
Trust. The Asset Privatization Trust, which should have been represented by the
Office of the Government Corporate Counsel, had the authority to file and
prosecute the case. The foregoing notwithstanding, this Court can not, at
present, readily subscribe to petitioner’s insistence that the case must be
dismissed. Significantly, it stands without refute, both in the pleadings as well as
in the evidence presented during the trial and up to the time this case reached
the Court, that the issue had been rendered moot with the occurrence of a
supervening event—the “buy-back” of the bank by its former owner, Leonardo
Ty, sometime in October 1993. By such re-acquisition from the Asset
Privatization Trust when the case was still pending in the lower court, the bank
reclaimed its real and actual interest over the unpaid promissory notes; hence, it
could rightfully qualify as a “holder” thereof under the NIL.
9. Asset Privatization Trust; History.-
—Taking into account the imperative need of formally launching a program for
the rationalization of the government corporate sector, then President Corazon
C. Aquino issued Proclamation No. 50 on December 8, 1986. As one of the twin
cornerstones of the program was to establish the privatization of a good
number of government corporations, the proclamation created the Asset
Privatization Trust, which would, for the benefit of the National Government,
take title to and possession of, conserve, provisionally manage and dispose of
transferred assets that were identified for privatization or disposition. In
accordance with the provisions of Section 23 of the proclamation, then President
Aquino subsequently issued Administrative Order No. 14 on February 3, 1987,
which approved the identification of and transfer to the National Government of
certain assets (consisting of loans, equity investments, accrued interest
receivables, acquired assets and other assets) and liabilities (consisting of
deposits, borrowings, other liabilities and contingent guarantees) of the
Development Bank of the Philippines (DBP) and the Philippine National Bank
(PNB). The transfer of assets was implemented through a Deed of Transfer
executed on February 27, 1987 between the National Government, on one hand,
and the DBP and PNB, on the other. In turn, the National Government
designated the Asset Privatization Trust to act as its trustee through a Trust
Agreement, whereby the non-performing accounts of DBP and PNB, including,
among others, the DBP’s equity with respondent Bank, were entrusted to the
Asset Privatization Trust. As provided for in the Agreement, among the powers
and duties of the Asset Privatization Trust with respect to the trust properties
consisting of receivables was to handle their administration and collection by
bringing suit to enforce payment of the obligations or any installment thereof or
settling or compromising any of such obligations or any other claim or demand
which the Govern- ment may have against any person or persons, and to do all
acts, institute all proceedings, and to exercise all other rights, powers, and
privileges of ownership that an absolute owner of the properties would
otherwise have the right to do.
Division: FIRST DIVISION
Docket Number: G.R. No. 146511
Counsel: Breva, Breva Law Firm, Hildegardo F. Iñigo, Bernardino Bolcan, Jr.
Ponente: AZCUNA
Dispositive Portion:
WHEREFORE, the October 9, 2000 Decision and December 26, 2000 Resolution
of the Court of Appeals in CA-G.R. CV No. 53413 are AFFIRMED. The petition is
DENIED for lack of merit.
G.R. No. 154740. April 16, 2008.*
HENRY DELA RAMA CO, petitioner, vs. ADMIRAL UNITED SAVINGS BANK,
respondent.
Civil Law; Negotiable Instruments Law; Loans; Accommodation Party; An
accommodation party who leads his name to enable the accommodated party
to obtain credit or raise money is liable on the instrument to a holder for value
even if he receives no part of the consideration.—Co’s assertion that he merely
acted as an accommodation party for METRO RENT cannot release him from
liability under the note. An accommodation party who lends his name to enable
the accommodated party to obtain credit or raise money is liable on the
instrument to a holder for value even if he receives no part of the
consideration. He assumes the obligation to the other party and binds himself
to pay the note on its due date. By signing the note, Co thus became liable for
the debt even if he had no direct personal interest in the obligation or did not
receive any benefit therefrom.
Same; Mortgages; Payment; The receipts of payment although not exclusive
were deemed to be the best evidence of the fact of payment; Cancellation of
mortgage is not conclusive proof of payment of a loan even as it may serve as
basis for an inference that payment of the principal obligation had been
made.—Co also offered the alternative defense that the loan had already been
extinguished by payment. He testified that METRO RENT paid the loan a week
before April 11, 1983. In Alonzo v. San Juan, 451 SCRA 45 (2005), we held that
the receipts of payment, although not exclusive, were deemed to be the best
evidence of the fact of payment. In this case, no receipt was presented to
substantiate the claim of payment. Instead, Co presented a Release of Real
Estate Mortgage dated April 11, 1983 to prove his assertion. But a cancellation
of mortgage is not conclusive proof of payment of a loan, even as it may serve
as basis for an inference that payment of the principal obligation had been
made.
Same; Same; Same; When the plaintiff alleges nonpayment, still the general rule
is that the burden rests on the defendant to prove payment rather than on the
plaintiff to prove nonpayment.—Juris-prudence is replete with rulings that in
civil cases, the party who alleges a fact has the burden of proving it. Burden of
proof is the duty of a party to present evidence on the facts in issue necessary
to prove the truth of his claim or defense by the amount of evidence required
by law. Thus, a party who pleads payment as a defense has the burden of
proving that such payment had, in fact, been made. When the plaintiff alleges
nonpayment, still, the general rule is that the burden rests on the defendant to
prove payment, rather than on the plaintiff to prove nonpayment. [Co vs.
Admiral United Savings Bank, 551 SCRA 472(2008)]
Case Title : CLAUDE P. BAUTISTA, petitioner, vs. AUTO PLUS TRADERS,
INCORPORATED and COURT OF APPEALS (Twenty-First Division),
respondentsCase Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Negotiable Instruments Law ; Words and Phrases ;
Accommodation Party ;
Syllabi:
1. Corporation Law; Generally, the stockholders and officers are not personally
liable for the obligations of the corporation except only when the veil of
corporate fiction is being used as a cloak or cover for fraud or illegality, or to
work injustice.-
—Juridical entities have personalities separate and distinct from its officers and
the persons composing it. Generally, the stockholders and officers are not
personally liable for the obligations of the corporation except only when the veil
of corporate fiction is being used as a cloak or cover for fraud or illegality, or to
work injustice. These situations, however, do not exist in this case. The evidence
shows that it is Cruiser Bus Lines and Transport Corporation that has obligations
to Auto Plus Traders, Inc. for tires. There is no agreement that petitioner shall be
held liable for the corporation’s obligations in his personal capacity. Hence, he
cannot be held liable for the value of the two checks issuedin payment for the
corporation’s obligation in the total amount of P248,700.
2. Negotiable Instruments Law; Words and Phrases; Accommodation
Party; Section 29 of the Negotiable Instruments Law defines an accommodation
party as a person who has signed the instrument as maker, drawer, acceptor, or
endorser, without receiving value therefor, and for the purpose of lending his
name to some other person.-
—Contrary to private respondent’s contentions, petitioner cannot be considered
liable as an accommodation party for Check No. 58832. Section 29 of the
Negotiable Instruments Law defines an accommodation party as a person “who
has signed the instrument as maker, drawer, acceptor, or indorser, without
receiving value therefor, and for the purpose of lending his name to some other
person.” As gleaned from the text, an accommodation party is one who meets
all the three requisites, viz.: (1) he must be a party to the instrument, signing as
maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and
(3) he must sign for the purpose of lending his name or credit to some other
person. An accommodation party lends his name to enable the accommodated
party to obtain credit or to raise money; he receives no part of the consideration
for the instrument but assumes liability to the other party/ies thereto. The first
two elements are present here, however there is insufficient evidence presented
in the instant case to show the presence of the third requisite. All that the
evidence shows is that petitioner signed Check No. 58832, which is drawn
against his personal account. The said check, dated December 15, 2000,
corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and
Transport Corporation on August 29, 2000. There is no showing of when
petitioner issued the check and in what capacity. In the absence of concrete
evidence it cannot just be assumed that petitioner intended to lend his name to
the corporation. Hence, petitioner cannot be considered as an accommodation
party.
Division: SECOND DIVISION
Docket Number: G.R. No. 166405
Counsel: Rodolfo B. Ta-asan, Jr.
Ponente: QUISUMBING
Dispositive Portion:
I, THEREFORE, VOTE TO DISMISS THE PETITION.
Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF
APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO,
respondents.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Certiorari|Negotiable Instruments Law|Checks|Crossed
Checks|Presumptions|Words and Phrases|Banks and Banking|Damages
Syllabi:
1. Certiorari; Only questions of law may be raised in an appeal by certiorari
under Rule 45 of the Rules of Court; Factual findings of the Court of Appeals
are entitled to great weight and respect, especially when the CA affirms the
factual findings of the trial court; Exceptions.-
—Generally, only questions of law may be raised in an appeal by certiorari
under Rule 45 of the Rules of Court. Factual findings of the CA are entitled to
great weight and respect, especially when the CA affirms the factual findings of
the trial court. Such questions on whether certain items of evidence should be
accorded probative value or weight, or rejected as feeble or spurious, or
whether or not the proofs on one side or the other are clear and convincing and
adequate to establish a proposition in issue, are questions of fact. The same
holds true for questions on whether or not the body of proofs presented by a
party, weighed and analyzed in relation to contrary evidence submitted by the
adverse party may be said to be strong, clear and convincing, or whether or not
inconsistencies in the body of proofs of a party are of such gravity as to justify
refusing to give said proofs weight—all these are issues of fact which are not
reviewable by the Court. This rule, however, is not absolute and admits of
certain exceptions, namely: a) when the conclusion is a finding grounded
entirely on speculations, surmises, or conjectures; b) when the inference made is
manifestly mistaken, absurd, or impossible; c) when there is a grave abuse of
discretion; d) when the judgment is based on a misapprehension of facts; e)
when the findings of fact are conflicting; f) when the CA, in making its findings,
went beyond the issues of the case and the same are contrary to the admissions
of both appellant and appellee; g) when the findings of the CA are contrary to
those of the trial court; h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; i) when the finding of fact
of the CA is premised on the supposed absence of evidence but is contradicted
by the evidence on record; and j) when the CA manifestly overlooked certain
relevant facts not disputed by the parties and which, if properly considered,
would justify a different conclusion.
2. Same; Same; Damages; A depositor has the right to recover reasonable moral
damages even if the bank’s negligence may not have been attended with malice
and bad faith, if the former suffered mental anguish, serious anxiety,
embarrassment and humiliation.-
—This whole incident would have been avoided had petitioner adhered to the
standard of diligence expected of one engaged in the banking business. A
depositor has the right to recover reasonable moral damages even if the bank’s
negligence may not have been attended with malice and bad faith, if the former
suffered mental anguish, serious anxiety, embarrassment and humiliation.
Moral damages are not meant to enrich a complainant at the expense of
defendant. It is only intended to alleviate the moral suffering she has
undergone. The award of exemplary damages is justified, on the other hand,
when the acts of the bank are attended by malice, bad faith or gross negligence.
The award of reasonable attorney’s fees is proper where exemplary damages
are awarded. It is proper where depositors are compelled to litigate to protect
their interest.
3. Same; Same; The taking and collection of a check without the proper
indorsement amount to a conversion of the check by the bank.-
—To begin with, the irregularity appeared plainly on the face of the checks.
Despite the obvious lack of indorsement thereon, petitioner permitted the
encashment of these checks three times on three separate occasions. This
negates petitioner’s claim that it merely made a mistake in crediting the value of
the checks to Salazar’s account and instead bolsters the conclusion of the CA
that petitioner recognized Salazar’s claim of ownership of checks and acted
deliberately in paying the same, contrary to ordinary banking policy and
practice. It must be emphasized that the law imposes a duty of diligence on the
collecting bank to scrutinize checks deposited with it, for the purpose of
determining their genuineness and regularity. The collecting bank, being
primarily engaged in banking, holds itself out to the public as the expert on this
field, and the law thus holds it to a high standard of conduct. The taking and
collection of a check without the proper indorsement amount to a conversion of
the check by the bank.
4. Same; Same; As businesses affected with public interest, and because of the
nature of their functions, banks are under obligation to treat the accounts of
their depositors with meticulous care, always having in mind the fiduciary
nature of their relationship.-
—It is conceded that petitioner had the right of set-off over the amount it paid
to Templonuevo against the deposit of Salazar, the issue of whether it acted
judiciously is an entirely different matter. As businesses affected with public
interest, and because of the nature of their functions, banks are under
obligation to treat the accounts of their depositors with meticulous care, always
having in mind the fiduciary nature of their relationship. In this regard,
petitioner was clearly remiss in its duty to private respondent Salazar as its
depositor.
5. Same; Banks and Banking; Checks; A bank generally has a right of set-off
over the deposits therein for the payment of any withdrawals on the part of a
depositor-
—the right of a collecting bank to debit a client’s account for the value of a
dishonored check that has previously been credited has fairly been established
by jurisprudence.—The right of set-off was explained in Associated Bank v. Tan,
446 SCRA 282 (2004): A bank generally has a right of set-off over the deposits
therein for the payment of any withdrawals on the part of a depositor. The right
of a collecting bank to debit a client’s account for the value of a dishonored
check that has previously been credited has fairly been established by
jurisprudence. To begin with, Article 1980 of the Civil Code provides that “[f]ixed,
savings, and current deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan.” Hence, the relationship
between banks and depositors has been held to be that of creditor and debtor.
Thus, legal compensation under Article 1278 of the Civil Code may take place
“when all the requisites mentioned in Article 1279 are present,” as follows: (1)
That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other; (2) That both debts consist in a sum of
money, or if the things due are consumable, they be of the same kind, and also
of the same quality if the latter has been stated; (3) That the two debts be due;
(4) That they be liquidated and demandable; (5) That over neither of them there
be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
6. Same; Same; It is an exception to the general rule for a payee of an order
instrument to transfer the instrument without indorsement.-
—It is an exception to the general rule for a payee of an order instrument to
transfer the instrument without indorsement. Precisely because the situation is
abnormal, it is but fair to the maker and to prior holders to require possessors to
prove without the aid of an initial presumption in their favor, that they came
into possession by virtue of a legitimate transaction with the last holder. Salazar
failed to discharge this burden, and the return of the check proceeds to
Templonuevo was therefore warranted under the circumstances despite the fact
that Templonuevo may not have clearly demonstrated that he never authorized
Salazar to deposit the checks or to encash the same. Noteworthy also is the fact
that petitioner stamped on the back of the checks the words: “All prior
endorsements and/or lack of endorsements guaranteed,” thereby making the
assurance that it had ascertained the genuineness of all prior endorsements.
Having assumed the liability of a general indorser, petitioner’s liability to the
designated payee cannot be denied.
7. Same; Same; Presumptions; Words and Phrases; The presumption under
Section 131(s) of the Rules of Court stating that a negotiable instrument was
given for a sufficient consideration will not inure to the benefit of someone who
was merely the transferee of the physical possession of the instrument-
—the phrase “given or indorsed” in the context of a negotiable instrument refers
to the manner in which such instrument may be negotiated.—The presumption
under Section 131(s) of the Rules of Court stating that a negotiable instrument
was given for a sufficient consideration will not inure to the benefit of Salazar
because the term “given” does not pertain merely to a transfer of physical
possession of the instrument. The phrase “given or indorsed” in the context of a
negotiable instrument refers to the manner in which such instrument may be
negotiated. Negotiable instruments are negotiated by “transfer to one person or
another in such a manner as to constitute the transferee the holder thereof. If
payable to bearer it is negotiated by delivery. If payable to order it is negotiated
by the indorsement completed by delivery.” The present case involves checks
payable to order. Not being a payee or indorsee of the checks, private
respondent Salazar could not be a holder thereof.
8. Same; Same; Crossed Checks; If instruments payable to named payees or to
their order have not been indorsed in blank, only such payees or their indorsees
can be holders and entitled to receive payment in their own right.-
—In State Investment House v. IAC, 175 SCRA 310 (1989), the Court enumerated
the effects of crossing a check, thus: (1) that the check may not be encashed but
only deposited in the bank; (2) that the check may be negotiated only once—to
one who has an account with a bank; and (3) that the act of crossing the check
serves as a warning to the holder that the check has been issued for a definite
purpose so that such holder must inquire if the check has been received
pursuant to that purpose. Thus, even if the delay in the demand for
reimbursement is taken in conjunction with Salazar’s possession of the checks, it
cannot be said that the presumption of ownership in Templonuevo’s favor as the
designated payee therein was sufficiently overcome. This is consistent with the
principle that if instruments payable to named payees or to their order have not
been indorsed in blank, only such payees or their indorsees can be holders and
entitled to receive payment in their own right.
9. Negotiable Instruments Law; Checks; The weight of authority is that the
mere possession of a negotiable instrument does not in itself conclusively
establish either the right of the possessor to receive payment, or of the right of
one who has made payment to be discharged from liability.-
—Section 49 of the Negotiable Instruments Law contemplates a situation
whereby the payee or indorsee delivers a negotiable instrument for value
without indorsing it, thus: Transfer without indorsement; effect of.—Where the
holder of an instrument payable to his order transfers it for value without
indorsing it, the transfer vests in the transferee such title as the transferor had
therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of determining whether the
transferee is a holder in due course, the negotiation takes effect as of the time
when the indorsement is actually made. It bears stressing that the above
transaction is an equitable assignment and the transferee acquires the
instrument subject to defenses and equities available among prior parties. Thus,
if the transferor had legal title, the transferee acquires such title and, in
addition, the right to have the indorsement of the transferor and also the right,
as holder of the legal title, to maintain legal action against the maker or
acceptor or other party liable to the transferor. The underlying premise of this
provision, however, is that a valid transfer of ownership of the negotiable
instrument in question has taken place. Transferees in this situation do not enjoy
the presumption of ownership in favor of holders since they are neither payees
nor indorsees of such instruments. The weight of authority is that the mere
possession of a negotiable instrument does not in itself conclusively establish
either the right of the possessor to receive payment, or of the right of one who
has made payment to be discharged from liability. Thus, something more than
mere possession by persons who are not payees or indorsers of the instrument is
necessary to authorize payment to them in the absence of any other facts from
which the authority to receive payment may be inferred.
Division: FIRST DIVISION
Docket Number: G.R. No. 136202
Counsel: Justino M. Marquez, III, Abesamis, Medialdea & Abesamis, Arniel N.
Bondoc
Ponente: AZCUNA
Dispositive Portion:
WHEREFORE, the petition is partially GRANTED. The assailed Decision dated
April 3, 1998 and Resolution dated April 3, 1998 rendered by the Court of
Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it ordered petitioner
Bank of the Philippine Islands to return the amount of Two Hundred Sixty-seven
Thousand Seven Hundred and Seven and 70/100 Pesos (P267,707.70) to
respondent Annabelle A. Salazar, which portion is REVERSED and SET ASIDE. In
all other respects, the same are AFFIRMED.
Case Title : METROPOLITAN BANK AND TRUST COMPANY (formerly ASIANBANK
CORPORATION), petitioner, vs. BA FINANCE CORPORATION and MALAYAN
INSURANCE CO., INC., respondents.Case Nature : PETITION for review on
certiorari of a decision of the Court of Appeals.
Syllabi Class : Negotiable Instruments Law|Banks and Banking|Agency|Interest
Rates
Syllabi:
1. Negotiable Instruments Law; Checks; Where an instrument is payable to the
order of two or more payees or indorsees who are not partners, all must indorse
unless the one indorsing has authority to indorse for the others.-
—Section 41 of the Negotiable Instruments Law provides: Where an instrument
is payable to the order of two or more payees or indorsees who are not partners,
all must indorse unless the one indorsing has authority to indorse for the others.
Bitanga alone endorsed the crossed check, and petitioner allowed the deposit
and release of the proceeds thereof, despite the absence of authority of
Bitanga’s co-payee BA Finance to endorse it on its behalf.
2. Same; Banks and Banking; Agency; Interest Rates; The nature of the
relationship between the payee of a check and the collecting bank is one of
agency-
—the obligation of the bank does not arise out of a loan or forbearance of
money, goods or credit, thus the legal interest should be 6%, not 12%, per
annum.—The Court takes exception, however, to the appellate court’s
affirmance of the trial court’s grant of legal interest of 12% per annum on the
value of the check. For the obligation in this case did not arise out of a loan or
forbearance of money, goods or credit. While Article 1980 of the Civil Code
provides that: Fixed savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan, said
provision does not find application in this case since the nature of the
relationship between BA Finance and petitioner is one of agency whereby
petitioner, as collecting bank, is to collect for BA Finance the corresponding
proceeds from the check. Not being a loan or forbearance of money, the interest
should be 6% per annum computed from the date of extrajudicial demand on
September 25, 1992 until finality of judgment; and 12% per annum from finality
of judgment until payment, conformably with Eastern Shipping Lines, Inc. v.
Court of Appeals, 234 SCRA 78 (1994).
3. Same; Quasi-Delicts; Damages; Words and Phrases; In quasi-delict,
exemplary damages may be granted if the defendant acted with gross
negligence; “Gross negligence” implies a want or absence of or failure to
exercise even slight care or diligence, or the entire absence of care, evincing a
thoughtless disregard of consequences without exerting any effort to avoid
them.-
—Petitioner’s liability is based not on contract or quasi-contract but on quasi-
delict since there is no pre-existing contractual relation between the parties.
Article 2231 of the Civil Code, which provides that in quasi-delict, exemplary
damages may be granted if the defendant acted with gross negligence, thus
applies. For “gross negligence” implies a want or absence of or failure to
exercise even slight care or diligence, or the entire absence of care, evincing a
thoughtless disregard of consequences without exerting any effort to avoid
them. x x x The law allows the grant of exemplary damages to set an example
for the public good. The business of a bank is affected with public interest; thus
it makes a sworn profession of diligence and meticulousness in giving
irreproachable service. For this reason, the bank should guard against ininjury
attributable to negligence or bad faith on its part. The award of exemplary
damages is proper as a warning to [the petitioner] and all concerned not to
recklessly disregard their obligation to exercise the highest and strictest
diligence in serving their depositors.
4. Same; Same; Same; When the maker dishonors the instrument, the holder
thereof can turn to those secondarily liable-
—the indorser—for recovery.—Granting petitioner’s appeal for partial liability
would run counter to the existing principles on the liabilities of parties on
negotiable instruments, particularly on Section 68 of the Negotiable Instruments
Law which instructs that joint payees who indorse are deemed to indorse jointly
and severally. Recall that when the maker dishonors the instrument, the holder
thereof can turn to those secondarily liable—the indorser—for recovery. And
since the law explicitly mandates a solidary liability on the part of the joint
payees who indorse the instrument, the holder thereof (assuming the check was
further negotiated) can turn to either Bitanga or BA Finance for full recompense.
5. Same; Same; Banks and Banking; One who credits the proceeds of a check to
the account of the indorsing payee is liable in conversion to the non-indorsing
payee for the entire amount of the check.-
—The provisions of the Negotiable Instruments Law and underlying
jurisprudential teachings on the black-letter law provide definitive justification
for petitioner’s full liability on the value of the check. To be sure, a collecting
bank, Asianbank in this case, where a check is deposited and which indorses the
check upon presentment with the drawee bank, is an indorser. This is because in
indorsing a check to the drawee bank, a collecting bank stamps the back of the
check with the
6. Same; Same; The payment of an instrument over a missing indorsement is the
equivalent of payment on a forged indorsement or an unauthorized indorsement
in itself in the case of joint payees.-
—Petitioner’s argument that since there was neither forgery, nor unauthorized
indorsement because Bitanga was a co-payee in the subject check, the dictum in
Associated Bank v. CA does not apply in the present case fails. The payment of
an instrument over a missing indorsement is the equivalent of payment on a
forged indorsement or an unauthorized indorsement in itself in the case of joint
payees. Clearly, petitioner, through its employee, was negligent when it allowed
the deposit of the crossed check, despite the lone endorsement of Bitanga,
ostensibly ignoring the fact that the check did not, it bears repeating, carry the
indorsement of BA Finance.
Division: FIRST DIVISION
Docket Number: G.R. No. 179952
Counsel: Carlo Magno J. Verzo and Lemuel D. Lopez
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the Decision of the Court of Appeals dated May 18, 2007 is
AFFIRMED with MODIFICATION in that the rate of interest on the judgment
obligation of P224,500 should be 6% per annum, computed from the time of
extrajudicial demand on September 25, 1992 until its full payment before
finality of judgment; thereafter, if the amount adjudged remains unpaid, the
interest rate shall be 12% per annum computed from the time the judgment
becomes final and executory until fully satisfied. Costs against petitioner.
Case Nature : PETITION for review on certiorari of a decision of the Court of
Appeals.
Syllabi Class : Banks and Banking|Philippine Clearing House
Corporation|Arbitration|Checks|Actions|Third-Party Complaints|Jurisdiction
Syllabi:
1. Banks and Banking; Philippine Clearing House
Corporation; Arbitration; Checks; Actions; Third-Party
Complaints; Jurisdiction; A third-party complaint of one bank against another
involving a check cleared through the PCHC is unavailing, unless the third-party
claimant has first exhausted the arbitral authority of the PCHC Arbitration
Committee and obtained a decision from said body adverse to its claim.-
—Banco de Oro and Associated Bank are clear and unequivocal: a third-party
complaint of one bank against another involving a check cleared through the
PCHC is unavailing, unless the third-party claimant has first exhausted the
arbitral authority of the PCHC Arbitration Committee and obtained a decision
from said body adverse to its claim.
2. Same; Same; Same; In the world of commerce, especially in the field of
banking, the promised word is crucial. Once given, it may no longer be broken.-
—By participating in the clearing operations of the PCHC, petitioner agreed to
submit disputes of this nature to arbitration. Accordingly, it cannot invoke the
jurisdiction of the trial courts without a prior recourse to the PCHC Arbitration
Committee. Having given its free and voluntary consent to the arbitration
clause, petitioner cannot unilaterally take it back according to its whim. In the
world of commerce, especially in the field of banking, the promised word is
crucial. Once given, it may no longer be broken.
3. Same; Same; Same; Same; Same; Same; Same; The doctrine that a trial
court, which has jurisdiction over the main action, also has jurisdiction over the
third-party complaint, even if the said court would have had no jurisdiction over
it had it been filed as an independent action, does not apply in the case of banks,
which have given written and subscribed consent to arbitration under the
auspices of the PCHC.-
—We are not unaware of the rule that a trial court, which has jurisdiction over
the main action, also has jurisdiction over the third-party complaint, even if the
said court would have had no jurisdiction over it had it been filed as an
independent action. However, this doctrine does not apply in the case of banks,
which have given written and subscribed consent to arbitration under the
auspices of the PCHC.
4. Same; Same; Same; Same; Same; Same; Same; When the error is so patent,
gross and prejudicial as to constitute grave abuse of discretion, courts may
address questions of fact already decided by the arbitrator.-
—When the error is so patent, gross and prejudicial as to constitute grave abuse
of discretion, courts may address questions of fact already decided by the
arbitrator.
5. Same; Same; Same; Same; Same; Same; Same; Primary recourse to the PCHC
does not preclude an appeal to the regional trial courts on questions of law.-
—We defer to the primary authority of PCHC over the present dispute, because
its technical expertise in this field enables it to better resolve questions of this
nature. This is not prejudicial to the interest of any party, since primary recourse
to the PCHC does not preclude an appeal to the regional trial courts on
questions of law.
Division: FIRST DIVISION
Docket Number: G.R. No. 123871
Counsel: Ocampo, Quiroz, Pesayco & Associates, Alfonso B. Verzosa
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner.
Case Title : CELY YANG, petitioner, vs. HON. COURT OF APPEALS, PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, FAR EAST BANK & TRUST CO., EQUITABLE
BANKING CORPORATION, PREM CHANDIRAMANI and FERNANDO DAVID,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Negotiable Instrument Law|Every holder of a negotiable
instrument is deemed prima facie a holder in due course|Definition of a holder
in due course
Syllabi:
1. Negotiable Instrument Law; Every holder of a negotiable instrument is
deemed prima facie a holder in due course; Definition of a holder in due
course; Presumption rebuttable.-
Every holder of a negotiable instrument is deemed prima facie a holder in due
course. However, this presumption arises only in favor of a person who is a
holder as defined in Section 191 of the Negotiable Instruments Law, meaning a
“payee or indorsee of a bill or note, who is in possession of it, or the bearer
thereof.” In the present case, it is not disputed that David was the payee of the
checks in question. The weight of authority sustains the view that a payee may
be a holder in due course. Hence, the presumption that he is a prima facie holder
in due course applies in his favor. However, said presumption may be rebutted.
Hence, what is vital to the resolution of this issue is whether David took
possession of the checks under the conditions provided for in Section 52 of the
Negotiable Instruments Law. All the requisites provided for in Section 52 must
concur in David’s case; otherwise he cannot be deemed a holder in due course.
2. Negotiable Instrument Law; Section 24 of the Negotiable Instruments Law
creates a presumption that every party to an instrument acquired the same for a
consideration or for value; Petitioner must present convincing evidence to
overthrow the presumption.-
With respect to consideration, Section 24 of the Negotiable Instruments Law
creates a presumption that every party to an instrument acquired the same for a
consideration or for value. Thus, the law itself creates a presumption in David’s
favor that he gave valuable consideration for the checks in question. In alleging
otherwise, the petitioner has the onus to prove that David got hold of the checks
absent said consideration. In other words, the petitioner must present
convincing evidence to overthrow the presumption. Our scrutiny of the records,
however, shows that the petitioner failed to discharge her burden of proof. The
petitioner’s averment that David did not give valuable consideration when he
took possession of the checks is unsupported, devoid of any concrete proof to
sustain it.
3. Negotiable Instrument Law; Court has taken judicial cognizance of the
practice that a check with two parallel lines in the upper left hand corner means
that it could only be deposited and not converted into cash.-
The Negotiable Instruments Law is silent with respect to crossed checks,
although the Code of Commerce makes reference to such instruments.
Nonetheless, this Court has taken judicial cognizance of the practice that a check
with two parallel lines in the upper left hand corner means that it could only be
deposited and not converted into cash. The effects of crossing a check, thus,
relates to the mode of payment, meaning that the drawer had intended the
check for deposit only by the rightful person, i.e., the payee named therein.
Division: SECOND DIVISION
Docket Number: G.R. No. 138074
Counsel: Don P. Porciuncula, Victor N. Alimurong, Siguion Reyna, Monticillo &
Ongsiako, Curato, Divina & Associates, Recto Law Offices, Fortun, Narvasa &
Salazar, Pacis, Ramirez & Bacorro Law Offices
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the instant petition is DENIED. The assailed decision of the Court
of Appeals, dated March 25, 1999, in
Case Title : EQUITABLE PCI BANK (the Banking Entity into which Philippine
Commercial International Bank was merged), petitioner, vs. ROWENA ONG,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Actions|Banks and Banking|Damages|Proximate
Cause|Judgments|Words and Phrases|Checks|Doctrine of Unjust
Enrichment|Manager’s Checks
Syllabi:
1. Actions; Judgments; Words and Phrases; A genuine issue is an issue of fact
which calls for the presentation of evidence, as distinguished from an issue
which is sham, fictitious, contrived and pat-ently unsubstantiated so as not to
constitute a genuine issue of fact.-
—It has been held that a summary judgment is proper where, upon a motion
filed after the issues had been joined and on the basis of the pleadings and
papers filed, the court finds that there is no genuine issue as to any material fact
to except as to the amount of damages. A genuine issue has been defined as an
issue of fact which calls for the presentation of evidence, as distinguished from
an issue which is sham, fictitious, contrived and patently unsubstantial so as not
to constitute a genuine issue for trial. A court may grant summary judgment to
settle expeditiously a case if, on motion of either party, there appears from the
pleadings, depositions, admissions, and affidavits that no important issues of
fact are involved, except the amount of damages. Rule 35, Section 3, of the
Rules of Court provides two requisites for summary judgment to be proper: (1)
there must be no genuine issue as to any material fact, except for the amount of
damages; and (2) the party presenting the motion for summary judgment must
be entitled to a judgment as a matter of law.
2. Banks and Banking; Whether as mere passive entities for the safe-keeping
and saving of money or as active instruments of business and commerce, banks
have attained an ubiquitous presence among the people, who have come to
regard them with respect and even gratitude and most of all, confidence.-
—The law allows the grant of exemplary damages to set an example for the
public good. The banking system has become an indispensable institution in the
modern world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safe-keeping and saving of money or as
active instruments of business and commerce, banks have attained an
ubiquitous presence among the people, who have come to regard them with
respect and even gratitude and most of all, confidence. For this reason, banks
should guard against injury attributable to negligence or bad faith on its part.
Without a doubt, it has been repeatedly emphasized that since the banking
business is impressed with public interest, of paramount importance thereto is
the trust and confidence of the public in general. Consequently, the highest
degree of diligence is expected, and high standards of integrity and performance
are even required of it. Having failed in this respect, the award of exemplary
damages is warranted.
3. Proximate Cause; Words and Phrases; Proximate cause is that cause which,
in natural and continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would not have
occurred.-
—By refusing to make good the manager’s check it has issued, Ong suffered
embarrassment and humiliation arising from the dishonor of the said check.
Secondly, the culpable act of PCI Bank in having cleared the check of Serande
and issuing the manager’s check to Ong is undeniable. Thirdly, the proximate
cause of the loss is attributable to PCI Bank. Proximate cause is defined as that
cause which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not
have occurred. In this case, the proximate cause of the loss is the act of PCI Bank
in having cleared the check of Sarande and its failure to exercise that degree of
diligence required of it under the law which resulted in the loss to Ong.
4. Damages; The requisites for an award of moral damages are well-defined,
thus, firstly, evidence of besmirched reputation or physical, mental or
psychological suffering sustained by the claimant;secondly, a culpable act or
omission factually established; thirdly, proof that the wrongful act or omission
of the defendant is the proximate cause of the damages sustained by the
claimant; and, fourthly, that the case is predicated on any of the instances
expressed or envisioned by Articles 2219 and 2220 of the Civil Code.-
—Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the
defendant’s wrongful act or omission. The requisites for an award of moral
damages are well-defined, thus, firstly, evidence of besmirched reputation or
physical, mental or psychological suffering sustained by the claimant; secondly,
a culpable act or omission factually established; thirdly, proof that the wrongful
act or omission of the defendant is the proximate cause of the damages
sustained by the claimant; and fourthly, that the case is predicated on any of the
instances expressed or envisioned by Article 2219 and Article 2220 of the Civil
Code. All these elements are present in the instant case.
5. Same; Same; The degree of diligence required of banks is more than that of a
good father of a family where the fiduciary nature of their relationship with their
depositors is concerned.-
—Section 2, of Republic Act No. 8791, The General Banking Law of 2000 decrees:
SEC. 2. Declaration of Policy.—The State recognizes the vital role of banks in
providing an environment conducive to the sustained development of the
national economy and the fiduciary nature of banking that requires high
standards of integrity and performance. In furtherance thereof, the State shall
promote and maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a developing
economy. In Associated Bank v. Tan, 446 SCRA 282 (2004), it was reiterated: “x x
x the degree of diligence required of banks is more than that of a good father of
a family where the fiduciary nature of their relationship with their depositors is
concerned.” Indeed, the banking business is vested with the trust and confidence
of the public; hence the “appropriate standard of diligence must be very high, if
not the highest degree of diligence.”
6. Same; Same; Manager’s Checks; Words and Phrases; A manager’s check is
an order of the bank to pay, drawn upon itself, committing in effect its total
resources, integrity and honor behind its issuance, and by its peculiar character
and general use in commerce, a manager’s check is regarded substantially to be
as good as the money it represents.-
—Easily discernible is that what Ong obtained from PCI Bank was not just any
ordinary check but a manager’s check. A manager’s check is an order of the
bank to pay, drawn upon itself, committing in effect its total resources, integrity
and honor behind its issuance. By its peculiar character and general use in
commerce, a manager’s check is regarded substantially to be as good as the
money it represents. A manager’s check stands on the same footing as a
certified check. The effect of certification is found in Section 187, Negotiable
Instruments Law. Sec. 187. Certification of check; effect of.—Where a check is
certified by the bank on which it is drawn, the certification is equivalent to an
acceptance.
7. Banks and Banking; Checks; Doctrine of Unjust Enrichment; The
fundamental doctrine of unjust enrichment is the transfer of value without
just cause or consideration, the main objective being to prevent one to enrich
himself at the expense of another; A check which has been cleared and credited
to the account of the creditor shall be equivalent to a delivery to the creditor of
cash in an amount equal to the amount credited to his account.-
—On the matter of unjust enrichment, the fundamental doctrine of unjust
enrichment is the transfer of value without just cause or consideration. The
elements of this doctrine are: enrichment on the part of the defendant;
impoverishment on the part of the plaintiff; and lack of cause. The main
objective is to prevent one to enrich himself at the expense of another. It is
based on the equitable postulate that it is unjust for a person to retain benefit
without paying for it. It is well to stress that the check of Sarande had been
cleared by the PCI Bank for which reason the former issued the check to Ong. A
check which has been cleared and credited to the account of the creditor shall
be equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account.
Division: FIRST DIVISION
Docket Number: G.R. No. 156207
Counsel: Jowel T. Cloma, Roberto T. Sencio
Ponente: CHICO-NAZARIO
Dispositive Portion:
WHEREFORE, premises considered, the Petition is DENIED and the Decision of
the Court of Appeals dated 29 October 2002 in CA-G.R. CV No. 65000 affirming
the Decision dated 3 May 1999, of the Regional Trial Court of Davao City,
Branch 14, in Civil Case No. 21458-92, are AFFIRMED.
Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. GREGORIO C.
ROXAS, respondent.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Negotiable Instruments Law||Presumption|Words and
Phrases|Checks|Cashier’s Check|Judicial Notice
Syllabi:
1. Negotiable Instruments Law; “Holder in Due Course,” Explained.-
—SEC. 52. What constitutes a holder in due course.—A holder in due course is a
holder who has taken the instrument under the following conditions: (a) That it
is complete and regular upon its face; (b) That he became the holder of it before
it was overdue and without notice that it had been previously dishonored, if such
was the fact; (c) That he took it in good faith and for value; (d) That at the time
it was negotiated to him, he had no notice of any infirmity in the instrument or
defect in the title of person negotiating it.
2. Same; Same; Checks; Cashier’s Check; Judicial Notice; The Supreme Court
has taken judicial notice of the well-known and accepted practice in the
business sector that a cashier’s check is deemed as cash; Cashier’s check is
really the bank’s own check and may be treated as a promissory note with the
bank as the maker.-
—It bears emphasis that the disputed check is a cashier’s check. In International
Corporate Bank v. Spouses Gueco, 351 SCRA 516 (2001), this Court held that a
cashier’s check is really the bank’s own check and may be treated as a
promissory note with the bank as the maker. The check becomes the primary
obligation of the bank which issues it and constitutes a written promise to pay
upon demand. In New Pacific Timber & Supply Co., Inc. v. Señeris, 101 SCRA 686
(1980), this Court took judicial notice of the “well-known and accepted practice
in the business sector that a cashier’s check is deemed as cash.” This is because
the mere issuance of a cashier’s check is considered acceptance thereof.
3. Same; Same; Same; Words and Phrases; Value in general terms may be some
right, interest, profit or benefit to the party who makes the contract or some
forbearance, detriment, loan, responsibility, etc. on the other side.-
—In Walker Rubber Corp. v. Nederlandsch Indische & Handelsbank, N.V. and
South Sea Surety & Insurance Co., Inc., 105 Phil. 934, this Court ruled that value
“in general terms may be some right, interest, profit or benefit to the party who
makes the contract or some forbearance, detriment, loan, responsibility, etc. on
the other side.” Here, there is no dispute that respondent received Rodrigo
Cawili’s cashier’s check as payment for the former’s vegetable oil. The fact that
it was Rodrigo who purchased the cashier’s check from petitioner will not affect
respondent’s status as a holder for value since the check was delivered to him as
payment for the vegetable oil he sold to spouses Cawili. Verily, the Court of
Appeals did not err in concluding that respondent is a holder in due course of the
cashier’s check.
4. Same; Same; Presumption; Every holder is presumed prima facie to be a
holder in due course and he who claims otherwise has the onus probandi to
prove that one or more of the conditions required to constitute a holder in due
course are lacking.-
—As a general rule, under the above provision, every holder is presumed prima
facie to be a holder in due course. One who claims otherwise has the onus
probandi to prove that one or more of the conditions required to constitute a
holder in due course are lacking. In this case, petitioner contends that the
element of “value” is not present, therefore, respondent could not be a holder in
due course.
Division: FIRST DIVISION
Docket Number: G.R. No. 157833
Counsel: Benedicto, Versoza, Gealogo, Burkley and Associates, Dominador R.
Santiago
Ponente: SANDOVAL-GUTIERREZ
Dispositive Portion:
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of
Appeals (Fourth Division) in CA-G.R. CV No. 67980 is AFFIRMED. Costs against
petitioner.
Case Title : SPS. PEDRO AND FLORENCIA VIOLAGO, petitioners, vs. BA FINANCE
CORPORATION and AVELINO VIOLAGO, respondentsCase Nature : PETITION for
review on certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Corporation Law ; Piercing-of-the-Corporate-Veil; ;
Syllabi:
1. Negotiable Instruments Law; Promissory Notes; The promissory note is
clearly negotiable.-
—The promissory note is clearly negotiable. The appellate court was correct in
finding all the requisites of a negotiable instrument present. The NIL provides:
Section 1. Form of Negotiable Instruments.—An instrument to be negotiable
must conform to the following requirements: (a) It must be in writing and signed
by the maker or drawer; (b) Must contain an unconditional promise or order to
pay a sum certain in money; (c) Must be payable on demand, or at a fixed or
determinable future time; (d) Must be payable to order or to bearer; and (e)
Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.
2. Corporation Law; Piercing-of-the-Corporate-Veil; We suggested as much in
Arcilla v. Court of Appeals (215 SCRA 120 [1992]), an appellate proceeding
involving petitioner Arcilla’s bid to avoid the adverse CA decision on argument
that he is not personally liable for the amount adjudged since the same
constitutes a corporate liability which nevertheless cannot be enforced against
the corporation which has not been impleaded as a party below.-
—The fact that VMSC was not included as defendant in petitioners’ third party
complaint does not preclude recovery by petitioners from Avelino; neither would
such non-inclusion constitute a bar to the application of the piercing-of-the-
corporate-veil doctrine. We suggested as much in Arcilla v. Court of Appeals, 215
SCRA 120 (1992), an appellate proceeding involving petitioner Arcilla’s bid to
avoid the adverse CA decision on the argument that he is not personally liable
for the amount adjudged since the same constitutes a corporate liability which
nevertheless cannot even be enforced against the corporation which has not
been impleaded as a party below. In that case, the Court found as well-taken the
CA’s act of disregarding the separate juridical personality of the corporation and
holding its president, Arcilla, liable for the obligations incurred in the name of
the corporation although it was not a party to the collection suit before the trial
court.
3. Same; Same; The Negotiable Instruments Law considers every negotiable
instrument prima facie to have been issued for a valuable consideration.-
—In the hands of one other than a holder in due course, a negotiable instrument
is subject to the same defenses as if it were non-negotiable. A holder in due
course, however, holds the instrument free from any defect of title of prior
parties and from defenses available to prior parties among themselves, and may
enforce payment of the instrument for the full amount thereof. Since BA Finance
is a holder in due course, petitioners cannot raise the defense of non-delivery of
the object and nullity of the sale against the corporation. The NIL considers
every negotiable instrument prima facie to have been issued for a valuable
consideration. In Salas, 181 SCRA 296 (1990), we held that a party holding an
instrument may enforce payment of the instrument for the full amount thereof.
As such, the maker cannot set up the defense of nullity ofthe contract of sale.
Thus, petitioners are liable to respondent corporation for the payment of the
amount stated in the instrument.
4. Same; Same; The law presumes that a holder of a negotiable instrument is a
holder thereof in due course.-
—The law presumes that a holder of a negotiable instrument is a holder thereof
in due course. In this case, the CA is correct in finding that BA Finance meets all
the foregoing requisites: In the present recourse, on its face, (a) the “Promissory
Note,” Exhibit “A,” is complete and regular; (b) the “Promissory Note” was
endorsed by the VMSC in favor of the Appellee; (c) the Appellee, when it
accepted the Note, acted in good faith and for value; (d) the Appellee was never
informed, before and at the time the “Promissory Note” was endorsed to the
Appellee, that the vehicle sold to the Defendants-Appellants was not delivered
to the latter and that VMSC had already previously sold the vehicle to Esmeraldo
Violago. Although Jose Olvido mortgaged the vehicle to Generoso Lopez, who
assigned his rights to the BA Finance Corporation (Cebu Branch), the same
occurred only on May 8, 1987, much later than August 4, 1983, when VMSC
assigned its rights over the “Chattel Mortgage” by the Defendants-Appellants to
the Appellee. Hence, Appellee was a holder in due course.
Division: SECOND DIVISION
Docket Number: G.R. No. 158262
Counsel: Cabrera, Makalintal & Baliad Law Offices
Ponente: VELASCO, JR.
Dispositive Portion:
WHEREFORE, the CA’s August 20, 2002 Decision and May 15, 2003 Resolution in
CA-G.R. CV No. 48489 are SET ASIDE insofar as they dismissed without prejudice
the third party complaint of petitioners-spouses Pedro and Florencia Violago
against respondent Avelino Violago. The March 5, 1994 Decision of the RTC is
REINSTATED and AFFIRMED. Costs against Avelino Violago.
Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF
APPEALS and BENJAMIN C. NAPIZA, respondents.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Negotiable Instruments Law|Banks and
Banking|Passbooks|Negotiable Instruments Law|Checks|Words and
Phrases|Negligence
Syllabi:
1. Negotiable Instruments Law; Warranties of a person negotiating an
instrument by delivery or by qualified indorsement.-
Section 65, on the other hand, provides for the following warranties of a person
negotiating an instrument by delivery or by qualified indorsement: (a) that the
instrument is genuine and in all respects what it purports to be; (b) that he has a
good title to it; and (c) that all prior parties had capacity to contract.
2. Banks and Banking; Passbooks; The requirement of presentation of the
passbook when withdrawing an amount cannot be given mere lip service even
though the person making the withdrawal is authorized by the depositor to do
so.-
The withdrawal slip contains a boxed warning that states: “This receipt must be
signed and pre- sented with the corresponding foreign currency savings
passbook by the depositor in person. For withdrawals thru a representative,
depositor should accomplish the authority at the back.” The requirement of
presentation of the passbook when withdrawing an amount cannot be given
mere lip service even though the person making the withdrawal is authorized by
the depositor to do so. This is clear from Rule No. 6 set out by petitioner so that,
for the protection of the bank’s interest and as a reminder to the depositor, the
withdrawal shall be entered in the depositor’s passbook. The fact that private
respondent’s passbook was not presented during the withdrawal is evidenced by
the entries therein showing that the last transaction that he made with the bank
was on September 3, 1984, the date he deposited the controversial check in the
amount of $2,500.00.
3. Banks and Banking; Negotiable Instruments Law; Checks; A negotiable
instrument, such as a check, whether a manager’s check or ordinary check, is
not legal tender.-
As correctly held by the Court of Appeals, in depositing the check in his name,
private respondent did not become the outright owner of the amount stated
therein. Under the above rule, by depositing the check with petitioner, private
respondent was, in a way, merely designating petitioner as the collecting bank.
This is in consonance with the rule that a negotiable instrument, such as a check,
whether a manager’s check or ordinary check, is not legal tender. As such, after
receiving the deposit, under its own rules, petitioner shall credit the amount in
private respondent’s account or infuse value thereon only after the drawee bank
shall have paid the amount of the check or the check has been cleared for
deposit. Again, this is in accordance with ordinary banking practices and with
this Court’s pronouncement that “the collecting bank or last endorser generally
suffers the loss because it has the duty to ascertain the genuineness of all prior
endorsements considering that the act of presenting the check for payment to
the drawee is an assertion that the party making the presentment has done its
duty to ascertain the genuineness of the endorsements.” The rule finds more
meaning in this case where the check involved is drawn on a foreign bank and
therefore collection is more difficult than when the drawee bank is a local one
even though the check in question is a manager’s check.
4. Banks and Banking; Negotiable Instruments Law; Checks; Words and
Phrases; “Manager’s Check" Explained; A manager’s check is like a cashier’s
check which, in the commercial world, is regarded substantially to be as good as
the money it represents.-
A manager’s check is like a cashier’s check which, in the commercial world, is
regarded substantially to be as good as the money it represents (Tan v. Court of
Appeals, G.R. No. 108555, 239 SCRA 310, 322 [1994]).
5. Banks and Banking; Negotiable Instruments Law; In dealing with its
depositors, a bank should exercise its functions not only with the diligence of a
good father of a family but it should do so with the highest degree of care.-
Said ruling brings to light the fact that the banking business is affected with
public interest. By the nature of its functions, a bank is under obligation to treat
the accounts of its depositors “with meticulous care, always having in mind the
fiduciary nature of their relationship.” As such, in dealing with its depositors, a
bank should exercise its functions not only with the diligence of a good father of
a family but it should do so with the highest degree of care.
6. Banks and Banking; Negotiable Instruments Law; Words and
Phrases; “Negligence,” Explained; Negligence is the omission to do something
which a reasonable man, guided by those considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would do.-
In the case at bar, petitioner, in allowing the withdrawal of private respondent’s
deposit, failed to exercise the diligence of a good father of a family. In total
disregard of its own rules, petitioner’s personnel negligently handled private
respondent’s account to petitioner’s detriment. As this Court once said on this
matter: “Negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent and reasonable
man would do. The seventy-eight (78)-year-old, yet still relevant, case of Picart
v. Smith, provides the test by which to determine the existence of negligence in a
particular case which may be stated as follows: Did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet pater familias of the Roman
law. The existence of negligence in a given case is not determined by reference
to the personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that.”
7. Banks and Banking; Negotiable Instruments Law; Even after the lapse of the
35-day period, the amount of a deposited check cannot be withdrawn in the
absence of a clearance thereon.-
From these facts on record, it is at once apparent that petitioner’s personnel
allowed the withdrawal of an amount bigger than the original deposit of
$750.00 and the value of the check deposited in the amount of $2,500.00
although they had not yet received notice from the clearing bank in the United
States on whether or not the check was funded. Reyes’ contention that after the
lapse of the 35-day period the amount of a deposited check could be withdrawn
even in the absence of a clearance thereon, otherwise it could take a long time
before a depositor could make a withdrawal, is untenable. Said practice
amounts to a disregard of the clearance requirement of the banking system.
8. Banks and Banking; Negotiable Instruments Law; Negligence; Words and
Phrases; “Proximate Cause,” Explained; Proximate cause, which is determined
by a mixed consideration of logic, common sense, policy and precedent, is “that
cause, which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which the result would not
have occurred.”-
While it is true that private respondent’s having signed a blank withdrawal slip
set in motion the events that resulted in the withdrawal and encashment of the
counterfeit check, the negligence of petitioner’s personnel was the proximate
cause of the loss that petitioner sustained. Proximate cause, which is
determined by a mixed consideration of logic, common sense, policy and
precedent, is “that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the
result would not have occurred.” The proximate cause of the withdrawal and
eventual loss of the amount of $2,500.00 on petitioner’s part was its personnel’s
negligence in allowing such withdrawal in disregard of its own rules and the
clearing requirement in the banking system. In so doing, petitioner assumed the
risk of incurring a loss on account of a forged or counterfeit foreign check and
hence, it should suffer the resulting damage.
Division: FIRST DIVISION
Docket Number: G.R. No. 112392
Counsel: Benedicto, Tale & Versoza, Leonen, Ramirez & Associates, Renato M.
Coronado
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the petition for review on certiorari is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 37392 is AFFIRMED.
Case Title : GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners, vs.
THE HON. COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY,
respondents.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Remedial Law|Commercial Law|Petition for Review|Banks and
Banking|Negligence
Syllabi:
1. Remedial Law; Petition for Review; Factual findings of the Court of Appeals
are conclusive on the parties and not reviewable by the Court—and they carry
even more weight when the Court of Appeals affirms the factual findings of the
trial court.-
Section 1 of Rule 45 of the Revised Rules of Court provides that “(T)he petition
(for review) shall raise only questions of law which must be distinctly set forth.”
Thus, we have ruled that factual findings of the Court of Appeals are conclusive
on the parties and not reviewable by this Court—and they carry even more
weight when the Court of Appeals affirms the factual findings of the trial court.
2. Commercial Law; Banks and Banking; Negligence; The degree of diligence
required of banks is more than that of a good father of a family where the
fiduciary nature of their relationship with their depositors is concerned; The
same higher degree of diligence is not expected to be exerted by banks in
commercial transactions that do not involve their fiduciary relationship with
their depositors.-
With these established facts, we now determine the degree of diligence that
banks are required to exert in their commercial dealings. In Philippine Bank of
Commerce v. Court of Appeals upholding a long standing doctrine, we ruled that
the degree of diligence required of banks, is more than that of a good father of a
family where the fiduciary nature of their relationship with their depositors is
concerned. In other words banks are duty bound to treat the deposit accounts of
their depositors with the highest degree of care. But the said ruling applies only
to cases where banks act under their fiduciary capacity, that is, as deposi- tary
of the deposits of their depositors. But the same higher degree of diligence is not
expected to be exerted by banks in commercial transactions that do not involve
their fiduciary relationship with their depositors.
Division: SECOND DIVISION
Docket Number: G.R. No. 118492
Counsel: Benitez, Parlade, Africa, Herrera, Parlade & Panga Law Offices, Antonio
R. Bautista & Partners
Ponente: DE LEON, JR.
Dispositive Portion:
WHEREFORE, the petition is hereby DENIED, and the assailed decision of the
Court of Appeals is AFFIRMED. Costs against the petitioners.
Case Title : ASSOCIATED BANK (Now WESTMONT BANK), petitioner, vs. VICENTE
HENRY TAN, respondent.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Commercial Law|Banks and Banking|Negotiable Instruments Law
Syllabi:
1. Commercial Law; Banks and Banking; The right of a collecting bank to debit
a client’s account for the value of a dishonored check that has previously been
credited has fairly been established by jurisprudence.-
A bank generally has a right of setoff over the deposits therein for the payment
of any withdrawals on the part of a depositor. The right of a collecting bank to
debit a client’s account for the value of a dishonored check that has previously
been credited has fairly been established by jurisprudence. To begin with, Article
1980 of the Civil Code provides that “[f]ixed, savings, and current deposits of
money in banks and similar institutions shall be governed by the provisions
concerning simple loan.”
2. Commercial Law; Banks and Banking; The relationship between banks and
depositors has been held to take place.-
The relationship between banks and depositors has been held to be that of
creditor and debtor. Thus, legal compensation under Article 1278 of the Civil
Code may take place “when all the requisites mentioned in Article 1279 are
present,” as follows: “(1) That each one of the obligors be bound principally, and
that he be at the same time a principal creditor of the other; (2) That both debts
consist in a sum of money, or if the things due are consumable, they be of the
same kind, and also of the same quality if the latter has been stated; (3) That
the two debts be due; (4) That they be liquidated and demandable; (5) That over
neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.”
3. Commercial Law; Banks and Banking; By the nature of its functions, a bank is
under obligation to treat the accounts of its depositors with meticulous care.-
In BPI v. Casa Montessori, the Court has emphasized that the banking business is
impressed with public interest. “Consequently, the highest degree of diligence is
expected, and high standards of integrity and performance are even required of
it. By the nature of its functions, a bank is under obligation to treat the accounts
of its depositors with meticulous care.”
4. Commercial Law; Banks and Banking; The degree of diligence required of
banks is more than that of a good father of a family where the fiduciary nature
of their relationship with their depositors is concerned; The standard applies,
regardless of whether the account consists of only a few hundred pesos or of
millions.-
Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court
of Appeals has held that “the degree of diligence required of banks is more than
that of a good father of a family where the fiduciary nature of their relationship
with their depositors is concerned.” Indeed, the banking business is vested with
the trust and confidence of the public; hence the “appropriate standard of
diligence must be very high, if not the highest, degree of diligence.” The
standard applies, regardless of whether the account consists of only a few
hundred pesos or of millions.
5. Commercial Law; Banks and Banking; It is indeed arguable that “in signing
the deposit slip, the depositor does so only to identify himself and not to agree
to the conditions set forth at the back of the deposit slip”.-
This reservation is not enough to insulate the bank from any liability. In the past,
we have expressed doubt about the binding force of such conditions unilaterally
imposed by a bank without the consent of the depositor. It is indeed arguable
that “in signing the deposit slip, the depositor does so only to identify himself
and not to agree to the conditions set forth at the back of the deposit slip.”
6. Commercial Law; Banks and Banking; Negotiable Instruments Law; Under
the provisions of the Negotiable Instruments Law regarding the liability of a
general indorser and the procedure for a notice of dishonor, it was incumbent on
the bank to give proper notice to respondent.-
Under the provisions of the Negotiable Instruments Law regarding the liability of
a general indorser and the procedure for a notice of dishonor, it was incumbent
on the bank to give proper notice to respondent. In Gullas v. National Bank, the
Court emphasized: “x x x [A] general indorser of a negotiable instrument
engages that if the instrument—the check in this case—is dishonored and the
necessary proceedings for its dishonor are duly taken, he will pay the amount
thereof to the holder (Sec. 66) It has been held by a long line of authorities that
notice of dishonor is necessary to charge an indorser and that the right of action
against him does not accrue until the notice is given.
Division: THIRD DIVISION
Docket Number: G.R. No. 156940
Counsel: Edgardo G. Villarin, Cesar R. Villar
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.
Case Title : SOLIDBANK CORPORATION, petitioner, vs. Spouses TEODULFO and
CARMEN ARRIETA, respondents.Case Nature : PETITION for review on certiorari
of the decision and resolution of the Court of Appeals.
Syllabi Class : Banks and Banking|Negotiable Instruments
Law|Checks|Damages|Words and Phrases
Syllabi:
1. Banks and Banking; Negotiable Instruments Law; Checks; Damages; The
fact that another check a person had issued was previously dishonored does not
necessarily imply that the dishonor of a succeeding check can no longer cause
moral injury and personal hurt for which the aggrieved party may claim
damages.-
The fact that another check Carmen had issued was previously dishonored does
not necessarily imply that the dishonor of a succeeding check can no longer
cause moral injury and personal hurt for which the aggrieved party may claim
damages. Such prior occurrence does not prove that respondent does not have a
good reputation that can be besmirched. The reasons for and the circumstances
surrounding the previous issuance and eventual dishonor of Check No. 0293983
are totally separate—the payee of the prior check was different—from that of
Check No. 0293984, subject of present case. Carmen had issued the earlier check
to accommodate a relative, and the succeeding one to pay for goods purchased
from Lopue’s Department Store. That she might not have suffered damages as a
result of the first dishonored check does not necessarily hold true for the second.
In the light of sufficient evidence showing that she indeed suffered damages as a
result of the dishonor of Check No. 0293984, petitioner may not be exonerated
from liability.
2. Banks and Banking; Negotiable Instruments
Law; Checks; Damages; Conditions for Award of Moral Damages.-
Case law lays out the following conditions for the award of moral damages: (1)
there is an injury—whether physical, mental or psychological—clearly sustained
by the claimant; (2) the culpable act or omission is factually established; (3) the
wrongful act or omission of the defendant is the proximate cause of the injury
sustained by the claimant; and (4) the award of damages is predicated on any of
the cases stated in Article 2219 of the Civil Code.
3. Banks and Banking; Negotiable Instruments Law; Checks; Damages; Words
and Phrases; “Proximate Cause,” Explained.-
Proximate cause has been defined as “any cause which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the
result complained of and without which would not have occurred x x x.” It is
determined from the facts of each case upon combined considerations of logic,
common sense, policy and precedent. Clearly, had the bank accepted and
honored the check, Carmen would not have had to face the questions of—and
explain her predicament to—her office mates, her daughters, and the leaders
and members of her church.
4. Banks and Banking; Negotiable Instruments
Law; Checks; Damages; Treating a depositor’s account as closed, merely
because the ledger could not be found was a reckless act that could not simply
be brushed off as an honest mistake.-
Treating Carmen’s account as closed, merely because the ledger could not be
found was a reckless act that could not simply be brushed off as an honest
mistake. We have repeatedly emphasized that the banking industry is impressed
with public interest. Consequently, the highest degree of diligence is expected,
and high standards of integrity and performance are even required of it. By the
nature of its functions, a bank is under obligation to treat the accounts of its
depositors with meticulous care and always to have in mind the fiduciary nature
of its relationship with them.
5. Banks and Banking; Negotiable Instruments Law; Checks; Damages; The
award of moral damages is aimed at a restoration within the limits of the
possible, of the spiritual status quo ante—it must always reasonably
approximate the extent of injury and be proportional to the wrong committed.-
The foregoing notwithstanding, we find the sum of P150,000 awarded by the
lower courts excessive. Moral damages are not intended to enrich the
complainant at the expense of the defendant. Rather, these are awarded only to
enable the injured party to obtain “means, diversions or amusements” that will
serve to alleviate the moral suffering that resulted by reason of the defendant’s
culpable action. The purpose of such damages is essentially indemnity or
reparation, not punishment or correction. In other words, the award thereof is
aimed at a restoration within the limits of the possible, of the spiritual status
quo ante; therefore, it must always reasonably approximate the extent of injury
and be proportional to the wrong committed. Accordingly, the award of moral
damages must be reduced to P20,000, an amount commensurate with the
alleviation of the suffering caused by the dishonored check that was issued for
the amount of P330.
6. Banks and Banking; Negotiable Instruments Law; Checks; Damages; The
initial carelessness of the bank, aggravated by its lack of promptness in
repairing its error, justifies the grant of exemplary damages.-
The law allows the grant of exemplary damages to set an example for the public
good. The business of a bank is affected with public interest; thus, it makes a
sworn profession of diligence and meticulousness in giving irreproachable
service. For this reason, the bank should guard against injury attributable to
negligence or bad faith on its part. The banking sector must at all times
maintain a high level of meticulousness. The grant of exemplary damages is
justified by the initial carelessness of petitioner, aggravated by its lack of
promptness in repairing its error. It was only on August 30, 1990, or a period of
five months from the erroneous dishonor of the check, when it wrote Lopue’s
Department Store a letter acknowledging the bank’s mistake. In our view,
however, the award of P50,000 is excessive and should accordingly be reduced
to P20,000.
Division: THIRD DIVISION
Docket Number: G.R. No. 152720
Counsel: Segundo Y. Chua, Romeo B. Esuerte
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the Petition is PARTLY GRANTED and the assailed Decision
MODIFIED. Petitioners are ORDERED to pay respondents P20,000 as moral
damages, P20,000 as exemplary damages, and P20,000 as attorney’s fees.
Case Title : MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON,
Spouses ANASTACIO and MARY T. BUENA-VENTURA, petitioners, vs. HEIRS OF
BARTOLOME RAMOS, respondents.Case Nature : PETITION for review on
certiorari of a decision of the Court of Appeals.
Syllabi Class : Remedial Law|Civil Law|Negotiable Instruments
Law|Appeals|Agency
Syllabi:
1. Remedial Law; Appeals; Supreme Court’s role in a petition under Rule 45 is
limited to reviewing errors of law allegedly committed by the Court of Appeals.-
Well-entrenched is the rule that the Supreme Court’s role in a petition under
Rule 45 is limited to reviewing errors of law allegedly committed by the Court of
Appeals. Factual findings of the trial court, especially when affirmed by the CA,
are conclusive on the parties and this Court. Petitioners have not given us
sufficient reasons to deviate from this rule.
2. Civil Law; Agency; In a contract of agency, one binds oneself to render some
service or to do something in representation or on behalf of another, with the
latter’s consent or authority; Elements of Agency.-
In a contract of agency, one binds oneself to render some service or to do
something in representation or on behalf of another, with the latter’s consent or
authority. The following are the elements of agency: (1) the parties’ consent,
express or implied, to establish the relationship; (2) the object, which is the
execution of a juridical act in relation to a third person; (3) the representation,
by which the one who acts as an agent does so, not for oneself, but as a
representative; (4) the limitation that the agent acts within the scope of his or
her authority. As the basis of agency is representation, there must be, on the
part of the principal, an actual intention to appoint, an intention naturally
inferable from the principal’s words or actions. In the same manner, there must
be an intention on the part of the agent to accept the appointment and act upon
it. Absent such mutual intent, there is generally no agency.
3. Civil Law; Agency; Declarations of agents alone are generally insufficient to
establish the fact or extent of their authority.-
The declarations of agents alone are generally insufficient to establish the fact
or extent of their authority. The law makes no presumption of agency; proving
its existence, nature and extent is incumbent upon the person alleging it. In the
present case, petitioners raise the fact of agency as an affirmative defense, yet
fail to prove its existence.
4. Negotiable Instruments Law; After an instrument is dishonored by
nonpayment, indorsers cease to be merely secondarily liable, they become
principal debtors whose liability becomes identical to that of the original
obligor.-
As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the
checks were to be accepted or paid, or both, according to their tenor; and that in
case they were dishonored, she would pay the corresponding amount. After an
instrument is dishonored by nonpayment, indorsers cease to be merely
secondarily liable; they become principal debtors whose liability becomes
identical to that of the original obligor. The holder of a negotiable instrument
need not even proceed against the maker before suing the indorser. Clearly,
Evangeline Santos—as the drawer of the checks—is not an indispensable party
in an action against Maria Tuazon, the indorser of the checks.
Division: THIRD DIVISION
Docket Number: G.R. No. 156262
Counsel: Habitan, Carbonell, Ferrer, Chan & Associates, Ireneo G. Calderon
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioners.
G.R. No. 148211. July 25, 2006.*
SINCERE Z. VILLANUEVA, petitioner, vs. MARLYN P. NITE,** respondent.
Actions; Annulment of Judgment; Parties; An action for annulment of judgment
can be filed by one who was not a party to the case in which the assailed
judgment was rendered.—Annulment of judgment is a remedy in law
independent of the case where the judgment sought to be annulled is
promulgated. It can be filed by one who was not a party to the case in which the
assailed judgment was rendered. Section 1 of Rule 47 provides: Section 1.
Coverage.—This Rule shall govern the annulment by the Court of Appeals of
judgments or final orders and resolutions in civil actions of Regional Trial Courts
for which the ordinary remedies of new trial, appeal, petition for relief or other
appropriate remedies are no longer available through no fault of the petitioner.
Respondent may avail of the remedy of annulment of judgment under Rule 47.
The ordinary remedies of new trial, appeal and petition for relief were not
available to her for the simple reason that she was not made a party to the suit
against ABC. Thus, she was neither able to participate in the original
proceedings nor resort to the other remedies because the case was filed when
she was abroad.
Same; Annulment of judgment may be based only on extrinsic fraud and lack of
jurisdiction.—Annulment of judgment may be based only on extrinsic fraud and
lack of jurisdiction. Extrinsic or collateral fraud pertains to such fraud which
prevents the aggrieved party from having a trial or presenting his case to the
court, or is used to procure the judgment without fair submission of the
controversy. This refers to acts intended to keep the unsuccessful party away
from the courts as when there is a false promise of compromise or when one is
kept in ignorance of the suit.
Banks and Banking; Negotiable Instruments Law; Checks; Parties; If a bank
refuses to pay a check (notwithstanding sufficiency of funds), the payee-holder
cannot sue the bank—the payee should instead sue the drawer who might in
turn sue the bank.—If a bank refuses to pay a check (notwithstanding the
sufficiency of funds), the payee-holder cannot, in view of the cited sections, sue
the bank. The payee should instead sue the drawer who might in turn sue the
bank. Section 189 is sound law based on logic and established legal principles:
no privity of contract exists between the drawee-bank and the payee. Indeed, in
this case, there was no such privity of contract between ABC and petitioner.
Petitioner should not have sued ABC. Contracts take effect only between the
parties, their assigns and heirs, except in cases where the rights and obligations
arising from the contract are not transmissible by their nature, or by stipulation
or by provision of law. None of the foregoing exceptions to the relativity of
contracts applies in this case.
Parties; Words and Phrases; An indispensable party is one whose interest in the
controversy is such that a final decree will necessarily affect his rights; If an
indispensable party is not impleaded, any judgment is ineffective.—The
contract of loan was between petitioner and respondent. No collection suit
could prosper without respondent who was an indispensable party. Rule 3, Sec.
7 of the Rules of Court states: Sec. 7. Compulsory joinder of indispensable
parties.—Parties in interest without whom no final determination can be had of
an action shall be joined either as plaintiffs or defendants. (emphasis ours) An
indispensable party is one whose interest in the controversy is such that a final
decree will necessarily affect his rights. The court cannot proceed without his
presence. If an indispensable party is not impleaded, any judgment is
ineffective. [Villanueva vs. Nite, 496 SCRA 459(2006)]
Case Title : MELVA THERESA ALVIAR GONZALES, petitioner, vs. RIZAL
COMMERCIAL BANKING CORPORATION, respondent.Case Nature : PETITION for
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Negotiable Instruments|Checks|Equity
Syllabi:
1. Negotiable Instruments; Checks; A subsequent party which caused the defect
in the instrument cannot have any recourse against any of the prior endorsers in
good faith.-
—The dollar-check in question in the amount of $7,500.00 drawn by Don
Zapanta of Ade Medical Group (U.S.A.) against a Los Angeles, California bank,
Wilshire Center Bank N.A., was dishonored because of “End. Irregular,” i.e., an
irregular endorsement. While the foreign drawee bank did not specifically state
which among the four signatures found on the dorsal portion of the check made
the check irregularly endorsed, it is absolutely undeniable that only the
signature of Olivia Gomez, an RCBC employee, was a qualified endorsement
because of the phrase “up to P17,500.00 only.” There can be no other
acceptable explanation for the dishonor of the foreign check than this signature
of Olivia Gomez with the phrase “up to P17,500.00 only” accompanying it. This
Court definitely agrees with the petitioner that the foreign drawee bank would
not have dishonored the check had it not been for this signature of Gomez with
the same phrase written by her. The foreign drawee bank, Wilshire Center Bank
N.A., refused to pay the bearer of this dollar-check drawn by Don Zapanta
because of the defect introduced by RCBC, through its employee, Olivia Gomez.
It is, therefore, a useless piece of paper if returned in that state to its original
payee, Eva Alviar. There is no doubt in the mind of the Court that a subsequent
party which caused the defect in the instrument cannot have any recourse
against any of the prior endorsers in good faith. Eva Alviar’s and the petitioner’s
liability to subsequent holders of the foreign check is governed by the Negotiable
Instruments Law.
2. Same; Same; Equity; The holder or subsequent endorser who tries to claim
under the instrument which had been dishonored for “irregular endorsement”
must not be the irregular endorser himself who gave cause for the
dishonor; Courts of law, being also courts of equity, may not countenance
grossly unfair results without doing violence to their solemn obligation to
administer fair and equal justice for all.-
—Section 66 of the Negotiable Instruments Law which further states that the
general endorser additionally engages that, on due presentment, the instrument
shall be accepted or paid, or both, as the case may be, according to its tenor,
and that if it be dishonored and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder, or to any subsequent
endorser who may be compelled to pay it, must be read in the light of the rule in
equity requiring that those who come to court should come with clean hands.
The holder or subsequent endorser who tries to claim under the instrument
which had been dishonored for “irregular endorsement” must not be the
irregular endorser himself who gave cause for the dishonor. Otherwise, a clear
injustice results when any subsequent party to the instrument may simply make
the instrument defective and later claim from prior endorsers who have no
knowledge or participation in causing or introducing said defect to the
instrument, which thereby caused its dishonor. Courts in this jurisdiction are not
only courts of law but also of equity, and therefore cannot unqualifiedly apply a
provision of law so as to cause clear injustice which the framers of the law could
not have intended to so deliberately cause. In Carceller v. Court of Appeals, 302
SCRA 718 (1999), this Court had occasion to stress: “Courts of law, being also
courts of equity, may not countenance such grossly unfair results without doing
violence to its solemn obligation to administer fair and equal justice for all.”
Division: SECOND DIVISION
Docket Number: G.R. No. 156294
Counsel: Jinky Rose L. Go, Siguion Reyna, Montecillo & Ongsiako
Ponente: GARCIA
Dispositive Portion:
WHEREFORE, the assailed CA Decision dated August 30, 2002 is REVERSED and
SET ASIDE and the Complaint in this case DISMISSED for lack of merit.
Petitioner’s counter- claim is GRANTED, ordering the respondent RCBC to
reimburse petitioner the amount P12,822.20, with legal interest computed from
the time of salary deduction up to actual payment, and to pay petitioner the
total amount of P60,000.00 as moral and exemplary damages, and attorney’s
fees.
Case Title : GEMMA ILAGAN, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent., ALBERT CORDERO SY, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent., JAIME TAN, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITIONS for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Estafa|Evidence
Syllabi:
1. Criminal Law; Estafa; Evidence; Deceit and damage are the essential
elements of estafa; Deceit to constitute estafa under Article 315, 2(d) of the
Revised Penal Code must be the efficient cause of the defraudation.-
—Deceit and damage are the essential elements of estafa. Deceit to constitute
estafa under above-quoted Article 315, 2(d) of the Revised Penal Code must be
the efficient cause of the defraudation. There must be concomitance: the
issuance of the check should be the means to obtain money or property from the
payer.
2. Same; Same; Same; Petitioners’ lack of criminal liability notwithstanding,
they are civilly liable in the amount of P470,350 to bear 12% interest from the
filing of the information on January 30, 2002 up to the time it is fully paid.-
—The lack of criminal liability of petitioners then notwithstanding, they are
civilly liable in the amount of P470,350, to bear 12% interest from the filing of
the information on January 30, 2002 up to the time it is fully paid.
Division: SECOND DIVISION
Docket Number: G.R. No. 166873, G.R. No. 168069, G.R. No. 168543
Counsel: M.M. Lazaro and Associates, Virgilio B. Jara, Antonio H. Tan, R.A. Din,
Jr. and Associates Law Office, The Solicitor General
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the challenged decision of the Court of Appeals convicting
petitioners Gemma Ilagan, Albert Cordero Sy, and Jaime Tan is REVERSED and
SET ASIDE. Petitioners are thus ACQUITTED of the crime charged.
Case Title : EQUITABLE PCI BANK, petitioner, vs. ARCELITO B. TAN,
respondent.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Damages|Banks and Banking
Syllabi:
1. Administrative Law; Administrative issuances must not override, supplant or
modify the law, but must remain consistent with the law they intend to carry
out-
—Office Order No. 82-04-CG cannot defeat the provisions of Republic Act No.
8246.—Although CA-G.R. CV No. 41928 originated from Cebu City and is thus
referable to the CA’s Divisions in Cebu City, the said case was already submitted
for decision as of July 25, 1994. Hence, CA-G.R. CV No. 41928, which was already
submitted for decision as of the effectivity of R.A. 8246, i.e., February 1, 1997,
can no longer be referred to the CA’s Division in Cebu City. Thus, the CA’s Former
Fourth Division correctly ruled that CA-G.R. CV No. 41928 pending in its division
was not among those cases that had to be re-raffled to the newly-created CA
Divisions in the Visayas Region. Further, administrative issuances must not
override, supplant or modify the law, but must remain consistent with the law
they intend to carry out. Thus, Office Order No. 82-04-CG cannot defeat the
provisions of R.A. 8246.
2. Same; Same; The highest degree of diligence is expected of banking
institutions-
—high standards of integrity and performance are required of them—and where
they fail in that regard, award of exemplary damages may be made.—The law
allows the grant of exemplary damages to set an example for the public good.
The banking system has become an indispensable institution in the modern
world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safekeeping and saving of money or as
active instruments of business and commerce, banks have attained an
ubiquitous presence among the people, who have come to regard them with
respect and even gratitude and most of all, confidence. For this reason, banks
should guard against injury attributable to negligence or bad faith on its part.
Without a doubt, it has been repeatedly emphasized that since the banking
business is impressed with public interest, of paramount importance thereto is
the trust and confidence of the public in general. Consequently, the highest
degree of diligence is expected, and high standards of integrity and performance
are even required of it. Petitioner, having failed in this respect, the award of
exemplary damages in the amount of P50,000.00 is in order.
3. Same; Banks and Banking; A bank is under obligation to treat the accounts of
its depositors with meticulous care whether such account consists only of a few
hundred pesos or of millions of pesos-
—responsibility arising from negligence in the performance of every kind of
obligation is demandable.—Anent the award of moral damages, it is settled that
moral damages are meant to compensate the claimant for any physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and similar injuries unjustly
caused. In Philippine National Bank v. Court of Appeals, 315 SCRA 309 (1999),
the Court held that a bank is under obligation to treat the accounts of its
depositors with meticulous care whether such account consists only of a few
hundred pesos or of millions of pesos. Responsibility arising from negligence in
the performance of every kind of obligation is demandable. While petitioner’s
negligence in that case may not have been attended with malice and bad faith,
the banks’ negligence caused respondent to suffer mental anguish, serious
anxiety, embarrassment and humiliation. In said case, We ruled that respondent
therein was entitled to recover reasonable moral damages. In this case, the
unexpected cutting off of respondent’s electricity, which resulted in the
stoppage of his business operations, had caused him to suffer humiliation,
mental anguish and serious anxiety. The award of P50,000.00 is reasonable,
considering the reputation and social standing of respondent. As found by the
CA, as an accredited supplier, respondent had been reposed with a certain
degree of trust by various reputable and well-established corporations.
4. Same; The allowance of temperate damages when actual damages were not
adequately proven is ultimately a rule drawn from equity, the principle affording
relief to those definitely injured who are unable to prove how definite the
injury.-
—In the absence of competent proof on the actual damages suffered,
respondent is entitled to temperate damages. Under Article 2224 of the Civil
Code of the Philippines, temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when the
court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be proved with certainty. The allowance of
temperate damages when actual damages were not adequately proven is
ultimately a rule drawn from equity, the principle affording relief to those
definitely injured who are unable to prove how definite the injury.
5. Damages; The Court cannot simply rely on speculation, conjecture or
guesswork in determining the amount of damages.-
—Actual or compensatory damages are those awarded in order to compensate
a party for an injury or loss he suffered. They arise out of a sense of natural
justice and are aimed at repairing the wrong done. Except as provided by law or
by stipulation, a party is entitled to an adequate compensation only for such
pecuniary loss as he has duly proven. To recover actual damages, not only must
the amount of loss be capable of proof; it must also be actually proven with a
reasonable degree of certainty, premised upon competent proof or the best
evidence obtainable. Respondent’s claim for damages was based on purchase
orders from various customers which were allegedly not met due to the
disruption of the operation of his sawmills. However, aside from the purchase
orders and his testimony, respondent failed to present competent proof on the
specific amount of actual damages he suffered during the entire period his
power was cut off. No other evidence was provided by respondent to show that
the foregoing purchase orders were not met or were canceled by his various
customers. The Court cannot simply rely on speculation, conjecture or
guesswork in determining the amount of damages.
6. Same; Same; Same; As a matter of practice, bank tellers would not receive
nor honor such checks which they believe to be unclear, without the counter-
signature of its drawer.-
—In its memorandum filed before the RTC, petitioner submits that respondent
caused confusion on the true date of the check by writing the date of the check
as 5/3/0/92. If, indeed, petitioner was confused on whether the check was dated
May 3 or May 30 because of the “/” which allegedly separated the number “3”
from the “0,” petitioner should have required respondent drawer to countersign
the said “/” in order to ascertain the true intent of the drawer before honoring
the check. As a matter of practice, bank tellers would not receive nor honor such
checks which they believe to be unclear, without the counter-signature of its
drawer. Petitioner should have exercised the highest degree of diligence
required of it by ascertaining from the respondent the accuracy of the entries
therein, in order to settle the confusion, instead of proceeding to honor and
receive the check.
7. Same; Same; Negligence; Proximate Cause; Words and Phrases; Proximate
cause is that cause which, in a natural and continuous sequence, unbroken by
any efficient intervening cause, produces the injury, and without which the
result would not have occurred; The bank on which the check is drawn, known
as the drawee bank, is under strict liability to pay to the order of the payee in
accordance with the drawer’s instructions as reflected on the face and by the
terms of the check-
—payment made before the date specified by the drawer is clearly against the
drawee bank’s duty to its client.—With respect to the third issue, petitioner
submits that respondent’s way of writing the date on Check No. 275100 was the
proximate cause of the dishonor of his three other checks. Contrary to
petitioner’s view, the Court finds that its negligence is the proximate cause of
respondent’s loss. Proximate cause is that cause which, in a natural and
continuous sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred. The proximate
cause of the loss is not respondent’s manner of writing the date of the check, as
it was very clear that he intended Check No. 275100 to be dated May 30, 1992
and not May 3, 1992. The proximate cause is petitioner’s own negligence in
debiting the account of the respondent prior to the date as appearing in the
check, which resulted in the subsequent dishonor of several checks issued by the
respondent and the disconnection by ASELCO and ANECO of his electric supply.
The bank on which the check is drawn, known as the drawee bank, is under strict
liability to pay to the order of the payee in accordance with the drawer’s
instructions as reflected on the face and by the terms of the check. Thus,
payment made before the date specified by the drawer is clearly against the
drawee bank’s duty to its client.
8. Same; Same; The diligence required of banks, therefore, is more than that of
a good father of a family.-
—The diligence required of banks, therefore, is more than that of a good father
of a family. In every case, the depositor expects the bank to treat his account
with the utmost fidelity, whether such account consists only of a few hundred
pesos or of millions. The bank must record every single transaction accurately,
down to the last centavo, and as promptly as possible. This has to be done if the
account is to reflect at any given time the amount of money the depositor can
dispose of as he sees fit, confident that the bank will deliver it as and to
whomever he directs. From the foregoing, it is clear that petitioner bank did not
exercise the degree of diligence that it ought to have exercised in dealing with
its client.
9. Same; Banks and Banking; Statutes; Although Republic Act No. 8791 took
effect only in the year 2000, the Court had already imposed on banks the same
high standard of diligence required under Republic Act No. 8791 at the time of
the untimely debiting of respondent’s account by petitioner in May 1992.-
—The law imposes on banks high standards in view of the fiduciary nature of
banking. Section 2 of R.A. 8791 decrees: Declaration of Policy.—The State
recognizes the vital role of banks in providing an environment conducive to the
sustained development of the national economy and the fiduciary nature of
banking that requires high standards of integrity and performance. In
furtherance thereof, the State shall promote and maintain a stable and efficient
banking and financial system that is globally competitive, dynamic and
responsive to the demands of a developing economy. Although R.A. 8791 took
effect only in the year 2000, the Court had already imposed on banks the same
high standard of diligence required under R.A. 8791 at the time of the untimely
debiting of respondent’s account by petitioner in May 1992. In Simex
International (Manila), Inc. v. Court of Appeals, 183 SCRA 360 (1990), which was
decided in 1990, the Court held that as a business affected with public interest
and because of the nature of its functions, the bank is under obligation to treat
the accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.
10. Mercantile Law; Negotiable Instruments Law; Checks; The purpose for the
issuance of the check has no logical connection with the date of the check.-
—The RTC concluded that the check was dated May 3, 1992 and not May 30,
1992, because the same check was not issued to pay for Bills of Lading Nos. 15,
16 and 17, as respondent claims. The trial court’s conclusion is preposterous and
illogical. The purpose for the issuance of the check has no logical connection
with the date of the check. Besides, the trial court need not look into the
purpose for which the check was issued. A reading of Check No. 275100 would
readily show that it was dated May 30, 1992.
11. Appeals; In an appeal by certiorari under Rule 45 of the Rules of Court, only
questions of law may be raised, but one of the recognized exceptions is when
the findings of the appellate court are contrary to those of the trial court.-
—The principle is well established that this Court is not a trier of facts.
Therefore, in an appeal by certiorari under Rule 45 of the Rules of Court, only
questions of law may be raised. The resolution of factual issues is the function of
the lower courts whose findings on these matters are received with respect and
are, as a rule, binding on this Court. However, this rule is subject to certain
exceptions. One of these is when the findings of the appellate court are contrary
to those of the trial court. Due to the divergence of the findings of the CA and
the RTC, We shall re-examine the facts and evidence presented before the lower
courts.
Division: SECOND DIVISION
Docket Number: G.R. No. 165339
Counsel: Francis M. Zosa
Ponente: PERALTA
Dispositive Portion:
Petitioner Equitable PCI Bank is instead directed to pay respondent the amount
of Fifty Thousand Pesos (P50,000.00) as temperate damages. The award of
One Million Eight Hundred Sixty-Four Thousand and Five Hundred Pesos
(P1,864,500.00) as actual damages, in favor of respondent Arcelito B. Tan, is
DELETED; and 2. WHEREFORE, the petition is PARTIALLY GRANTED. The
Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 41928, dated
May 31, 2004 and August 24, 2004, respectively, are AFFIRMED with the
following MODIFICATIONS: 1.
Case Title : CITIBANK, N.A., petitioner, vs. ATTY. ERNESTO S. DINOPOL,
respondent.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Banks and Banking
Syllabi:
1. Remedial Law; Certiorari; The general rule is that in petitions for review on
certain certiorari, the Court will not re-examine the findings of fact of the
appellate court; Exceptions.-
—The general rule is that in petitions for review on certiorari, the Court will not
re-examine the findings of fact of the appellate court except (a) when the
latter’s findings are grounded entirely on speculations, surmises or conjectures;
(b) when its inference is manifestly mistaken, absurd or impossible; (c) when
there is a grave abuse of discretion; (d) when its findings of fact are conflicting;
and (e) when it goes beyond the issues of the case. Citibank fails to convince the
Court that the case falls under any of the exceptions. Hence, the findings of fact
should no longer be reviewed.
2. Banks and Banking; Banks must always act in good faith and must win the
confidence of clients and people in general.-
—In any event, Citibank should have been more cautious in dealing with its
clients since its business is imbued with public interest. Banks must always act in
good faith and must win the confidence of clients and people in general. It is
irrelevant whether the client is a lawyer or not.
3. Same; Same; Exemplary Damages; The law allows the award of exemplary
damages by way of example for the public good.-
—As to the award of exemplary damages, the law allows it by way of example
for the public good. The business of banking is impressed with public interest
and great reliance is made on the bank’s sworn profession of diligence and
meticulousness in giving irreproachable service. Thus, the Court affirms the
award as a way of setting an example for the public good. In addition, it also
provided for attorney’s fees. Both are subject to legal interest.
4. Civil Law; Damages; Moral Damages; The award of moral damages should
be granted in reasonable amounts depending on the facts and circumstances of
the case.-
—The award of moral damages should be granted in reasonable amounts
depending on the facts and circumstances of the case. Moral damages are
meant to compensate the claimant for any physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation and similar injuries unjustly caused.
Division: SECOND DIVISION
Docket Number: G.R. No. 188412
Counsel: Jose Luis V. Agcaoili
Ponente: MENDOZA
Dispositive Portion:
Costs of suit, plus interest at the legal rate reckoned from the filing of the
complaint. P50,000.00 as and for attorney’s fees; and 4] P50,000.00 as and
for exemplary damages; 3] P100,000.00 as and for moral damages; 2]
WHEREFORE, the December 16, 2008 Decision of the Court of Appeals is
MODIFIED to read as follows: “In view of the foregoing, judgment is hereby
rendered ordering defendant Citibank, N.A. to pay plaintiff Atty. Ernesto S.
Dinopol the following: 1]
Case Title : LINA LIM LAO, petitioner, vs. COURT OF APPEALS and PEOPLE OF
THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari
of a decision of the Court of Appeals.
Syllabi Class : Criminal Law|Batas Pambansa Blg. 22
Syllabi:
1. Criminal Law; Batas Pambansa Blg. 22; Elements of the offense penalized
under B.P. Blg. 22.-
—This Court listed the elements of the offense penalized under B.P. Blg. 22, as
follows: “(1) the making, drawing and issuance of any check to apply to account
or for value; (2) the knowledge of the maker, drawer or issuer that at the time of
issue he does not have sufficient funds in or credit with the drawee bank for the
payment of such check in full upon its presentment; and (3) subsequent dishonor
of the check by the drawee bank for insufficiency of funds or credit or dishonor
for the same reason had not the drawer, without any valid cause, ordered the
bank to stop payment.”
2. Same; Same; Responsibility under B.P. Blg. 22 is personal to the accused,
hence, personal knowledge of the notice of dishonor is necessary.-
—In this light, the postulate of Respondent Court of Appeals that “(d)emand on
the Corporation constitutes demand on appellant (herein petitioner),” is
erroneous. Premiere has no obligation to forward the notice addressed to it to
the employee concerned, especially because the corporation itself incurs no
criminal liability under B.P. Blg. 22 for the issuance of a bouncing check.
Responsibility under B.P. Blg. 22 is personal to the accused; hence, personal
knowledge of the notice of dishonor is necessary. Consequently, constructive
notice to the corporation is not enough to satisfy due process. Moreover, it is
petitioner, as an officer of the corporation, who is the latter’s agent for purposes
of receiving notices and other documents, and not the other way around. It is
but axiomatic that notice to the corporation, which has a personality distinct
and separate from the petitioner, does not constitute notice to the latter.
3. Same; Same; The absence of a notice of dishonor necessarily deprives an
accused an opportunity to preclude a criminal prosecution.-
—In this light, the full payment of the amount appearing in the check within five
banking days from notice of dishonor is a “complete defense.” The absence of a
notice of dishonor necessarily deprives an accused an opportunity to preclude a
criminal prosecution. Accordingly, procedural due process clearly enjoins that a
notice of dishonor be actually served on petitioner. Petitioner has a right to
demand—and the basic postulates of fairness require—that the notice of
dishonor be actually sent to and received by her to afford her the opportunity to
avert prosecution under B.P. Blg. 22.
4. Same; Same; Because no notice of dishonor was actually sent to and received
by the petitioner, the prima facie presumption that she knew about the
insufficiency of funds cannot apply.-
—Because no notice of dishonor was actually sent to and received by the
petitioner, the prima facie presumption that she knew about the insufficiency of
funds cannot apply. Section 2 of B.P. Blg. 22 clearly provides that this
presumption arises not from the mere fact of drawing, making and issuing a
bum check; there must also be a showing that, within five banking days from
receipt of the notice of dishonor, such maker or drawer failed to pay the holder
of the check the amount due thereon or to make arrangement for its payment in
full by the drawee of such check.
5. Same; Same; The element of knowledge of insufficiency of funds having been
proven to be absent, petitioner is entitled to an acquittal.-
—Since petitioner Lina Lim Lao signed the checks without knowledge of the
insufficiency of funds, knowledge she was not expected or obliged to possess
under the organizational structure of the corporation, she may not be held liable
under B.P. Blg. 22. For in the final analysis, penal statutes such as B.P. Blg. 22
“must be construed with such strictness as to carefully safeguard the rights of
the defendant x x x.” The element of knowledge of insufficiency of funds having
been proven to be absent, petitioner is therefore entitled to an acquittal.
6. Same; Same; The prosecution has a duty to prove all the elements of the
crime, including the acts that give rise to the prima facie
presumption; petitioner, on the other hand, has a right to rebut the prima facie
presumption.-
—In the present case, the fact alone that petitioner was a signatory to the
checks that were subsequently dishonored merely engenders the prima facie
presumption that she knew of the insufficiency of funds, but it does not render
her automatically guilty under B.P. Blg. 22. The prosecution has a duty to prove
all the elements of the crime, including the acts that give rise to the prima facie
presumption; petitioner, on the other hand, has a right to rebut the prima facie
presumption. Therefore, if such knowledge of insufficiency of funds is proven to
be actually absent or non-existent, the accused should not be held liable for the
offense defined under the first paragraph of Section 1 of B.P. Blg. 22. Although
the offense charged is a malum prohibitum, the prosecution is not thereby
excused from its responsibility of proving beyond reasonable doubt all the
elements of the offense, one of which is knowledge of the insufficiency of funds.
7. Same; Same; Knowledge of insufficiency of funds or credit in the drawee bank
for the payment of a check upon its presentment is an essential element of the
offense.-
—Knowledge of insufficiency of funds or credit in the drawee bank for the
payment of a check upon its presentment is an essential element of the offense.
There is a prima facie presumption of the existence of this element from the fact
of drawing, issuing or making a check, the payment of which was subsequently
refused for insufficiency of funds. It is important to stress, however, that this is
not a conclusive presumption that forecloses or precludes the presentation of
evidence to the contrary.
Division: THIRD DIVISION
Docket Number: G.R. No. 119178
Counsel: Garcia, Garcia, Ong Vano Law Offices, Generosa R. Jacinto Law Firm
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the questioned Decision of the Court of Appeals affirming that of
the Regional Trial Court, is hereby REVERSED and SET ASIDE. Petitioner Lina Lim
Lao is ACQUITTED. The Clerk of Court is hereby ORDERED to furnish the
Secretary of Justice and the Secretary of Interior and Local Government with
copies of this Decision. No costs.
Case Title : BETTY KING, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Batas Pambansa Blg. 22|Evidence
Syllabi:
1. Criminal Law; Batas Pambansa Blg. 22; Evidence; Petitioner’s conviction was
based on the evidence presented during trial, and not on the stipulations made
during the pre-trial.-
Petitioner’s conviction was based on the evidence presented during trial, and
not on the stipulations made during the pretrial. Hence, petitioner’s admissions
during the trial are governed not by the Fule ruling or by Section 4 of Rule 118,
but by Section 4 of Rule 129.
2. Criminal Law; Batas Pambansa Blg. 22; Evidence; Elements of the Crime of
Batas Pambansa Blg. 22.-
This Court has held that the elements of the crime are as follows: 1. The accused
makes, draws or issues any check to apply to account or for value. 2. The check
is subsequently dishonored by the drawee bank for insufficiency of funds or
credit; or it would have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop payment. 3. The
accused knows at the time of the issuance that he or she does not have
sufficient funds in, or credit with, drawee bank for the payment of the check in
full upon its presentment.
3. Criminal Law; Batas Pambansa Blg. 22; Evidence; To hold a person liable
under BP 22, it is not enough to establish that a check issued was subsequently
dishonored; It must be shown further that the person who issued the check has
knowledge of the insufficiency of funds.-
To hold a person liable under BP 22, it is not enough to establish that a check
issued was subsequently dishonored. It must be shown further that the person
who issued the check knew “at the time of issue that he does not have sufficient
funds in or credit with the drawee bank for the payment of such check in full
upon its presentment.” Because this element involves a state of mind which is
difficult to establish, Section 2 of the law creates a prima facie presumption of
such knowledge.
4. Criminal Law; Batas Pambansa Blg. 22; Evidence; Prima facie presumption
does not arise when the issuer pays the amount of the check or makes
arrangement for its payment “within five banking days after receiving notice
that such check has not been paid by the drawee.”-
The prima facie presumption arises when a check is issued. But the law also
provides that the presumption does not arise when the issuer pays the amount
of the check or makes arrangement for its payment “within five banking days
after receiving notice that such check has not been paid by the drawee.” Verily,
BP 22 gives the accused an opportunity to satisfy the amount indicated in the
check and thus avert prosecution. As the Court held in Lozano v. Martinez, the
aforecited provision serves to “mitigate the harshness of the law in its
application.” This opportunity, however, can be used only upon receipt by the
accused of a notice of dishonor. This point was underscored by the Court in Lina
Lim Lao v. Court of Appeals.
5. Criminal Law; Batas Pambansa Blg. 22; Evidence; To create the prima facie
presumption it must be shown that the issuer received a notice of dishonor and,
within five banking days thereafter, failed to satisfy the amount of the check or
make arrangement for its payment.-
In order to create the prima facie presumption that the issuer knew of the
insufficiency of funds, it must be shown that he or she received a notice of
dishonor and, within five banking days thereafter, failed to satisfy the amount of
the check or make arrangement for its payment.
6. Criminal Law; Batas Pambansa Blg. 22; Evidence; Evidence on hand
demonstrates the indelible fact that petitioner did not receive notice that the
checks had been dishonored; Presumption that petitioner knew of the
insufficiency of funds cannot arise.-
Notwithstanding the clear import of the post-master’s certification, the
prosecution failed to adduce any other proof that petitioner received the post
office notice but unjustifiably refused to claim the registered mail. It is possible
that the drawee bank sent petitioner a notice of dishonor, but the prosecution
did not present evidence that the bank did send it, or that petitioner actually
received it. It was also possible that she was trying to flee from complainant by
staying in different addresses. Speculations and possibilities, however, cannot
take the place of proof. Conviction must rest on proof beyond reasonable doubt.
Clearly, the evidence on hand demonstrates the indelible fact that petitioner did
not receive notice that the checks had been dishonored. Necessarily, the
presumption that she knew of the insufficiency of funds cannot arise.
Division: THIRD DIVISION
Docket Number: G.R. No. 131540
Counsel: Chua and Associates Law Office, The Solicitor General
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the assailed Decision of the Court of Appeals is hereby REVERSED
and SET ASIDE. Petitioner Betty King is ACQUITTED for failure of the prosecution
to prove all the elements of the crimes charged. No pronouncement as to costs.
Case Title : GREAT ASIAN SALES CENTER CORPORATION and TAN CHONG LIN,
petitioners, vs. THE COURT OF APPEALS and BANCASIA FINANCE AND
INVESTMENT CORPORATION, respondents.Case Nature : PETITION for review
on certiorari of a decision of the Court of Appeals.
Syllabi Class : Corporation Law|Commercial Law|Negotiable Instruments Law
Syllabi:
1. Corporation Law; The exercise of the corporate powers of the corporation
rested in the board of directors save in those instances where the Corporation
Code requires stockholders’ approval for certain specific acts.-
The Corporation Code of the Philippines vests in the board of directors the
exercise of the corporate powers of the corporation, save in those instances
where the Code requires stockholders’ approval for certain specific acts. In the
ordinary course of business, a corporation can borrow funds or dispose of assets
of the corporation only on authority of the board of directors. The board of
directors normally designates one or more corporate officers to sign loan
documents or deeds of assignment for the corporation.
2. Commercial Law; Negotiable Instruments Law; Meaning of “Discounting
Line.”-
In the financing industry, the term “discounting line” means a credit facility with
a financing company or bank, which allows a business entity to sell, on a
continuing basis, its accounts receivable at a discount. The term “discount”
means the sale of a receivable at less than its face value. The purpose of a
discounting line is to enable a business entity to generate instant cash out of its
receivables which are still to mature at future dates. The financing company or
bank which buys the receivables makes its profit out of the difference between
the face value of the receivable and the discounted price.
3. Commercial Law; Negotiable Instruments Law; Under the Negotiable
Instruments Law, notice of dishonor is not required if the drawer has no right to
expect or require the bank to honor the check, or if the drawer has
countermanded payment.-
Under the Negotiable Instruments Law, notice of dishonor is not required if the
drawer has no right to expect or require the bank to honor the check, or if the
drawer has countermanded payment. In the instant case, all the checks were
dishonored for any of the following reasons: “account closed,” “account under
garnishment,” “insufficiency of funds,” or “payment stopped.” In the first three
instances, the drawers had no right to expect or require the bank to honor the
checks, and in the last instance, the drawers had countermanded payment.
4. Commercial Law; Negotiable Instruments Law; Delay in notice of dishonor,
where such notice is required, discharges the drawer only to the extent of the
loss caused by the delay.-
Under common law, delay in notice of dishonor, where such notice is required,
discharges the drawer only to the extent of the loss caused by the delay. This
rule finds application in this jurisdiction pursuant to Section 196 of the
Negotiable Instruments Law which states, “Any case not provided for in this Act
shall be governed by the provisions of existing legislation, or in default thereof,
by the rules of the Law Merchant.” Under Section 186 of the Negotiable
Instruments Law, delay in the presentment of checks discharges the drawer.
However, Section 186 refers only to delay in presentment of checks but is silent
on delay in giving notice of dishonor. Consequently, the common law or Law
Merchant can supply this gap in accordance with Section 196 of the Negotiable
Instruments Law.
5. Commercial Law; Negotiable Instruments Law; Distinction between a
Discounting Line and a Loan Accommodation.-
At any rate, there is indeed a fine distinction between a discounting line and a
loan accommodation. If the accounts receivable, like postdated checks, are sold
for a consideration less than their face value, the transaction is one of
discounting, and is subject to the provisions of the Financing Company Act. The
assignee is immediately subrogated as creditor of the accounts receivable.
However, if the accounts receivable are merely used as collateral for the loan,
the transaction is only a simple loan, and the lender is not subrogated as
creditor until there is a default and the collateral is foreclosed.
Division: THIRD DIVISION
Docket Number: G.R. No. 105774
Counsel: Antonio H. Garces, Balgos & Perez, Angelito Chua
Ponente: CARPIO
Dispositive Portion:
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R.CV No.
20167 is AFFIRMED with MODIFICATION. Petitioners are ordered to pay,
solidarily, private respondent the following amounts: (a) P1,042,005.00 plus 3%
penalty thereon, (b) interest on the total outstanding amount in item (a) at the
legal rate of 12% per annum from the filing of the complaint until the same is
fully paid, (c) attorney’s fees equivalent to 25% of the total amount in item (a),
including interest at 12% per annum on the outstanding amount of the
attorney’s fees from the finality of this judgment until the same is fully paid, and
(c) costs of suit.
Case Title : WILLY G. SIA, appellee, vs. PEOPLE OF THE PHILIPPINES,
appellant.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Batas Pambansa Bilang 22
Syllabi:
1. Criminal Law; Batas Pambansa Bilang 22; The act sought to be prevented by
B.P. Blg. 22 is the act of making and issuing a check with the knowledge that, at
the time of issue, the drawer issuing the check does not have sufficient funds in
or credit with the bank.-
The act sought to be prevented by the law is the act of making and issuing a
check with the knowledge that, at the time of issue, the drawer issuing the check
does not have sufficient funds in or credit with the bank for payment and the
check was subsequently dishonored upon presentment. What the law punishes
is the issuance of a worthless check and not the purpose for which such check
was issued nor the terms or conditions relating to its issuance. The thrust of the
law is to prohibit, under pain of penal sanctions, the making of worthless checks
and putting them in circulation. The crime is one against public order and is
malum prohibitum. The law is intended to safeguard the interests of the banking
system and the legitimate checking account user. It is not intended nor designed
to coerce a debtor to pay his debt, nor to favor or encourage those who seek to
enrich themselves through manipulation and circumvention of the purpose of
the law.
2. Criminal Law; Batas Pambansa Bilang 22; To hold a person liable, the
prosecution must prove that the accused knew, at the time of issue, that he does
not have sufficient funds in or credit for the full payment of such check upon its
presentment.-
To hold a person liable, the prosecution must prove that the accused knew, at
the time of issue, that he does not have sufficient funds in or credit for the full
payment of such check upon its presentment. The prosecution must rely on the
strength of its own evidence and not on the weakness of the evidence of the
accused.
3. Criminal Law; Batas Pambansa Bilang 22; Knowledge on the part of the
drawer or maker of the insufficiency of funds or credit in the drawee bank for
the payment of a check upon its presentment is an essential element of the
offense.-
Knowledge on the part of the drawer or maker of the insufficiency of funds or
credit in the drawee bank for the payment of a check upon its presentment is an
essential element of the offense. This element involves a state of the mind of the
drawer or maker of the check which is difficult for the prosecution to prove. To
ease the burden of the prosecution, Section 2 of B.P. Blg. 22 created a prima
facie presumption of knowledge on the part of the drawer or maker of the check
of the insufficiency of his fund in the drawee bank.
4. Criminal Law; Batas Pambansa Bilang 22; The drawer or maker of a check
has a right, under the law, to demand that a written notice of dishonor be sent
to and received by him to enable him to avoid indictment for violation of B.P.
Blg. 22.-
For the presumption to arise, the prosecution must adduce evidence to prove
the factual basis for its onset, namely, (a) the check is presented within ninety
(90) days from the date of the check; (b) the drawer or maker of the check
receives notice that such check has not been paid by the drawer; and, (c) the
drawer or maker of the check fails to pay the holder of the check the amount
due thereon, or makes arrangements for payment in full within five (5) banking
days after receiving notice that such check has not been paid by the drawer.
With the onset of the presumption, the burden of evidence is shifted on the
drawer/maker of the check to prove that, when he issued the subject check, he
had no knowledge that he had insufficient funds in the drawee bank to answer
for the amount due. The notice of dishonor may be sent to the drawer or maker
by the drawee bank, the holder of the check, or the offended party, either by
personal delivery or by registered mail. The drawer or maker of a check has a
right, under the law, to demand that a written notice of dishonor be sent to and
received by him to enable him to avoid indictment for violation of B.P. Blg. 22.
5. Criminal Law; Batas Pambansa Bilang 22; Notice of dishonor of a check to
the maker must be in writing.-
Construing Section 2 of the said law, we held in Domagsang v. Court of Appeals,
et al. that the notice of dishonor of a check to the maker must be in writing. A
mere oral notice to the drawer or maker of the dishonor of his check is not
enough.
6. Criminal Law; Batas Pambansa Bilang 22; Unless and until the drawer or
maker of the check receives a written notice of dishonor of the check, or where
there is no proof as to when and such notice of dishonor was received by the
drawer or maker, the five-day period within which the drawer or maker has to
pay the amount due or made arrangements with the drawee bank for the
payment of the check, cannot be determined.-
Unless and until the drawer or maker of the check receives a written notice of
dishonor of the check, or where there is no proof as to when such notice of
dishonor was received by the drawer or maker, the five-day period within which
the drawer or maker has to pay the amount due or made arrangements with the
drawee bank for the payment of the check, cannot be determined. In such case,
the prima facie presumption cannot arise. Emphasizing the intent of the State in
providing a five-day banking period from notice of dishonor of a check within
which the maker or drawer may pay the amount due or make arrangements
with the drawee bank for its payments the Court declared in Lao v. Court of
Appeals: It has been observed that the State, under this statute, actually offers
the violator “a compromise by allowing him to perform some act which operates
to preempt the criminal action, and if he opts to perform it the action is abated.”
This was also compared “to certain laws allowing illegal possessors of firearms a
certain period of time to surrender the illegally possessed firearms to the
Government, without incurring any criminal liability.
7. Criminal Law; Batas Pambansa Bilang 22; If the maker or drawer pays, or
makes arrangements with the drawee bank for the payment of the amount due
within the five-day period from notice of the dishonor given to the drawer, it is a
complete defense; the accused may no longer be indicted for violation of Section
1, B.P. Blg. 22.-
If the maker or drawer pays, or makes arrangements with the drawee bank for
the payment of the amount due within the five-day period from notice of the
dishonor given to the drawer, it is a complete defense; the accused may no
longer be indicted for violation of Section 1, B.P. Blg. 22. If he is so indicted, he
may set up the payment of the amount due as a complete defense.
8. Criminal Law; Batas Pambansa Bilang 22; In not sending a notice of dishonor
or letter of dishonor to the petitioner as required by law, the COLF deprived the
petitioner of his right to avoid prosecution for violation of B.P. Blg 22.-
Assuming that the petitioner had knowledge that he had insufficient funds in the
drawee bank when he issued the questioned checks, he could still have paid the
checks or made arrangements with the drawee bank for the payment of the said
checks if he had been duly notified of their dishonor. In not sending a notice or
letter of dishonor to the petitioner as required by law, the COLF deprived the
petitioner of his right to avoid prosecution for violation of B.P. Blg. 22.
Division: SECOND DIVISION
Docket Number: G.R. No. 149695
Counsel: Abaño, Pamfilo, Paras, Pineda & Agustin Law Offices, The Solicitor
General
Ponente: CALLEJO, SR.
Dispositive Portion:
IN LIGHT OF THE FOREGOING, the petition is GRANTED. The Decision of the
Court of Appeals affirming with modifications the Decision of the Regional Trial
Court in Criminal Cases Nos. 11865 and 11866 are REVERSED and SET ASIDE.
The petitioner is ACQUITTED of the crimes charged in said cases for insufficiency
of evidence.
Case Title : ALFREDO RIGOR, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law|Negotiable Instruments Law|Violation of Batas
Pambansa Blg. 22|Elements|Notice of Dishonor of a Check|Violations of B.P.
Blg. 22|Continuing Crimes|Remedial Law|Jurisdiction
Syllabi:
1. Criminal Law; Violation of Batas Pambansa Blg. 22; Elements; The elements
of the offense are: (1) making, drawing, and issuance of any check to apply on
account or for value; (2) knowledge of the maker, drawer, or issuer that at the
time of issue he does not have sufficient funds in or credit with the drawee bank
for the payment of the check in full upon its presentment; and (3) subsequent
dishonor of the check by the drawee bank for insufficiency of funds or credit, or
dishonor of the check for the same reason had not the drawer, without any valid
cause, ordered the bank to stop payment.-
Petitioner is charged with violation of Section 1 of Batas Pambansa Bilang 22,
thus: SECTION 1. Checks without sufficient funds.—Any person who makes or
draws and issues any check to apply on account or for value, knowing at the
time of issue that he does not have sufficient funds in or credit with the drawee
bank for the payment of such check in full upon its presentment, which check is
subsequently dishonored by the drawee bank for insufficiency of funds or credit
or would have been dishonored for the same reason had not the drawer,
without any valid reason, ordered the bank to stop payment, shall be punished
by imprisonment of not less than thirty days but not more than one (1) year or
by a fine of not less than but not more than double the amount of the check
which fine shall in no case exceed Two hundred thousand pesos, or both such
fine and imprisonment at the discretion of the court. The elements of the offense
are: (1) Making, drawing, and issuance of any check to apply on account or for
value; (2) knowledge of the maker, drawer, or issuer that at the time of issue he
does not have sufficient funds in or credit with the drawee bank for the payment
of the check in full upon its presentment; and (3) subsequent dishonor of the
check by the drawee bank for insufficiency of funds or credit, or dishonor of the
check for the same reason had not the drawer, without any valid cause, ordered
the bank to stop payment.
2. Criminal Law; Violation of Batas Pambansa Blg. 22; Elements; Assuming
arguendo that the payee had knowledge that he had insufficient funds at the
time he issued the check, such knowledge by the payee is immaterial as deceit is
not an essential element of the offense under B.P. Blg. 22; The gravamen of the
offense is the issuance of a bad check—hence malice and intent in the issuance
thereof are inconsequential.-
Assuming arguendo that the payee had knowledge that he had insufficient
funds at the time he issued the check, such knowledge by the payee is
immaterial as deceit is not an essential element of the offense under Batas
Pambansa Bilang 22. The gravamen of the offense is the issuance of a bad
check; hence, malice and intent in the issuance thereof are inconsequential.
3. Negotiable Instruments Law; Notice of Dishonor of a Check; The notice of
dishonor of a check may be sent to the drawer or maker by the drawee bank,
the holder of the check, or the offended party either by personal delivery or by
registered mail. The notice of dishonor to the maker of a check must be in
writing.-
The notice of dishonor of a check may be sent to the drawer or maker by the
drawee bank, the holder of the check, or the offended party either by personal
delivery or by registered mail. The notice of dishonor to the maker of a check
must be in writing.
4. Criminal Law; Violations of B.P. Blg. 22; Continuing Crimes; Remedial
Law; Jurisdiction; Violations of BP Blg. 22 are categorized as transitory or
continuing crimes; In such crimes, some acts material and essential to the crimes
and requisite to their consummation occur in one municipality or territory and
some in another, in which event, the court of either has jurisdiction to try the
cases, it being understood that the first court taking cognizance of the case
excludes the other.-
Violations of Batas Pambansa Bilang 22 are categorized as transitory or
continuing crimes. In such crimes, some acts material and essential to the crimes
and requisite to their consummation occur in one municipality or territory and
some in another, in which event, the court of either has jurisdiction to try the
cases, it being understood that the first court taking cognizance of the case
excludes the other. Hence, a person charged with a transitory crime may be
validly tried in any municipality or territory where the offense was in part
committed.
Division: FIRST DIVISION
Docket Number: G.R. No. 144887
Counsel: Jesus A. Concepcion, The Solicitor General
Ponente: AZCUNA
Dispositive Portion:
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of
Appeals, in CA-G.R. CR No. 18855, is hereby AFFIRMED. Costs against petitioner.
Case Title : JAMES SVENDSEN, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Criminal Law ; Bouncing Checks Law (B.P. Blg. 22) ; Loans ;
Evidence ;
Syllabi:
1. Criminal Law; Bouncing Checks Law (B.P. Blg. 22); Elements.-
—For petitioner to be validly convicted of the crime under B.P. Blg. 22, the
following requisites must thus concur: (1) the making, drawing and issuance of
any check to apply for account or for value; (2) the knowledge of the maker,
drawer, or issuer that at the time of issue he does not have sufficient funds in or
credit with the drawee bank for the payment of the check in full upon its
presentment; and (3) the subsequent dishonor of the check by the drawee bank
for insufficiency of funds or credit or dishonor for the same reason had not the
drawer, without any valid cause, ordered the bank to stop payment.
2. Same; Same; Same; Evidence; The presentation of the promissory note may
be dispensed with in a prosecution for violation of B.P. Blg. 22 as the purpose for
the issuance of such check is irrelevant in the determination of the accused’s
criminal liability.-
—Respecting petitioner’s claim that since the promissory note incorporating the
stipulated 10% interest per month was not presented, there is no written proof
thereof, hence, his obligation to pay the same must be void, the same fails. As
reflected above, Cristina admitted such stipulation. In any event, the
presentation of the promissory note may be dispensed with in a prosecution for
violation of B.P. Blg. 22 as the purpose for the issuance of such check is
irrelevant in the determination of the accused’s criminal liability. It is for the
purpose of determining his civil liability that the document bears significance.
Notably, however, Section 24 of the Negotiable Instruments Law provides that
“Every negotiable instrument is deemed prima facie to have been issued for a
valuable consideration, and every person whose signature appears thereon to
have become a party thereto for value.” It was incumbent then on petitioner to
prove thatthe check was not for a valuable consideration. This he failed to
discharge.
3. Same; Same; Loans; Interests; Usury; An obligation to pay 10% interest per
month on the loan is unconscionable and against public policy-
—while the Usury Law ceiling on interest rates was lifted by Central Bank
Circular No. 905, nothing therein grants lenders carte blanche to raise interest
rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets, and stipulations authorizing such interest are
contra bonos mores, if not against the law.—The decision of the MeTC, which
was affirmed on appeal by the RTC and the appellate court, ordering petitioner
“to pay private complainant Cristina C. Reyes civil indemnity in the total amount
of ONE HUNDRED SIXTY THOUSAND PESOS (P160,000) representing his civil
obligation covered by subject check,” deserves circumspect examination,
however, given that the obligation of petitioner to pay 10% interest per month
on the loan is unconscionable and against public policy. The P160,000 check
petitioner issued to Cristina admittedly represented unpaid interest. By Cristina’s
information, the interest was computed at a fixed rate of 10% per month. While
the Usury Law ceiling on interest rates was lifted by Central Bank Circular No.
905, nothing therein grants lenders carte blanche to raise interest rates to levels
which will either enslave their borrowers or lead to a hemorrhaging of their
assets. Stipulations authorizing such interest are contra bonos mores, if not
against the law. They are, under Article 1409 of the New Civil Code, inexistent
and void from the beginning.
4. Same; Same; Postal Service; Registry Receipts; Receipts for registered letters
including return receipts do not themselves prove receipt-
—they must be properly authenticated to serve as proof of receipt of the
letters.—The evidence for the prosecution failed to prove the second element.
While the registry receipt, which is said to cover the letter-notice of dishonor
and of demand sent to petitioner, was presented, there is no proof that he or a
duly authorized agent received the same. Receipts for registered letters
including return receipts do not themselves prove receipt; they must be properly
authenticated to serve as proof of receipt of the letters. Thus in Ting v. Court of
Appeals, 344 SCRA 551 (2000), this Court observed: x x x All that we have on
record is an illegible signature on the registry receipt as evidence that someone
received the letter. As to whether this signature is that of one of the petitioners
or of their authorized agent remains a mystery. From the registry receipt alone,
it is possible that petitioners or their authorized agent did receive the demand
letter. Possibilities, however, cannot replace proof beyond reasonable doubt.
Division: SECOND DIVISION
Docket Number: G.R. No. 175381
Counsel: Florosco P. Fronda
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the Court of Appeals Decision of November 16, 2006 is REVERSED
and SET ASIDE. Petitioner, James Svendsen, is acquitted of the crime charged
for failure of the prosecution to prove his guilt beyond reasonable doubt. He is,
however, ordered to pay private complainant, Cristina C. Reyes, the amount of
SIXTEEN THOUSAND PESOS (P16,000) representing civil indemnity, plus 12%
interest per annum computed from April 29, 1999 up to the finality of this
judgment. After the judgment becomes final and executory until the obligation
is satisfied, the total amount due shall earn interest at 12% per annum.
G.R. No. 166810. June 26, 2008.*
JUDE JOBY LOPEZ, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.
Criminal Law; Estafa; Elements of the crime of estafa.—By settled
jurisprudence, the elements of the crime of estafa, as defined in the above
quoted provision of law, are as follows: (1) the offender has postdated or issued
a check in payment of an obligation contracted at the time of the postdating or
issuance; (2) at the time of postdating or issuance of said check, the offender
has no funds in the bank or the funds deposited are not sufficient to cover the
amount of the check; and (3) the payee has been defrauded. Damage and
deceit are essential elements of the offense and must be established with
satisfactory proof to warrant conviction, while the false pretense or fraudulent
act must be committed prior to, or simultaneous with, the issuance of the bad
check. The drawer of the dishonored check is given three days from receipt of
the notice of dishonor to cover the amount of the check, otherwise, a prima
facie presumption of deceit arises.
Same; Same; It is settled that it is criminal fraud or deceit in the issuance of a
check which is made punishable under the Revised Penal Code, and not the
nonpayment of a debt.—It is settled that it is criminal fraud or deceit in the
issuance of a check which is made punishable under the Revised Penal Code,
and not the nonpayment of a debt. Deceit is the false representation of a
matter of fact whether by words or conduct by false or misleading allegations or
by concealment of that which should have been disclosed which deceives or is
intended to deceive another so that he shall act upon it to his legal injury.
Concealment which the law denotes as fraudulent implies a purpose or design
to hide facts which the other party ought to have. The postdating or issuing of a
check in payment of an obligation when the offender had no funds in the bank
or his funds deposited therein are not sufficient to cover the amount of the
check is a false pretense or a fraudulent act.
Same; Same; The receipt by the drawer of the notice of dishonor is not an
element of the offense.—The receipt by the drawer of the notice of dishonor is
not an element of the offense. The presumption only dispenses with the
presentation of evidence of deceit if such notification is received and the
drawer of the check failed to deposit the amount necessary to cover his check
within three (3) days from receipt of the notice of dishonor of the check. The
presumption indulged in by law does not preclude the presentation of other
evidence to prove deceit. It is not disputed by petitioner that, as found by the
CA, respondent Ables “called” up petitioner to inform him of the dishonor of
the check. Moreover, when petitioner issued the check in question on March
23, 1998, he knew that his current account with the DBP was a closed account
as early as January 27, 1998.
Same; Same; Section 114(d) of the Negotiable Instruments Law provides: Sec.
114. When notice need not be given to drawer.—Notice of dishonor is not
required to be given to the drawer in either of the following cases: x x x d.)
where the drawer has no right to expect or require that the drawee or acceptor
will honor the check.—The absence of proof as to receipt of the written notice
of dishonor notwithstanding, the evidence shows that petitioner had actual
notice of the dishonor of the check because he was verbally notified by the
respondent and notice whether written or verbal was a surplusage and totally
unnecessary considering that almost two (2) months before the issuance of the
check, petitioner’s current account was already closed. Under these
circumstances, the notice of dishonor would have served no useful purpose as
no deposit could be made in a closed bank account. Pertinently, Section 114(d)
of the Negotiable Instruments Law provides: Sec. 114. When notice need not be
given to drawer.—Notice of dishonor is not required to be given to the drawer
in either of the following cases: x x x d. Where the drawer has no right to expect
or require that the drawee or acceptor will honor the check. Since petitioner’s
bank account was already closed even before the issuance of the subject check,
he had no right to expect or require the drawee bank to honor his check. By
virtue of the aforequoted provision of law, petitioner is not entitled to be given
a notice of dishonor.
Same; Same; Penalties; The Indeterminate Sentence Law provides that if an
offense is punished by the Revised Penal Code or its amendments, the court
shall sentence the accused to an indeterminate penalty, the maximum term of
which shall be that which, in view of the attending circumstances, can be
properly imposed under the rules of the Revised Penal Code, while the
minimum term of which shall be within the range of penalty next lower to that
prescribed by the Code for the offense.—The Indeterminate Sentence Law
provides that if an offense is punished by the Revised Penal Code or its
amendments, the court shall sentence the accused to an indeterminate penalty,
the maximum term of which shall be that which, in view of the attending
circumstances, can be properly imposed under the rules of the Revised Penal
Code, while the minimum term of which shall be within the range of the penalty
next lower to that prescribed by the Code for the offense. [Lopez vs. People,
555 SCRA 525(2008)]
G.R. No. 152666. April 23, 2008.*
MARCIANO TAN, petitioner, vs. PHILIPPINE COMMERCIAL INTERNATIONAL
BANK, respondent.
Criminal Law; Bouncing Checks Law; Elements Necessary for Conviction for
Violation of B.P. Blg. 22.—Unless the following elements are shown to have
been proven by the prosecution, an accused will not be convicted for violation
of B.P. Blg. 22: 1. The accused makes, draws or issues any check to apply to
account or for value; 2. The accused knows at the time of the issuance that he
or she does not have sufficient funds in, or credit with, the drawee bank for the
payment of the check in full upon its presentment; and 3. The check is
subsequently dishonored by the drawee bank for insufficiency of funds or
credit, or it would have been dishonored for the same reason had not the
drawer, without any valid reason, ordered the bank to stop payment. (Italics
supplied) While issuing of a bouncing check is malum prohibitum, the
prosecution is not excused from its responsibility of proving beyond reasonable
doubt all the elements of the offense.
Same; Same; Same; Respecting the second element of the crime, the
prosecution must prove that the accused knew, at the time of issuance, that he
does not have sufficient funds or credit for the full payment of the check upon
its presentment.—Respecting the second element of the crime, the prosecution
must prove that the accused knew, at the time of issuance, that he does not
have sufficient funds or credit for the full payment of the check upon its
presentment. The element of “knowledge” involves a state of mind that
obviously would be difficult to establish, hence, the statute creates a prima
facie presumption of knowledge on the insufficiency of funds or credit
coincidental with the attendance of the two other elements.
Same; Same; Same; In order to create such presumption, it must be shown that
the drawer or maker received a notice of dishonor and, within five banking days
thereafter, failed to satisfy the amount of the check or arrange for its payment;
Presumption is not conclusive as it may be rebutted by full payment; Payment is
a complete defense that would lie regardless of the strength of the evidence
presented by the prosecution.—In order to create such presumption, it must be
shown that the drawer or maker received a notice of dishonor and, within five
banking days thereafter, failed to satisfy the amount of the check or arrange for
its payment. The above-quoted provision creates a presumption juris tantum
that the second element prima facie exists when the first and third elements of
the offense are present. The presumption is not conclusive, however, as it may
be rebutted by full payment. If the maker or drawer pays, or makes
arrangement with the drawee bank for the payment of the amount due within
the five-day period from notice of the dishonor, he or she may no longer be
indicted for such violation. It is a complete defense that would lie regardless of
the strength of the evidence presented by the prosecution. In essence, the law
affords the drawer or maker the opportunity to avert prosecution by
performing some acts that would operate to preempt the criminal action, which
opportunity serves to mitigate the harshness of the law in its application.
Same; Same; Same; Only a full payment at the time of its presentment or during
the five-day grace period could exonerate one from criminal liability under B.P.
Blg. 22 and that subsequent payments can only affect the civil, but not the
criminal, liability.—It is a general rule that only a full payment at the time of its
presentment or during the five-day grace period could exonerate one from
criminal liability under B.P. Blg. 22 and that subsequent payments can only
affect the civil, but not the criminal, liability. [Tan vs. Philippine Commercial
International Bank, 552 SCRA 532(2008)]
Case Title : ANAMER SALAZAR, petitioner, vs. J.Y. BROTHERS MARKETING
CORPORATION, respondent.Case Nature : PETITION for review on certiorari of
the decision and resolution of the Court of Appeals.
Syllabi Class : Obligations and Contracts|Novation|Checks|Crossed
Checks|Judicial Notice|Words and Phrases
Syllabi:
1. Obligations and Contracts; Novation; Checks; Novation is never presumed,
there must be an express intention to novate; The creditor’s acceptance of
another check, which replaced an earlier dishonored check, does not result in
novation where there was no express agreement to establish that the debtor
was already discharged from his liability.-
—In this case, respondent’s acceptance of the Solid Bank check, which replaced
the dishonored Prudential Bank check, did not result to novation as there was no
express agreement to establish that petitioner was already discharged from his
liability to pay respondent the amount of P214,000.00 as payment for the 300
bags of rice. As we said, novation is never presumed, there must be an express
intention to novate. In fact, when the Solid Bank check was delivered to
respondent, the same was also indorsed by petitioner which shows petitioner’s
recognition of the existing obligation to respondent to pay P214,000.00 subject
of the replaced Prudential Bank check.
2. Same; Same; Same; Crossed Checks; Judicial Notice; Words and Phrases; The
Court has taken judicial cognizance of the practice that a check with two
parallel lines in the upper left hand corner means that it could only be
deposited and could not be converted into cash; The effect of crossing a check
relates to the mode of payment, meaning that the drawer had intended the
check for deposit only by the rightful person, i.e., the payee named therein-
—the change in the mode of paying the obligation is not a change in any of the
objects or principal condition of the contract for novation to take place.—
Among the different types of checks issued by a drawer is the crossed check. The
Negotiable Instruments Law is silent with respect to crossed checks, although
the Code of Commerce makes reference to such instruments. We have taken
judicial cognizance of the practice that a check with two parallel lines in the
upper left hand corner means that it could only be deposited and could not be
converted into cash. Thus, the effect of crossing a check relates to the mode of
payment, meaning that the drawer had intended the check for deposit only by
the rightful person, i.e., the payee named therein. The change in the mode of
paying the obligation was not a change in any of the objects or principal
condition of the contract for novation to take place.
Division: Secondary
Docket Number: G.R. No. 171998
Counsel: Frank E. Lobrigo
Ponente: PERALTA
Dispositive Portion:
WHEREFORE, the petition is DENIED. The Decision dated September 29, 2005
and the Resolution dated March 2, 2006, of the Court of Appeals in CA-G.R. CV
No. 83104, are AFFIRMED.
Case Title : PHILIPPINE NATIONAL BANK, petitioner, vs. COURT OF APPEALS,
CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF COMMUNICATIONS,
and F. ABANTE MARKETING, respondents.Case Nature : PETITION for review on
certiorari of a decision of the Court of Appeals.
Syllabi Class : Banks and Banking|Damages||Attorney’s Fees
Syllabi:
1. Banks and Banking; Negotiable Instruments Law (Act No. 2031); Checks;
Words and Phrases; An alteration is said to be material if it alters the effect of
the instrument.-
We shall first deal with the effect of the alteration of the serial number on the
negotiability of the check in question. Petitioner anchors its position on Section
125 of the Negotiable Instruments Law (ACT No. 2031). Petitioner alleges that
there is no hard and fast rule in the interpretation of the aforequoted provision
of the Negotiable Instruments Law. It maintains that under Section 125(f), any
change that alters the effect of the instrument is a material alteration. We do
not agree. An alteration is said to be material if it alters the effect of the
instrument. It means an unauthorized change in an instrument that purports to
modify in any respect the obligation of a party or an unauthorized addition of
words or numbers or other change to an incomplete instrument relating to the
obligation of a party. In other words, a material alteration is one which changes
the items which are required to be stated under Section 1 of the Negotiable
Instruments Law.
2. Banks and Banking; The drawee bank cannot refuse to accept a check on the
ground that the serial number of said check was altered, since the serial number
is an item which is not an essential requisite for negotiability under Section 1 of
the Negotiable Instruments Law.-
The case at bench is unique in the sense that what was altered is the serial
number of the check in question, an item which, it can readily be observed, is not
an essential requisite for negotiability under Section 1 of the Negotiable
Instruments Law. The aforementioned alteration did not change the relations
between the parties. The name of the drawer and the drawee were not altered.
The intended payee was the same. The sum of money due to the payee
remained the same. The check’s serial number is not the sole indication of its
origin. As succinctly found by the Court of Appeals, the name of the government
agency which issued the subject check was prominently printed therein. The
check’s issuer was therefore sufficiently identified, rendering the referral to the
serial number redundant and inconsequential. Petitioner, thus cannot refuse to
accept the check in question on the ground that the serial number was altered,
the same being an immaterial or innocent one.
3. Damages; Attorney’s Fees; Where the lower courts fail to explicitly state the
rationale for the award of attorney’s fees, the same shall be disallowed.-
The amount of P10,000.00 as attorney’s fees is hereby deleted. In their
respective decisions, the trial court and the Court of Appeals failed to explicitly
state the rationale for the said award. The foregoing is in conformity with the
guiding principles laid down in a long line of cases and reiterated recently in
Consolidated Bank Trust Corporation (Solidbank) v. Court of Appeals: The award
of attorney’s fees lies within the discretion of the court and depends upon the
circumstances of each case. However, the discretion of the court to award
attorney’s fees under Article 2208 of the Civil Code of the Philippines demands
factual, legal and equitable justification, without which the award is a
conclusion without a premise and improperly left to speculation and conjecture.
It becomes a violation of the proscription against the imposition of a penalty on
the right to litigate (Universal Shipping Lines, Inc. v. Intermediate Appellate
Court, 188 SCRA 170 [1990]). The reason for the award must be stated in the
text of the court’s decision. If it is stated only in the dispositive portion of the
decision, the same shall be disallowed. As to the award of attorney’s fees being
an exception rather than the rule, it is necessary for the court to make findings
of fact and law that would bring the case within the exception and justify the
grant of the award (Refractories Corporation of the Philippines v. Intermediate
Appellate Court, 176 SCRA 539 [1989]).
Division: FIRST DIVISION
Docket Number: G.R. No. 107508
Counsel: Monsod, Tamargo, Valencia & Associates, Siguion Reyna, Montecillo &
Ongsiako
Ponente: KAPUNAN
Dispositive Portion:
WHEREFORE, premises considered, except for the deletion of the award of
attorney’s fees, the decision of the Court of Appeals is hereby AFFIRMED.
Case Title : THE INTERNATIONAL CORPORATE BANK, INC., petitioner, vs. COURT
OF APPEALS and PHILIPPINE NATIONAL BANK, respondents.Case Nature :
PETITION for review on certiorari of the amended decision and resolution of the
Court of Appeals.
Syllabi Class : Appeals|Negotiable Instruments Law|Banks and
Banking|Petitioners may not delegate upon the court the task of determining
under which rule the petition should fall|Certiorari|The remedies of appeal and
certiorari are mutually exclusive and not alternative or successive|Material
Alterations
Syllabi:
1. Appeals; Petitioners may not delegate upon the court the task of
determining under which rule the petition should fall; A petition cannot be
subsumed simultaneously under Rule 45 and Rule 65 of the Rules of Court, and
neither may petitioners delegate upon the court the task of determining under
which rule the petition should fall.-
—Respondent asserts that the petition should be dismissed outright since
petitioner availed of a wrong mode of appeal. Respondent cites Ybañez v. Court
of Appeals, 253 SCRA 540 (1996), where the Court ruled that “a petition cannot
be subsumed simultaneously under Rule 45 and Rule 65 of the Rules of Court,
and neither may petitioners delegate upon the court the task of determining
under which rule the petition should fall.”
2. Banks and Banking; Material Alterations; Since there were no material
alterations on the checks, respondent as drawee bank has no right to dishonor
them and return them to petitioner, the collecting bank.-
—The Court will not rule on the proper application of Central Bank Circular No.
580 in this case. Since there were no material alterations on the checks,
respondent as drawee bank has no right to dishonor them and return them to
petitioner, the collecting bank. Thus, respondent is liable to petitioner for the
value of the checks, with legal interest from the time of filing of the complaint
on 16 March 1982 until full payment. Further, considering that respondent’s
motion for reconsideration was filed late, the 10 October 1991 Decision, which
held respondent liable for the value of the checks amounting to P1,447,920, had
become final and executory.
3. Appeals; There are instances when rules of procedure are relaxed in the
interest of justice, however, in this case, respondent did not proffer any
explanation for the late filing of the motion of reconsideration.-
—There are instances when rules of procedure are relaxed in the interest of
justice. However, in this case, respondent did not proffer any explanation for the
late filing of the motion for reconsideration. Instead, there was a deliberate
attempt to deceive the Court of Appeals by claiming that the copy of the 10
October 1991 Decision was received on 22 October 1991 instead of on 16
October 1991. We find no justification for the posture taken by the Court of
Appeals in admitting the motion for reconsideration. Thus, the late filing of the
motion for reconsideration rendered the 10 October 1991 Decision final and
executory.
4. Negotiable Instruments Law; Material Alterations; The alteration on the
serial number of a check is not a material alteration.-
—The question on whether an alteration of the serial number of a check is a
material alteration under the Negotiable Instruments Law is already a settled
matter. In Philippine National Bank v. Court of Appeals, 256 SCRA 491 (1996),
this Court ruled that the alteration on the serial number of a check is not a
material alteration. Thus: An alteration is said to be material if it alters the
effect of the instrument. It means an unauthorized change in an instrument that
purports to modify in any respect the obligation of a party or an unauthorized
addition of words or numbers or other change to an incomplete instrument
relating to the obligation of a party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of the
Negotiable Instrument[s] Law.
5. Same; Certiorari; The remedies of appeal and certiorari are mutually
exclusive and not alternative or successive; However, this Court may set aside
technicality for justifiable reasons and in the interest of justice, we will treat the
petition as having been filed under Rule 45.-
—The remedies of appeal and certiorari are mutually exclusive and not
alternative or successive. However, this Court may set aside technicality for
justifiable reasons. The petition before the Court is clearly meritorious. Further,
the petition was filed on time both under Rules 45 and 65. Hence, in accordance
with the liberal spirit which pervades the Rules of Court and in the interest of
justice, we will treat the petition as having been filed under Rule 45.
Division: THIRD DIVISION
Docket Number: G.R. No. 129910
Counsel: Macalino & Associates, Salvador A. Uy
Ponente: CARPIO
Dispositive Portion:
WHEREFORE, we SET ASIDE the 9 August 1994 Amended Decision and the 16
July 1997 Resolution of the Court of Appeals. We rule that respondent
Philippine National Bank is liable to petitioner International Corporate Bank, Inc.
for the value of the checks amounting to P1,447,920, with legal interest from 16
March 1982 until full payment. Costs against respondent.
Case Title : METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs.
RENATO D. CABILZO, respondent.Case Nature : PETITION for review on
certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Equitable Estoppel|Banks and Banking|Negotiable
Instruments|Checks
Syllabi:
1. Equitable Estoppel; The doctrine of equitable estoppel states that when one
of the two innocent persons, each guiltless of any intentional or moral wrong,
must suffer a loss, it must be borne by the one whose erroneous conduct, either
by omission or commission, was the cause of injury.-
Metrobank cannot lightly impute that Cabilzo was negligent and is therefore
prevented from asserting his rights under the doctrine of equitable estoppel
when the facts on record are bare of evidence to support such conclusion. The
doctrine of equitable estoppel states that when one of the two innocent persons,
each guiltless of any intentional or moral wrong, must suffer a loss, it must be
borne by the one whose erroneous conduct, either by omission or commission,
was the cause of injury. Metrobank’s reliance on this dictum, is misplaced. For
one, Metrobank’s representation that it is an innocent party is flimsy and
evidently, misleading. At the same time, Metrobank cannot asseverate that
Cabilzo was negligent and this negligence was the proximate cause of the loss in
the absence of even a scintilla proof to buttress such claim. Negligence is not
presumed but must be proven by the one who alleges it.
2. Banks and Banking; The point is that as a business affected with public
interest and because of the nature of its functions, the bank is under obligation
to treat the accounts of its depositors with meticulous care, always having in
mind the fiduciary nature of their relationship.-
The point is that as a business affected with public interest and because of the
nature of its functions, the bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of
their relationship. The appropriate degree of diligence required of a bank must
be a high degree of diligence, if not the utmost diligence.
3. Negotiable Instruments; Checks; Payment made under materially altered
instrument is not payment done in accordance with the instruction of the
drawer.-
The bank on which the check is drawn, known as the drawee bank, is under strict
liability to pay to the order of the payee in accordance with the drawer’s
instructions as reflected on the face and by the terms of the check. Payment
made under materially altered instrument is not payment done in accordance
with the instruction of the drawer. When the drawee bank pays a materially
altered check, it violates the terms of the check, as well as its duty to charge its
client’s account only for bona fide disbursements he had made. Since the
drawee bank, in the instant case, did not pay according to the original tenor of
the instrument, as directed by the drawer, then it has no right to claim
reimbursement from the drawer, much less, the right to deduct the erroneous
payment it made from the drawer’s account which it was expected to treat with
utmost fidelity.
4. Negotiable Instruments; It owes the highest degree fidelity to its client and
should not therefore lightly rely on the judgment of other banks on occasions
where its clients money were involve, no matter how small or substantial the
amount at stake.-
The reliance made by Metrobank on Westmont Bank’s indorsement is clearly
inconsistent, if not totally offensive to the dictum that being impressed with
public interest, banks should exercise the highest degree of diligence, if not
utmost diligence in dealing with the accounts of its own clients. It owes the
highest degree fidelity to its clients and should not therefore lightly rely on the
judgment of other banks on occasions where its clients money were involve, no
matter how small or substantial the amount at stake.
Division: FIRST DIVISION
Docket Number: G.R. No. 154469
Counsel: Sedigo, Sison & Associates, Jose A. Suing
Ponente: CHICO-NAZARIO
Dispositive Portion:
WHEREFORE, premises considered, the instant Petition is DENIED. The Decision
dated 8 March 2002 and the Resolution dated 26 July 2002 of the Court of
Appeals are AFFIRMED with modification that exemplary damages in the
amount of P50,000.00 be awarded. Costs against the petitioner.
Case Title : ALLIED BANKING CORPORATION, petitioner, vs. COURT OF APPEALS,
G.G. SPORTSWEAR MANUFACTURING CORPORATION, NARI GIDWANI, SPOUSES
LETICIA AND LEON DE VILLA AND ALCRON INTERNATIONAL LTD.,
respondents.Case Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals.
Syllabi Class : Obligations and Contracts|Laches|Negotiable Instruments Law|
Syllabi:
1. Obligations and Contracts; Obligations arising from contracts have the force
of law between the parties and should be complied with in good faith.-
—We must stress that obligations arising from contracts have the force of law
between the parties and should be complied with in good faith. Nothing can
stop the parties from establishing stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.
2. Negotiable Instruments Law; There are well-defined distinctions between the
contract of an indorser and that of a guaran-tor/surety of a commercial paper.-
—Section 152 of the Negotiable Instruments Law pertaining to indorsers, relied
on by respondents, is not pertinent to this case. There are well-defined
distinctions between the contract of an indorser and that of a guarantor/surety
of a commercial paper, which is what is involved in this case. The contract of
indorsement is primarily that of transfer, while the contract of guaranty is that
of personal security. The liability of a guarantor/surety is broader than that of
an indorser. Unless the bill is promptly presented for payment at maturity and
due notice of dishonor given to the indorser within a reasonable time, he will be
discharged from liability thereon. On the other hand, except where required by
the provisions of the contract of suretyship, a demand or notice of default is not
required to fix the surety’s liability.
3. Laches; The question of laches is addressed to the sound discretion of the
court and since laches is an equitable doctrine, its application is controlled by
equitable considerations.-
—We find the defense of laches unavailing. The question of laches is addressed
to the sound discretion of the court and since laches is an equitable doctrine, its
application is controlled by equitable considerations. Respondents, however,
failed to show that the collection suit against them as sureties was inequitable.
Remedies in equity address only situations tainted with inequity, not those
expressly governed by statutes.
Division: THIRD DIVISION
Docket Number: G.R. No. 125851
Counsel: Walter T. Young, Ernesto T. Zshornack, Jr., Valeriano Del Rosario, Larry
Gabriel Ramos
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the
Court of Appeals is hereby MODIFIED, and we hold that respondent Alcron
International Ltd. is subsidiarily liable, while respondents Nari Gidwani, and
Spouses Leon and Leticia de Villa are jointly and severally liable together with
G.G. Sportswear, to pay petitioner Bank the sum of P151,474.52 with interest at
the legal rate from the filing of the complaint, and the costs.
Case Title : PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. EXCELSA
INDUSTRIES, INC., respondent.Case Nature : PETITION for review on certiorari
of the decision and resolution of the Court of Appeals.
Syllabi Class : Real Estate Mortgage|Mortgages
Syllabi:
1. Real Estate Mortgage; Mortgages; Negotiable Instruments Law; Where the
drawer executes a separate letter of undertaking in consideration for the bank’s
negotiation of its sight drafts, the Court held that the drawer can still be made
liable under the letter of undertaking even if he is discharged due to the bank’s
failure to protest the non-acceptance of the drafts.-
—In Velasquez v. Solidbank Corporation, 550 SCRA 119 (2008), where the
drawer therein also executed a separate letter of undertaking in consideration
for the bank’s negotiation of its sight drafts, the Court held that the drawer can
still be made liable under the letter of undertaking even if he is discharged due
to the bank’s failure to protest the non-acceptance of the drafts. The Court
explained, thus: Petitioner, however, can still be made liable under the letter of
undertaking. It bears stressing that it is a separate contract from the sight draft.
The liability of petitioner under the letter of undertaking is direct and primary. It
is independent from his liability under the sight draft. Liability subsists on it even
if the sight draft was dishonored for non-acceptance or non-payment.
2. Same; Same; It has been settled in a long line of decisions that mortgages
given to secure future advancements are valid and legal contracts, and the
amounts named as consideration in said contracts do not limit the amount for
which the mortgage may stand as security if from the four corners of the
instrument the intent to secure future and other indebtedness can be gathered.-
—Respondent executed a real estate mortgage containing a “blanket mortgage
clause,” also known as a “dragnet clause.” It has been settled in a long line of
decisions that mortgages given to secure future advancements are valid and
legal contracts, and the amounts named as consideration in said contracts do
not limit the amount for which the mortgage may stand as security if from the
four corners of the instrument the intent to secure future and other
indebtedness can be gathered.
Division: SECOND DIVISION
Docket Number: G.R. No. 152071
Counsel: Pangilinan, Britanico, Sarmiento & Franco Law Offices
Ponente: TINGA
Dispositive Portion:
WHEREFORE, the instant petition for review on certiorari is GRANTED and the
decision and resolution of the Court of Appeals in CA-G.R. CV No. 59931 are
REVERSED and SET ASIDE. The decision of the Regional Trial Court Branch 73,
Antipolo, Rizal in Civil Case No. 1587-A and LR Case No. 90-787 is REINSTATED.
Case Title : PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR
BANK OF ASIA AND AMERICA), petitioner, vs. COURT OF APPEALS and FORD
PHILIPPINES, INC. and CITIBANK, N.A., respondents., FORD PHILIPPINES, INC.,
petitioner, vs. COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE
COMMERCIAL INTERNATIONAL BANK, respondents., FORD PHILIPPINES, INC.,
petitioner, vs. CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL BANK
and THE COURT OF APPEALS, respondents.Case Nature : PETITIONS for review
on certiorari of a decision of the Court of Appeals.
Syllabi Class : Negligence|Banks and Banking|Torts|Quasi-Delicts|Words and
Phrases|Negotiable Instruments|Checks|Collecting Banks|Taxation|Crossed
Checks|Negligence|Doctrine of Comparative Negligence|Prescription
Syllabi:
1. Negligence; Torts; Quasi-Delicts; The general rule is that if the master is
injured by the negligence of a third person and by the concurring contributory
negligence of his own servant or agent, the latter’s negligence is imputed to his
superior and will defeat the superior’s action against the third person, assuming,
of course that the contributory negligence was the proximate cause of the injury
of which complaint is made.-
On this point, jurisprudence regarding the imputed negligence of employer in a
master-servant relationship is instructive. Since a master may be held for his
servant’s wrongful act, the law imputes to the master the act of the servant, and
if that act is negligent or wrongful and proximately results in injury to a third
person, the negligence or wrongful conduct is the negligence or wrongful
conduct of the master, for which he is liable. The general rule is that if the
master is injured by the negligence of a third person and by the concurring
contributory negligence of his own servant or agent, the latter’s negligence is
imputed to his superior and will defeat the superior’s action against the third
person, assuming, of course that the contributory negligence was the proximate
cause of the injury of which complaint is made.
2. Negligence; Torts; Quasi-Delicts; Words and Phrases; Proximate cause is that
which, in the natural and continuous sequence, unbroken by any efficient,
intervening cause, produces the injury, and without which the result would not
have occurred.-
Accordingly, we need to determine whether or not the action of Godofredo
Rivera, Ford’s General Ledger Accountant, and/or Alexis Marindo, his assistant,
was the proximate cause of the loss or damage. As defined, proximate cause is
that which, in the natural and continuous sequence, unbroken by any efficient,
intervening cause produces the injury, and without which the result would not
have occurred.
3. Banks and Banking; Negotiable Instruments; Checks; The mere fact that the
forgery was committed by a drawer-payor’s confidential employee or agent,
who by virtue of his position had unusual facilities for perpetrating the fraud and
imposing the forged paper upon the bank, does not entitle the bank to shift the
loss to the drawer-payor, in the absence of some circumstances raising estoppel
against the drawer.-
It appears that although the employees of Ford initiated the transactions
attributable to an organized syndicate, in our view, their actions were not the
proximate cause of encashing the checks payable to the CIR. The degree of
Ford’s negligence, if any, could not be characterized as the proximate cause of
the injury to the parties. The Board of Directors of Ford, we note, did not confirm
the request of Godofredo Rivera to recall Citibank Check No. SN-04867. Rivera’s
instruction to replace the said check with PCIBank’s Manager’s Check was not in
the ordinary course of business which could have prompted PCIBank to validate
the same. As to the preparation of Citibank Checks Nos. SN-10597 and 16508, it
was established that these checks were made payable to the CIR. Both were
crossed checks. These checks were apparently turned around by Ford’s
employees, who were acting on their own personal capacity. Given these
circumstances, the mere fact that the forgery was committed by a drawer-
payor’s confidential employee or agent, who by virtue of his position had
unusual facilities for perpetrating the fraud and imposing the forged paper upon
the bank, does not entitle the bank to shift the loss to the drawer-payor, in the
absence of some circumstance raising estoppel against the drawer. This rule
likewise applies to the checks fraudulently negotiated or diverted by the
confidential employees who hold them in their possession.
4. Banks and Banking; Checks; Collecting Banks; Taxation; A bank authorized
to collect the payment of taxpayers in behalf of the Bureau of Internal Revenue
is duty bound to consult its principal regarding the unwarranted instructions
given by the pay or of its agent.-
Citibank Check No. SN-04867 was deposited at PCIBank through its Ermita
Branch. It was coursed through the ordinary banking transaction, sent to Central
Clearing with the indorsement at the back “all prior indorsements and/or lack of
indorsements guaranteed,” and was presented to Citibank for payment.
Thereafter PCIBank, instead of remitting the proceeds to the CIR, prepared two
of its Manager's checks and enabled the syndicate to encash the same. On
record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the
checks. The neglect of PCIBank employees to verify whether his letter requesting
for the replacement of the Citibank Check No. SN-04867 was duly authorized,
showed lack of care and prudence required in the circumstances. Furthermore, it
was admitted that PCIBank is authorized to collect the payment of taxpayers in
behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult its
principal regarding the unwarranted instructions given by the payor or its agent.
5. Banks and Banking; Checks; Collecting Banks; Negotiable Instruments; It is a
well-settled rule that the relationship between the payee or holder of
commercial paper and the bank to which it is sent for collection is, in the
absence of an agreement to the contrary, that of principal and agent.-
It is a well-settled rule that the relationship between the payee or holder of
commercial paper and the bank to which it is sent for collection is, in the
absence of an agreement to the contrary, that of principal and agent. A bank
which receives such paper for collection is the agent of the payee or holder.
6. Banks and Banking; Checks; Collecting Banks; Even considering arguendo,
that the diversion of the amount of a check payable to the collecting bank in
behalf of the designated payee may be allowed, still such diversion must be
properly authorized by the payor.-
Even considering arguendo, that the diversion of the amount of a check payable
to the collecting bank in behalf of the designated payee may be allowed, still
such diversion must be properly authorized by the payor. Otherwise stated, the
diversion can be justified only by proof of authority from the drawer, or that the
drawer has clothed his agent with apparent authority to receive the proceeds of
such check.
7. Banks and Banking; Checks; Collecting Banks; Crossed Checks; Words and
Phrases; The crossing of the check with the phrase “Payee’s Account Only,” is a
warning that the check should be deposited only in the account of the payee; It
is the collecting bank which is bound to scrutinize the check and to know its
depositors before it could make the clearing indorsement “all prior indorsements
and lor lack ofindorsement guaranteed.”-
Indeed, the crossing of the check with the phrase “Payee’s Account Only,” is a
warning that the check should be deposited only in the account of the CIR. Thus,
it is the duty of the collecting bank PCIBank to ascertain that the check be
deposited in payee’s account only. Therefore, it is the collecting bank (PCIBank)
which is bound to scrutinize the check and to know its depositors before it could
make the clearing indorsement “all prior indorsements and/or lack of
indorsement guaranteed.”
8. Banks and Banking; Checks; Collecting Banks; A bank which cashes a check
drawn upon another bank, without requiring proof as to the identity of persons
presenting it, or making inquiries with regard to them, cannot hold the proceeds
against the drawee when the proceeds of the checks were afterwards diverted
to the hands of a third party.-
Banking business requires that the one who first cashes and negotiates the
check must take some precautions to learn whether or not it is genuine. And if
the one cashing the check through indifference or other circumstance assists the
forger in committing the fraud, he should not be permitted to retain the
proceeds of the check from the drawee whose sole fault was that it did not
discover the forgery or the defect in the title of the person negotiating the
instrument before paying the check. For this reason, a bank which cashes a
check drawn upon another bank, without requiring proof as to the identity of
persons presenting it, or making inquiries with regard to them, cannot hold the
proceeds against the drawee when the proceeds of the checks were afterwards
diverted to the hands of a third party. In such cases the drawee bank has a right
to believe that the cashing bank (or the collecting bank) had, by the usual proper
investigation, satisfied itself of the authenticity of the negotiation of the checks.
Thus, one who encashed a check which had been forged or diverted and in turn
received payment thereon from the drawee, is guilty of negligence which
proximately contributed to the success of the fraud practiced on the drawee
bank. The latter may recover from the holder the money paid on the check.
9. Banks and Banking; Checks; Torts; As a general rule, a banking corporation is
liable for the wrongful or tortuous acts and declarations of its officers or agents
within the course and scope of their employment—it may be liable for the
tortuous acts of its officers even as regards that species of tort of which malice is
an essential element.-
In this case, there was no evidence presented confirming the conscious
participation of PCIBank in the embezzlement. As a general rule, however, a
banking corporation is liable for the wrongful or tortuous acts and declarations
of its officers or agents within the course and scope of their employment. A bank
will be held liable for the negligence of its officers or agents when acting within
the course and scope of their employment. It may be liable for the tortuous acts
of its officers even as regards that species of tort of which malice is an essential
element. In this case, we find a situation where the PCIBank appears also to be
the victim of the scheme hatched by a syndicate in which its own management
employees had participated.
10. Banks and Banking; Checks; Torts; The general rule is that a bank is liable
for the fraudulent acts or representations of an officer or agent acting within the
course and apparent scope of his employment or authority.-
A bank hold- ing out its officers and agents as worthy of confidence will not be
permit- ted to profit by the frauds these officers or agents were enabled to
perpetrate in the apparent course of their employment; nor will it be permitted
to shirk its responsibility for such frauds, even though no benefit may accrue to
the bank therefrom. For the general rule is that a bank is liable for the
fraudulent acts or representations of an officer or agent acting within the course
and apparent scope of his employment or authority. And if an officer or
employee of a bank, in his official capacity, receives money to satisfy an
evidence of indebtedness lodged with his bank for collection, the bank is liable
for his misappropriation of such sum.
11. Banks and Banking; Checks; Torts; Negligence; As a business affected with
public interest and because of the nature of its functions, a bank is under
obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship.-
Citibank should have scrutinized Citibank Check Numbers SN-10597 and 16508
before paying the amount of the proceeds thereof to the collecting bank of the
BIR. One thing is clear from the record: the clearing stamps at the back of
Citibank Check Nos. SN-10597 and 16508 do not bear any initials. Citibank failed
to notice and verify the absence of the clearing stamps. Had this been duly
examined, the switching of the worthless checks to Citibank Check Nos. 10597
and 16508 would have been discovered in time. For this reason, Citibank had
indeed failed to perform what was incumbent upon it, which is to ensure that
the amount of the checks should be paid only to its designated payee. The fact
that the drawee bank did not discover the irregularity seasonably, in our view,
constitutes negligence in carrying out the bank’s duty to its depositors. The point
is that as a business affected with public interest and because of the nature of
its functions, the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their
relationship.
12. Banks and Banking; Checks; Torts; Negligence; Doctrine of Comparative
Negligence; Where both the collecting and drawee banks failed in their
respective obligations and both were negligent in the selection and supervision
of their employees, both are equally liable for the loss of the proceeds of checks
fraudulently encashed.-
Thus, invoking the doctrine of comparative negligence, we are of the view that
both PCIBank and Citibank failed in their respective obligations and both were
negligent in the selection and supervision of their employees resulting in the
encashment of Citibank Check Nos. SN-10597 and 16508. Thus, we are
constrained to hold them equally liable for the loss of the proceeds of said
checks issued by Ford in favor of the CIR.
13. Banks and Banking; Checks; Torts; Negligence; The banking business is so
impressed with public interest where the trust and confidence of the public in
general is of paramount importance such that the appropriate standard of
diligence must be very high, if not the highest, degree of diligence.-
Time and again, we have stressed that banking business is so impressed with
public interest where the trust and confidence of the public in general is of
paramount importance such that the appropriate standard of diligence must be
very high, if not the highest, degree of diligence. A bank’s liability as obligor is
not merely vicarious but primary, wherein the defense of exercise of due
diligence in the selection and supervision of its employees is of no moment.
14. Banks and Banking; Checks; Torts; Negligence; Banks are expected to
exercise the highest degree of diligence in the selection and supervision of their
employees.-
Banks handle daily transactions involving millions of pesos. By the very nature of
their work the degree of responsibility, care and trustworthiness expected of
their employees and officials is far greater than those of ordinary clerks and
employees. Banks are expected to exercise the highest degree of diligence in the
selection and supervision of their employees.
15. Banks and Banking; Checks; Torts; Prescription; The statute of limitations
begins to run when the bank gives the depositor notice of the payment, and an
action upon a check is ordinarily governed by the statutory period applicable to
instruments in writing; An action upon a written contract must be brought
within ten years from the time the right of action accrues.-
The statute of limitations begins to run when the bank gives the depositor notice
of the payment, which is ordinarily when the check is returned to the alleged
drawer as a voucher with a statement of his account, and an action upon a
check is ordinarily governed by the statutory period applicable to instruments in
writing. Our laws on the matter provide that the action upon a written contract
must be brought within ten years from the time the right of action accrues.
Hence, the reckoning time for the prescriptive period begins when the
instrument was issued and the corresponding check was returned by the bank to
its depositor (normally a month thereafter). Applying the same rule, the cause of
action for the recovery of the proceeds of Citibank Check No. SN-04867 would
normally be a month after December 19, 1977, when Citibank paid the face
value of the check in the amount of P4,746,114.41. Since the original complaint
for the cause of action was filed on January 20, 1983, barely six years had
lapsed. Thus, we conclude that Ford’s cause of action to recover the amount of
Citibank Check No. SN-04867 was seasonably filed within the period provided by
law.
16. Banks and Banking; Checks; Torts; Negligence; Failure on the part of the
depositor to examine its passbook, statements of account, and cancelled checks
and to give notice within a reasonable time (or as required by statute) of any
discrepancy which it may in the exercise of due care and diligence find therein,
serves to mitigate the banks’ liability by reducing the award of interest from
twelve percent (12%) to six percent (6%) per annum.-
We also find that Ford is not completely blameless in its failure to detect the
fraud. Failure on the part of the depositor to examine its passbook, statements
of account, and cancelled checks and to give notice within a reasonable time (or
as required by statute) of any discrepancy which it may in the exercise of due
care and diligence find therein, serves to mitigate the banks’ liability by reducing
the award of interest from twelve percent (12%) to six percent (6%) per annum.
As provided in Article 1172 of the Civil Code of the Philippines, responsibility
arising from negligence in the performance of every kind of obligation is also
demandable, but such liability may be regulated by the courts, according to the
circumstances. In quasi-delicts, the contributory negligence of the plaintiff shall
reduce the damages that he may recover.
Division: SECOND DIVISION
Docket Number: G.R. No. 121413, G.R. No. 121479, G.R. No. 128604, G.R. Nos.
121413
Counsel: Romulo, Mabanta, Buenaventura, Sayoc & Delos Angeles, Agabin,
Verzola, Hermoso, Layaoen, De Castro, Angara, Abello, Concepcion, Regala, Cruz
Ponente: QUISUMBING
Dispositive Portion:
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in
CA-G.R. CV No. 25017, are AFFIRMED. PCIBank, known formerly as Insular Bank
of Asia and America, is declared solely responsible for the loss of the proceeds
of Citibank Check No. SN-04867 in the amount of P4,746,114.41, which shall be
paid together with six percent (6%) interest thereon to Ford Philippines, Inc.
from the date when the original complaint was filed until said amount is fully
paid.However, the Decision and Resolution of the Court of Appeals in CA-G.R.
No. 28430 are MODIFIED as follows: PCIBank and Citibank are adjudged liable
for and must share the loss, (concerning the proceeds of Citibank Check
Numbers SN-10597 and 16508 totalling P12,163,298.10) on a fifty-fifty ratio,
and each bank is ORDERED to pay Ford Philippines, Inc. P6,081,649.05, with six
percent (6%) interest thereon, from the date the complaint was filed until full
payment of said amount.Costs against Philippine Commercial International Bank
and Citibank, N.A.
Case Title : ELVIRA YU OH, petitioner, vs. COURT OF APPEALS and PEOPLE OF
THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari
of the decision and resolution of the Court of Appeals.
Syllabi Class : Criminal Law|Jurisdiction|Batas Pambansa (B.P.) Bilang. 22
Syllabi:
1. Criminal Law; Jurisdiction; Republic Act (R.A.) 7691 does not prohibit certain
acts or provides penalties for its violation, neither does it treat of the nature of
crimes and its punishment.-
A penal law, as defined by this Court, is an act of the legislature that prohibits
certain acts and establishes penalties for its violations. It also defines crime,
treats of its nature and provides for its punishment. R.A. No. 7691 does not
prohibit certain acts or provides penalties for its violation; neither does it treat
of the nature of crimes and its punishment. Consequently, R.A. No. 7691 is not a
penal law, and therefore, Art. 22 of the RPC does not apply in the present case.
2. Criminal Law; Jurisdiction; Jurisdiction being a matter of substantive law, the
established rule is that the statute in force at the time of the commencement of
the action determines the jurisdiction of the court; A law vesting additional
jurisdiction in the court cannot be given retroactive effect.-
In the case of Cang vs. Court of Appeals, this Court held that “jurisdiction being a
matter of substantive law, the established rule is that the statute in force at the
time of the commencement of the action determines the jurisdiction of the
court.” R.A. No. 7691 was not yet in force at the time of the commencement of
the cases in the trial court. It took effect only during the pendency of the appeal
before the Court of Appeals. There is therefore no merit in the claim of petitioner
that R.A. No. 7691 should be retroactively applied to this case and the same be
remanded to the MTC. The Court has held that a “law vesting additional
jurisdiction in the court cannot be given retroactive effect.”
3. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; The language of B.P. Blg. 22
is broad enough to cover all kinds of checks, whether present dated or
postdated, or whether issued in payment of pre-existing obligations or given in
mutual or simultaneous exchange for something for value.-
Petitioner’s claim that cases of “closed accounts” are not included in the
coverage of B.P. Blg. 22 has no merit considering the clear intent of the law,
which is to discourage the issuance of worthless checks due to its harmful effect
to the public. This Court, in Lozano vs. Martinez, was explicit in ruling that the
language of B.P. Blg. 22 is broad enough to cover all kinds of checks, whether
present dated or postdated, or whether issued in payment of preexisting
obligations or given in mutual or simultaneous exchange for something of value.
4. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; Elements of the Crime of
Batas Pambansa Blg. 22.-
“B.P. Blg. 22 or the Bouncing Check’s Law seeks to prevent the act of making
and issuing checks with the knowledge that at the time of issue, the drawer does
not have sufficient funds in or credit with the bank for payment and the checks
were subsequently dishonored upon presentment. To be convicted thereunder,
the following elements must be proved: 1. The accused makes, draws or issues
any check to apply to account or for value; 2. The accused knows at the time of
the issuance that he or she does not have sufficient funds in, or credit with, the
drawee bank for the payment of the check in full upon its presentment; and 3.
The check is subsequently dishonored by the drawee bank for insufficiency of
funds or credit or it would have been dishonored for the same reason had not
the drawer, without any valid reason, ordered the bank to stop payment.
5. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; For liability to attach under
B.P. Blg. 22, prosecution must establish that checks were issued, the same were
subsequently dishonored and that the issuer at the time of the check’s issuance
had knowledge that he did not have enough funds or credit in the bank of
payment thereof upon its presentment.-
For liability to attach under B.P. Blg. 22, it is not enough that the prosecution
establishes that checks were issued and that the same were subsequently
dishonored. The prosecution must also prove that the issuer, at the time of the
check’s issuance, had knowledge that he did not have enough funds or credit in
the bank of payment thereof upon its presentment.
6. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; Presumption that the issuer
had knowledge of the insufficiency of funds is brought into existence only after it
is proved that the issuer had received a notice of dishonor and that within five
days from receipt thereof, he failed to pay the amount of the check or to make
arrangement for its payment.-
Based on this section, the presumption that the issuer had knowledge of the
insufficiency of funds is brought into existence only after it is proved that the
issuer had received a notice of dishonor and that within five days from receipt
thereof, he failed to pay the amount of the check or to make arrangement for its
payment. The presumption or prima facie evidence as provided in this section
cannot arise, if such notice of non-payment by the drawee bank is not sent to
the maker or drawer, or if there is no proof as to when such notice was received
by the drawer, since there would simply be no way of reckoning the crucial 5-
day period.
7. Criminal Law; Batas Pambansa (B.P.) Bilang. 22; Failure of the prosecution to
prove that petitioner was given the requisite notice of dishonor is a clear ground
for her acquittal.-
A perusal of the testimony of the prosecution witness Joaquin Novales III,
General Manager of complainant Solid Gold, discloses that no personal
demands were made on appellant before the filing of the complaints against
her. Thus, absent a clear showing that petitioner actually knew of the dishonor
of her checks and was given the opportunity to make arrangements for payment
as provided for under the law, we cannot with moral certainty convict her of
violation of B.P. Blg. 22. The failure of the prosecution to prove that petitioner
was given the requisite notice of dishonor is a clear ground for her acquittal.
Division: SECOND DIVISION
Docket Number: G.R. No. 125297
Counsel: M. Quevero Taganas, The Solicitor General
Ponente: AUSTRIA-MARTINEZ
Dispositive Portion:
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are
hereby REVERSED and SET ASIDE. Petitioner Elvira Yu Oh is ACQUITTED of the
offense of violation of B.P. Blg. 22 on ten counts for insufficiency of evidence.
However, she is ordered to pay complainant Solid Gold International Traders,
Inc. the total amount of Five Hundred Thousand Pesos (P500,000.00) with 12%
interest per annum from date of finality of herein judgment.
Case Title : HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED,
petitioner, vs. CECILIA DIEZ CATALAN, respondent., HSBC INTERNATIONAL
TRUSTEE LIMITED, petitioner, vs. CECILIA DIEZ CATALAN, respondent.Case
Nature : PETITIONS for review on certiorari of a decision of the Court of
Appeals.
Syllabi Class : Actions|Pleadings and Practice|Cause of Action|Damages|Abuse
of Rights Principle|Elements|Forum Shopping|Jurisdictions|Voluntary
Appearance
Syllabi:
1. Actions; Pleadings and Practice; Cause of Action; The elementary test for
failure to state a cause of action is whether the complaint alleges facts which if
true would justify the relief demanded.-
The elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded. Stated
otherwise, may the court render a valid judgment upon the facts alleged
therein? The inquiry is into the sufficiency, not the veracity of the material
allegations. If the allegations in the complaint furnish sufficient basis on which it
can be maintained, it should not be dismissed regardless of the defense that
may be presented by the defendants.
2. Actions; Pleadings and Practice; Damages; Abuse of Rights
Principle; Elements; There is an abuse of right when it is exercised for the only
purpose of prejudicing or injuring another.-
Catalan anchors her complaint for damages on Article 19 of the Civil Code. It
speaks of the fundamental principle of law and human conduct that a person
“must, in the exercise of his rights and in the performance of his duties, act with
justice, give every one his due, and observe honesty and good faith.” It sets the
standards which may be observed not only in the exercise of one’s rights but
also in the performance of one’s duties. When a right is exercised in a manner
which does not conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which the
wrongdoer must be held responsible. But a right, though by itself legal because
recognized or granted by law as such, may nevertheless become the source of
some illegality. A person should be protected only when he acts in the legitimate
exercise of his right, that is, when he acts with prudence and in good faith; but
not when he acts with negligence or abuse. There is an abuse of right when it is
exercised for the only purpose of prejudicing or injuring another. The exercise of
a right must be in accordance with the purpose for which it was established, and
must not be excessive or unduly harsh; there must be no intention to injure
another. Thus, in order to be liable under the abuse of rights principle, three
elements must concur, to wit: (a) that there is a legal right or duty; (b) which is
exercised in bad faith; and (c) for the sole intent of prejudicing or injuring
another.
3. Actions; Pleadings and Practice; Forum Shopping; Elements; There is forum
shopping when there exists the following.-
It has been held that forum shopping exists where a litigant sues the same party
against whom another action or actions for the alleged violation of the same
right and the enforcement of the same relief is/are still pending, the defense of
litis pendentia in one case is a bar to the others; and, a final judgment in one
would constitute res judicata and thus would cause the dismissal of the rest.
Thus, there is forum shopping when there exist: a) identity of parties, or at least
such parties as represent the same interests in both actions, b) identity of rights
asserted and relief prayed for, the relief being founded on the same facts, and c)
the identity of the two preceding particulars is such that any judgment rendered
in the pending case, regardless of which party is successful would amount to res
judicata in the other.
4. Actions; Pleadings and Practice; Forum Shopping; Verily, there can be no
forum shopping where in one proceeding a party raises a claim for damages
based on tort and, in another proceeding a party seeks the allowance of an
alleged last will based on one’s claim as an heir.-
Verily, there can be no forum shopping where in one proceeding a party raises a
claim for damages based on tort and, in another proceeding a party seeks the
allowance of an alleged last will based on one’s claim as an heir. After all, the
merits of the action for damages is not to be determined in the probate
proceeding and vice versa. Undeniably, the facts or evidence as would support
and establish the two causes of action are not the same.
5. Actions; Pleadings and Practice; Jurisdictions; Voluntary Appearance; The
Court has held that the filing of motions seeking affirmative relief such as, to
admit answer, for additional time to file answer, for reconsideration of a default
judgment, and to lift order of default with motion for reconsideration, are
considered voluntary submission to the jurisdiction of the court.-
The Court has held that the filing of motions seeking affirmative relief, such as,
to admit answer, for additional time to file answer, for reconsideration of a
default judgment, and to lift order of default with motion for reconsideration,
are considered voluntary submission to the jurisdiction of the court.
6. Actions; Pleadings and Practice; Jurisdictions; A party who makes a special
appearance in court challenging the jurisdiction of said court, cannot be
considered voluntary submission to the jurisdiction of the court.-
It is settled that a party who makes a special appearance in court challenging
the jurisdiction of said court, e.g., invalidity of the service of summons, cannot
be considered to have submitted himself to the jurisdiction of the court.
Division: SECOND DIVISION
Docket Number: G.R. No. 159590, G.R. No. 159591
Counsel: Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles, The Law
Firm of Mirano and Mirano
Ponente: AUSTRIA-MARTINEZ
Dispositive Portion:
WHEREFORE, the petition in G.R. No. 159590 is DENIED. The Decision of the
Court of Appeals, dated August 14, 2003, in CA-G.R. SP No. 75757 dismissing the
petition for certiorari of the Hongkong and Shanghai Banking Corporation
Limited is AFFIRMED.The petition in G.R. No. 159591 is GRANTED. The Decision
of the Court of Appeals, dated August 14, 2003, in CA-G.R. SP No. 75756
dismissing the petition for certiorari of the HSBC International Trustee Limited is
REVERSED and SET ASIDE. The Regional Trial Court, Branch 44, Bacolod City is
declared without jurisdiction to take cognizance of Civil Case No. 01-11372
against the HSBC International Trustee Limited, and all its orders and issuances
with respect to the latter are hereby ANNULLED and SET ASIDE. The said
Regional Trial Court is hereby ORDERED to DESIST from maintaining further
proceedings against the HSBC International Trustee Limited in the case
aforestated.
Case Title : LUZON DEVELOPMENT BANK, petitioner, vs. BENEDICTO C.
CONQUILLA, CORNELIA C. CONQUILLA, DOROTEA C. ORCINE and FELICIANO S.
CONQUILLA, respondents.Case Nature : PETITION for review on certiorari of the
decision and resolution of the Court of Appeals.
Syllabi Class : Judgments|Actions|Res Judicata|Causes of
Action|Mortgages|Acceleration Clauses|Words and Phrases|Pleadings and
Practice|Evidence|Admissions|Judgments on the
Pleadings|Requisites|Parties|Promissory Notes|Foreclosure of Mortgage
Syllabi:
1. Judgments; Res Judicata; Requisites.-
A case is barred by prior judgment or res judicata when the following requisites
concur: (1) the former judgment is final; (2) it is rendered by a court having
jurisdiction over the subject matter and the parties; (3) it is a judgment or an
order on the merits; (4) there is—between the first and the second actions—
identity of parties, of subject matter, and of causes of action.
2. Actions; Causes of Action; Elements.-
Preliminarily, we have to determine the actual ground for the dismissal of Civil
Case No. N-6659. According to the CA, the ground for dismissal could not
possibly be “failure to establish [respondents’] cause of action,” as stated by the
trial court, because there was no hearing on the case. Rather, the CA ruled that
the ground for dismissal could only be “failure to state a cause of action” in the
light of the fact that the trial court had looked only at the allegations in the
Complaint. “Cause of action” is the act or omission by which a party violates a
right of another. It contains three elements: (1) a right existing in favor of the
plaintiff, (2) a duty on the part of the defendant to respect the right of the
plaintiff, and (3) a breach of the defendant’s duty.
3. Actions; Causes of Action; Usually, the declaration that a plaintiff failed to
establish a cause of action is postponed until after the parties are given the
opportunity to present all relevant evidence on questions of fact.-
It is clear that plaintiff had a cause of action to apply for an injunction on the
basis of the alleged breach. In other words, the allegations in the Complaint are
sufficient to enable the trial court to grant the relief prayed for. Therefore, we
do not agree that there was a “failure to state a cause of action”; on the
contrary, there was no “insufficiency of allegations” in the pleading. To repeat,
the actual ground for dismissal was the insufficiency of the factual basis for the
action. It may be raised at any time after the questions of fact shall have been
resolved on the basis of stipulations, admissions, or evidence presented. Usually,
the declaration that a plaintiff failed to establish a cause of action is postponed
until after the parties are given the opportunity to present all relevant evidence
on questions of fact.
4. Actions; Causes of Action; Mortgages; Acceleration Clauses; Words and
Phrases; An acceleration clause is a stipulation stating that, on the occasion of
the mortgagor’s default, the whole sum remaining unpaid automatically
becomes due and payable.-
The Complaint (and its Annexes) admitted that respondents’ own default
triggered the acceleration clause of the mortgage Contract. An acceleration
clause is a stipulation stating that, on the occasion of the mortgagors’ default,
the whole sum remaining unpaid automatically becomes due and payable. The
presence and activation of the acceleration clause, the validity of which was
never questioned by respondents, negates their contention that the foreclosure
was premature.
5. Actions; Causes of Action; Pleadings and
Practice; Evidence; Admissions; Admissions in the complaint and its annexes,
the same being in the nature of judicial admission made in the course of the
proceedings, do not require proof.-
To state it simply, respondents are saying in their own pleading that the breach
committed by petitioner bank is actually justified in the light of their breach of
the agreement on the monthly installments. Hence, on the basis of their
admission of their breach of their own obligations to the bank, the trial court
found that petitioner had a right to foreclose the mortgage. This is not a flimsy
conclusion arrived at by the trial court. It is a fact derived from respondents’
Complaint and its Annexes. Being in the nature of a judicial admission made in
the course of the proceedings, it did not require proof. This factual admission in
the pleadings on record dispensed with the need for petitioner to present
evidence to prove the admitted fact.
6. Actions; Causes of Action; Findings of facts are not unbendingly postponed
until after the trial, but may be made as soon as there is sufficient evidence
available.-
Findings of fact are not unbendingly postponed until after trial, but may be
made as soon as there is sufficient evidence available. In the present case, the
evidence that the trial court needed in order to make a decision on the matter
was the admission contained in respondents’ Complaint and its Annexes.
7. Judgments; Judgments on the Pleadings; A judgment on the pleadings may
be rendered by the court either on motion of the plaintiff or motu proprio.-
What transpired in the court below is akin to a judgment on the pleadings. A
judgment on the pleadings may be rendered by the court either on motion of the
plaintiff or motu proprio. Such judgment is based exclusively upon the pleadings
without introduction of evidence; therefore, it is proper whenever it appears
that there is no controverted factual issue.
8. Judgments; Words and Phrases; A judgment is “on the merits” when it
amounts to a legal declaration of the respective rights and duties of the parties,
based upon the disclosed facts; “Merits” has been defined as a matter of
substance in law, as distinguished from a matter of form—it refers to the real or
substantial grounds of action or defense, as contrasted with some technical or
collateral matter raised in the course of the suit.-
The CA ruled that Civil Case No. N-6659 did not operate as res judicata, because
no trial had ever been conducted in the trial court; hence, no judgment on the
merits could have possibly been issued. While it is indisputable that there was no
trial on the merits in Civil Case No. N-6659, the ruling was nonetheless a
judgment on the merits. Escarte v. Office of the President held that a ruling
based on a motion to dismiss, without any trial on the merits or formal
presentation of evidence, can still be a judgment on the merits. “Merits” has
been defined as a matter of substance in law, as distinguished from a matter of
form; it refers to the real or substantial grounds of action or defense, as
contrasted with some technical or collateral matter raised in the course of the
suit. A judgment is “on the merits” when it amounts to a legal declaration of the
respective rights and duties of the parties, based upon the disclosed facts.
9. Judgments; A judgment ruling that the defense was substantial enough to
overcome the relief sought by the plaintiff is a judgment on the merits; Dismissal
on the ground of failure to state a cause of action is still a judgment on the
merits and operates as res judicata on a subsequent case.-
Contrary to the findings of the appellate court, the dismissal of Civil Case No. N-
6659 was a dismissal on the merits. The Order was based on the finding that the
Complaint contained an admission that respondents had violated the terms of
the Mortgage Contract, a violation that gave petitioner the right to foreclose the
mortgaged property. The judgment was on the merits, because it ruled that
petitioner’s defense was substantial enough to overcome the relief sought by
respondents. The Order applied the law to the facts as stated in the Complaint;
it was and is thus conclusive on the propriety of foreclosure and determinative
of the legal rights and obligations of the parties with respect to the mortgage.
The Order definitively put an end to the controversy and barred any subsequent
action on the same subject matter. Even assuming arguendo that the ground for
dismissal in the First Case was the “failure to state a cause of action,” that
particular Order of Dismissal was still a judgment on the merits and operated as
res judicata on a subsequent case.
10. Judgments; What appears to be essential to a judgment on the merits is that
it is a reasoned decision, which clearly states the facts and law on which it is
based.-
These cases show that even a dismissal on the ground of “failure to state a
cause of action” may operate as res judicata on a subsequent case involving the
same parties, subject matter, and causes of action, provided that the order of
dismissal actually ruled on the issues raised. What appears to be essential to a
judgment on the merits is that it be a reasoned decision, which clearly states the
facts and the law on which it is based. In the present case, the Order of Dismissal
in Civil Case No. N-6659 ruled on the right of petitioner to foreclose the property.
It held that foreclosure was valid; and that the debtor was in default in the
payment of his obligation. The Order of Dismissal also explained that the
Mortgage Contract and the Promissory Notes had authorized the mortgagee to
foreclose. It clearly looked into the facts as presented by respondents’ pleadings
and applied the law accordingly. Thus, based on Manalo and Mendiola, the
Order carried the effect of res judicata, it definitively settled the controversy
between the parties.
11. Judgments; Res Judicata; Requisites; Parties; Promissory Notes; Words and
Phrases; To invoke res judicata, absolute identity of the parties is not required—
substantial identity is sufficient. A Promissory Note is defined as “an
unconditional promise in writing made by one person to another, signed by the
maker, engaging to pay on demand, or at a determinable future time, a sum
certain in money to order or to bearer.”-
It is axiomatic that to invoke res judicata, absolute identity of parties is not
required. A substantial identity of parties is sufficient. There is substantial
identity of parties when there is a community of interest between a party in the
first case and that in the second one, even if the latter party was not impleaded
in the first case. In the instant controversy, the Complaint alleged that Columbia
College, Inc., was the only debtor. But the CA found that the Promissory Note
given to petitioner contained the signatures of all the four registered owners,
without any qualification. A Promissory Note is defined as “an unconditional
promise in writing made by one person to another, signed by the maker,
engaging to pay on demand, or at a fixed or determinable future time, a sum
certain in money to order or to bearer.” This definition shows that the makers or
signatories of a promissory note have the duty to pay the amount stated on it.
12. Judgments; Res Judicata; Identity of causes of action does not mean
absolute identity—the test to determine whether the causes of action are
identical is to ascertain whether the same evidence will sustain both actions, or
whether there is an identity in the facts essential to the maintenance of the
actions.-
Respondents insist that the two cases involve different causes of action,
allegedly because the First Case seeks to prevent, and the Third Case to nullify,
the foreclosure. However, hornbook is the rule that identity of causes of action
does not mean absolute identity. Otherwise, a party could easily escape the
operation of res judicata by changing the form of the action or the relief sought.
The test to determine whether the causes of action are identical is to ascertain
whether the same evidence will sustain both actions, or whether there is an
identity in the facts essential to the maintenance of the two actions. If the same
facts or evidence would sustain both, the two actions are considered the same,
and a judgment in the first case is a bar to the subsequent action.
13. Judgments; Res Judicata; According to the principle of res judicata, a
judgment is conclusive between the parties with respect to matters directly
adjudged and to any other matter that may have been related thereto.-
The alleged failure of petitioner bank to release the balance of the loan was a
fact already in existence at the time that the First Case was filed in court. If
petitioner had really violated the terms of the loan agreement, this fact should
have been pleaded by respondents in the First Case. If true, such fact bolstered
the claim of respondents that petitioner had no right to foreclose. According to
the principle of res judicata, a judgment is conclusive between the parties with
respect to matters directly adjudged and to any other matter that may have
been raised in relation to it. By failing to raise this matter in the first instance,
respondents are deemed to have waived it. They can no longer cite any ground
for invalidating the Mortgage Contract, which was already in existence at the
time of the First Case.
14. Judgments; Res Judicata; Relitigation of issues already settled merely
burdens the courts and the taxpayers, creates uneasiness and confusion, wastes
valuable time and energy that could be devoted to worthier cases.-
In putting an end to litigation between the same parties over a subject that has
already been adjudicated, the principle of res judicata is dictated by public
interest. “Relitigation of issues already settled merely burdens the courts and
the taxpayers, creates uneasiness and confusion, and wastes valuable time and
energy that could be devoted to worthier cases.” “Even at the risk of occasional
errors, judgments of courts should become final at some definite time fixed by
law and x x x parties should not be permitted to litigate the same issues over
again.”
15. Judgments; Res Judicata; Mortgages; Foreclosure of Mortgage; An action
for recovery of the excess proceeds of the foreclosure sale is a different cause of
action from an injunction of foreclosure; By accessory nature of mortgage, the
mortgagee has the right to foreclose the mortgaged property only to the extent
of the loan secured by it.-
A different fate befalls the third alternative cause of action in Civil Case No. LP
99-0019, which is for recovery of the excess proceeds of the foreclosure sale.
Respondents allege that the mortgaged property was sold for P18,462,900,
which allegedly far exceeded the amount of loan agreed upon by the parties.
Under the “same evidence” test, this is a different cause of action from an
injunction of foreclosure. As already discussed, Civil Case No. N-6659 requires
proof that the mortgagee had no right to foreclose; on the other hand, the
alternative cause of action in Civil Case No. LP 99-0019 requires proof that the
bid price of the mortgaged property was in excess of the contracted loan. The
two issues require different sets of evidence; there is no identity of causes of
action. Moreover, the recovery of the excess proceeds of the sale was not and
could not be included in Civil Case No. N-6659, because it was a new cause of
action that had arisen only after the foreclosure. It was not barred by res
judicata, because it could not have been raised then. This is the only matter that
may be remanded to the trial court. If it is proven that the mortgaged property
was foreclosed and sold for an amount exceeding the loan contracted,
respondent must be allowed to recover the excess. By the accessory nature of
mortgage, the mortgagee has the right to foreclose the mortgaged property
only to the extent of the loan secured by it. Any decision to the contrary abets
unjust enrichment.
Division: THIRD DIVISION
Docket Number: G.R. No. 163338
Counsel: De Jesus and Associates Law Offices, Vicente M. Tagoc, Jr.
Ponente: PANGANIBAN
Dispositive Portion:
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision and
Resolution are hereby MODIFIED pursuant to the above discussion. The case is
REMANDED to the Regional Trial Court of Cavite City for further proceedings,
only on the matter of recovery of the alleged excess proceeds of the auction
sale. No pronouncement as to costs.
Case Title : VICTORIA J. ILANO represented by her Attorney-in-fact, MILO
ANTONIO C. ILANO, petitioners, vs. HON. DOLORES L. ESPAÑOL, in her capacity
as Executive Judge, RTC of Imus, Cavite, Br. 90, and, AMELIA ALONZO, EDITH
CALILAP, DANILO CAMACLANG, ESTELA CAMACLANG, ALLAN CAMACLANG,
LENIZA REYES, EDWIN REYES, JANE BACAREL, CHERRY CAMACLANG, FLORA
CABRERA, ESTELITA LEGASPI, CARMENCITA GONZALES, NEMIA CASTRO, GLORIA
DOMINGUEZ, ANNILYN C. SABALE and several JOHN DOES, respondents.Case
Nature : PETITION for review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Actions|Pleadings and Practice|Complaints|Causes of Action|Bill
of Particulars
Syllabi:
1. Actions; Pleadings and Practice; Complaints; Causes of Action; A cause of
action has three elements—(1) the legal right of the plaintiff, (2) the correlative
obligation of the defendant, and (3) the act or omission of the defendant in
violation of said legal right.-
A cause of action has three elements: (1) the legal right of the plaintiff, (2) the
correlative obligation of the defendant, and (3) the act or omission of the
defendant in violation of said legal right. In determining the presence of these
elements, inquiry is confined to the four corners of the complaint including its
annexes, they being parts thereof. If these elements are absent, the complaint
becomes vulnerable to a motion to dismiss on the ground of failure to state a
cause of action.
2. Actions; Pleadings and Practice; Complaints; Bill of Particulars; Where the
allegations of a complaint are vague, indefinite, or in the form of conclusion, its
dismissal is not proper for the defendant may ask for more particulars.-
While some of the allegations may lack particulars, and are in the form of
conclusions of law, the elements of a cause of action are present. For even if
some are not stated with particularity, petitioner alleged 1) her legal right not to
be bound by the instruments which were bereft of consideration and to which
her consent was vitiated; 2) the correlative obligation on the part of the
defendantsrespondents to respect said right; and 3) the act of the
defendantsrespondents in procuring her signature on the instruments through
“deceit,” “abuse of confidence” machination,” “fraud,” “falsification,” “forgery,”
“defraudation,” and “bad faith,” and “with malice, malevolence and selfish
intent.” Where the allegations of a complaint are vague, indefinite, or in the
form of conclusion, its dismissal is not proper for the defendant may ask for
more particulars.
Division: THIRD DIVISION
Docket Number: G.R. No. 161756
Counsel: Edgardo J. Naoe, Nora Alejo-Buenviaje, Deogenes N. Agellon
Ponente: CARPIO-MORALES
Dispositive Portion:
WHEREFORE, the petition is PARTLY GRANTED. 21, 2003 decision of the
appellate court affirming the October 12, 2000 Order of the trial court, Branch
20 of the RTC of Imus, Cavite, is AFFIRMED with MODIFICATION in light of the
foregoing discussions.The trial court is DIRECTED to REINSTATE Civil Case No.
2079-00 to its docket and take further proceedings thereon only insofar as the
complaint seeks the revocation/cancellation of the subject promissory notes
and damaLet the records of the case be then REMANDED to the trial court.
Case Title : ATTY. JOSE RICUERDO P. FLORES, complainant, vs. FELIX M.
FALCOTELO, Sheriff IV, RTC, Branch 276, Muntinlupa City, respondent.Case
Nature : ADMINISTRATIVE MATTER in the Supreme Court. Simple Neglect of
Duty.
Syllabi Class : Administrative Law|Courts|Sheriffs
Syllabi:
1. Administrative Law; Courts; Any conduct, act or omission on the part of those
who violate the norm of public accountability and diminish or even just tend to
diminish the faith of the people in the judiciary shall not be countenanced.-
This Court has pointed out, time and again, the heavy burden and responsibility
court personnel are saddled with in view of their exalted positions as keepers of
the public faith. Any impression of impropriety, misdeed or negligence in the
performance of official functions must therefore be avoided. Court personnel
should be examples of responsibility, competence and efficiency and must
discharge their duties with due care and utmost diligence. Any conduct, act or
omission on the part of those who would violate the norm of public
accountability and diminish or even just tend to diminish the faith of the people
in the judiciary shall not be countenanced.
2. Administrative Law; Courts; Sheriffs; As officers of the court, sheriffs are
duty-bound to use reasonable skill and diligence in the performance of their
duties, and conduct themselves with propriety and decorum and act above
suspicion.-
Sheriffs in particular play an important role in the administration of justice since
they are called upon to serve court writs, execute all processes, and carry into
effect the orders of the court with due care and utmost diligence. As officers of
the court, sheriffs are duty-bound to use reasonable skill and diligence in the
performance of their duties, and conduct themselves with propriety and
decorum and act above suspicion.
3. Administrative Law; Courts; Sheriffs; In garnishment of bank deposits, the
executing sheriff is mandated to observe the same procedure under paragraph
(a) of the same Rule with respect to delivery of payment to the judgment
obligee.-
Under paragraph (c), Section 9, Rule 39 of the Rules of Court on garnishment of
bank deposits, the executing sher- iff is mandated to observe the same
procedure under paragraph (a) of the same Rule with respect to delivery of
payment to the judgment obligee.
4. Administrative Law; Courts; Sheriffs; While respondent’s explanation may
dispel any ill motive on the part of the sheriff, still, his act cannot be allowed to
go unpunished for he failed to strictly observe the rules in implementing money
judgments.-
Respondent explains that the prevailing party in the civil case initially sought to
have the check made payable to Divina Remollino, president of plaintiff Polilio
Shipping Lines. However, since the notice of garnishment did not specify to
whom it shall be issued, the bank did not directly issue a check in the name of
said prevailing party and instead issued a check to the order of “RTC Br. 276
Muntinlupa thru Felix Falcotelo, Sheriff IV.” While such explanation may dispel
any ill motive on the part of the sheriff, still, his act cannot be allowed to go
unpunished for he failed to strictly observe the rules in implementing money
judgments.
5. Administrative Law; Courts; Sheriffs; Court explained in Philippine Airlines,
Inc. vs. Court of Appeals, 181 SCRA 557 (1990), why checks should not be made
payable through Sheriffs.-
Issuing checks in the name of sheriffs is fraught with danger. In Philippine
Airlines, Inc. vs. Court of Appeals, 181 SCRA 557 (1990), where the judgment
debtor issued a check in the name of the sheriff who later absconded with the
money, the Court explained why checks should not be made payable through
sheriffs: It is, indeed, out of the ordinary that checks intended for a particular
payee are made out in the name of another. Making the checks payable to the
judgment creditor would have prevented the encashment or the taking of undue
advantage by the sheriff, or any person into whose hands the checks may have
fallen, whether wrongfully or in behalf of the creditor. The issuance of the checks
in the name of the sheriff clearly made possible the misappropriation of the
funds that were withdrawn.
6. Administrative Law; Courts; Sheriffs; As an implementing officer of the court,
respondent should set the example by faithfully observing the Rules of Court,
and not brazenly disregard the Rules.-
Respondent argues that he never had any intention to misappropriate the
amount of P900,000.00 covered by the subject check since the issuance of the
same was with the conformity of both the plaintiff and the defendant in Civil
Case No. 95-172. Even if true, such excuse will not completely exculpate him.
Good faith on the part of the sheriff, in proceeding to execute his mandate
would be of no moment for he is chargeable with the knowledge that being the
officer of the court tasked therefor, it behooves him to make due compliances.
As an implementing officer of the court, respondent should set the example by
faithfully observing the Rules of Court, and not brazenly disregard the Rules.
Indeed, despite the hazards that come with the implementation of the
judgment, sheriffs must perform their duties by the book.
Division: FIRST DIVISION
Docket Number: A.M. No. P-05-2038
Ponente: AUSTRIA-MARTINEZ
Dispositive Portion:
WHEREFORE, respondent FELIX FALCOTELO, Sheriff IV of RTC Branch 276,
Muntinlupa City, is found GUILTY of simple neglect of duty and FINED the
amount of Five Thousand Pesos (P5,000.00) with a WARNING that a repetition
of the same or similar acts in the future shall be dealt with more severely.
Case Title : LETICIA G. MIRANDA, petitioner, vs. PHILIPPINE DEPOSIT
INSURANCE CORPORATION, BANGKO SENTRAL NG PILIPINAS and PRIME
SAVINGS BANK, respondents.Case Nature : PETITION for review on certiorari of
the decision and resolution of the Court of Appeals.
Syllabi Class : Jurisdictions|Banks and Banking|Banks and Banking
Syllabi:
1. Jurisdictions; Banks and Banking; Regular courts do not have jurisdiction over
actions filed by claimants against an insolvent bank, unless there is a clear
showing that the action taken by the BSP, through the Monetary Board in the
closure of financial institutions was in excess of jurisdiction, or with grave abuse
of discretion.-
—The claim lodged by the petitioner qualifies as a disputed claim subject to the
jurisdiction of the liquidation court. Regular courts do not have jurisdiction over
actions filed by claimants against an insolvent bank, unless there is a clear
showing that the action taken by the BSP, through the Monetary Board in the
closure of financial institutions was in excess of jurisdiction, or with grave abuse
of discretion.
2. Same; Section 31 of the New Central Bank Act which provides that “[I]n case
of liquidation of a bank or quasi-bank, after payment of the cost of proceedings,
including reasonable expenses and fees of the receiver to be allowed by the
court, the receiver shall pay the debts of such institutions, under order of the
court, in accordance with the rules on concurrence and preference of credit as
provided in the Civil Code,” should apply.-
—In the distribution of assets of Prime Savings Bank, Section 31 of the New
Central Bank Act which provides that “[i]n case of liquidation of a bank or quasi-
bank, after payment of the cost of proceedings, including reasonable expenses
and fees of the receiver to be allowed by the court, the receiver shall pay the
debts of such institution, under order of the court, in accordance with the rules
on concurrence and preference of credit as provided in the Civil Code,” should
apply.
3. Same; In a situation involving the element of fraud, where a cashier’s check is
purchased from a bank at a time when it is insolvent, as its officers know or are
bound to know by the exercise of reasonable diligence, it has been held that the
purchase as entitled to a preference in the assets of the bank on its liquidation
before the check is paid.-
—In a situation involving the element of fraud, where a cashier’s check is
purchased from a bank at a time when it is insolvent, as its officers know or are
bound to know by the exercise of reasonable diligence, it has been held that the
purchase is entitled to a preference in the assets of the bank on its liquidation
before the check is paid.
4. Same; In the absence of fraud, the purchase of cashier’s check, like the
purchase of a draft on a correspondent bank, creates the relation of creditor and
debtor.-
—In the absence of fraud, the purchase of a cashier’s check, like the purchase of
a draft on a correspondent bank, creates the relation of creditor and debtor, not
that of principal and agent, with the result that the purchaser or holder thereof
is not entitled to a preference over general creditors in the assets of the bank
issuing the check, when it fails before payment of the check.
5. Same; Both BSP and PDIC cannot therefore be held directly and solidarily
liable for the payment of the two cashier’s checks.-
—Co-respondent PDIC was impleaded as a party-litigant only in its
representative capacity as the receiver/liquidator of Prime Savings Bank. Both
BSP and PDIC cannot therefore be held directly and solidarily liable for the
payment of the two cashier’s checks. Sole liability rests with Prime Savings Bank.
6. Same; The BSP, through the Monetary Board was well within its discretion to
exercise this power granted by law to issue a resolution suspending the
interbank clearing privileges of Prime Savings Bank, having made a factual
determination that the bank had deficient cash reserves deposited before the
BSP.-
—As correctly pointed out by the Court of Appeals, the BSP should not be held
liable on the crossed cashier’s checks for it was not a party to the issuance of the
same; nor can it be held liable for imposing the sanctions on Prime Savings Bank
which indirectly affected Miranda, since it is mandated under Sec. 37 of R.A. No.
7653 to act accordingly. The BSP, through the Monetary Board was well within
its discretion to exercise this power granted by law to issue a resolution
suspending the interbank clearing privileges of Prime Savings Bank, having
made a factual determination that the bank had deficient cash reserves
deposited before the BSP. There is no showing that the BSP abused this
discretionary power conferred upon it by law.
7. Same; Solidary liability cannot attach to the BSP, in its capacity as
government regulator of banks, and the PDIC as statutory receiver under R.A.
No. 7653, because they are the principal government agencies mandated by law
to determine the financial viability of banks and quasi-banks, and facilitate
receivership and liquidation of closed financial institutions, upon a factual
determination of the latter’s insolvency.-
—Regarding the third issue, it is only Prime Savings Bank that is liable to pay for
the amount of the two cashier’s checks. Solidary liability cannot attach to the
BSP, in its capacity as government regulator of banks, and the PDIC as statutory
receiver under R.A. No. 7653, because they are the principal government
agencies mandated by law to determine the financial viability of banks and
quasi-banks, and facilitate receivership and liquidation of closed financial
institutions, upon a factual determination of the latter’s insolvency.
8. Same; As clearly laid down in Ong v. Court of Appeals, 253 SCRA 105 (1996),
the rationale behind the judicial liquidation is intended to prevent multiplicity of
actions against the insolvent bank.-
—As clearly laid down in Ong v. Court of Appeals, 253 SCRA 105 (1996), the
rationale behind judicial liquidation is intended to prevent multiplicity of actions
against the insolvent bank. It is a pragmatic arrangement designed to establish
due process and orderliness in the liquidation of the bank, to obviate the
proliferation of litigations and to avoid injustice and arbitrariness. The
lawmaking body contemplated that for convenience, only one court, if possible,
should pass upon the claims against the insolvent bank and that the liquidation
court should assist the Superintendent of Banks and regulate his operations.
9. Same; In Central Bank of the Philippines v. Dela Cruz, 191 SCRA 346 (1990),
we held that the actions of the Monetary Board in proceedings on insolvency are
explicitly declared by the law to be “final and executory”-
—they may not be set aside, or restrained, or enjoined by the courts, except
upon “convincing proof that the action is plainly arbitrary and made in bad
faith.—In Central Bank of the Philippines v. De la Cruz, 191 SCRA 346 (1990), we
held that the actions of the Monetary Board in proceedings on insolvency are
explicitly declared by law to be “final and executory.” They may not be set aside,
or restrained, or enjoined by the courts, except upon “convincing proof that the
action is plainly arbitrary and made in bad faith.
10. Same; It is well-settled in both law and jurisprudence that the Central
Monetary Authority, through the Monetary Board, is vested with exclusive
authority to assess, evaluate, and determine the condition of any bank.-
—It is well-settled in both law and jurisprudence that the Central Monetary
Authority, through the Monetary Board, is vested with exclusive authority to
assess, evaluate and determine the condition of any bank, and finding such
condition to be one of insolvency, or that its continuance in business would
involve a probable loss to its depositors or creditors, forbid bank or non-bank
financial institution to do business in the Philippines; and shall designate an
official of the BSP or other competent person as receiver to immediately take
charge of its assets and liabilities.
11. Same; “Disputed claims” refer to all claims, whether they be against the
assets of the insolvent bank, for specific performance, breach of contract,
damages, or whatever.-
—“Disputed claims” refer to all claims, whether they be against the assets of the
insolvent bank, for specific performance, breach of contract, damages, or
whatever. Petitioner’s claim which involved the payment of the two cashier’s
checks that were not honored by Prime Savings Bank due to its closure falls
within the ambit of a claim against the assets of the insolvent bank. The
issuance of the cashier’s checks by Prime Savings Bank to the petitioner created
a debtor/creditor relationship between them. This disputed claim should
therefore be lodged in the liquidation proceedings by the petitioner as creditor,
since the closure of Prime Savings Bank has rendered all claims subsisting at that
time moot which can best be threshed out by the liquidation court and not the
regular courts.
12. Banks and Banking; The power and authority of the Monetary Board to
close banks and liquidate them thereafter when public interest so requires is an
exercise of the police power of the State.-
— The power and authority of the Monetary Board to close banks and liquidate
them thereafter when public interest so requires is an exercise of the police
power of the State. Police power, however, is subject to judicial inquiry. It may
not be exercised arbitrarily or unreasonably and could be set aside if it is either
capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a
denial of due process and equal protection clauses of the Constitution.
Division: FIRST DIVISION
Docket Number: G.R. No. 169334
Counsel: Earnest A. Soberano, Office of the General Counsel
Ponente: YNARES-SANTIAGO
Dispositive Portion:
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
February 23, 2005 and the Resolution dated July 7, 2005, in CA-G.R. CV No.
77556, are AFFIRMED with the MODIFICATION that petitioner Leticia G.
Miranda is entitled to a preference in the assets of Prime Savings Bank in its
liquidation for the amounts of P3,002,000.00 and P2,500,000.00, respectively
stated in Cashier’s Check No. 0000000514 and 0000000518 dated June 3, 1999
in the proceedings before the liquidation court designated to adjudicate on all
claims against Prime Savings Bank, in accordance with the rules on concurrence
and preference of credits as provided in the Civil Code.
Case Title : CITIBANK, N.A. (Formerly First National City Bank) and INVESTORS’
FINANCE CORPORATION, doing business under the name and style of FNCB
Finance, petitioners, vs. MODESTA R. SABENIANO, respondent.Case Nature :
PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.
Syllabi Class : Actions|Appeals|Judges|Evidence|Banks and
Banking|Damages|Pleadings and Practice|Forum Shopping|Motions for
Extension of Time|Certification Against Forum
Shopping|Contents|Admissions|Documentary Evidence|Promissory
Notes|Obligations and Contracts|Payments|Witnesses|Preponderance of
Evidence|Checks|Crossed Checks|Presumptions|Loans|Words and
Phrases|Best Evidence Rule|Compensation|Notarial Law|Pledge|Conflict of
Laws|Processual Presumptions|Forgery|When a document is assailed on the
basis of forgery|the best evidence rule applies
Syllabi:
1. Actions; Pleadings and Practice; Forum Shopping; Motions for Extension of
Time; The Petition for Review would constitute the initiatory pleading before the
Supreme Court, upon the timely filing of which, the case before the Court
commences, much in the same way a case is initiated by the filing of a
Complaint before the trial court-
—and, without such a Petition, there is technically no case before the Court; A
Motion for Extension of Time within which to file a Petition for Review does not
serve the same purpose as the Petition for Review itself.—Although it may seem
at first glance that respondent was simultaneously seeking recourse from the
Court of Appeals and this Court, a careful and closer scrutiny of the details of the
case at bar would reveal otherwise. It should be recalled that respondent did
nothing more in G.R. No. 152985 than to file with this Court a Motion for
Extension of Time within which to file her Petition for Review. For unexplained
reasons, respondent failed to submit to this Court her intended Petition within
the reglementary period. Consequently, this Court was prompted to issue a
Resolution, dated 13 November 2002, declaring G.R. No. 152985 terminated,
and the therein assailed Court of Appeals Decision final and executory. G.R. No.
152985, therefore, did not progress and respondent’s appeal was unperfected.
The Petition for Review would constitute the initiatory pleading before this
Court, upon the timely filing of which, the case before this Court commences;
much in the same way a case is initiated by the filing of a Complaint before the
trial court. The Petition for Review establishes the identity of parties, rights or
causes of action, and relief sought from this Court, and without such a Petition,
there is technically no case before this Court. The Motion filed by respondent
seeking extension of time within which to file her Petition for Review does not
serve the same purpose as the Petition for Review itself. Such a Motion merely
presents the important dates and the justification for the additional time
requested for, but it does not go into the details of the appealed case. Without
any particular idea as to the assignments of error or the relief respondent
intended to seek from this Court, in light of her failure to file her Petition for
Review, there is actually no second case involving the same parties, rights or
causes of action, and relief sought, as that in CA-G.R. CV No. 51930.
2. Damages; The award of moral damages is meant to compensate for the
actual injury suffered by a party, not to enrich her.-
—For the mental anguish, serious anxiety, besmirched reputation, moral shock
and social humiliation suffered by the respondent, the award of moral damages
is but proper. However, this Court reduces the amount thereof to P300,000.00,
for the award of moral damages is meant to compensate for the actual injury
suffered by the respondent, not to enrich her.
3. Banks and Banking; Banking is impressed with public interest and its fiduciary
character requires high standards of integrity and performance-
—a bank is under the obligation to treat the accounts of its depositors with
meticulous care whether such accounts consist only of a few hundred pesos or of
millions of pesos.—Although this Court appreciates the right of petitioner
Citibank to effect legal compensation of respondent’s local deposits, as well as
its right to the proceeds of PNs No. 20138 and 20139 by virtue of the notarized
Deeds of Assignment, to partly extinguish respondent’s outstanding loans, it
finds that petitioner Citibank did commit wrong when it failed to pay and
properly account for the proceeds of respondent’s money market placements,
evidenced by PNs No. 23356 and 23357, and when it sought the remittance of
respondent’s dollar accounts from Citibank-Geneva by virtue of a highly-suspect
Declaration of Pledge to be applied to the remaining balance of respondent’s
outstanding loans. It bears to emphasize that banking is impressed with public
interest and its fiduciary character requires high standards of integrity and
performance. A bank is under the obligation to treat the accounts of its
depositors with meticulous care whether such accounts consist only of a few
hundred pesos or of millions of pesos. The bank must record every single
transaction accurately, down to the last centavo, and as promptly as possible.
Petitioner Citibank evidently failed to exercise the required degree of care and
transparency in its transactions with respondent, thus, resulting in the wrongful
deprivation of her property.
4. Appeals; Review of matters, even those not assigned as errors in the appeal,
may be authorized if the consideration thereof is necessary in arriving at a just
decision of the case, and there is a close interrelation between the omitted
assignment of error and those actually assigned and discussed by the appellant.-
—While it is true that the general rule is that only errors which have been stated
in the assignment of errors and properly argued in the brief shall be considered,
this Court has also recognized exceptions to the general rule, wherein it
authorized the review of matters, even those not assigned as errors in the
appeal, if the consideration thereof is necessary in arriving at a just decision of
the case, and there is a close interrelation between the omitted assignment of
error and those actually assigned and discussed by the appellant. Thus, the
Court of Appeals did not err in awarding the damages when it already made
findings that would justify and support the said award.
5. Same; Presumptions; It is presumed that evidence willfully suppressed by a
party would be adverse to said party if the evidence is produced.-
—Respondent made several attempts to have the original copy of the pledge
produced before the RTC so as to have it examined by experts. Yet, despite
several Orders by the RTC, petitioner Citibank failed to comply with the
production of the original Declaration of Pledge. It is admitted that Citibank-
Geneva had possession of the original copy of the pledge. While petitioner
Citibank in Manila and its branch in Geneva may be separate and distinct
entities, they are still incontestably related, and between petitioner Citibank and
respondent, the former had more influence and resources to convince Citibank-
Geneva to return, albeit temporarily, the original Declaration of Pledge.
Petitioner Citibank did not present any evidence to convince this Court that it
had exerted diligent efforts to secure the original copy of the pledge, nor did it
proffer the reason why Citibank-Geneva obstinately refused to give it back,
when such document would have been very vital to the case of petitioner
Citibank. There is thus no justification to allow the presentation of a mere
photocopy of the Declaration of Pledge in lieu of the original, and the photocopy
of the pledge presented by petitioner Citibank has nil probative value. In
addition, even if this Court cannot make a categorical finding that respondent’s
signature on the original copy of the pledge was forged, it is persuaded that
petitioner Citibank willfully suppressed the presentation of the original
document, and takes into consideration the presumption that the evidence
willfully suppressed would be adverse to petitioner Citibank if produced.
6. Same; Best Evidence Rule; Forgery; When a document is assailed on the
basis of forgery, the best evidence rule applies; Without the original document
containing the alleged forged signature, one cannot make a definitive
comparison which would establish forgery-
—a comparison based on a mere xerox copy or reproduction of the document
under controversy cannot produce reliable results.—Respondent denied that it
was her signature on the Declaration of Pledge. She claimed that the signature
was a forgery. When a document is assailed on the basis of forgery, the best
evidence rule applies—Basic is the rule of evidence that when the subject of
inquiry is the contents of a document, no evidence is admissible other than the
original document itself except in the instances mentioned in Section 3, Rule 130
of the Revised Rules of Court. Mere photocopies of documents are inadmissible
pursuant to the best evidence rule. This is especially true when the issue is that
of forgery. As a rule, forgery cannot be presumed and must be proved by clear,
positive and convincing evidence and the burden of proof lies on the party
alleging forgery. The best evidence of a forged signature in an instrument is the
instrument itself reflecting the alleged forged signature. The fact of forgery can
only be established by a comparison between the alleged forged signature and
the authentic and genuine signature of the person whose signature is theorized
upon to have been forged. Without the original document containing the
alleged forged signature, one cannot make a definitive comparison which would
establish forgery. A comparison based on a mere xerox copy or reproduction of
the document under controversy cannot produce reliable results.
7. Same; Same; Conflict of Laws; Processual Presumptions; Words and
Phrases; In the absence of any allegation and evidence presented of the specific
rules and laws governing the constitution of a pledge in Geneva, Switzerland,
they will be presumed to be the same as Philippine local or domestic laws-
—this is known as processual presumption.—Certain principles of private
international law should be considered herein because the property pledged was
in the possession of an entity in a foreign country, namely, Citibank-Geneva. In
the absence of any allegation and evidence presented by petitioners of the
specific rules and laws governing the constitution of a pledge in Geneva,
Switzerland, they will be presumed to be the same as Philippine local or
domestic laws; this is known as processual presumption.
8. Same; Pledge; Although the pertinent documents were entitled Deeds of
Assignment, they were, in reality, more of a pledge.-
—Petitioner Citibank was only acting upon the authority granted to it under the
foregoing Deeds when it finally used the proceeds of PNs No. 20138 and 20139,
paid by petitioner FNCB Finance, to partly pay for respondent’s outstanding
loans. Strictly speaking, it did not effect a legal compensation or off-set under
Article 1278 of the Civil Code, but rather, it partly extinguished respondent’s
obligations through the application of the security given by the respondent for
her loans. Although the pertinent documents were entitled Deeds of
Assignment, they were, in reality, more of a pledge by respondent to petitioner
Citibank of her credit due from petitioner FNCB Finance by virtue of her money
market placements with the latter. According to Article 2118 of the Civil Code—
ART. 2118. If a credit has been pledged becomes due before it is redeemed, the
pledgee may collect and receive the amount due. He shall apply the same to the
payment of his claim, and deliver the surplus, should there be any, to the
pledgor.
9. Same; Same; The certificate of acknowledgment in notarized Deeds of
Assignment constitutes prima facie evidence of the execution thereof.-
—The rule on the evidentiary weight that must be accorded a notarized
document is clear and unambiguous. The certificate of acknowledgement in the
notarized Deeds of Assignment constituted prima facie evidence of the
execution thereof. Thus, the burden of refuting this presumption fell on
respondent. She could have presented evidence of any defect or irregularity in
the execution of the said documents or raised questions as to the verity of the
notary public’s acknowledgment and certificate in the Deeds. But again,
respondent admitted executing the Deeds of Assignment, dated 2 March 1978
and 9 March 1978, although claiming that the loans for which they were
executed as security were already paid. And, she assailed the Deeds of
Assignment, dated 25 August 1978, with nothing more than her bare denial of
execution thereof, hardly the clear and convincing evidence required to trounce
the presumption of due execution of a notarized document.
10. Evidence; Notarial Law; On the evidentiary value of notarized documents, it
should be recalled that the notarization of a private document converts it into a
public one and renders it admissible in court without further proof of its
authenticity.-
—The Deeds of Assignment of the money market placements with petitioner
FNCB Finance were notarized documents, thus, admissible in evidence. Rule 132,
Section 30 of the Rules of Court provides that—SEC. 30. Proof of notarial
documents.—Every instrument duly acknowledged or proved and certified as
provided by law, may be presented in evidence without further proof, the
certificate of acknowledgement being prima facie evidence of the execution of
the instrument or document involved. Significant herein is this Court’s
elucidation in De Jesus v. Court of Appeals, 217 SCRA 307 (1993), which reads—
On the evidentiary value of these documents, it should be recalled that the
notarization of a private document converts it into a public one and renders it
admissible in court without further proof of its authenticity (Joson vs. Baltazar,
194 SCRA 114 [1991]). This is so because a public document duly executed and
entered in the proper registry is presumed to be valid and genuine until the
contrary is shown by clear and convincing proof (Asido vs. Guzman, 57 Phil. 652
[1918]; U.S. vs. Enriquez, 1 Phil. 241 [1902]; Favor vs. Court of Appeals, 194
SCRA 308 [1991]). As such, the party challenging the recital of the document
must prove his claim with clear and convincing evidence (Diaz vs. Court of
Appeals, 145 SCRA 346 [1986]).
11. Banks and Banking; Compensation; Compensation takes place by operation
of law.-
—There is little controversy when it comes to the right of petitioner Citibank to
compensate respondent’s outstanding loans with her deposit account. As
already found by this Court, petitioner Citibank was the creditor of respondent
for her outstanding loans. At the same time, respondent was the creditor of
petitioner Citibank, as far as her deposit account was concerned, since bank
deposits, whether fixed, savings, or current, should be considered as simple loan
or mutuum by the depositor to the banking institution. Both debts consist in
sums of money. By June 1979, all of respondent’s PNs in the second set had
matured and became demandable, while respondent’s savings account was
demandable anytime. Neither was there any retention or controversy over the
PNs and the deposit account commenced by a third person and communicated
in due time to the debtor concerned. Compensation takes place by operation of
law, therefore, even in the absence of an expressed authority from respondent,
petitioner Citibank had the right to effect, on 25 June 1979, the partial
compensation or off-set of respondent’s outstanding loans with her deposit
account, amounting to P31,079.14.
12. Same; A basic rule of evidence states that “evidence that one did or did not
do a certain thing at one time is not admissible to prove that he did or did not do
the same or similar thing at another time, but it may be received to prove a
specific intent or knowledge, identity, plan, system, scheme, habit, custom or
usage, and the like.”-
—While the Court of Appeals can take judicial notice of the Decision of its Third
Division in the Dy case, it should not have given the said case much weight when
it rendered the assailed Decision, since the former does not constitute a
precedent. The Court of Appeals, in the challenged Decision, did not apply any
legal argument or principle established in the Dy case but, rather, adopted the
findings therein of wrongdoing or misconduct on the part of herein petitioner
Citibank and Mr. Tan. Any finding of wrongdoing or misconduct as against
herein petitioners should be made based on the factual background and pieces
of evidence submitted in this case, not those in another case. It is apparent that
the Court of Appeals took judicial notice of the Dy case not as a legal precedent
for the present case, but rather as evidence of similar acts committed by
petitioner Citibank and Mr. Tan. A basic rule of evidence, however, states that,
“Evidence that one did or did not do a certain thing at one time is not admissible
to prove that he did or did not do the same or similar thing at another time; but
it may be received to prove a specific intent or knowledge, identity, plan, system,
scheme, habit, custom or usage, and the like.” The rationale for the rule is
explained thus—The rule is founded upon reason, public policy, justice and
judicial convenience. The fact that a person has committed the same or similar
acts at some prior time affords, as a general rule, no logical guaranty that he
committed the act in question. This is so because, subjectively, a man’s mind
and even his modes of life may change; and, objectively, the conditions under
which he may find himself at a given time may likewise change and thus induce
him to act in a different way. Besides, if evidence of similar acts are to be
invariably admitted, they will give rise to a multiplicity of collateral issues and
will subject the defendant to surprise as well as confuse the court and prolong
the trial.
13. Same; Same; Even with respect to documentary evidence, the best evidence
rule applies only when the content of such document is the subject of the
inquiry.-
—As the afore-quoted provision states, the best evidence rule applies only when
the subject of the inquiry is the contents of the document. The scope of the rule
is more extensively explained thus—But even with respect to documentary
evidence, the best evidence rule applies only when the content of such document
is the subject of the inquiry. Where the issue is only as to whether such
document was actually executed, or exists, or on the circumstances relevant to
or surrounding its execution, the best evidence rule does not apply and
testimonial evidence is admissible (5 Moran, op. cit., pp. 76-66; 4 Martin, op.
cit., p. 78). Any other substitutionary evidence is likewise admissible without
need for accounting for the original. Thus, when a document is presented to
prove its existence or condition it is offered not as documentary, but as real,
evidence. Parol evidence of the fact of execution of the documents is allowed
(Hernaez, et al. vs. McGrath, etc., et al., 91 Phil 565). x x x
14. Same; Best Evidence Rule; Words and Phrases; In general, the best evidence
rule requires that the highest available degree of proof must be produced, and,
for documentary evidence, the contents of a document are best proved by the
production of the document itself, to the exclusion of any secondary or
substitutionary evidence.-
—The best evidence rule requires that the highest available degree of proof
must be produced. Accordingly, for documentary evidence, the contents of a
document are best proved by the production of the document itself, to the
exclusion of any secondary or substitutionary evidence. The best evidence rule
has been made part of the revised Rules of Court, Rule 130, Section 3, which
reads—SEC. 3. Original document must be produced; exceptions.—When the
subject of inquiry is the contents of a document, no evidence shall be admissible
other than the original document itself, except in the following cases: (a) When
the original has been lost or destroyed, or cannot be produced in court, without
bad faith on the part of the offeror; (b) When the original is in the custody or
under the control of the party against whom the evidence is offered, and the
latter fails to produce it after reasonable notice; (c) When the original consists of
numerous accounts or other documents which cannot be examined in court
without great loss of time and the fact sought to be established from them is
only the general result of the whole; and (d) When the original is a public record
in the custody of a public officer or is recorded in a public office.
15. Evidence; Preponderance of Evidence; Words and Phrases; While it is well-
settled that the term “preponderance of evidence” should not be wholly
dependent on the number of witnesses, there are certain instances when the
number of witnesses becomes the determining factor.-
—This Court finds that the preponderance of evidence supports the existence of
the respondent’s loans, in the principal sum of P1,920,000.00, as of 5 September
1979. While it is well-settled that the term “preponderance of evidence” should
not be wholly dependent on the number of witnesses, there are certain
instances when the number of witnesses become the determining factor—The
preponderance of evidence may be determined, under certain conditions, by the
number of witnesses testifying to a particular fact or state of facts. For instance,
one or two witnesses may testify to a given state of facts, and six or seven
witnesses of equal candor, fairness, intelligence, and truthfulness, and equally
well corroborated by all the remaining evidence, who have no greater interest in
the result of the suit, testify against such state of facts. Then the preponderance
of evidence is determined by the number of witnesses. (Wilcox vs. Hines, 100
Tenn. 524, 66 Am. St. Rep., 761.)
16. Same; Loans; Words and Phrases; Booking the loan means recording it in
the General Ledger.-
—Ms. Cristina Dondoyano, who worked at petitioner Citibank as a loan
processor, was responsible for booking respondent’s loans. Booking the loans
means recording it in the General Ledger. She explained the procedure for
booking loans, as follows: The account officer, in the Marketing Department,
deals directly with the clients who wish to borrow money from petitioner
Citibank. The Marketing Department will forward a loan booking checklist,
together with the borrowing client’s PNs and other supporting documents, to
the loan pre-processor, who will check whether the details in the loan booking
checklist are the same as those in the PNs. The documents are then sent to
Signature Control for verification of the client’s signature in the PNs, after which,
they are returned to the loan pre-processor, to be forwarded finally to the loan
processor. The loan processor shall book the loan in the General Ledger,
indicating therein the client name, loan amount, interest rate, maturity date,
and the corresponding PN number. Since she booked respondent’s loans
personally, Ms. Dondoyano testified that she saw the original PNs. In 1986, Atty.
Fernandez of petitioner Citibank requested her to prepare an accounting of
respondent’s loans, which she did, and which was presented as Exhibit “120” for
the petitioners. The figures from the said exhibit were culled from the bookings
in the General Ledger, a fact which respondent’s counsel was even willing to
stipulate.
17. Same; Same; Same; A check, whether a manager’s check or ordinary check,
is not legal tender, and an offer of a check in payment of a debt is not a valid
tender of payment and may be refused receipt by the obligee or creditor.-
—Mr. Tan, in his deposition, further explained that provisional receipts were
issued when payment to the bank was made using checks, since the checks
would still be subject to clearing. The purpose for the provisional receipts was
merely to acknowledge the delivery of the checks to the possession of the bank,
but not yet of payment. This bank practice finds legitimacy in the
pronouncement of this Court that a check, whether an MC or an ordinary check,
is not legal tender and, therefore, cannot constitute valid tender of payment. In
Philippine Airlines, Inc. v. Court of Appeals, 181 SCRA 557 (1990), this Court
elucidated that: Since a negotiable instrument is only a substitute for money and
not money, the delivery of such an instrument does not, by itself, operate as
payment (Sec. 189, Act 2031 on Negs. Insts.; Art. 1249, Civil Code; Bryan Landon
Co. v. American Bank, 7 Phil. 255; Tan Sunco, v. Santos, 9 Phil. 44; 21 R.C.L. 60,
61). A check, whether a manager’s check or ordinary check, is not legal tender,
and an offer of a check in payment of a debt is not a valid tender of payment
and may be refused receipt by the obligee or creditor. Mere delivery of checks
does not discharge the obligation under a judgment. The obligation is not
extinguished and remains suspended until the payment by commercial
document is actually realized (Art. 1249, Civil Code, par. 3).
18. Same; Same; Same; Same; Where checks crossed for payee’s account only
were actually deposited, cleared, and paid, then the presumption would be
that the said checks were properly deposited to the account of the payee, who
was clearly named as such in the checks; The mere fact that the Manager’s
Checks (MCs) do not bear the payee’s signature at the back does not negate
deposit thereof in her account.-
—Respondent denied ever receiving MCs No. 220701 and 226467. However,
considering that the said checks were crossed for payee’s account only, and that
they were actually deposited, cleared, and paid, then the presumption would be
that the said checks were properly deposited to the account of respondent, who
was clearly named the payee in the checks. Respondent’s bare allegations that
she did not receive the two checks fail to convince this Court, for to sustain her,
would be for this Court to conclude that an irregularity had occurred somewhere
from the time of the issuance of the said checks, to their deposit, clearance, and
payment, and which would have involved not only petitioner Citibank, but also
BPI, which accepted the checks for deposit, and the Central Bank of the
Philippines, which cleared the checks. It falls upon the respondent to overcome
or dispute the presumption that the crossed checks were issued, accepted for
deposit, cleared, and paid for by the banks involved following the ordinary
course of their business. The mere fact that MCs No. 220701 and 226467 do not
bear respondent’s signature at the back does not negate deposit thereof in her
account. The liability for the lack of indorsement on the MCs no longer fall on
petitioner Citibank, but on the bank who received the same for deposit, in this
case, BPI Cubao Branch. Once again, it must be noted that the MCs were
crossed, for payee’s account only, and the payee named in both checks was
none other than respondent. The crossing of the MCs was already a warning to
BPI to receive said checks for deposit only in respondent’s account. It was up to
BPI to verify whether it was receiving the crossed MCs in accordance with the
instructions on the face thereof. If, indeed, the MCs were deposited in accounts
other than respondent’s, then the respondent would have a cause of action
against BPI.
19. Same; Same; Same; Same; It is presumed that private transactions have
been fair and regular, and that the ordinary course of business has been
followed.-
—This Court finds applicable herein the presumptions that private transactions
have been fair and regular, and that the ordinary course of business has been
followed. There is no question that the loan transaction between petitioner
Citibank and the respondent is a private transaction. The transactions revolving
around the crossed MCs—from their issuance by petitioner Citibank to
respondent as payment of the proceeds of her loans; to its deposit in
respondent’s accounts with several different banks; to the clearing of the MCs
by an independent clearing house; and finally, to the payment of the MCs by
petitioner Citibank as the drawee bank of the said checks—are all private
transactions which shall be presumed to have been fair and regular to all the
parties concerned. In addition, the banks involved in the foregoing transactions
are also presumed to have followed the ordinary course of business in the
acceptance of the crossed MCs for deposit in respondent’s accounts, submitting
them for clearing, and their eventual payment and cancellation.
20. Same; Same; Same; Presumptions; Given that a check is more than just an
instrument of credit used in commercial transactions for it also serves as a
receipt or evidence for the drawee bank of the cancellation of the said check due
to payment, then, the possession by the drawee bank of the said Manager’s
Checks (MCs), duly stamped “Paid” gives rise to the presumption that the said
Manager’s Checks (MCs) were already paid out to the intended payee.-
—The crossed MCs presented by petitioner Bank were indeed deposited in
several different bank accounts and cleared by the Clearing Office of the Central
Bank of the Philippines, as evidenced by the stamp marks and notations on the
said checks. The crossed MCs are already in the possession of petitioner
Citibank, the drawee bank, which was ultimately responsible for the payment of
the amount stated in the checks. Given that a check is more than just an
instrument of credit used in commercial transactions for it also serves as a
receipt or evidence for the drawee bank of the cancellation of the said check due
to payment, then, the possession by petitioner Citibank of the said MCs, duly
stamped “Paid” gives rise to the presumption that the said MCs were already
paid out to the intended payee, who was in this case, the respondent.
21. Same; Same; Crossed Checks; A crossed check cannot be presented to the
drawee bank for payment in cash-
—the check can only be deposited with the payee’s bank which, in turn, must
present it for payment against the drawee bank in the course of normal banking
hours; The crossed check can only be deposited and the drawee bank may only
pay to another bank in the payee’s or indorser’s account.—In general, a crossed
check cannot be presented to the drawee bank for payment in cash. Instead, the
check can only be deposited with the payee’s bank which, in turn, must present
it for payment against the drawee bank in the course of normal banking hours.
The crossed check cannot be presented for payment, but it can only be deposited
and the drawee bank may only pay to another bank in the payee’s or indorser’s
account. The effect of crossing a check was described by this Court in Philippine
Commercial International Bank v. Court of Appeals, 350 SCRA 446 (2001)—[T]he
crossing of a check with the phrase “Payee’s Account Only” is a warning that the
check should be deposited in the account of the payee. Thus, it is the duty of the
collecting bank PCI Bank to ascertain that the check be deposited in payee’s
account only. It is bound to scrutinize the check and to know its depositors
before it can make the clearing indorsement “all prior indorsements and/or lack
of indorsement guaranteed.”
22. Banks and Banking; Checks; Manager’s Checks (MCs) are drawn by the
bank’s manager upon the bank itself and regarded to be as good as the money it
represents.-
—It bears to emphasize that the proceeds of the loans were paid to respondent
in MCs, with the respondent specifically named as payee. MCs checks are drawn
by the bank’s manager upon the bank itself and regarded to be as good as the
money it represents. Moreover, the MCs were crossed checks, with the words
“Payee’s Account Only.”
23. Same; Preponderance of Evidence; Words and Phrases; Preponderant
evidence means that, as a whole, the evidence adduced by one side outweighs
that of the adverse party.-
—After going through the testimonial and documentary evidence presented by
both sides to this case, it is this Court’s assessment that respondent did indeed
have outstanding loans with petitioner Citibank at the time it effected the off-
set or compensation on 25 July 1979 (using respondent’s savings deposit with
petitioner Citibank), 5 September 1979 (using the proceeds of respondent’s
money market placements with petitioner FNCB Finance) and 26 October 1979
(using respondent’s dollar accounts remitted from Citibank-Geneva). The totality
of petitioners’ evidence as to the existence of the said loans preponderates over
respondent’s. Preponderant evidence means that, as a whole, the evidence
adduced by one side outweighs that of the adverse party.
24. Same; Witnesses; Taking into consideration the substantial length of time
between the transactions and the witnesses’ testimonies, as well as the
undeniable fact that bank officers deal with multiple clients and process
numerous transactions during their tenure, the Court is reluctant to give much
weight to such bank officials’ testimonies regarding the payment of promissory
notes and the use of the proceeds thereof for opening time deposit accounts-
—the Court finds it implausible that they should remember, after all these years,
the particular transaction with respondent involving her promissory notes and
her time deposit accounts.—Before anything else, it should be noted that when
Mr. Pujeda’s testimony before the RTC was made on 12 March 1990 and Mr.
Tan’s deposition in Hong Kong was conducted on 3 September 1990, more than
a decade had passed from the time the transactions they were testifying on took
place. This Court had previously recognized the frailty and unreliability of human
memory with regards to figures after the lapse of five years. Taking into
consideration the substantial length of time between the transactions and the
witnesses’ testimonies, as well as the undeniable fact that bank officers deal
with multiple clients and process numerous transactions during their tenure, this
Court is reluctant to give much weight to the testimonies of Mr. Pujeda and Mr.
Tan regarding the payment of PNs No. 23356 and 23357 and the use by
respondent of the proceeds thereof for opening TD accounts. This Court finds it
implausible that they should remember, after all these years, this particular
transaction with respondent involving her PNs No. 23356 and 23357 and TD
accounts. Both witnesses did not give any reason as to why, from among all the
clients they had dealt with and all the transactions they had processed as
officers of petitioner Citibank, they specially remembered respondent and her
PNs No. 23356 and 23357. Their testimonies likewise lacked details on the
circumstances surrounding the payment of the two PNs and the opening of the
time deposit accounts by respondent, such as the date of payment of the two
PNs, mode of payment, and the manner and context by which respondent
relayed her instructions to the officers of petitioner Citibank to use the proceeds
of her two PNs in opening the TD accounts.
25. Same; Obligations and Contracts; Payments; As a general rule, one who
pleads payment has the burden of proving it-
—even where the plaintiff must allege non-payment, the general rule is that the
burden rests on the defendant to prove payment, rather than on the plaintiff to
prove non-payment.—Since the genuineness and due execution of PNs No.
23356 and 23357 are uncontested, respondent was able to establish prima facie
that petitioner Citibank is liable to her for the amounts stated therein. The
assertion of petitioner Citibank of payment of the said PNs is an affirmative
allegation of a new matter, the burden of proof as to such resting on petitioner
Citibank. Respondent having proved the existence of the obligation, the burden
of proof was upon petitioner Citibank to show that it had been discharged. It has
already been established by this Court that—As a general rule, one who pleads
payment has the burden of proving it. Even where the plaintiff must allege non-
payment, the general rule is that the burden rests on the defendant to prove
payment, rather than on the plaintiff to prove non-payment. The debtor has the
burden of showing with legal certainty that the obligation has been discharged
by payment. When the existence of a debt is fully established by the evidence
contained in the record, the burden of proving that it has been extinguished by
payment devolves upon the debtor who offers such defense to the claim of the
creditor. Where the debtor introduces some evidence of payment, the burden of
going forward with the evidence—as distinct from the general burden of proof—
shifts to the creditor, who is then under the duty of producing some evidence of
non-payment.
26. Evidence; Admissions; Documentary Evidence; Promissory Notes; By the
admission of the genuineness and due execution of an instrument is meant
that the party whose signature it bears admits that he signed it or that it was
signed by another for him with his authority, that at the time it was signed it
was in words and figures exactly as set out in the pleading of the party relying
on it, that the document was delivered, and that any formal requisites
required by law, are waived by him; The effect of an admission is such that in
the case of a promissory note a prima facie case is made for the plaintiff which
dispenses with the necessity of evidence on his part and entitles him to a
judgment on the pleadings unless a special defense of new matter, such as
payment, is interposed by the defendant.-
—Petitioner Citibank did not deny the existence nor questioned the authenticity
of PNs No. 23356 and 23357 it issued in favor of respondent for her money
market placements. In fact, it admitted the genuineness and due execution of
the said PNs, but qualified that they were no longer outstanding. In Hibberd v.
Rohde and McMillian, 32 Phil. 476, this Court delineated the consequences of
such an admission—By the admission of the genuineness and due execution of
an instrument, as provided in this section, is meant that the party whose
signature it bears admits that he signed it or that it was signed by another for
him with his authority; that at the time it was signed it was in words and figures
exactly as set out in the pleading of the party relying upon it; that the document
was delivered; and that any formal requisites required by law, such as a seal, an
acknowledgment, or revenue stamp, which it lacks, are waived by him. Hence,
such defenses as that the signature is a forgery (Puritan Mfg. Co. vs. Toti Cox vs.
Northwestern Stage Co., 1 Idaho, 376; Woollen vs. Whitacre, 73 Ind., 198; Smith
vs. Ehnert, 47 Wis., 479; Faelnar vs. Escaño, 11 Phil. Rep., 92); or that it was
unauthorized, as in the case of an agent signing for his principal, or one signing
in behalf of a partnership (Country Bank vs. Greenberg, 127 Cal., 26; Henshaw
vs. Root, 60 Inc., 220; Naftzker vs. Lantz, 137 Mich., 441) or of a corporation
(Merchant vs. International Banking Corporation, 6 Phil Rep., 314; Wanita vs.
Rollins, 75 Miss., 253; Barnes vs. Spencer or that, in the case of the latter, that
the corporation was authorized under its charter to sign the instrument
(Merchant vs. International Banking Corporation, supra); or that the party
charged signed the instrument in some other capacity than that alleged in the
pleading setting it out (Payne vs. National Bank, 16 Kan., 147); or that it was
never delivered (Hunt vs. Weir, 29 Ill., 83; Elbring vs. Mullen, 4 Idaho, 199; Thorp
vs. Keokuk Coal Co., 48 N.Y., 253; Fire Association of Philadelphia vs. Ruby, 60
Neb., 216) are cut off by the admission of its genuineness and due execution.
The effect of the admission is such that in the case of a promissory note a prima
facie case is made for the plaintiff which dispenses with the necessity of
evidence on his part and entitles him to a judgment on the pleadings unless a
special defense of new matter, such as payment, is interposed by the defendant
(Papa vs. Martinez, 12 Phil. Rep., 613; Chinese Chamber of Commerce vs. Pua To
Ching, 14 Phil. Rep., 222; Banco Español-Filipino vs. McKay & Zoeller, 27 Phil.
Rep., 183). x x x
27. Judges; That the trial court judge who decided a case is not the same judge
who heard the case and received the evidence is of little consequence when the
records and transcripts of stenographic notes (TSNs) are complete and available
for consideration by the former.-
—What deserves stressing is that, in this jurisdiction, there exists a disputable
presumption that the RTC Decision was rendered by the judge in the regular
performance of his official duties. While the said presumption is only disputable,
it is satisfactory unless contradicted or overcame by other evidence.
Encompassed in this presumption of regularity is the presumption that the RTC
judge, in resolving the case and drafting his Decision, reviewed, evaluated, and
weighed all the evidence on record. That the said RTC judge is not the same
judge who heard the case and received the evidence is of little consequence
when the records and transcripts of stenographic notes (TSNs) are complete and
available for consideration by the former.
28. Appeals; Findings of fact of the Court of Appeals are conclusive upon the
Supreme Court;Exceptions.-
—It is already a well-settled rule that the jurisdiction of this Court in cases
brought before it from the Court of Appeals by virtue of Rule 45 of the Revised
Rules of Court is limited to reviewing errors of law. Findings of fact of the Court
of Appeals are conclusive upon this Court. There are, however, recognized
exceptions to the foregoing rule, namely: (1) when the findings are grounded
entirely on speculation, surmises, or conjectures; (2) when the interference
made is manifestly mistaken, absurd, or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when in making its
findings, the Court of Appeals went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (7) when
the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9)
when the facts set forth in the petition as well as in the petitioner’s main and
reply briefs are not disputed by the respondent; and (10) when the findings of
fact are premised on the supposed absence of evidence and contradicted by the
evidence on record.
29. Same; Same; Same; Certification Against Forum Shopping; Contents; The
Certification against Forum Shopping is required to be attached to the initiatory
pleading.-
—It should also be noted that the Certification against Forum Shopping is
required to be attached to the initiatory pleading, which, in G.R. No. 152985,
should have been respondent’s Petition for Review. It is in that Certification
wherein respondent certifies, under oath, that: (a) she has not commenced any
action or filed any claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of her knowledge, no such other action or claim
is pending therein; (b) if there is such other pending action or claim, that she is
presenting a complete statement of the present status thereof; and (c) if she
should thereafter learn that the same or similar action or claim has been filed or
is pending, she shall report that fact within five days therefrom to this Court.
Without her Petition for Review, respondent had no obligation to execute and
submit the foregoing Certification against Forum Shopping. Thus, respondent
did not violate Rule 7, Section 5 of the Revised Rules of Court; neither did she
mislead this Court as to the pendency of another similar case.
Division: FIRST DIVISION
Docket Number: G.R. No. 156132
Counsel: Agcaoili & Associates, Angara, Abello, Concepcion, Regala & Cruz,
Moises R. Tolentino, Jr.
Ponente: CHICO-NAZARIO
Dispositive Portion:
IN VIEW OF THE FOREGOING, the instant Petition is PARTLY GRANTED. The
assailed Decision of the Court of Appeals in CA-G.R. No. 51930, dated 26 March
2002, as already modified by its Resolution, dated 20 November 2002, is hereby
AFFIRMED WITH MODIFICATION, as follows—
Case Title : HI-CEMENT CORPORATION, petitioner, vs. INSULAR BANK OF ASIA
AND AMERICA (later PHILIPPINE COMMERCIAL INTERNATIONAL BANK and now,
EQUITABLE-PCI BANK), respondent., E.T. HENRY & CO. and SPOUSES ENRIQUE
TAN and LILIA TAN, petitioners, vs. INSULAR BANK OF ASIA AND AMERICA (later
PHILIPPINE COMMERCIAL INTERNATIONAL BANK and now, EQUITABLE-PCI
BANK), respondent.Case Nature : PETITIONS for review on certiorari of a
decision of the Court of Appeals.
Syllabi Class : Remedial Law|Mercantile Law|Civil Law|Civil
Procedure|Certiorari|Negotiable Instruments Law|Holder in Due
Course|Crossed Checks|Obligations and Contracts|Solidary
Liability|Corporation Law|Doctrine of Piercing the Veil of Corporate
Entity|Sales|Foreclosures|Cross-Claims
Syllabi:
1. Remedial Law; Civil Procedure; Certiorari; As a rule, an appeal by certiorari
under Rule 45 of the Rules of Court is limited to review of errors of law; The
factual findings of the trial court are generally binding on us unless there was a
misapprehension of facts or when the inference drawn from the facts was
manifestly mistaken.-
—As a rule, an appeal by certiorari under Rule 45 of the Rules of Court is limited
to review of errors of law. The factual findings of the trial court, specially when
affirmed by the appellate court, are generally binding on us unless there was a
misapprehension of facts or when the inference drawn from the facts was
manifestly mistaken. This case falls within the exception.
2. Remedial Law; Civil Procedure; Cross-Claims; Under Rule 3 of the Rules of
Court, every action, including a counterclaim or a cross-claim, must be
prosecuted or defended in the name of the real party in interest.-
—Under Rule 3 of the Rules of Court, every action, including a counterclaim (or a
cross-claim), must be prosecuted or defended in the name of the real party in
interest. The term “defendant” may refer to the original defending party, the
defendant in a counterclaim, the cross-defendant or the third (fourth, etc.) party
defendant. Hence, for this technical lapse, we are constrained not to pass on E.T.
Henry’s and the spouses Tan’s cross-claims.
3. Civil Law; Sales; Foreclosures; Mere inadequacy of the price obtained at the
sheriff’s sale, unless shocking to the conscience, was not sufficient to set aside
the sale if there was no showing that, in the event of a regular sale, a better
price can be obtained.-
—With respect to the allegation that foreclosure was void due to the
inadequacy of the bid price, we agree with the CA that the “mere inadequacy of
the price obtained at the [s]heriff’s sale, unless shocking to the conscience, (was)
not sufficient to set aside the sale if there (was) no showing that, in the event of
a regular sale, a better price (could) be obtained.”
4. Same; Same; Same; Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself
sufficient ground for disregarding the separate corporate personality.-
—Mere ownership by a single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not of itself sufficient ground for
disregarding the separate corporate personality. For this ground to stand in this
case, there must be proof that the spouses Tan: (1) had control or complete
domination of E.T. Henry’s finances and that the latter had no separate
existence with respect to the act complained of; (2) used such control to commit
fraud or wrong and (3) the control was the proximate cause of the loss or injury
complained of by respondent. The records of this case do not show that these
elements were present.
5. Same; Same; Same; Fraud is an allegation of fact that demands clear and
convincing evidence. It is never presumed.-
—The CA left a gaping hole by failing to provide the basis for its ruling that E.T.
Henry and the spouses Tan defrauded respondent. It did not also state what act
constituted the fraud. Fraud is an allegation of fact that demands clear and
convincing evidence. It is never presumed.
6. Mercantile Law; Corporation Law; Doctrine of Piercing the Veil of Corporate
Entity; It is only when the fiction or notion of legal entity is used to defeat public
convenience, justify wrong, perpetuate fraud or defend crime that the law will
shred the corporate legal veil and regard it as a mere association of persons.-
—If any general rule can be laid down, it is that the corporation will be looked
upon as a legal entity until sufficient reasons to the contrary appear. It is only
when the fiction or notion of legal entity is used to defeat public convenience,
justify wrong, perpetuate fraud or defend crime that the law will shred the
corporate legal veil and regard it as a mere association of persons. This is
referred to as the doctrine of piercing the veil of corporate entity.
7. Civil Law; Obligations and Contracts; Solidary Liability; Solidary liability
cannot be presumed but must be established by law or contract; There is
solidary liability only when the obligation expressly so states, or when the
obligation requires solidarity.-
—Solidary liability cannot be presumed but must be established by law or
contract. Neither is present here. Articles 1207 and 1208 of the Civil Code
provide: Art. 1207. The concurrence of two or more debtors in one and the same
obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the
presentation. There is solidary liability only when the obligation expressly so
states, or when the obligation requires solidarity.
8. Same; Same; Same; The Negotiable Instruments Law (NIL) does not
absolutely bar a holder who is not a holder in due course from recovering on
the checks; It may recover from the party who indorsed/encashed the checks “if
the latter has no valid excuse for refusing payment.”-
—We note, however, that in the two aforementioned cases, we made it clear
that the NIL does not absolutely bar a holder who is not a holder in due course
from recovering on the checks. In both, we ruled that it may recover from the
party who indorsed/encashed the checks “if the latter has no valid excuse for
refusing payment.” Here, there was no doubt that it was E.T. Henry that re-
discounted Hi-Cement’s checks and received their value from respondent. Since
E.T. Henry had no justification to refuse payment, it should pay respondent.
9. Same; Same; Same; Apparently, it was not the payee who presented the
same for payment and therefore, there was no proper presentment, and the
liability did not attach to the drawer; In the absence of due presentment, the
drawer did not become liable.-
—In State Investment House, Inc. (SIHI) v. Intermediate Appellate Court, 175
SCRA 310 (1989), SIHI re-discounted crossed checks and was declared not a
holder in due course. As a result, when it presented the checks for deposit, we
deemed that its presentment to the drawee bank was not proper, hence, the
liability did not attach to the drawer of the checks. We ruled that: The three
subject checks in the case at bar had been crossed…which could only mean that
the drawer had intended the same for deposit only by the rightful person, i.e.,
the payee named therein. Apparently, it was not the payee who presented the
same for payment and therefore, there was no proper presentment, and the
liability did not attach to the drawer. Thus, in the absence of due presentment,
the drawer did not become liable.
10. Same; Same; Same; It is settled that crossing of checks should put the holder
on inquiry and upon him devolves the duty to ascertain the indorser’s title to the
check or the nature of his possession. Failing in this respect, the holder is
declared guilty of gross negligence amounting to legal absence of good faith.-
—It is then settled that crossing of checks should put the holder on inquiry and
upon him devolves the duty to ascertain the indorser’s title to the check or the
nature of his possession. Failing in this respect, the holder is declared guilty of
gross negligence amounting to legal absence of good faith…and as such[,] the
consensus of authority is to the effect that the holder of the check is not a holder
in due course.
11. Same; Same; Crossed Checks; Effects.-
—In order to preserve the credit worthiness of checks, jurisprudence has
pronounced that crossing of a check should have the following effects: (a) the
check may not be encashed but only deposited in the bank; (b) the check may be
negotiated only once—to one who has an account with a bank [and]; (c) the act
of crossing the checks serves as warning to the holder that the check has been
issued for a definite purpose so that he must inquire if he has received the check
pursuant to that purpose, otherwise, he is not a holder in due course.
12. Mercantile Law; Negotiable Instruments Law; Holder in Due
Course; “Holder” means the payee or indorsee of a bill or a note, or the person
who is in possession of it, or the bearer thereof.-
—“Holder” means the payee or indorsee of a bill or a note, or the person who is
in possession of it, or the bearer thereof. On the other hand, Section 52 states: A
holder in due course is a holder who has taken the instrument under the
following conditions: (a) it is complete and regular on its face; (b) he became the
holder of it before it was overdue, and without notice that it has previously been
dishonored, if such was the fact; (c) he took it in good faith and for value and (d)
at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.
Division: FIRST DIVISION
Docket Number: G.R. No. 132403, G.R. No. 132419
Counsel: Quisumbing, Torres, Westwood Law, Bengzon, Narciso, Cudala,
Jimenez, Gonzales and Liwanag
Ponente: CORONA
Dispositive Portion:
WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. CV No.
31600 is hereby AFFIRMED with MODIFICATION. Accordingly, petitioner Hi-
Cement Corporation is discharged from any liability. Only petitioner E.T. Henry
& Co. is ORDERED to pay respondent Insular Bank of Asia and America (later
Philippine Commercial International Bank and now Equitable PCI-Bank) the
following:Let the records of this case be remanded to the trial court for the
proper computation of E.T. Henry’s, Riverside’s and Kanebo’s liabilities for the
checks, attorney’s fees and costs of litigation.Costs against petitioners E.T.
Henry and the spouses Enrique and Lilia Tan.
Case Title : METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs.
PHILIPPINE BANK OF COMMUNICATIONS, FILIPINAS ORIENT FINANCE
CORPORATION, PIPE MASTER CORPORATION and TAN JUAN LIAN, respondents.,
SOLID BANK CORPORATION, petitioner, vs. FILIPINAS ORIENT FINANCE
CORPORATION, PIPE MASTER CORPORATION, TAN JUAN LIAN and/or
PHILIPPINE BANK OF COMMUNICATIONS, respondents.Case Nature : PETITIONS
for review on certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Banks and Banking|Negotiable Instruments Law|Checks|Judicial
Notice
Syllabi:
1. Banks and Banking; Negotiable Instruments Law; Checks; Judicial
Notice; While the Negotiable Instruments Law is silent with respect to crossed
checks, the Supreme Court nonetheless has taken judicial cognizance of the
practice that a check with two parallel lines on the upper left hand corner
means that it could only be deposited and not converted into cash; The
crossing of a check with the phrase “Payee’s Account Only” is a warning that the
check should be deposited in the account of the payee.-
—A check is defined by law as a bill of exchange drawn on a bank payable on
demand. The Negotiable Instruments Law is silent with respect to crossed
checks. Nonetheless, this Court has taken judicial cognizance of the practice that
a check with two parallel lines on the upper left hand corner means that it could
only be deposited and not converted into cash. The crossing of a check with the
phrase “Payee’s Account Only” is a warning that the check should be deposited
in the account of the payee. It is the collecting bank which is bound to scrutinize
the check and to know its depositors before it can make the clearing
indorsement, “all prior indorsements and/or lack of indorsement guaranteed.”
2. Same; Same; Same; One who accepts and encashes a check from an
individual knowing that the payee is a corporation does so at his peril; It must
be emphasized that the law imposes on the collecting bank the duty to diligently
scrutinize the checks deposited with it for the purpose of determining their
genuineness and regularity-
—the collecting bank, being primarily engaged in banking, holds itself out to the
public as the expert on this field, and the law thus holds it to a high standard of
conduct.—Petitioner banks disregarded established banking rules and
procedures. They were negligent in accepting the checks and allowing the
transaction to push through. In Jai-Alai Corp. of the Phil. v. Bank of the Phil.
Islands, 66 SCRA 29 (1975), we ruled that one who accepts and encashes a check
from an individual knowing that the payee is a corporation does so at his peril.
Therefore, petitioner banks are liable to respondent Filipinas Orient. In fine, it
must be emphasized that the law imposes on the collecting bank the duty to
diligently scrutinize the checks deposited with it for the purpose of determining
their genuineness and regularity. The collecting bank, being primarily engaged
in banking, holds itself out to the public as the expert on this field, and the law
thus holds it to a high standard of conduct. Since petitioner banks’ negligence
was the direct cause of the misappropriation of the checks, they should bear and
answer for respondent Filipinas Orient’s loss, without prejudice to their filing of
an appropriate action against Yu Kio.
3. Same; Same; Same; The drawee bank cannot be held liable since it mainly
relied on the express guarantee made by the collecting banks of all prior
indorsements.-
—In Associated Bank v. Court of Appeals, 252 SCRA 620 (1996), we held that the
collecting bank or last endorser generally suffers the loss because it has the duty
to ascertain the genuineness of all prior indorsements and is privy to the
depositor who negotiated the check. PBCom, as the drawee bank, cannot be
held liable since it mainly relied on the express guarantee made by petitioners,
the collecting banks, of all prior indorsements.
4. Same; Same; Same; Under Section 66 of the Negotiable Instruments Law, an
endorser warrants “that the instrument is genuine and in all respects what it
purports to be; that he has a good title to it;that all prior parties had capacity
to contract; and that the instrument is at the time of his indorsement valid
and subsisting”; Collecting banks which stamp at the back of the check that “all
prior indorsements and/or lack of indorsements are guaranteed” become
general endorsers and cannot deny liability.-
—As what transpired in this case, petitioner banks accommodated Yu Kio, being
a valued client and the president of Pipe Master, and accepted the crossed
checks. They stamped at the back thereof that “all prior indorsements and/or
lack of indorsements are guaranteed.” In so doing, they became general
endorsers. Under Section 66 of the Negotiable Instruments Law, an endorser
warrants “that the instrument is genuine and in all respects what it purports to
be; that he has a good title to it; that all prior parties had capacity to contract;
and that the instrument is at the time of his indorsement valid and subsisting.”
5. Same; Same; Same; The effect of crossing a check means that the drawer had
intended the check for deposit only by the rightful person, i.e., the payee named
therein.-
—Here, petitioner banks have the obligation to ensure that the PBCom checks
were deposited in accordance with the instructions stated in the checks. The four
PBCom checks in question had been crossed and issued “for payee’s account
only.” This could only mean that the drawer, Filipinas Orient, intended the same
for deposit only by the payee, Pipe Master. The effect of crossing a check means
that the drawer had intended the check for deposit only by the rightful person,
i.e., the payee named therein—Pipe Master.
Division: FIRST DIVISION
Docket Number: G.R. No. 141408, G.R. No. 141429
Counsel: Perez & Calima Law Office, Siguion Reyna, Montecillo & Ongsiako,
Maximo Z. Banaga, Jr., Quisumbing, Torres Law Offices
Ponente: SANDOVAL-GUTIERREZ
Dispositive Portion:
WHEREFORE, we DENY the petitions. The challenged Decision
G.R. No. 170984. January 30, 2009.*
SECURITY BANK AND TRUST COMPANY, petitioner, vs. RIZAL COMMERCIAL
BANKING CORPORATION, respondent.
G.R. No. 170987. January 30, 2009.*
RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. SECURITY BANK
AND TRUST COMPANY, respondent.
Banks and Banking; Checks; Words and Phrases; A manager’s check is one
drawn by a bank’s manager upon the bank itself—it stands on the same footing
as a certified check, which is deemed to have been accepted by the bank that
certified it.—It must be noted that the questioned check issued by SBTC is not
just an ordinary check but a manager’s check. A manager’s check is one drawn
by a bank’s manager upon the bank itself. It stands on the same footing as a
certified check, which is deemed to have been accepted by the bank that
certified it. As the bank’s own check, a manager’s check becomes the primary
obligation of the bank and is accepted in advance by the act of its issuance. In
this case, RCBC, in immediately crediting the amount of P8 million to CMC’s
account, relied on the integrity and honor of the check as it is regarded in
commercial transactions. Where the questioned check, which was payable to
“Cash,” appeared regular on its face, and the bank found nothing unusual in the
transaction, as the drawer usually issued checks in big amounts made payable
to cash, RCBC cannot be faulted in paying the value of the questioned check.
Same; Same; The banking system has become an indispensable institution in the
modern world and plays a vital role in the economic life of every civilized
society—it is important that banks should guard against injury attributable to
negligence or bad faith on its part; The highest degree of diligence is expected,
and high standards of integrity and performance are required of banks.—In
addition to the above-mentioned award of compensatory damages, we also
find merit in the need to award exemplary damages in order to set an example
for the public good. The banking system has become an indispensable
institution in the modern world and plays a vital role in the economic life of
every civilized society. Whether as mere passive entities for the safe-keeping
and saving of money or as active instruments of business and commerce, banks
have attained an ubiquitous presence among the people, who have come to
regard them with respect and even gratitude and, above all, trust and
confidence. In this connection, it is important that banks should guard against
injury attributable to negligence or bad faith on its part. As repeatedly
emphasized, since the banking business is impressed with public interest, the
trust and confidence of the public in it is of paramount importance.
Consequently, the highest degree of diligence is expected, and high standards
of integrity and performance are required of it. SBTC having failed in this
respect, the award of exemplary damages to RCBC in the amount of P50,000.00
is warranted. [Security Bank and Trust Company vs. Rizal Commercial Banking
Corporation, 577 SCRA 407(2009)]
Case Title : ROBERT DINO, petitioner, vs. MARIA LUISA JUDAL-LOOT, joined by
her husband VICENTE LOOT, respondents.Case Nature : PETITION for review on
certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Mercantile Law|Negotiable Instruments|Checks|Holder in Due
Course
Syllabi:
1. Mercantile Law; Negotiable Instruments Law; Checks; Crossed Checks; The
act of crossing a check serves as a warning to the holder that the check has been
issued for a definite purpose so that the holder thereof must inquire if he has
received the check pursuant to that purpose, otherwise, he is not a holder in due
course.-
—The act of crossing a check serves as a warning to the holder that the check
has been issued for a definite purpose so that the holder thereof must inquire if
he has received the check pursuant to that purpose; otherwise, he is not a holder
in due course. Contrary to respondents’ view, petitioner never changed his
theory, that respondents are not holders in due course of the subject check, as
would violate fundamental rules of justice, fair play, and due process. Besides,
the subject check was presented and admitted as evidence during the trial and
respondents did not and in fact cannot deny that it is a crossed check.
2. Same; Same; Same; Holder in Due Course; The Negotiable Instruments Law
does not provide that a holder who is not a holder in due course may not in
any case recover on the instrument; The only disadvantage of a holder who is
not in due course is that the negotiable instrument is subject to defenses as if it
were non-negotiable.-
—The fact that respondents are not holders in due course does not
automatically mean that they cannot recover on the check. The Negotiable
Instruments Law does not provide that a holder who is not a holder in due
course may not in any case recover on the instrument. The only disadvantage of
a holder who is not in due course is that the negotiable instrument is subject to
defenses as if it were non-negotiable. Among such defenses is the absence or
failure of consideration, which petitioner sufficiently established in this case.
Petitioner issued the subject check supposedly for a loan in favor of Consing’s
group, who turned out to be a syndicate defrauding gullible individuals. Since
there is in fact no valid loan to speak of, there is no consideration for the
issuance of the check. Consequently, petitioner cannot be obliged to pay the
face value of the check.
3. Same; Same; Same; Same; “Special Crossed Check,” and General Crossed
Check,” Defined; Crossing a check is done by placing two parallel lines
diagonally on the left top portion of the check.-
—Under usual practice, crossing a check is done by placing two parallel lines
diagonally on the left top portion of the check. The crossing may be special
wherein between the two parallel lines is written the name of a bank or a
business institution, in which case the drawee should pay only with the
intervention of that bank or company, or crossing may be general wherein
between two parallel diagonal lines are written the words “and Co.” or none at
all as in the case at bar, in which case the drawee should not encash the same
but merely accept the same for deposit. The effect therefore of crossing a check
relates to the mode of its presentment for payment. Under Section 72 of the
Negotiable Instruments Law, presentment for payment to be sufficient must be
made (a) by the holder, or by some person authorized to receive payment on his
behalf x x x As to who the holder or authorized person will be depends on the
instructions stated on the face of the check.
4. Same; Same; Checks; Crossed Checks; Principles that must be considered in
the treatment of crossed checks.-
—In the case of a crossed check, as in this case, the following principles must
additionally be considered: A crossed check (a) may not be encashed but only
deposited in the bank; (b) may be negotiated only once—to one who has an
account with a bank; and (c) warns the holder that it has been issued for a
definite purpose so that the holder thereof must inquire if he has received the
check pursuant to that purpose; otherwise, he is not a holder in due course.
5. Mercantile Law; Negotiable Instruments Law; “Holder in Due Course,”
Defined.-
—Section 52 of the Negotiable Instruments Law defines a holder in due course,
thus: “A holder in due course is a holder who has taken the instrument under the
following conditions: (a) That it is complete and regular upon its face; (b) That
he became the holder of it before it was overdue, and without notice that it has
been previously dishonored, if such was the fact; (c) That he took it in good faith
and for value; (d) That at the time it was negotiated to him, he had no notice of
any infirmity in the instrument or defect in the title of the person negotiating it.”
6. Civil Procedure; Courts; Jurisdiction; The Court is clothed with ample
authority to entertain issues or matters not raised in the lower courts in the
interest of substantial justice.-
—In any event, the Court is clothed with ample authority to entertain issues or
matters not raised in the lower courts in the interest of substantial justice. In
Casa Filipina Realty v. Office of the President, 241 SCRA 165 (1995), the Court
held: “[T]he trend in modern-day procedure is to accord the courts broad
discretionary power such that the appellate court may consider matters bearing
on the issues submitted for resolution which the parties failed to raise or which
the lower court ignored. Since rules of procedure are mere tools designed to
facilitate the attainment of justice, their strict and rigid application which would
result in technicalities that tend to frustrate rather than promote substantial
justice, must always be avoided. Technicality should not be allowed to stand in
the way of equitably and completely resolving the rights and obligations of the
parties.”
Division: SECOND DIVISION
Docket Number: G.R. No. 170912
Counsel: The Law Firm of Hermosisima & Inso
Ponente: CARPIO
Dispositive Portion:
WHEREFORE, we GRANT the petition. We SET ASIDE the 16 August 2005
Decision and 30 November 2005 Resolution of the Court of Appeals in CA-G.R.
CV No. 57994.
Case Title : SALVADOR O. ECHANO, JR., petitioner, vs. LIBERTY TOLEDO,
respondent.Case Nature : PETITION for review on certiorari of a decision of the
Court of Appeals.
Syllabi Class : Administrative Law|Misconduct
Syllabi:
1. Administrative Law; Misconduct; Misconduct is a transgression of some
established and definite rule of action, more particularly, unlawful behavior or
gross negligence by a public officer; In grave misconduct the elements of
corruption, clear intent to violate the law or flagrant disregard of established
rule, must be manifest.-
—There is no doubt, based on the evidence that Echano was guilty of grave
misconduct. Misconduct is a transgression of some established and definite rule
of action, more particularly, unlawful behavior or gross negligence by a public
officer. As differentiated from simple misconduct, in grave misconduct the
elements of corruption, clear intent to violate the law or flagrant disregard of
established rule, must be manifest.
2. Same; Same; There is a tremendous difference between the-
—As Acting Branch Cashier, petitioner was charged with responsibility of
handling the bank’s daily transactions which could run into large amounts.
There is a tremendous difference between the degree of responsibility, care, and
trustworthiness expected of a clerk or ordinary employee in the bureaucracy and
that required of bank managers, cashiers, finance officers, and other officials
directly handling large sums of money and properties. The evidence clearly
shows that Echano took light of such responsibility and flagrantly disregarded
established banking rules and practices. His misconduct and dishonesty paved
the way for the commission of fraud against, and consequent damage to, the
City Government of Manila.
Division: SECOND DIVISION
Docket Number: G.R. No. 173930
Counsel: Scheherazade C. Miluhon
Ponente: ABAD
Dispositive Portion:
WHEREFORE, the Court DENIES the petition and AFFIRMS the assailed decision
of the Court of Appeals in CA-G.R. SP 75681 dated April 17, 2006.
Case Title : JOVENCIO LIM and TERESITA LIM, petitioners, vs. THE PEOPLE OF
THE PHILIPPINES, THE REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 217,
THE CITY PROSECUTOR OF QUEZON CITY, AND WILSON CHAM,
respondents.Case Nature : SPECIAL CIVIL ACTION in the Supreme Court.
Certiorari.
Syllabi Class : Constitutional Law|Criminal Law|Judgments
Syllabi:
1. Constitutional Law; Criminal Law; Judgments; Cruel and Excessive
Punishment; Settled is the rule that punishment authorized by statute is not
cruel, degrading or disproportionate to the nature of the offense unless it is
flagrantly and plainly oppressive and wholly disproportionate to the nature of
the offense as to shock the moral sense of the community.-
Settled is the rule that a punishment authorized by statute is not cruel,
degrading or disproportionate to the nature of the offense unless it is flagrantly
and plainly oppressive and wholly disproportionate to the nature of the offense
as to shock the moral sense of the community. It takes more than merely being
harsh, excessive, out of proportion or severe for a penalty to be obnoxious to the
Constitution. Based on this principle, the Court has consistently overruled
contentions of the defense that the penalty of fine or imprisonment authorized
by the statute involved is cruel and degrading.
2. Constitutional Law; Criminal Law; Judgments; The prohibition against cruel
and unusual punishment is generally aimed at the form or character of the
punishment rather than its severity in respect of its duration or amount, and
applies to punishments which never existed in America or which public
sentiment regards as cruel or obsolete.-
In People vs. Tongko, this Court held that the prohibition against cruel and
unusual punishment is generally aimed at the form or character of the
punishment rather than its severity in respect of its duration or amount, and
applies to punishments which never existed in America or which public
sentiment regards as cruel or obsolete. This refers, for instance, to those
inflicted at the whipping post or in the pillory, to burning at the stake, breaking
on the wheel, disemboweling and the like. The fact that the penalty is severe
provides insufficient basis to declare a law unconstitutional and does not, by
that circumstance alone, make it cruel and inhuman.
3. Constitutional Law; Criminal Law; Judgments; Presidential Decree 818; The
increase in penalty in PD 818 is to effectuate the repression of an evil that
undermines the country’s commercial and economic growth, and to serve as a
necessary precaution to deter people from issuing bouncing checks.-
Clearly, the increase in the penalty, far from being cruel and degrading, was
motivated by a laudable purpose, namely, to effectuate the repression of an evil
that undermines the country’s commercial and economic growth, and to serve
as a necessary precaution to deter people from issuing bouncing checks. The fact
that PD 818 did not increase the amounts corresponding to the new penalties
only proves that the amount is immaterial and inconsequential. What the law
sought to avert was the proliferation of estafa cases committed by means of
bouncing checks. Taking into account the salutary purpose for which said law
was decreed, we conclude that PD 818 does not violate Section 19 of Article III of
the Constitution.
4. Constitutional Law; Criminal Law; Judgments; The burden of proving the
invalidity of a law rests on those who challenge it.-
When a law is questioned before the Court, the presumption is in favor of its
constitutionality. To justify its nullification, there must be a clear and
unmistakable breach of the Constitution, not a doubtful and argumentative one.
The burden of proving the invalidity of a law rests on those who challenge it. In
this case, petitioners failed to present clear and convincing proof to defeat the
presumption of constitutionality of PD 818.
Docket Number: G.R. No. 149276
Counsel: Puno & Associates Law Office, Rodante D. Marcoleta
Ponente: CORONA
Dispositive Portion:
WHEREFORE, the petition is hereby DISMISSED.
Case Title : REPUBLIC OF THE PHILIPPINES, Represented by THE ANTI-MONEY
LAUNDERING COUNCIL (AMLC), petitioner, vs. HON. ANTONIO M. EUGENIO, JR.,
AS PRESIDING JUDGE OF RTC, MANILA, BRANCH 34, PANTALEON ALVAREZ and
LILIA CHENG, respondents.Case Nature : SPECIAL CIVIL ACTION in the Supreme
Court. Certiorari and Prohibition.
Syllabi Class : Banks and Banking|Anti-Money Laundering Act|Search
Warrants|Bank Secrecy Act of 1955
Syllabi:
1. Banks and Banking; Anti-Money Laundering Act; Even if the bank inquiry
order may be availed of without need of a pre-existing case under the Anti-
Money Laundering Act (AMLA), it does not follow that such order may be
availed of ex parte.-
We are unconvinced by this proposition, and agree instead with the then
Solicitor General who conceded that the use of the phrase “in cases of” was
unfortunate, yet submitted that it should be interpreted to mean “in the event
there are violations” of the AMLA, and not that there are already cases pending
in court concerning such violations. If the contrary position is adopted, then the
bank inquiry order would be limited in purpose as a tool in aid of litigation of live
cases, and wholly inutile as a means for the government to ascertain whether
there is sufficient evidence to sustain an intended prosecution of the account
holder for violation of the AMLA. Should that be the situation, in all likelihood
the AMLC would be virtually deprived of its character as a discovery tool, and
thus would become less circumspect in filing complaints against suspect account
holders. After all, under such set-up the preferred strategy would be to allow or
even encourage the indiscriminate filing of complaints under the AMLA with the
hope or expectation that the evidence of money laundering would somehow
surface during the trial. Since the AMLC could not make use of the bank inquiry
order to determine whether there is evidentiary basis to prosecute the suspected
malefactors, not filing any case at all would not be an alternative. Such
unwholesome setup should not come to pass. Thus Section 11 cannot be
interpreted in a way that would emasculate the remedy it has established and
encourage the unfounded initiation of complaints for money laundering. Still,
even if the bank inquiry order may be availed of without need of a pre-existing
case under the AMLA, it does not follow that such order may be availed of ex
parte. There are several reasons why the AMLA does not generally sanction ex
parte applications and issuances of the bank inquiry order.
2. Banks and Banking; Anti-Money Laundering Act; In the instances where a
court order is required for the issuance of the bank inquiry order, nothing in
Section 11 specifically authorizes that such order may be issued ex parte.-
In the instances where a court order is required for the issuance of the bank
inquiry order, nothing in Section 11 specifically authorizes that such court order
may be issued ex parte. It might be argued that this silence does not preclude
the ex parte issuance of the bank inquiry order since the same is not prohibited
under Section 11. Yet this argument falls when the immediately preceding
provision, Section 10, is examined.
3. Banks and Banking; Anti-Money Laundering Act; Section 10 uses specific
language to authorize an ex parte application for the provisional relief therein, a
circumstance absent in Section 11.-
Although oriented towards different purposes, the freeze order under Section 10
and the bank inquiry order under Section 11 are similar in that they are
extraordinary provisional reliefs which the AMLC may avail of to effectively
combat and prosecute money laundering offenses. Crucially, Section 10 uses
specific language to authorize an ex parte application for the provisional relief
therein, a circumstance absent in Section 11. If indeed the legislature had
intended to authorize ex parte proceedings for the issuance of the bank inquiry
order, then it could have easily expressed such intent in the law, as it did with
the freeze order under Section 10.
4. Banks and Banking; Anti-Money Laundering Act; With respect to freeze
orders under Section 10, the implementing rules do expressly provide that the
applications for freeze orders be filed ex parte but no similar clearance is
granted in the case of inquiry orders under Section 11.-
That the AMLA does not contemplate ex parte proceedings in applications for
bank inquiry orders is confirmed by the present implementing rules and
regulations of the AMLA, promulgated upon the passage of R.A. No. 9194. With
respect to freeze orders under Section 10, the implementing rules do expressly
provide that the applications for freeze orders be filed ex parte, but no similar
clearance is granted in the case of inquiry orders under Section 11. These
implementing rules were promulgated by the Bangko Sentral ng Pilipinas, the
Insurance Commission and the Securities and Exchange Commission, and if it
was the true belief of these institutions that inquiry orders could be issued ex
parte similar to freeze orders, language to that effect would have been
incorporated in the said Rules. This is stressed not because the implementing
rules could authorize ex parte applications for inquiry orders despite the absence
of statutory basis, but rather because the framers of the law had no intention to
allow such ex parteapplications.
5. Banks and Banking; Anti-Money Laundering Act; Court receiving the
application for inquiry order cannot simply take the Anti-Money Laundering
Council’s (AMLC’s) word that probable cause exists that the deposits or
investments are related to an unlawful activity.-
The court receiving the application for inquiry order cannot simply take the
AMLC’s word that probable cause exists that the deposits or investments are
related to an unlawful activity. It will have to exercise its own determinative
function in order to be convinced of such fact. The account holder would be
certainly capable of contesting such probable cause if given the opportunity to
be apprised of the pending application to inquire into his account; hence a
notice requirement would not be an empty spectacle. It may be so that the
process of obtaining the inquiry order may become more cumbersome or
prolonged because of the notice requirement, yet we fail to see any
unreasonable burden cast by such circumstance. After all, as earlier stated,
requiring notice to the account holder should not, in any way, compromise the
integrity of the bank records subject of the inquiry which remain in the
possession and control of the bank.
6. Banks and Banking; Anti-Money Laundering Act; Search Warrants; The
supposed analogy between a search warrant and a bank inquiry order is
unconvincing.-
Petitioner argues that a bank inquiry order necessitates a finding of probable
cause, a characteristic similar to a search warrant which is applied to and heard
ex parte. We have examined the supposed analogy between a search warrant
and a bank inquiry order yet we re- main to be unconvinced by petitioner. The
Constitution and the Rules of Court prescribe particular requirements attaching
to search warrants that are not imposed by the AMLA with respect to bank
inquiry orders. A constitutional warrant requires that the judge personally
examine under oath or affirmation the complainant and the witnesses he may
produce, such examination being in the form of searching questions and
answers. Those are impositions which the legislative did not specifically
prescribe as to the bank inquiry order under the AMLA, and we cannot find
sufficient legal basis to apply them to Section 11 of the AMLA. Simply put, a
bank inquiry order is not a search warrant or warrant of arrest as it
contemplates a direct object but not the seizure of persons or property.
7. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of
1955; There is a right to privacy governing bank accounts in the Philippines and
that such right finds application to the case at bar.-
Sufficient for our purposes, we can assert there is a right to privacy governing
bank accounts in the Philippines, and that such right finds application to the
case at bar. The source of such right is statutory, expressed as it is in R.A. No.
1405 otherwise known as the Bank Secrecy Act of 1955. The right to privacy is
enshrined in Section 2 of that law.
8. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of
1955; Unless the Bank Secrecy Act is repealed or amended, the legal order is
obliged to conserve the absolutely confidential nature of Philippine bank
deposits.-
Because of the Bank Secrecy Act, the confidentiality of bank deposits remains a
basic state policy in the Philippines. Subsequent laws, including the AMLA, may
have added exceptions to the Bank Secrecy Act, yet the secrecy of bank deposits
still lies as the general rule. It falls within the zones of privacy recognized by our
laws. The framers of the 1987 Constitution likewise recognized that bank
accounts are not covered by either the right to information under Section 7,
Article III or under the requirement of full public disclosure under Section 28,
Article II. Unless the Bank Secrecy Act is repealed or amended, the legal order is
obliged to conserve the absolutely confidential nature of Philippine bank
deposits.
9. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of
1955; Exceptions prescribed in Section 2 of the Bank Secrecy Act whereby bank
accounts may be examined by “any person, government official, bureau or
office”; The Ombudsman Act of 1989 contains a provision relating to “access to
bank accounts and records.”-
Any exception to the rule of absolute confidentiality must be specifically
legislated. Section 2 of the Bank Secrecy Act itself prescribes exceptions whereby
these bank accounts may be examined by “any person, government official,
bureau or office”; namely when: (1) upon written permission of the depositor;
(2) in cases of impeachment; (3) the examination of bank accounts is upon order
of a competent court in cases of bribery or dereliction of duty of public officials;
and (4) the money deposited or invested is the subject matter of the litigation.
Section 8 of R.A. Act No. 3019, the Anti-Graft and Corrupt Practices Act, has
been recognized by this Court as constituting an additional exception to the rule
of absolute confidentiality. A subsequent law, the Ombudsman Act of 1989
contains a provision relating to “access to bank accounts and records.”
10. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of
1955; The Anti-Money Laundering Act (AMLA) also provides exceptions to the
Bank Secrecy Act.-
The AMLA also provides exceptions to the Bank Secrecy Act. Under Section 11,
the AMLC may inquire into a bank account upon order of any competent court in
cases of violation of the AMLA, it having been established that there is probable
cause that the deposits or investments are related to unlawful activities as
defined in Section 3(i) of the law, or a money laundering offense under Section 4
thereof. Further, in instances where there is probable cause that the deposits or
investments are related to kidnapping for ransom, certain violations of the
Comprehensive Dangerous Drugs Act of 2002, hijacking and other violations
under R.A. No. 6235, destructive arson and murder, then there is no need for the
AMLC to obtain a court order before it could inquire into such accounts.
11. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of
1955; If there are doubts in upholding the absolutely confidential nature of bank
deposits against affirming the authority to inquire into such accounts, then such
doubts must be resolved in favor of the former.-
Just because the AMLA establishes additional exceptions to the Bank Secrecy Act
it does not mean that the later law has dispensed with the general principle
established in the older law that “[a]ll deposits of whatever nature with banks or
banking institutions in the Philippines x x x are hereby considered as of an
absolutely confidential nature.” Indeed, by force of statute, all bank deposits are
absolutely confidential, and that nature is unaltered even by the legislated
exceptions referred to above. There is disfavor towards construing these
exceptions in such a manner that would authorize unlimited discretion on the
part of the govern- ment or of any party seeking to enforce those exceptions and
inquire into bank deposits. If there are doubts in upholding the absolutely
confidential nature of bank deposits against affirming the authority to inquire
into such accounts, then such doubts must be resolved in favor of the former.
Such a stance would persist unless Congress passes a law reversing the general
state policy of preserving the absolutely confidential nature of Philippine bank
accounts.
12. Banks and Banking; Anti-Money Laundering Act; Bank Secrecy Act of
1955; Nowhere in the legislative record cited by Lilia Cheng does it appear that
there was an unequivocal intent to exempt from the bank inquiry order all bank
accounts opened prior to the passage of the Anti-Money Laundering Act
(AMLA).-
Nowhere in the legislative record cited by Lilia Cheng does it appear that there
was an unequivocal intent to exempt from the bank inquiry order all bank
accounts opened prior to the passage of the AMLA. There is a cited exchange
between Representatives Ronaldo Zamora and Jaime Lopez where the latter
confirmed to the former that “deposits are supposed to be exempted from
scrutiny or monitoring if they are already in place as of the time the law is
enacted.” That statement does indicate that transactions already in place when
the AMLA was passed are indeed exempt from scrutiny through a bank inquiry
order, but it cannot yield any interpretation that records of transactions
undertaken after the enactment of the AMLA are similarly exempt. Due to the
absence of cited authority from the legislative record that unqualifiedly supports
respondent Lilia Cheng’s thesis, there is no cause for us to sustain her
interpretation of the AMLA, fatal as it is to the anima of that law.
Division: SECOND DIVISION
Docket Number: G.R. No. 174629
Counsel: The Solicitor General, Saguisag, Carao and Associates, Diosdado N.
Silva, Madrid & Associates
Dispositive Portion:
WHEREFORE, the PETITION is DISMISSED. No pronouncement as to costs.
G.R. No. 184849. February 13, 2009.*
SPOUSES PNP DIRECTOR ELISEO D. DELA PAZ (Ret.) and MARIA FE C. DELA PAZ,
petitioners, vs. SENATE COMMITTEE ON FOREIGN RELATIONS and the SENATE
SERGEANT-AT-ARMS JOSE BALAJADIA, JR., respondents.
Administrative Law; Constitutional Law; Congress; The exercise of the power of
each house to determine the rules of its proceedings is generally exempt from
judicial supervision and interference, except on a clear showing of such
arbitrary and improvident use of the power as will constitute a denial of due
process.—Section 16(3), Article VI of the Philippine Constitution states: “Each
House shall determine the rules of its proceedings.” This provision has been
traditionally construed as a grant of full discretionary authority to the Houses of
Congress in the formulation, adoption and promulgation of its own rules. As
such, the exercise of this power is generally exempt from judicial supervision
and interference, except on a clear showing of such arbitrary and improvident
use of the power as will constitute a denial of due process.
Same; Same; Same; Respondent Senate Foreign Relations Committee has acted
within the proper sphere of its authority.—Even if it is within our power to
inquire into the validity of the exercise of jurisdiction over the petitioners by the
Senate Foreign Relations Committee, we are convinced that respondent
Committee has acted within the proper sphere of its authority. Paragraph 12,
Section 13, Rule 10 of the Senate Rules provides: 12) Committee on Foreign
Relations.—Fifteen (15) members. All matters relating to the relations of the
Philippines with other nations generally; diplomatic and consular services; the
Association of Southeast Asian Nations; the United Nations Organization and its
agencies; multi-lateral organizations, all international agreements, obligations
and contracts; and overseas Filipinos. A reading of the above provision
unmistakably shows that the investigation of the Moscow incident involving
petitioners is well within the respondent Committee’s jurisdiction.
Same; Same; Same; The Blue Ribbon Committee may conduct investigations on
all matters relating to malfeasance, misfeasance and nonfeasance in office by
officers and employees of the government, its branches, agencies, subdivisions
and instrumentalities, and on any matter of public interest on its own initiative
or brought to its attention by any of its members.—The Philippine Senate has
decided that the legislative inquiry will be jointly conducted by the respondent
Committee and the Senate Committee on Accountability of Public Officers and
Investigations (Blue Ribbon Committee). Pursuant to paragraph 36, Section 13,
Rule 10 of the Senate Rules, the Blue Ribbon Committee may conduct
investigations on all matters relating to malfeasance, misfeasance and
nonfeasance in office by officers and employees of the government, its
branches, agencies, subdivisions and instrumentalities, and on any matter of
public interest on its own initiative or brought to its attention by any of its
members. It is, thus, beyond cavil that the Blue Ribbon Committee can
investigate Gen. Dela Paz, a retired PNP general and member of the official PNP
delegation to the INTERPOL Conference in Russia, who had with him millions
which may have been sourced from public funds. [Dela Paz vs. Senate
Committee on Foreign Relations, 579 SCRA 521(2009)]
Case Title : SPOUSES SIMON YAP AND MILAGROS GUEVARRA, petitioners, vs.
FIRST e-BANK CORPORATION (previously known as PDCP DEVELOPMENT BANK,
INC.), respondent.Case Nature : PETITION for review on certiorari of a decision
of the Court of Appeals.
Syllabi Class : Loans|Mortgages|Options of an Unpaid Creditor
Syllabi:
1. Criminal Law; Bouncing Checks Law (Batas Pambansa Blg. 22); Foreclosure
of Mortgage; Prior to the effectivity of Circular 57-97, the alternative remedies
of foreclosure of mortgage and collection suit were not barred even if a suit for
Batas Pambansa Blg. 22 had been filed earlier, unless a judgment of conviction
had already been rendered in the BP 22 case finding the accused debtor
criminally liable and ordering him to pay the amount of the check(s).-
—Sad to say, Circular 57-97 (and, it goes without saying, Section 1(b), Rule 111
of the Rules of Court) was not yet in force when PDCP sued Sammy for violation
of BP 22 and when it filed a petition for extrajudicial foreclosure on the
mortgaged property of petitioners on February 8, 1993 and May 3, 1993,
respectively. In Lo Bun Tiong v. Balboa (542 SCRA 504 [2008]), Circular 57-97
was not applied because the collection suit and the criminal complaints for
violation of BP 22 were filed prior to the adoption of Circular 57-97. The same
principle applies here. Thus, prior to the effectivity of Circular 57-97, the
alternative remedies of foreclosure of mortgage and collection suit were not
barred even if a suit for BP 22 had been filed earlier, unless a judgment of
conviction had already been rendered in the BP 22 case finding the accused
debtor criminally liable and ordering him to pay the amount of the check(s).
2. Same; Same; Options of an Unpaid Creditor.-
—We state the rule at present. If the debtor fails (or unjustly refuses) to pay his
debt when it falls due and the debt is secured by a mortgage and by a check, the
creditor has three options against the debtor and the exercise of one will bar the
exercise of the others. He may pursue either of the three but not all or a
combination of them. First, the creditor may file a collection suit against the
debtor. This will open up all the properties of the debtor to attachment and
execution, even the mortgaged property itself. Second, the creditor may opt to
foreclose on the mortgaged property. In case the debt is not fully satisfied, he
may sue the debtor for deficiency judgment (not a collection case for the whole
indebtedness), in which case, all the properties of the debtor, other than the
mortgaged property, are again opened up for the satisfaction of the deficiency.
Lastly, the creditor may opt to sue the debtor for violation of BP 22 if the checks
securing the obligation bounce. Circular 57-97 and Section 1(b), Rule 111 of the
Rules of Court both provide that the criminal action for violation of BP 22 shall
be deemed to necessarily include the corresponding civil action, i.e., a collection
suit. No reservation to file such civil action separately shall be allowed or
recognized.
3. Same; Same; It is but logical that a creditor who obtains a personal judgment
against the debtor on a loan waives his right to foreclose on the mortgage
securing the loan, otherwise, the creditor becomes guilty of splitting a single
cause of action for the debtor’s inability (or unjustified refusal) to pay his debt.-
—So as not to create any misunderstanding, however, the point should be
underscored that the creditor’s obvious purpose when it forecloses on
mortgaged property is to obtain payment for a loan which the debtor is unable
or unjustifiably refuses to pay. The rationale is the same if the creditor opts to
sue the debtor for collection. Thus, it is but logical that a creditor who obtains a
personal judgment against the debtor on a loan waives his right to foreclose on
the mortgage securing the loan. Otherwise, the creditor becomes guilty of
splitting a single cause of action for the debtor’s inability (or unjustified refusal)
to pay his debt. Nemo debet bis vexare pro una et eadem causa. No man shall
be twice vexed for one and the same cause.
4. Loans; Mortgages; A third party mortgagor should be mindful that he has
agreed that his property would stand as collateral to the loan of the owner until
the last centavo is paid to the mortgagee.-
—Petitioners should be mindful that, by being third party mortgagors, they
agreed that their property would stand as collateral to the loan of Sammy until
the last centavo is paid to PDCP. That is a risk they willingly assumed. To release
the mortgage just because they find it inconvenient would be the height of
injustice against PDCP. All told, PDCP should not be left without recourse for the
unsettled loan of Sammy. Otherwise, an iniquitous situation will arise where
Sammy and petitioners are unjustly enriched at the expense of PDCP. That we
cannot sanction.

Division: FIRST DIVISION

Docket Number: G.R. No. 169889

Counsel: Leopoldo C. Tulagan, Sr.

Ponente: CORONA

Dispositive Portion:
WHEREFORE, the petition is hereby DENIED. Costs against petitioners.