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PHILIPPINE EDUCATION CO., INC., vs MAURICIO A.

SORIANO, ET AL FACTS Enrique Montinola sought to purchase from the Manila Post Office 10 money orders (P200 each), offering to pay for them with a private check. Montinola was able to leave the building with his check and the 10 money orders without the knowledge of the teller. Upon discovery, message was sent to all postmasters and banks involving the unpaid money orders. One of the money orders was received by the Philippine Education Co. as part of its sales receipt. It was deposited by the company with the Bank of America, which cleared it with the Bureau of Post. The Postmaster, through the Chief of the Money Order Division of the Manila Post Office informed the bank of the irregular issuance of the money order. The bank debited the account of the company. The company moved for reconsideration. ISSUE Whether postal money orders are negotiable instruments. HELD Philippine postal statutes are patterned from those of the United States, and the weight of authority in said country is that Postal money orders are not negotiable instruments inasmuch as the establishment of a postal money order is an exercise of governmental power for the publics benefit. Furthermore, some of the restrictions imposed upon money order by postal laws and regulations are inconsistent with the character of negotiable instruments. For instance, postal money orders may be withheld under a variety of circumstances, and which are restricted to not more than one endorsement. NORBERTO TIBAJIA, JR. and CARMEN TIBAJIA vs THE HONORABLE COURT OF APPEALS and EDEN TAN
FACTS: A suit of collection of sum of money was filed by Eden Tan against the spouses. A writ of attachment was issued, the Deputy Sheriff filed a return stating that a deposit made by Tibajia in the amount of P442,750 in another case, had been garnished by him. RTC ruled in favor of Eden Tan and ordered the spouses to pay her an amount in excess of P3,000,000. Court of Appeals modified the decision by reducing the amount for damages. Tibajia Spouses delivered to Sheriff Bolima the total money judgment of P398483.70. Tan refused to accept the payment and insisted that the garnished funds be withdrawn to satisfy the judgment obligation. ISSUE: Whether or not payment by means of check is considered payment in legal tender RULING: The ruling applies the statutory provisions which lay down the rule that a check is not legal tender and that a creditor may validly refuse payment by check, whether it be a managers check, cashiers or personal check. The decision of the court of Appeals is affirmed.

PHILIPPINE AIRLINES, INC. vs HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila, and AMELIA TAN THE FACTS:

Amelia Tan commenced a complaint for damages before the Court of First Instance against Philippine Airlines, Inc. (PAL). The Court rendered a judgment in favor of the former and against the latter. PAL filed its appeal with the Court of Appeals (CA), and the appellate court affirmed the judgment of the lower court with the modification that PAL is condemned to pay the latter the sum of P25, 000.00 as damages and P5, 000.00 as attorneys fee. Judgment became final and executory and was correspondingly entered in the case, which was remanded to the trial court for execution. The trial court upon the motion of Amelia Tan issued an order of execution with the corresponding writ in favor of the respondent. Said writ was duly referred to Deputy Sheriff Reyes for enforcement. Four months later, Amelia Tan moved for the issuance of an alias writ of execution, stating that the judgment rendered by the lower court, and affirmed with modification by the CA, remained unsatisfied. PAL opposed the motion, stating that it had already fully paid its obligation to plaintiff through the issuance of checks payable to the deputy sheriff who later did not appear with his return and instead absconded. The CA denied the issuance of the alias writ for being premature. After two months the CA granted her an alias writ of execution for the full satisfaction of the judgment rendered, when she filed another motion. Deputy Sheriff del Rosario is appointed special sheriff for enforcement thereof. PAL filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as yet been made by Deputy Sheriff Reyes and that judgment debt had already been fully satisfied by the former as evidenced by the cash vouchers signed and received by the executing sheriff. Deputy Sheriff del Rosario served a notice of garnishment on the depository bank of PAL, through its manager and garnished the latters deposit. Hence, PAL brought the case to the Supreme Court and filed a petition for certiorari. THE ISSUES: 1.WON an alias writ of execution can be issued without prior return of the original writ by the implementing officer. 2.WON payment of judgment to the implementing officer as directed in the writ of execution constitutes satisfaction of judgment. 3.WON payment made in checks to the sheriff and under his name is a valid payment to extinguish judgment of debt. THE RULING: 1. Affirmative. Technicality cannot be countenanced to defeat the execution of a judgment for execution is the fruit and end of the suit and is very aptly called the life of the law. A judgment cannot be rendered nugatory by unreasonable application of a strict rule of procedure. Vested right were never

intended to rest on the requirement of a return. So long as judgment is not satisfied, a plaintiff is entitled to other writs of execution. 2. Negative. In general, a payment, in order to be effective to discharge an obligation, must be made to the proper person. Article 1240 of the Civil Code provides: Payment made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. Under ordinary circumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid payment to extinguish judgment of debt. However, under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his name did not operate as a satisfaction of the judgment debt. 3. Negative. Article 1249 of the Civil Code provides: 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. Unless authorized to do so by law or by consent of the obligee, a public officer has no authority to accept anything other than money in payment of an obligation under a judgment being executed. Strictly speaking, the acceptance by the sheriff of the petitioners checks does not, per se, operate as a discharge of the judgment of debt. A check, whether managers check or ordinary check, is not legal tender, and an offer of a check in payment of a debt is not a valid tender or payment and may be refused receipt by the oblige or creditor. Hence, the obligation is not extinguished. THE TWIST: Payment in cash is logical, but it was not proper. Payment in cash to the implementing officer may be deemed absolute payment of judgment debt but the Court has never, in the least bit, suggested that judgment debtors should settle their obligations by turning over huge amounts of cash or legal tender to the executing officers. Payment in cash would result in damage or endless litigations each time a sheriff with huge amounts of cash in his hands decides to abscond. As a protective measure, the courts encourage the practice of payment of check provided adequate controls are instituted to prevent wrongful payment and illegal withdrawal or disbursement of funds. However, in the case at bar, it is out of the ordinary that checks intended for a particular payee are made out in the name of another. The issuance of the checks in the name of the sheriff clearly made possible the misappropriation of the funds that were withdrawn. The Court of Appeals explained:

Knowing as it does that the intended payment was for the respondent Amelia Tan, the petitioner corporation, utilizing the services of its personnel who are or should be knowledgeable about the accepted procedure and resulting consequences of the checks drawn, nevertheless, in this instance, without prudence, departed from what is generally observed and done, and placed as payee in the checks the name of the errant Sheriff and not the name of the rightful payee. Petitioner thereby created a situation which permitted the said Sheriff to personally encash said checks and misappropriate the proceeds thereof to his exclusive benefit. For the prejudice that resulted, the petitioner himself must bear the fault Having failed to employ the proper safeguards to protect itself, the judgment debtor whose act made possible the loss had but itself to blame. CALTEX (PHILIPPINES), INC. vs COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY In 1982, Angel de la Cruz obtained certificates of time deposit (CTDs) from Security Bank and Trust Company for the formers deposit with the said bank amounting to P1,120,000.00. The said CTDs are couched in the following manner: This is to Certify that B E A R E R has deposited in this Bank the sum of _______ Pesos, Philippine Currency, repayable to said depositor _____ days. after date, upon presentation and surrender of this certificate, with interest at the rate of ___ % per cent per annum. Angel de la Cruz subsequently delivered the CTDs to Caltex in connection with the purchase of fuel products from Caltex. In March 1982, Angel de la Cruz advised Security Bank that he lost the CTDs. He executed an affidavit of loss and submitted it to the bank. The bank then issued another set of CTDs. In the same month, Angel de la Cruz acquired a loan of P875,000.00 and he used his time deposits as collateral. In November 1982, a representative from Caltex went to Security Bank to present the CTDs (delivered by de la Cruz) for verification. Caltex advised Security Bank that de la Cruz delivered Caltex the CTDs as security for purchases he made with the latter. Security Bank refused to accept the CTDs and instead required Caltex to present documents proving the agreement made by de la Cruz with Caltex. Caltex however failed to produce said documents.

In April 1983, de la Cruz loan with Security bank matured and no payment was made by de la Cruz. Security Bank eventually set-off the time deposit to pay off the loan. Caltex sued Security Bank to compel the bank to pay off the CTDs. Security Bank argued that the CTDs are not negotiable instruments even though the word bearer is written on their face because the word bearer contained therein refer to depositor and only the depositor can encash the CTDs and no one else.

ISSUE: Whether or not the certificates of time deposit are negotiable. HELD: Yes. The CTDs indicate that they are payable to the bearer; that there is an implication that the depositor is the bearer but as to who the depositor is, no one knows. It does not say on its face that the depositor is Angel de la Cruz. If it was really the intention of respondent bank to pay the amount to Angel de la Cruz only, it could have with facility so expressed that fact in clear and categorical terms in the documents, instead of having the word BEARER stamped on the space provided for the name of the depositor in each CTD. On the wordings of the documents, therefore, the amounts deposited are repayable to whoever may be the bearer thereof. Thus, de la Cruz is the depositor insofar as the bank is concerned, but obviously other parties not privy to the transaction between them would not be in a position to know that the depositor is not the bearer stated in the CTDs. However, Caltex may not encash the CTDs because although the CTDs are bearer instruments, a valid negotiation thereof for the true purpose and agreement between Caltex and De la Cruz, requires both delivery and indorsement. As discerned from the testimony of Caltex representative, the CTDs were delivered to them by de la Cruz merely for guarantee or security and not as payment. ANG TEK LIAN vs THE COURT OF APPEALS In 1946, Ang Tek Lian approached Lee Hua and asked him if he could give him P4,000.00. He said that he meant to withdraw from the bank but the banks already closed. In exchange, he gave Lee Hua a check which is payable to the order of cash. The next day, Lee Hua presented the check for payment but it was dishonored due to insufficiency of funds. Lee Hua eventually sued Ang Tek Lian. In his defense, Ang Tek Lian argued that he did not indorse the check to Lee Hua and that when the latter accepted the check without Ang tek Lians indorsement, he had done so fully aware of the risk he was running thereby. ISSUE: Whether or not Ang Tek Lian is correct. HELD: No. Under the Negotiable Instruments Law (sec. 9 [d]), a check drawn payable to the order of cash is a check payable to bearer hence a bearer instrument, and the bank may pay it to the person presenting it for payment without the drawers indorsement. Where a check is made payable to the order of cash, the word cash does not purport to be the name of any person, and hence the instrument is payable to bearer. The drawee bank need not obtain any indorsement of the check, but may pay it to the person presenting it without any indorsement.

PHILIPPINE NATIONAL BANK vs MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC Facts: On 8 May 1920, the manager and the treasurer of the Manila Oil Refining & By-Products Company, Inc,. executed and delivered to the Philippine National Bank (PNB), a written instrument reading as follows: "RENEWAL. P61,000.00MANILA, P.I., May 8, 1920. On

demand after date we promise to pay to the order of the Philippine National Bank sixty-one thous and only pesos at Philippine National Bank, Manila, P.I. Without defalcation, value received; and do hereby authorize any attorney in the Philippine Islands, in case this note be not paid at maturity, to appear in my name and confess judgment for the above sum with interest, cost of suit and attorney's fees of ten (10) per cent for collection, a release of all errors and waiver of all rights to inquisition and appeal, and to the benefit of all laws exempting property, real or personal, from levy or sale. Value received. No. Due MANILA OILREFINING & BYPRODUCTS CO., INC., (Sgd.) VICENTE SOTELO, Manager. MANILA OIL REFINING & BY-PRODUCTS CO., INC.,(Sgd.) RAFAEL LOPEZ. Treasurer." The Manila Oil Refining &By-Products Company, Inc. failed to pay the promissory note on demand. PNB brought action in the Court of First Instanceof Manila, to recover P61,000, the amount of the note, together with interest and costs. Mr. Elias N. Recto, an attorney associated with PNB, entered his appearance in representation of Manila Oil, and filed a motion confessing judgment. Manila Oil, however, in a sworn declaration, objected strongly to the unsolicited representation of attorney Recto. Later, attorney Antonio Gonzalez appeared for Manila Oil and filed a demurrer, and when this was overruled, presented an answer. The trial judge rendered judgment on the motion of attorney Recto in the terms of the complaint. In the Supreme Court, the question of first impression raised in the case concerns the validity in this jurisdiction of a provision in a promissory note whereby incase the same is not paid at maturity, the maker authorizes any attorney to appear and confess judgment thereon for the principal amount, with interest, costs, and attorney's fees, and waives all errors, rights to inquisition, and appeal, and all property exemptions. Issue [1]: Whether the Negotiable Instruments Law (Act No.2031) expressly recognized judgment notes, enforcible under the regular procedure. Held [1]:The Negotiable Instruments Law, in section 5,provides that "The negotiable character of an instrument otherwise negotiable is not affected by a provision which (b)Authorizes confession of judgment if the instrument be not paid at maturity"; but this provision of law cannot be taken to sanction judgments by confession, because it is a portion of a uniform law which merely provides that, in jurisdictions where judgments notes are recognized, such clauses shall not affect the negotiable character of the instrument. Moreover, the same section of the Negotiable Instruments Law concludes with these words: "But nothing in this section shall validate any provision or stipulation otherwise illegal. "Issue [2]:Whether provisions in notes authorizing attorneys to appear and confess judgments against makers should not be recognized in Philippine jurisdiction by implication. Held [2]:Judgments by confession as appeared at common law were considered an amicable, easy, and cheap way to settle and secure debts. They are quick remedy serve to save the court's time. Time also save time and money of the litigants and the government the expenses that a long litigation entails. In one sense, instruments of this character may be considered as special agreements, with power to enter up judgments on them, binding the parties to the result as they themselves viewed it. On the other hand, are disadvantages to the commercial world which

outweigh the considerations just mentioned. Such warrants of attorney are void as against public policy, because they enlarge the field for fraud, because under these instruments the promissor bargains away his right to a day in court, and because the effect of the instrument is to strike down the right of appeal accorded by statute. The recognition of such form of obligation would bring about a complete reorganization of commercial customs and practices, with reference to short-term obligations. It can readily be seen that judgment notes, instead of resulting to the advantage of commercial life the Philippines might be the source of abuse and oppression, and make the courts involuntary parties thereto. If the bank has a meritorious case, the judgment is ultimately certain in the courts. The Court is of the opinion thus that warrants of attorney to confess judgment are not authorized nor contemplated by Philippine law; and that provisions in notes authorizing attorneys to appear and confess judgments against makers should not be recognized in this jurisdiction by implication and should only be considered as valid when given express legislative sanction.
REPUBLIC PLANTERS BANK vs COURT OF APPEALS and FERMIN CANLAS In 1979, World Garment Manufacturing, through its board authorized Shozo Yamaguchi (president) and Fermin Canlas (treasurer) to obtain credit facilities from Republic Planters Bank (RPB). For this, 9 promissory notes were executed. Each promissory note was uniformly written in the following manner:

___________, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(.) Philippine Currency Please credit proceeds of this note to: ________ Savings Account ______XX Current Account No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP. Sgd. Shozo Yamaguchi Sgd. Fermin Canlas
The note became due and no payment was made. RPB eventually sued Yamaguchi and Canlas. Canlas, in his defense, averred that he should not be held personally liable for such authorized corporate acts that he performed inasmuch as he signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing. ISSUE: Whether or not Canlas should be held liable for the promissory notes. HELD: Yes. The solidary liability of private respondent Fermin Canlas is made clearer and certain, without reason for ambiguity, by the presence of the phrase joint and several as describing the unconditiona l promise to pay to the

order of Republic Planters Bank. Where an instrument containing the words I promise to pay is signed by two or more persons, they are deemed to be jointly and severally liable thereon. Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons:

The promissory notes are negotiable instruments and must be governed by the Negotiable Instruments Law.
Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are liable as such. By signing the notes, the maker promises to pay to the order of the payee or any holder according to the tenor thereof.

SPS EDUARDO & EPIFANIA EVANGELISTA vs. MERCATOR FINANCE CORP. LYDIA P. SALAZAR, LAMECS REALTY & DEVT CORP. and the REGISTER OF DEEDS OF BULACAN [G.R. No. 148864. August 21, 2003] Facts: The spouses Evangelista filed a complaint for annulment of titles against the respondents, claiming to be the registered owners of five (5) parcels of land contained in the real estate mortgage executed by them and Embassy Farms Inc. in favor of Mercator Financing Corporation (Mercator). The mortgage was in consideration of certain loans and credit accommodations amounting to P844, 625.78. The spouses alleged the following: (1) that they executed the said real estate mortgage merely as officers of Embassy Farms; (2) that they did not receive the proceeds of the loan evidenced by the promissory note, as all went to Embassy Farms; (3) that the real estate mortgage is void due to absence of a principal obligation on which it rests; (4) that since the real estate mortgage is void, the foreclosure proceedings, the subsequent sale as well as the issuance of transfer certificates of title are likewise void. Petitioners further alleged ambiguity in the wording of the promissory note, which should be resolved against Mercator who provided the form thereof. Mercator admitted that petitioners were the owners of the subject parcels of land. It, however, contended that the spouses executed a Mortgage in favor of Mercator Finance Corporation for and in consideration of certain loans, and/or other forms of credit accommodations obtained from the Mortgagee (defendant Mercator Finance Corporation) amounting to EIGHT HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED TWENTY-FIVE & 78/100 (P844,625.78) and to secure the payment of the same and those others that the MORTGAGEE may extend to the MORTGAGOR (plaintiffs) x x x. It contended that since petitioners and Embassy Farms signed the promissory note as co-makers (the note being worded as For value received, I/We jointly and severally promise to pay to the order of Mercator), aside from the Continuing Suretyship Agreement subsequently executed to guarantee the indebtedness, the petitioners are jointly and severally liable with Embassy Farms. Due to their failure to pay the obligation, the foreclosure and subsequent sale of the mortgaged properties are thus valid. Respondents Salazar and Lamecs asserted that they are innocent purchasers for value and in good faith.

Issue: May the spouses be held solidarily liable with Embassy Farms? Held: YES. Courts can interpret a contract only if there is doubt in its letter. But, an examination of the promissory note shows no such ambiguity. Besides, assuming arguendo that there is an ambiguity, Section 17 of the Negotiable Instruments Law states, viz: SECTION 17. Construction where instrument is ambiguous. Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction apply: (g) Where an instrument containing the word I promise to pay is signed by two or more persons, they are deemed to be jointly and severally liable thereon. Petitioners also insist that the promissory note does not convey their true intent in executing the document. The defense is unavailing. Even if petitioners intended to sign the note merely as officers of Embassy Farms, still this does not erase the fact that they subsequently executed a continuing suretyship agreement. 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. Having executed the suretyship agreement, there can be no dispute on the personal liability of petitioners.