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[G.R. No. 170912. April 19, 2010.] ROBERT DINO, petitioner, vs. MARIA LUISA JUDAL-LOOT, joined by her husband VICENTE LOOT, respondents. DECISION CARPIO, J :
The Case This is a petition for review 1 of the 16 August 2005 Decision 2 and 30 November 2005 Resolution 3 of the Court of Appeals in CA-G.R. CV No. 57994. The Court of Appeals affirmed the decision of the Regional Trial Court, 7th Judicial Region, Branch 56, Mandaue City (trial court), with the deletion of the award of interest, moral damages, attorney's fees and litigation expenses. The trial court ruled that respondents Maria Luisa Judal-Loot and Vicente Loot are holders in due course of Metrobank Check No. C-MA 142119406 CA and ordered petitioner Robert Dino as drawer, together with co-defendant Fe Lobitana as indorser, to solidarily pay respondents the face value of the check, among others. The Facts Sometime in December 1992, a syndicate, one of whose members posed as an owner of several parcels of land situated in Canjulao, Lapu-lapu City, approached petitioner and induced him to lend the group P3,000,000.00 to be secured by a real estate mortgage on the properties. A member of the group, particularly a woman pretending to be a certain Vivencia Ompok Consing, even offered to execute a Deed of Absolute Sale covering the properties, instead of the usual mortgage contract.4 Enticed and convinced by the syndicate's offer, petitioner issued three Metrobank checks totaling P3,000,000.00, one of which is Check No. C-MA-142119406-CA postdated 13 February 1993 in the amount of P1,000,000.00 payable to Vivencia Ompok Consing and/or Fe Lobitana. 5 Upon scrutinizing the documents involving the properties, petitioner discovered that the documents covered rights over government properties. Realizing he had
been deceived, petitioner advised Metrobank to stop payment of his checks. However, only the payment of Check No. C-MA- 142119406-CA was ordered stopped. The other two checks were already encashed by the payees. Meanwhile, Lobitana negotiated and indorsed Check No. C-MA-142119406-CA to respondents in exchange for cash in the sum of P948,000.00, which respondents borrowed from Metrobank and charged against their credit line. Before respondents accepted the check, they first inquired from the drawee bank, Metrobank, Cebu-Mabolo Branch which is also their depositary bank, if the subject check was sufficiently funded, to which Metrobank answered in the positive. However, when respondents deposited the check with Metrobank, Cebu-Mabolo Branch, the same was dishonored by the drawee bank for reason "PAYMENT STOPPED."
Respondents filed a collection suit 6 against petitioner and Lobitana before the trial court. In their Complaint, respondents alleged, among other things, that they are holders in due course and for value of Metrobank Check No. C-MA142119406-CA and that they had no prior information concerning the transaction between defendants. In his Answer, petitioner denied respondents' allegations that "on the face of the subject check, no condition or limitation was imposed" and that respondents are holders in due course and for value of the check. For her part, Lobitana denied the allegations in the complaint and basically claimed that the transaction leading to the issuance of the subject check is a sale of a parcel of land by Vivencia Ompok Consing to petitioner and that she was made a payee of the check only to facilitate its discounting. The trial court ruled in favor of respondents and declared them due course holders of the subject check, since there was no privity between respondents and defendants. The dispositive portion of the 14 March 1996 Decision of the trial court reads:
In summation, this Court rules for the Plaintiff and against the Defendants and hereby orders: 1.)defendants to pay to Plaintiff, and severally, the amount of P1,000,000.00 representing the face value of subject Metrobank check; 2.)to pay to Plaintiff herein, jointly and severally, the sum of P101,748.00 for accrued and paid interest;
3.)to pay to Plaintiff, jointly and severally, moral damages in the amount of P100,000.00; 4.)to pay to Plaintiff, jointly and severally, the sum of P200,000.00 for attorney's fees; and 5.)to pay to Plaintiff, jointly and severally, litigation expenses in the sum of P10,000.00 and costs of the suit. SO ORDERED.
Only petitioner filed an appeal. Lobitana did not appeal the trial court's judgment. The Ruling of the Court of Appeals The Court of Appeals affirmed the trial court's finding that respondents are holders in due course of Metrobank Check No. C-MA-142119406-CA. The Court of Appeals pointed out that petitioner's own admission that respondents were never parties to the transaction among petitioner, Lobitana, Concordio Toring, Cecilia Villacarlos, and Consing, proved respondents' lack of knowledge of any infirmity in the instrument or defect in the title of the person negotiating it. Moreover, respondents verified from Metrobank whether the check was sufficiently funded before they accepted it. Therefore, respondents must be excluded from the ambit of petitioner's stop payment order.
The Court of Appeals modified the trial court's decision by deleting the award of interest, moral damages, attorney's fees and litigation expenses. The Court of Appeals opined that petitioner "was only exercising (although incorrectly), what he perceived to be his right to stop the payment of the check which he rediscounted." The Court of Appeals ruled that petitioner acted in good faith in ordering the stoppage of payment of the subject check and thus, he must not be made liable for those amounts. In its 16 August 2005 Decision, the Court of Appeals affirmed the trial court's decision with modifications, thus:
WHEREFORE, premises considered, finding no reversible error in the decision of the lower court, WE hereby DISMISS the appeal and AFFIRM the decision of the court a quo with modifications that the award of interest, moral damages, attorney's fees and litigation expenses be deleted.
No pronouncement as to costs. SO ORDERED.
In its 30 November 2005 Resolution, the Court of Appeals denied petitioner's motion for reconsideration. In denying the petitioner's motion for reconsideration, the Court of Appeals noted that petitioner raised the defense that the check is a crossed check for the first time on appeal (particularly in the motion for reconsideration). The Court of Appeals rejected such defense considering that to entertain the same would be offensive to the basic rules of fair play, justice, and due process. Hence, this petition. The Issues Petitioner raises the following issues:
I.THE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENTS WERE HOLDERS IN DUE COURSE. THE FACT THAT METROBANK CHECK NO. 142119406 IS A CROSSED CHECK CONSTITUTES SUFFICIENT WARNING TO THE RESPONDENTS TO EXERCISE EXTRAORDINARY DILIGENCE TO DETERMINE THE TITLE OF THE INDORSER. II.THE COURT OF APPEALS ERRED IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION UPON THE GROUND THAT THE ARGUMENTS RELIED UPON HAVE ONLY BEEN RAISED FOR THE FIRST TIME. EQUITY DEMANDS THAT THE COURT OF APPEALS SHOULD HAVE MADE AN EXCEPTION TO PREVENT THE COMMISSION OF MANIFEST WRONG AND INJUSTICE UPON THE PETITIONER. 9
The Ruling of this Court The petition is meritorious. Respondents point out that petitioner raised the defense that Metrobank Check No. C-MA-142119406-CA is a crossed check for the first time in his motion for reconsideration before the Court of Appeals. Respondents insist that issues not raised during the trial cannot be raised for the first time on appeal as it would be offensive to the elementary rules of fair play, justice and due process. Respondents further assert that a change of theory on appeal is improper.
In his Answer, petitioner specifically denied, among others, (1) Paragraph 4 of the Complaint, concerning the allegation that on the face of the subject check, no condition or limitation was imposed, and (2) Paragraph 8 of the Complaint, regarding the allegation that respondents were holders in due course and for value of the subject check. In his "Special Affirmative Defenses," petitioner claimed that "for want or lack of the prestation," he could validly stop the payment of his check, and that by rediscounting petitioner's check, respondents "took the risk of what might happen on the check." Essentially, petitioner maintained that respondents are not holders in due course of the subject check, and as such, respondents could not recover any liability on the check from petitioner. Indeed, petitioner did not expressly state in his Answer or raise during the trial that Metrobank Check No. C-MA-142119406-CA is a crossed check. It must be stressed, however, that petitioner consistently argues that respondents are not holders in due course of the subject check, which is one of the possible effects of crossing a check. 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. 10 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. 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. 11 In Casa Filipina Realty v. Office of the President, 12 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. 13
Inc. as in this case. respondents are not deemed holders in due course of the subject check. Intermediate Appellate Court squarely applies to this case. C-MA 142119406 CA as to entitle them to collect the face value of the check from its drawer or petitioner herein. Section 52 of the Negotiable Instruments Law defines a holder in due course. (b) may be negotiated only once — to one who has an account with a bank. (b)That he became the holder of it before it was overdue. the Court shall now proceed to the merits of the case. he is not a holder in due course. (d)That at the time it was negotiated to him. the following principles must additionally be considered: A crossed check (a) may not be encashed but only deposited in the bank. There. New Sikatuna Wood Industries. in this case Lobitana's. and without notice that it has been previously dishonored. This respondents failed to do. Failing in this respect. if such was the fact. he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. respondents had the duty to ascertain the indorser's.Having disposed of the procedural issue. issued by Anita Peña Chua 17 . otherwise. Hence. respondents are guilty of gross negligence amounting to legal absence of good faith. Respondents' verification from Metrobank on the funding of the check does not amount to determination of Lobitana's title to the check. sold at a discount to State Investment House three post-dated crossed checks. 15 contrary to Section 52 (c) of the Negotiable Instruments Law. The main issue is whether respondents are holders in due course of Metrobank Check No. 14 HECTaA Based on the foregoing. 16 State Investment House v. (c)That he took it in good faith and for value. 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. 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. In the case of a crossed check. title to the check or the nature of her possession.
As to who the holder or authorized person will be depends on the instructions stated on the face of the check. in which case the drawee should pay only with the intervention of that bank or company. were not the ones who presented the check for payment. and thus. As a result. The Court found State Investment House not a holder in due course of the checks. and the liability did not attach to the drawer. there was no proper presentment. In this case. i.000. it was not the payee who presented the check for payment. Accordingly.00. however. the drawer did not become liable. in which case the drawee should not encash the same but merely accept the same for deposit. Thus. Consequently. or crossing may be general wherein between two parallel diagonal lines are written the words "and Co.naming as payee New Sikatuna Wood Industries. The three subject checks in the case at bar had been crossed generally and issued payable to New Sikatuna Wood Industries. Lobitana or Consing. liability did not attach to the drawer. Apparently. The Court also expounded on the effect of crossing a check. no right of recourse is available to respondents against the drawer . there is no question that the payees 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. or by some person authorized to receive payment on his behalf . It was respondents who presented the subject check for payment. crossing a check is done by placing two parallel lines diagonally on the left top portion of the check. private respondent wife. Inc. considering that petitioner is not the proper party authorized to make presentment of the checks in question. The effect therefore of crossing a check relates to the mode of its presentment for payment. presentment for payment to be sufficient must be made (a) by the holder." or none at all as in the case at bar. in the absence of due presentment. the check was dishonored for reason "PAYMENT STOPPED. Inc.. . the payee named therein. Lobitana negotiated and indorsed the check to respondents in exchange for P948." In other words. no right of recourse is available to petitioner against the drawer of the subject checks. there was no proper presentment. Under Section 72 of the Negotiable Instruments Law. thus: Under usual practice. it was not the payee who presented the same for payment and therefore. which could only mean that the drawer had intended the same for deposit only by the rightful person.e.
at 34-36. Therefore. Brion.Records. the fact that respondents are not holders in due course does not automatically mean that they cannot recover on the check.Under Rule 45 of the Rules of Court. 21 in this case Lobitana. Villon. Respondents can collect from the immediate indorser. concur. the trial court's judgment has long become final and executory as to Lobitana. petitioner cannot be obliged to pay the face value of the check. Abad and Perez. 57994. p. Petitioner issued the subject check supposedly for a loan in favor of Consing's group. cHAaCE However.Id.R. 22. since respondents are not the proper party authorized to make presentment of the subject check. there is no consideration for the issuance of the check. among others. 20which petitioner sufficiently established in this case. pp.Id. WHEREFORE. petitioner herein. 5. JJ. Consequently. 19 Among such defenses is the absence or failure of consideration. Footnotes 1. Lanzanas with Associate Justices Arsenio J. SO ORDERED.of the check. CV No. Penned by Associate Justice Enrico A. 2. . the face value of the subject check. 18 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.. 3.Rollo. Lobitana did not appeal the trial court's decision. Magpale and Sesinando E. 4. Since there is in fact no valid loan to speak of. 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. finding her solidarily liable to pay. 24-32. who turned out to be a syndicate defrauding gullible individuals. Del Castillo. concurring. we GRANT the petition. Significantly. We SET ASIDE the 16 August 2005 Decision and 30 November 2005 Resolution of the Court of Appeals in CA-G.
at 316-317. v.Id.State Investment House v. 15. Lufthansa German Airlines. CA.R. citing Chan Wan v. 8. supra note 14 at 649. L-15126. at 14-15. de Ocampo & Co. v. Inc. 503-504 (1988). Bataan Cigar and Cigarette Factory.Docketed as Civil Case No. 7. supra note 10.Rollo. 109 Phil. Court of Appeals. 30 November 1961. 230 SCRA 643. FIRST DIVISION .Bataan Cigar and Cigarette Factory. 648. 72764. No. 889 (1975). 175 SCRA 310.6. 21. 706 (1960).Id.Id. 16.Vicente R.Phil. supra note 10. G. 3 March 1994. G. 17.State Investment House v. 13 July 1989. v. 13.311 Phil. at 31. See also Ortigas.. v. 497. Intermediate Appellate Court. No.Id. Intermediate Appellate Court. Gatchalian. Intermediate Appellate Court. 14. p. MAN-1843. v. 12. 315.R. 9. Jr. Inc.State Investment House v. 170. 181 (1995). 603. 18. 242 Phil.Bataan Cigar and Cigarette Factory. 19. Commercial & Industrial Bank v. 20. Inc. 77. Court of Appeals. 159-A Phil. 11. No. Negotiable Instruments Law. 10.Id. supra. Tan Kim and Chen So. Court of Appeals. 93048.Section 28. 3 SCRA 596. 863.
— The presumption expressed in section 59 of the Negotiable Instruments Law. and JOSE F. 2. a general partnership. Chas. No. Tenney for appellant. HOLDER IN DUE COURSE. defendants-appellees. plaintiff-appellant.R. 19461. March 28. E.] CHARLES A. members of the said partnership of FERNANDEZ HERMANOS. RETRANSFER TO ORIGINAL PAYEE OR HIS AGENT. even though the consideration for the instrument has failed.. FOSSUM. — If the original payee of a note unenforceable for lack consideration repurchases the instrument after transferring it to a holder in due course. that is. FERNANDEZ HERMANOS. PRESUMPTION IN FAVOR OF HOLDER HAVING PRESENT POSSESSION.BILLS AND NOTES. and this must be proved as an independent matter of fact. or the bearer thereof. TITLE DERIVED FROM HOLDER IN DUE COURSE. The same is true where the instrument is retransferred to an agent of the payee. Ernesto Zaragoza and Jose Varela Calderon for appellees. FERNANDEZ Y CASTRO and RAMON FERNANDEZ Y CASTRO. where it appears that such holder derives his title through a holder in due course.ID. 3.ID. SYLLABUS 1.[G. . the paper again becomes subject in the payee's hands to the same defense to which it would have been subject if the paper had never passed through the hands of a holder in due course.. — A person who is not himself a holder in due course of a negotiable instrument may yet recover against the person primarily liable thereon. But in order that the holder may recover on the instrument under such circumstances. a payee or indorses who is in possession of the draft. There is no presumption that a person through whose hands an instrument has passed was a holder in due course. it is incumbent upon him to show that he person through whom he derives his indefeasible title was a holder in due course. arises only in favor of a person who is a holder in the sense defined in section 191 of the same Law. 1923. to the effect that every holder is deemed prima facie to be a holder in due course. FAILURE OF CONSIDERATION. vs. FAILURE OF CONSIDERATION.
and no action whatever can be maintained on the instrument by the American Iron Products Company. Charles A.. a concern engaged in business in New York City. 1919. without consideration. to deliver to said firm a tail shaft. and the two individuals named as defendants in the complaint. and it remained for a time dishonored in the hands of the Philippine National Bank in Manila. at sixty days. the same being in the amount of $2. Inc. Inc. a general commercial partnership engaged in business the Philippine Islands.. upon Fernandez Hermanos. and on February 10. Upon inspection after arrival in Manila the shaft was found not to be in conformity with the specifications and was incapable of use for the purpose for which it had been intended. Upon discovering this Fernandez Hermanos refused to pay the draft. to be installed on the ship Romulus. for the purchase price of the shaft. then operated by Fernandez Hermanos.. Fernandez Hermanos. Fossum.250. had drawn a time draft. Meanwhile the American Iron Products Company. but in the autumn of 1920 it was dispatched to Manila. and payable to the Philippine National Bank. Inc. in the character of members of said partnership. and was accepted by said firm on December 15. On the foregoing statement it is evident that the consideration for the draft in question and for the acceptance placed thereon by Fernandez Hermanos. acting as agent of that company. Charles A. the said Fossum. procedures an order from Fernandez Hermanos. was the resident agent in Manila of the American Iron Products Company.DECISION STREET. Considerable delay seems to have been encountered in the matter of the manufacture and shipment of the shaft. and delivered it to the plaintiff. as managers of La Compania Maritima. 1921. In due course the draft was presented to Fernandez Hermanos for acceptance. or by any . 1920. who thereupon instituted the present action on the instrument against the acceptor. 1920. Later the bank indorsed the draft in blank. has completely failed. J : p Prior to the date of the making of the contract which gave rise to this litigation the plaintiff. It was stipulated that said tail shaft would be in accordance with the specifications contained in a blueprint which had been placed in the hands of Fossum on or about December 18. Fossum. having arrived in January. and it was further understood that the should be shipped from New York upon some steamer sailing in March or April of the year 1920. according to its tenor.
In this connection it was incumbent on the plaintiff to show. His attorney. and it was incumbent upon the plaintiff in this action to show that the bank had in fact acquired the instrument for value and under such conditions as would . after it was overdue. a payee or indorse is in possession of the draft. in the making of the contract. in order to be a holder. the bank was a holder in due course. that is. calls attention to in due course may yet recover against the person primarily liable where it appears that such holder derives his title through a holder in due course.) If this action had been instituted by the bank itself. 559. and considering that the plaintiff Fossum. he was himself a party to the contract which supplied the consideration for the draft. or the bearer thereof. as between the original parties. he procured the instrument to be indorsed by the bank and delivered to himself without the payment of value. We are of the opinion that the trial judge has committed no error. the presumption that the bank was a holder in due course would have arisen from the tenor of the draft and the fact that it was in the bank's possession. The difficulty of the plaintiff's position from this point of view is that there is not a line of proof in the record tending to show as a fact that the bank itself was ever a holder of this draft in due course. was individual who had acted for the American Iron Products Company. e. In recognition of this fact.other person against whom the defense of failure of consideration is available. The presumption expressed in that section arises only in favor of a person who is a holder in the same defined in section 191 of the same law. and with full notice that. that the person under whom the plaintiff claims i. Rosenbaum. the plaintiff himself is far from being a holder of this draft in due course. and upon this point the plaintiff can have no assistance from the presumption. 574. no presumption arises as to the character in which the bank held the paper. To begin with. Under this definition. 191 Mo. but when the instrument passed out the possession of the bank and into the possession of the present plaintiff.. albeit he there acted in a representative capacity. Inc. as an independent matter of fact. Under these circumstances recovery on this draft by the plaintiff by virtue of any merit in his own position is out of the question. expressed in section 59 of the Negotiable Instruments Law. In the second place. the trial court held that the action could not be maintained and absolved the defendants from the complaint. (Night & Day Bank vs. to the effect that every holder is deemed prima facie to be a holder i n due course. App. The bank's relation to the instrument became history when it delivered the document to the plaintiff. however... one must be in possession of the note or the bearer thereof. From this judgment the plaintiff appealed. in whose name the action is brought. In the first place. the consideration had completely failed.
and in the absence of proof the presumption must be that he still occupies the relation of agent to that company. There is another circumstance which exerted a decisive influence on the mind of the trial judge in deciding the case for the defendants. and before the commencement of the action. It is a well-known rule of law that if the original payee of a note unenforceable for lack of consideration repurchases the instrument after transferring it to a holder in due course. Inc. 470.. to the transaction giving origin to the instrument. Bender. 8 C. In the entire absence of proof on this point. the paper again becomes subject in the payee's hands to the same defenses to which it would have been subject if the paper had never passed through the hands of a holder in due course. Certainly an agent who actually makes a contract. They were then indorsed by the plaintiff to a bank which became holder in due course. The notes in suit were executed by the defendant in payment of the separator. in whose . It was held that the plaintiff could not recover. This is found in the fact that the plaintiff personally made the contract which constituted the consideration for this draft. 569). He was therefore a party in fact. 515. R. can stand on no better footing than his principal with respect to commercial paper growing out of the transaction. J. App. the action must fail. L. To place him on any higher plane would be incompatible with the fundamental conception underlying the relation of principal and agent. the plaintiff. and were assigned to the plaintiff before maturity.. would thresh and clean grain as well as any other separator of like size.. the notes were retransferred by the bank to the plaintiff. A. as agent of a corporation engaged in manufacturing agricultural implements. if not in law. Shade vs. [1915D]. with a general warranty that the machine. Hopkins (72 III. 25 Mich. 128 Mich. and it is difficult to see how the plaintiff could strip himself of the character of agent with respect to the origin of the contract and maintain this action in his own name where his principal could not. Calkins. (Kost vs. properly handled. but afterwards. 509). notwithstanding the fact that the notes had passed through a bank.) The same is true where the instrument is re-transferred it an agent of the payee (Battersbee vs.. In an action upon the notes the defendant alleged and proved breach of warranty and showed that the plaintiff knew of the defect in the separator at the time he purchased the notes. Hayes. 271. and who has notice of all equities emanating therefrom. In Dollarhide vs. sold to the defendant a separator for threshing small grain. We note that in the present case there is no proof that the plaintiff Fossum has ceased to be the ceased to the agent of the American Iron Products Company.constitute it a holder in due course.
so far as the legal consequences of certain acts are concerned. Fossum on the witness stand that the draft in question was indorsed and delivered to him by the bank in order that suit might be brought thereon in his name for the use and benefit of the bank. and that the bank is the real party in interest. is a rule of general jurisprudence that must operate in conjunction with that Law. or assignment. It appears from statements of Mr.. A.J. and Romualdez. Ostrand. was drawn by the American Iron Products Company. It is therefore unnecessary to discuss the bearing of this circumstance on the second feature of the case discussed in this opinion. Avanceña.. with costs against the appellant. C.. itself. Assuming that the suggestion thus made is true. J. Villamor.. We find nothing in the Negotiable Instruments Law that would interfere with the application of the doctrine applied in the cases above cited. Johns.. In addition to this it appears that during the pendency of the cause in this court on appeal a formal transfer. Inc. concur. which is said to be the real party in interest. in New York. Separate Opinions MALCOLM. J. to the bank was made by Fossum of all his interest in the draft and in the cause of action. for the rule that identifies the agent with the principal.hands they would not have been subject to the defense which had been subject to the defense which had been interposed (54 L. dissenting: The bill of exchange mentioned in the majority opinion.. and it is so ordered. and the use of the same of Fossum strikes us a mere attempt at an evasion of the rule of law that would have been fatal to the success of an action instituted by that company. The said bill . the result of the lawsuit in this court is not thereby affected. 678). payable sixty days after sight to the order of the Philippine National Bank. and addressed to Fernandez Hermanos of Manilas drawee. JJ. concurs in the result. since it has not been affirmatively shown that the bank is an innocent purchaser for value. and here in question. Araullo. For the reasons stated the judgment appealed from must be affirmed. R. Inc. We consider the situation to be the same in practical effect as if the action had been brought in the name of the American Iron Products Company..
has all the rights of such former holder in respect of all parties prior to the latter." Such are the facts. and who is not himself a party to any fraud or illegality affecting the instrument. A. 28. Varadero de Manila. P. EQUITABLE-PCI BANK). 2007.] . seas. Kaufman. petitioner. (Act. I must dissent. vs. No. (Sgd. O. 132419. [G. 57.R. No. 2031. 2007. 1920.. The absence or failure of consideration is not a defense against a holder in due course. 132403. Fossum is in exactly the same situation as the Philippine National Bank would be. 59. INSULAR BANK OF ASIA AND AMERICA (later PHILIPPINE COMMERCIAL INTERNATIONAL BANK and now. 13 February. A holder who derives his title through a holder in due course. Accordingly. as appears from the following: "Philippine National Bank. Fossum. 58.of exchange was accepted by Fernandez Hermanos. although it is a defense against a holder not in due course. September 28..) The plain provisions of the Negotiable Instruments Law should not be ignored and they should be construed and applied in accordance with the language of the Act and in accordance with precedents construing and applying the Uniform Negotiable Instruments Law. (Sgd. 1920. 51. 15th Dec. as clearly appears from the Negotiable Instruments Law. Due." The Philippine National Bank later indorsed the bill of exchange to Charles A. Manila. respondent. No. September 28. 52.) E." Under the provisions of this section. FIRST DIVISION [G. .I. C. Such is the law.] HI-CEMENT CORPORATION. Fossum entitled to all the rights that pertain to the Philippine National Bank as holder in due course.) Fernandez Hermanos. . Section 58 of the Negotiable Instruments Law provides: ".R. as appears from the following: "Accepted.
Sometime in 1979. J : p At bar are consolidated petitions assailing the decision of the Court of Appeals (CA) dated January 21. in February 1981.T.T. So were the checks of Riverside and Kanebo. Henry to execute a promissory note and a deed of assignment bearing the conformity of the client to the rediscounting. 1998 in CA-G. with pre-deducted interest.T. However. respondent required E. Henry & Co. Henry was able to re-discount its clients' checks (with deeds of assignment) with respondent.T.T.E.. 3 Riverside Mills Corporation (Riverside) and Kanebo Cosmetics Philippines.. et al. (E. Inc.R. 2 Among E. For every transaction. 6 . (Kanebo). Henry's customers were petitioner Hi-Cement Corporation (Hi-Cement). respondent. Henry and respondent were into "re-discounting" of checks. Inc. 31600 entitled Insular Bank of Asia and America [now Philippine Commercial International Bank/(PCIB)] v. E.T. In other words. Petitioners Enrique Tan and Lilia Tan (spouses Tan) were the controlling stockholders of E. and SPOUSES ENRIQUE TAN and LILIA TAN. E.T. DECISION CORONA.T. E. Henry). the postdated checks of its clients.T." Through this arrangement. vs.T.T. 4 From 1979 to 1981. E. EQUITABLE-PCI BANK). Henry. Henry a credit facility known as "Purchase of Short Term Receivables. For their purchases. Henry & Co. petitioners. HENRY & CO. a company engaged in the business of processing and distributing bunker fuel. 20 checks 5 of Hi-Cement (which were crossed and which bore the restriction "deposit to payee's account only") were dishonored. 1 The antecedent facts follow. Henry was able to encash. these corporations issued postdated checks to E. INSULAR BANK OF ASIA AND AMERICA (later PHILIPPINE COMMERCIAL INTERNATIONAL BANK and now. respondent Insular Bank of Asia and America (later PCIB and now Equitable PCI-Bank) granted E. CV No.
00 Respondent also sought to collect from E.T. exclusive of accrued and accruing interests.50 2. respectively) as deficiencies resulting from the foreclosure of the real estate mortgage on E. Riverside and Kanebo sought the dismissal of the case against them.750.T.51 and P4. (2) the deed of assignment purportedly executed by Hi-Cement assigning them to respondent only bore the conformity of its treasurer and (3) respondent was not a holder in due course as it should not have discounted them for being "crossed checks. the trial court rendered a decision which read: . Henry's favor.5.811.266.Respondent filed a complaint for sum of money 7 in the then Court of First Instance of Rizal 8 against E. On June 30.a.805.Hi-Cement Corporation10. Henry. respondent claimed that. Riverside and Kanebo. 1989.T.00 3. 12 Hi-Cement filed its answer alleging. Hi-Cement (including its general manager 9 and its treasurer 10 as signatories of the postdated crossed checks). charges and penalties such as attorney's fees and expenses of litigation.Riverside Mills CorporationP115. For their part. Henry and the spouses Tan other loan obligations (amounting to P1. among others.000. Inc. 11 In its complaint. that: (1) its general manager and treasurer were not authorized to issue the postdated crossed checks in E. (2) the extra-judicial sale of the mortgaged Sucat property was void due to gross inadequacy of the bid price 15 and (3) their loans were subjected to a usurious interest rate of 21% p. as follows: 1.900.T.312. Riverside and Kanebo). 14 E. Henry's property in Sucat. Henry. Parañaque.661.T. arguing that they were not privy to the re-discounting arrangement between respondent and E.Kanebo Cosmetics Philippines.T. the spouses Tan. it suffered actual damages equivalent to their value. Henry and the spouses Tan claimed that: (1) the drawers of the postdated checks failed to honor them due to the adverse economic conditions prevailing at the time respondent presented them for payment." 13 In their answer (with counterclaim against respondent and cross-claims against Hi-Cement. due to the dishonor of the checks.000.
4.Ordering [E. Henry] and/or [spouses Tan] to pay to [respondent] the sum of P4. Hi-Cement. 18 In G. Henry.50 (b)Kanebo Cosmetics Philippines. No.WHEREFORE.T. 16 SO ORDERED.R. Hence. In G. services. to wit: 1.266. spouses Tan. and penalties until fully paid. (2) respondent was not a holder in due course and (3) there was no basis for the lower court's holding that it was solidarily liable for the face value of Riverside's and Kanebo's checks. to pay [respondent] damages represented by the face value of the postdated checks as follows: (a)Riverside Mills CorporationP115. these petitions. Hi-Cement. charges.805. Riverside and Kanebo] to pay [respondent] [a]ttorney's fees and expenses of litigation in the amount of P200.5.661.51 plus interests.Ordering [E. 17 Only petitioners appealed the decision to the CA which affirmed it in toto.00 and pay the cost of this suit.T.000. Riverside and Kanebo].R. Riverside and Kanebo]. this Court hereby renders judgment in favor of [respondent] and against [E. 3.750. on the other hand.000.T.00 (c)Hi-Cement Corporation10. Inc. charges and penalties until fully paid. Henry and the spouses Tan essentially contend that the lower courts erred in: (1) applying the doctrine of piercing the veil of the corporate entity to make the spouses Tan solidarily liable .T. in view of the foregoing. jointly and severally.Ordering [E. charges.T.312. spouses Tan. Henry and spouses Tan] to pay [respondent] the sum of P1. Henry. 2. E.00 plus accrued interests.000.T. 132419. Henry. spouses Tan.Ordering [E. No.900. Hi-Cement. and as a consequence of the preponderance of evidence. 132403.00 plus interests.811. petitioner Hi-Cement disclaims liability for the postdated crossed checks because (1) it did not authorize their issuance. penalties until fully paid.
19 (A) G. respondent could not be considered a holder in due course. (c) he took it in good faith and for value and (d) at the time it was negotiated to him. he . or the person who is in possession of it. specifically Section 191. 132403 As a rule. (b) he became the holder of it before it was overdue. was able to re-discount with respondent. specially when affirmed by the appellate court. in turn. Section 52 23 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. Henry's Sucat property as void. are generally binding on us unless there was a misapprehension of facts or when the inference drawn from the facts was manifestly mistaken. if such was the fact.with E. 21 This case falls within the exception. and (3) not declaring the foreclosure of E. an appeal by certiorari under Rule 45 of the Rules of Court is limited to review of errors of law. AUTHORITY OF HI-CEMENT'S GENERAL MANAGER AND TREASURER TO ISSUE THE POSTDATED CROSSED CHECKS Both the trial court and the CA concluded that Hi-Cement authorized its general manager and treasurer to issue the subject postdated crossed checks. 20 The factual findings of the trial court. On the other hand. They both held that Hi-Cement was already estopped from denying such authority since it never objected to the signatories' issuance of all previous checks to E. notwithstanding such fact.T. Henry which the latter. (2) not ruling on their cross-claims and counterclaims.T. or the bearer thereof.R. 22 provides: "Holder" means the payee or indorsee of a bill or a note. However. We agree with the lower courts that both the general manager and treasurer of Hi-Cement were authorized to issue the subjects checks. and without notice that it has previously been dishonored. RESPONDENT BANK NOT A HOLDER IN DUE COURSE The Negotiable Instruments Law (NIL).T. Henry.
Atrium was aware of the fact that the checks were all for deposit only to payee's account. From the beginning. George King. the holder is not a holder in due course. Hi-Cement stopped payment. CA. CA.T. Henry was the payee of four Hi-Cement postdated checks which it endorsed to Atrium. In that case. Inc. When the latter presented the crossed checks to the drawee bank. then.had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. (b) the check may be negotiated only once — to one who has an account with a bank [and]. sold the checks on discount to State Investment House. Inc. in Atrium Management Corporation v. In Bataan Cigar and Cigarette Factory. Clearly. In the case at bar. Good faith becomes inconsequential . however. Likewise. Henry. we explained: In order to preserve the credit worthiness of checks.T. we held that Atrium (with which the checks were re-discounted) was not a holder in due course. the last two requirements were not met. Henry. SIHI filed a collection case against it. he is not a holder in due course. respondent's claim that it acted in good faith when it accepted and discounted Hi-Cement's postdated crossed checks from E.T. 25 where E. In the case at bar. 27 We held that Atrium was not a holder in due course: In the instant case. meaning E. There. Henry (as payee therein) fails to convince us. the drawer (BCCF) issued postdated crossed checks in favor of one of its suppliers (George King) who promised to deliver bales of tobacco leaf but failed. (SIHI) and upon the latter's presentment to the drawee bank. BCCF ordered a "stop payment. 24 we held that the holder of crossed checks was not a holder in due course. In ruling that SIHI was not a holder in due course. Absent any of the elements set forth in Section 52. Atrium could not be considered a holder in due course.T." Thereafter. (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. the checks were crossed and specifically indorsed for deposit to payee's account only. (BCCF) v. E. otherwise. 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. HiCement and its treasurer 26 again engaged in a legal scuffle over four postdated crossed checks.
it was not expected to be careless and negligent. Failing in this respect.e. 30 SIHI re-discounted crossed checks and was declared not a holder in due course. 28 Its business is impressed with public interest. there was no proper presentment. 29 we ruled: 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. CA. . thus. We ruled that: The three subject checks in the case at bar had been crossed . . The records likewise reveal that respondent completely disregarded a telling sign of irregularity in the re-discounting of the checks when the general manager did not acquiesce to it as only the treasurer's signature appeared on the deed of assignment. and as such[. (SIHI) v. We answer in the negative. Intermediate Appellate Court. hence. in the absence of due presentment.. when it presented the checks for deposit. it was not the payee who presented the same for payment and therefore. i. . .amidst proof of respondent's grossly negligent conduct in dealing with the subject checks. the holder is declared guilty of gross negligence amounting to legal absence of good faith. In Bataan Cigar and Cigarette Factory. . the drawer did not become liable. we deemed that its presentment to the drawee bank was not proper. 32 where we affirmed the CA ruling that the drawer of the postdated crossed checks was not liable to the holder who was deemed not a holder in due course. specially so where the checks it dealt with were crossed. Apparently. As a result. and the liability did not attach to the drawer. Inc. Thus. Inc. Respondent was all too aware that subject checks were crossed and bore restrictions that they were for deposit to payee's account only. In State Investment House. they could not be further negotiated to it. hence. the payee named therein. the liability did not attach to the drawer of the checks. it behooved respondent to act with extraordinary diligence in every transaction. (emphasis supplied) The next query is whether Hi-Cement can still be made liable for the checks. As a banking institution..] the consensus of authority is to the effect that the holder of the check is not a holder in due course. 31 Our resolution in the foregoing case was reiterated in Atrium Management Corporation v. which could only mean that the drawer had intended the same for deposit only by the rightful person.
we ruled that it may recover from the party who indorsed/encashed the checks "if the latter has no valid excuse for refusing payment. However. solidary liability cannot be presumed but must be established by law or contract. although the language of the trial court decision's dispositive portion seemed confusing. No. it should pay respondent. Since E. 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. (B) G. or that each one of the latter is bound to render. Henry had no justification to refuse payment.We note. subject to the Rules governing the multiplicity of suits. Articles 1207 and 1208 of the Civil Code provide: Art. In both. Furthermore. Henry and/or the spouses Tan for the respective values of their checks. or when the obligation requires solidarity.T. a reading of the decision in its entirety reveals that the fallo was for each corporation to be liable solidarily with E.T. however. If from the law. 1207. At any rate." Here. Henry that re-discounted Hi-Cement's checks and received their value from respondent. the issue has become moot in view of our ruling that Hi-Cement is not liable for the checks. SOLIDARY LIABILITY OF HICEMENT FOR THE FACE VALUE OF RIVERSIDE'S AND KANEBO'S CHECKS Hi-Cement could not also be made solidarily liable with Riverside and Kanebo for the face value of their checks. There is solidary liability only when the obligation expressly so states. or the nature of the wording of the obligations to which the preceding article refers to the contrary does not appear. 1208.T. there was no doubt that it was E. 132419 . 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.R. (emphasis supplied) Art. the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors. that in the two aforementioned cases. the credits or debts being considered distinct from one another. entire compliance with the presentation. Neither is present here. Hi-Cement had nothing to do with the checks of these two corporations.
36 It is never presumed. 35 Similarly. we hold that E.T. the CA held: .. It appears that spouses Tan are controlling stockholders of E.DOCTRINE OF PIERCING THE VEIL OF CORPORATE ENTITY In their petition. 33 It is only when the fiction or notion of legal entity is used to defeat public convenience. Henry's corporate veil should not have been pierced at all. same being true when the corporation is controlled. They claim that both the trial and appellate courts failed to cite the reasons why the doctrine was relevant to them. First. .T. Henry and the spouses Tan in this respect. Fraud is an allegation of fact that demands clear and convincing evidence. and its affairs are so conducted to make it merely an instrumentality.T. Henry and the spouses Tan defrauded respondent. Henry & Co. After a careful study of the records.T. agency or conduit of another. 38 For this ground to . justify wrong. . the CA left a gaping hole by failing to provide the basis for its ruling that E. the trial court failed to provide a clear ground why the doctrine was used. The business of the corporation was conducted solely for the benefit of the spouses Tan who colluded with [Hi-Cement] in defrauding [respondent]. 34 This is referred to as the doctrine of piercing the veil of corporate entity. E. . If any general rule can be laid down. perpetuate fraud or defend crime that the law will shred the corporate legal veil and regard it as a mere association of persons. Henry's and the spouses Tan's case. 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 sufficient ground for disregarding the separate corporate personality. Inc. We agree with petitioners E. it is that the corporation will be looked upon as a legal entity until sufficient reasons to the contrary appear. It merely stated that it agreed with respondent's arguments but did not explain why the doctrine was relevant to petitioner E.T. Henry and the spouses Tan argue that the lower courts erred in applying the "piercing the veil of corporate entity" doctrine to their case. It did not also state what act constituted the fraud. On the other hand. . [I]t is a settled law in this and other jurisdictions that when the corporation is a mere alter ego of a person.T. As the lower court cited . as well as its authorized signatories. 37 Second.
T.T.stand in this case.T. E." 40 Furthermore. Henry and the spouses Tan failed to implead Hi-Cement. . there must be proof that the spouses Tan: (1) had control or complete domination of E. unless shocking to the conscience. COUNTERCLAIMS AND CROSS-CLAIMS Lastly. (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. for this technical lapse. 41 The term "defendant" may refer to the original defending party. Riverside and Kanebo. Henry and the spouses Tan filed the counterclaim against respondent on the basis of an alleged void foreclosure proceeding on E. etc. in the event of a regular sale. (was) not sufficient to set aside the sale if there (was) no showing that. the defendant in a counterclaim. in the absence of any irregularity in the foreclosure proceeding or proof that it was carried out without strict observance of the procedure. every action.T. Under Rule 3 of the Rules of Court. Henry's finances and that the latter had no separate existence with respect to the act complained of. E. E. In this case. must be prosecuted or defended in the name of the real party in interest. Second. We decline to do so.T. we are constrained not to pass on E. First. Henry and the spouses Tan call this Court's attention to the alleged failure of the lower court to pass upon their counterclaim against respondent or cross-claims against Hi-Cement. we will continue to assume its regularity and strike down any attempt to vitiate it.) party defendant. Henry and the spouses Tan made no mention of any anomaly to support the nullification of the foreclosure sale but merely alleged a disparity in the bid price and the property's fair market value. we agree with the CA that the "mere inadequacy of the price obtained at the [s]heriff's sale. They ask us now to hold these parties liable on the basis of said claims. 39 The records of this case do not show that these elements were present. including a counterclaim (or a cross-claim). a better price (could) be obtained. 42 Hence.T. INADEQUACY OF THE BID PRICE TO ANNUL FORECLOSURE PROCEEDING With respect to the allegation that foreclosure was void due to the inadequacy of the bid price. the crossdefendant or the third (fourth. Riverside and Kanebo as parties in the case at bar. Henry's and the spouses Tan's cross-claims.T. E.
Only petitioner E. Let the records of this case be remanded to the trial court for the proper computation of E. JJ.A.P10.T.51 and P4.. Footnotes 1. 31600 is hereby AFFIRMED with MODIFICATION.Penned by Justice B. attorney's fees and costs of litigation. 132419 posed no contest on the lower courts' ruling on E. Henry & Co. petitioner HiCement Corporation is discharged from any liability. CV No.. charges and penalties until fully paid. Henry's. Barrios .Henry's Sucat property due to an inadequate bid price. Henry and the spouses Enrique and Lilia Tan. 43 To be consistent. No.000. Henry. Accordingly. the solidarity liability arising from the checks of Riverside and Kanebo shall only be enforced against E.805 plus accrued interests. Puno. Costs against petitioners E.900.the loans for P1. C.266. is ORDERED to pay respondent Insular Bank of Asia and America (later Philippine Commercial International Bank and now Equitable PCI-Bank) the following: 1. however. the assailed decision of the Court of Appeals in CA-G. Riverside's and Kanebo's liabilities for the checks. Sandoval-Gutierrez. SO ORDERED. It is no longer necessary to delve into this matter in view of our finding that the mere inadequacy of the bid price on the property did not automatically render the foreclosure sale irregular or void.661. Adelfuin-de la Cruz (retired) with the concurrence of Justices Alicia Austria-Martinez (now Supreme Court Justice) and Roberto A.T. Azcuna and Garcia.R.000 representing the value of Hi-Cement's checks it received from respondent plus accrued interests.J. concur. Henry and the spouses Tan.R. charges and penalties until fully paid. WHEREFORE.T.T. and 2. the petition in G. with our dictum on the separate personality of E.T. Henry's and the spouses Tan's solidary liability with Riverside and Kanebo vis-a-vis their checks. Incidentally.T.
For the total amount of P10 million.T. 11.312. 132419. 74.Now Regional Trial Court (RTC).T. 42-45. Henry filed the counterclaim against respondent to nullify the foreclosure sale and cross-claims against Hi-Cement.Under the Negotiable Instruments Law. Henry are the petitioners in G.811. 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.The complaint also impleaded Philip Tanchi and Edward Lee as signatories of Riverside and Kanebo. No.R. 4.Respondent's Comment. 132403).T.Hi-Cement is the petitioner in G. 6. 132403. No. Henry's Sucat. 14. or the person who is in possession of either. 5. Rollo (G. .750.With application for a writ of preliminary attachment.Lourdes Meer de Leon. Under Section 191 of the same law. No. 2.50 and Kanebo's 19 checks amounted to P5. (b) he became the holder of it before it was overdue. 12. 10. Fifteenth Division of the Court of Appeals. 132403).E.T.R. pp. 7. 3.R. p.R.The spouses Tan and E. and without notice that it has previously been dishonored. rollo (G. The payment of these loans was secured by two real estate mortgages on E.Riverside's check was worth P115. if such was the fact. 9. No. a "holder" is the payee or indorsee of a bill or a note. Parañaque property which were enforced by respondent after the latter failed to pay the loans. Henry obtained loans (on separate dates) from respondent. Riverside and Kanebo for the value of their dishonored checks. particularly Section 52 thereof. he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.(deceased).Antonio de las Alas. 13. 8.E. (c) he took it in good faith and for value and (d) at the time it was negotiated to him.
Hi-Cement stopped payment claiming the checks were issued without its authority. 16. No. G. 30. 121794. No.R. 27. 22 September 2005. 28 February 2001.Rollo (G. pp.R. The trial court previously dropped the charges against de las Alas and de Leon on findings that they merely acted in a representative capacity. 353 SCRA 23.R. 167346. 29. 25. No. Lourdes de Leon v. No.R. 132403). No. 21. 166550. 17. Rafael De Leon and Hi-Cement Corporation. No. According to the Court. 20. 18. 38-A to 42. 109491. CA and Hi-Cement Corporation. 2 April 2007. 470 SCRA 585. 3 March 1994.Id. Henry and Co.Decided by Judge Jainal D. No.Rollo (G. p. . 26 January 2005. G. 24.The full title of the case was Atrium Management Corporation v.R.T. 132419).G. 22.R.Lourdes Meer de Leon.. De Leon. 22.Solidbank Corporation v. 28. 230 SCRA 643. p. 13 July 1989. Spouses Tan. 23. Henry. In this case. CA. Henry and spouses Tan claimed that the Sucat property was worth P23 million during the foreclosure sale but was awarded to respondent as the highest bidder for only P10 million.E. Rollo (G. 152115. 26. Rasul.R. No. CA.Id.15. Purefoods Corporation. No.R. 42.Supra at note 13. consolidated with G. p. G. 132419). E. No.Casol v. 19.R. 132419).Supra at note 24. 72764.T.T. she was aware that the checks were strictly indorsed for deposit only to the payee's account and not to be further negotiated. Hi-Cement's treasurer (de Leon) was found to have been negligent when she signed the confirmation letter (deed of assignment) for the rediscounting of the crossed checks issued in favor of E.R. Lourdes Victoria M. (G. 93048.G. G. 23.Usero v. 449 SCRA 352.R. 175 SCRA 310. No.
R. Ltd. 384 Phil. Traders Royal Bank v. November 13. 1 (2000).Since Riverside and Kanebo did not appeal the trial court's decision. 171 (2000). G.] MARCELO A. No. Vasquez. 20 April 1990. Loyola v. 383 Phil. respondents. Cezar. 36. Ltd. vs. 42. CA. 316-317. L-24571. 43. it is deemed final and executory to them. 418 (2000).Id.Francisco v. 447 Phil.. GONONG. Maestrado v. 34. 362 SCRA 738. Mejia. 1986. Sps. THE HONORABLE INTERMEDIATE APPELLATE COURT.R. 362 Phil. v. 37. 32. See also Pabalan v. MESINA. 89879. Section 1. See also Tankiko v. 306 (2003). No. petitioner. v. G. No. 39. JOSE GO. Section 2. 14 August 2001. CA. Rehabilitation Finance Corporation. 38. No. 36 SCRA 289.R. 336 Phil. See also Ponce de Leon v.Francisco v. and ALBERT UY.Cathay Pacific Airways. 184 SCRA 495.Rule 3. Mejia. supra. 184 (1999). 15 (1997).Supra at note 1.Manila Hotel Corp. Sps. 41. HON.Cathay Pacific Airways. v. in his capacity as Judge of Regional Trial Court — Manila (Branch VIII).Supra at note 25. ARSENIO M.31. NLRC. 70145. SECOND DIVISION [G. . CA. 35. 33. 141617.Rule 3. NLRC. 397 Phil. 40. pp. 18 December 1970. Vazquez.Supra at note 1.Id. supra.
his visitor Lim was already gone. When he returned to his desk. Several days later. which suggestion Jose Go immediately followed. 1984. the same was again returned to Associated Bank on January 4. which dismissed the petition for certiorari and prohibition filed by Marcelo A. Mesina regarding their conflicting claims over Associated Bank Cashier's Check No. in its letter. replied saying the check belonged to Jose Go who lost it in the bank and is laying claim to it. who had then a visitor in the person of Alexander Lim. Said case (an Interpleader) was filed by Associated Bank against Jose Go and Marcelo A. if payment is not made. with the words "Payment Stopped" stamped on it. He also executed an affidavit of loss. Unfortunately. dated Jan. Mesina against the trial court in Civil Case No. the facts and statement of the case are as follows: Respondent Jose Go. from a certain Atty. purchased from Associated Bank Cashier's Check No. The latter advised Jose Go to go to the bank to accomplish a "STOP PAYMENT" order.000. Briefly. . Uy had to answer a phone call on a nearby telephone after which he proceeded to the men's room. When Jose Go inquired for his cashier's check from Albert Uy. However. respondent Associated Bank received a letter. pointing to the person of Alexander Lim as the one who could shed light on it. The bank manager entrusted the check for safekeeping to a bank official. on December 29. J : p This is an appeal by certiorari from the decision of the then Intermediate Appellate Court (IAC for short). 1984. a certain Albert Uy. 1985. dated January 9.DECISION PARAS. coming from Prudential Bank. Albert Uy went to the police to report the loss of the check.P. He however refused to reveal the name of his client and threatened to sue. which was being held by his client. 04710. 011302 for P800. 8422515. S. Jose Go left said check on the top of the desk of the bank manager when he left the bank. Respondent bank. now the Court of Appeals (CA) in AC-G. 1984 and for the second time it was dishonored.000.00. 1983. Escolta Branch. Lorenzo Navarro demanding payment on the cashier's check in question. dated January 20.R. 1983. 22. The check was immediately dishonored by Associated Bank by sending it back to Prudential Bank. The records of the police show that Associated Bank received the lost check for clearing on December 31.00. dated December 29. 011302 for P800. 1983. the check was not in his folder and nowhere to be found.
Respondent bank moved to amend its complaint. 1984 bearing the number C-11139. Meanwhile. Jose Go and one John Doe. 1984 in the Interpleader Case and moved to participate as intervenor in the complaint for damages. Mesina. Simultaneously. Gimao went to Marcelo Mesina to ask how he came to possess the check. An information for theft (Annex J) was instituted against Alexander Lim and the corresponding warrant for his arrest was issued (Annex 6-A) which up to the date of the filing of this instant petition remains unserved because of Alexander Lim's successful evasion thereof. Navarro's then unnamed client. requesting assistance in identifying the person who tried to encash the check but said bank refused saying that it had to protect its client's interest and the identity could only be revealed with the client's conformity. 1984. Jose Go filed his answer on February 24. he said it was paid to him by Alexander Lim in a "certain transaction" but refused to elucidate further. Petitioner instead of filing his answer to the complaint in the interpleader filed on May 17. 1984. The trial court in the interpleader case issued an order dated July 13. Atty. On the scheduled date of pre-trial conference in the interpleader case. police sent a letter to the Manager of the Prudential Bank. respondent bank received summons and copy of the complaint for damages of a certain Marcelo A. 1984 declaring . Gimao of the Western Police District that the lost check of Jose Go is in the possession of Marcelo Mesina. Upon motion for respondent Jose Go dated October 31. Albert Uy filed a motion for intervention and answer in the complaint for Interpleader. Mesina from the Regional Trial Court (RTC) of Caloocan City filed on January 23.On February 1. When Cpl. Respondent bank in the other civil case (CC-11139) for damages moved to dismiss suit in view of the existence already of the Interpleader case. respondent judge issued an order on November 6. denying the motion to dismiss of petitioner Mesina and ruling that respondent bank's complaint sufficiently pleaded a cause of action for interpleader. 1984. Navarro's client and substituted Marcelo A. respondent Associated Bank on February 2. On even date. Mesina for John Doe. respondent bank. 1984 filed an action for Interpleader naming as respondent. thru representative Albert Uy. herein petitioner. having been notified for the first time of the name of Atty. 1984. failure to state a cause of action and lack of personality to sue. Escolta Branch. Petitioner filed his motion for reconsideration which was denied by the trial court on September 26. informed Cpl. it was disclosed that the "John Doe" impleaded as one of the defendants is actually petitioner Marcelo A. Unsure of what to do on the matter. 1984 an Omnibus Motion to Dismiss Ex Abudante Cautela alleging lack of jurisdiction in view of the absence of an order to litigate.
CC-011302? Said issue having been resolved already in Civil Case No. 1984. SO ORDERED." On March 29. 1985. really this instant case has become moot and academic. 1984 as well as the Motion For Reconsideration dated September 10. judgment is hereby rendered ordering plaintiff Associate Bank to replace Cashier's Check No.petitioner in default since his period to answer has already expired and set the ex-parte presentation of respondent bank's evidence on November 7. 1984. the trial court in Civil Case #8422515 (Interpleader) rendered a decision. 84-22515. in view of the foregoing. 011302 in favor of Jose Go or its cash equivalent with legal rate of interest from date of complaint. Petitioner Mesina filed a petition for certiorari with preliminary injunction with IAC to set aside 1) order of respondent court denying his omnibus Motion to Dismiss 2) order of respondent court denying his Motion for Reconsideration and 3) the order of default against him. On January 22. issued an order. SO ORDERED. 84-22515 and in this instant case are the same which is: who between Marcelo Mesina and Jose Go is entitled to payment of Associated Bank's Cashier's Check No. the pertinent portion of which states: "The records of this case show that on August 20. and with costs of suit against the latter." . Meanwhile. 1985). C-11139. for damages. Petitioner Mesina filed his Motion for Reconsideration which was also denied by the same court in its resolution dated February 18. 1985. in view of the foregoing. 1984 proceedings in this case was (were) ordered suspended because the main issue in Civil Case No. WHEREFORE. 1985. the dispositive portion reading as follows: "WHEREFORE. IAC rendered its decision dismissing the petition for certiorari. In view of the foregoing ruling no more action should be taken on the "Motion For Reconsideration (of the Order admitting the Intervention)" dated June 21. the motion should be as it is hereby granted and this case is ordered dismissed. the trial court in Civil Case No. on same date (February 18.
If a payee of a cashier's check obtained it from the issuing bank by fraud.Annul the orders of respondent Judge of RTC Manila giving due course to the interpleader suit and declaring petitioner in default. 3. 1985 resolution denying the Motion for Reconsideration. He refused to say how and why it was passed to him. Admittedly. Moreover. Theories and examples advanced by petitioner on causes and effects of a cashier's check such as 1) it cannot be countermanded in the hands of a holder in due course and 2) a cashier's check is a bill of exchange drawn by the bank against itself — are general principles which cannot be aptly applied to the case at bar. or if there is some other reason why the payee is not entitled to collect the check. 2. since respondent bank was aware of the facts surrounding I he loss of the check in question. without considering other things. the respondent bank would. alleging that: 1.Petitioner now comes to Us. He had therefore notice of the defect of his title over the check from the start. dated January 22. of course.IAC erred in countenancing the filing and maintenance of an interpleader suit by a party who had earlier been sued on the same claim.IAC erred in ruling that a cashier's check can be countermanded even in the hands of a holder in due course. 2. The holder of a cashier's check who is not a holder in due course cannot enforce such check against the issuing bank which dishonors the same. 1985 and set aside the February 18. Petitioner failed to substantiate his claim that he is a holder in due course and for consideration or value as shown by the established facts of the case. Petitioner's allegations hold no water.IAC erred in upholding the trial court's order declaring petitioner as in default when there was no proper order for him to plead in the interpleader complaint. there is no similarity in the cases cited by petitioner since respondent bank did not issue the cashier's . petitioner became the holder of the cashier's check as endorsed by Alexander Lim who stole the check.Reverse the decision of the IAC.IAC went beyond the scope of its certiorari jurisdiction by making findings of facts in advance of trial. have the right to refuse payment of the check when presented by the payee. Petitioner now interposes the following prayer: 1. 4.
The bank was therefore liable to nobody on the check but Jose Go. it was not aware of any suit for damages filed by petitioner against it as supported by the fact that the interpleader case was first entitled Associated Bank vs. The bank had no intention to issue it to petitioner but only to buyer Jose Go. and from the moment said cashier's check was lost and or stolen no one outside of Jose Go can be termed a holder in due course because Jose Go had not indorsed it in due course. the owner of the check. respondent bank knew it was Jose Go's check and no one else since Go had not paid or indorsed it to anyone. On the very day that the bank instituted the case in interpleader. petitioner asking payment thereon and Jose Go as the purchaser or owner. Considering the aforementioned facts and circumstances. The check in question suffers from the infirmity of not having been properly negotiated and for value by respondent Jose Go who as already been said is the real owner of said instrument. Said validity will depend on the strength of the parties' respective rights and titles thereto. The check was Jose Go's property when it was misplaced or stolen hence he stopped its payment. Jose Go bought it from respondent bank for purposes of transferring his funds from respondent bank to another bank near his establishment realizing that carrying money in this form is safer than if it wherein cash. The allegation of petitioner that respondent bank had effectively relieved itself of its primary liability under the check by simply filing a complaint for interpleader is belied by the willingness of respondent bank to issue a certificate of time deposit in the amount of P800. In his second assignment of error.000 representing the cashier's check in question in the name of the Clerk of Court of Manila to be awarded to whoever will be found by the court as validly entitled to it. It has been shown that the interpleader suit was filed by respondent bank because petitioner and Jose Go were both laying their claims on the check. petitioner stubbornly insists that there is no showing of conflicting claims and interpleader is out of the question. There is enough evidence to establish the contrary. When payment on it was therefore stopped. Respondent bank could not be drawer and drawee for clearly.check in payment of its obligation. Jose Go owns the money it represents and he is therefore the drawer and the drawee in the same manner as if he has a current account and he issued a check against it. respondent bank merely took the necessary precaution not to make a mistake as to whom to pay and therefore interpleader was its proper remedy. Bank filed the interpleader suit not because petitioner sued it but because petitioner is laying claim to the same check that Go is claiming. Jose Go and John Doe. At the outset. Mesina for John Doe when his name became known to respondent bank. . but later on changed to Marcelo A. respondent bank was not the one who did it but Jose Go.
concur. The trial court issued an order. Feria. such contention is untenable." Respondent IAC cannot rule on whether respondent RTC committed an abuse of discretion or not. . SO ORDERED. respondent bank took all precautionary and necessary measures to bring out the truth. On the other hand. Petitioner argues in his memorandum that this order requiring petitioner to file his answer was issued without jurisdiction alleging that since he is presumably a holder in due course and for value. Jr. finding that the instant petition is merely dilatory. Fernan. substantially and essentially and therefore in compliance with the provisions of Rule 63 of the Rules of Court.In his third assignment of error. Again. without being apprised of the facts and reasons why respondent Associated Bank instituted the Interpleader case. the same is hereby denied and the assailed orders of the respondent court are hereby AFFIRMED in toto. WHEREFORE. petitioner is not a party to the check either and therefore has no valid claim to the Check. Petitioner chose to withhold substantial facts.. Respondents were not forbidden to present their side — this is the purpose of the Comment of respondent to the petition. a Pre-Trial Conference was set with notice to parties to submit position papers. JJ . IAC decided the question by considering both the facts submitted by petitioner and those given by respondents. Furthermore. petitioner assails the then respondent IAC in upholding the trial court's order declaring petitioner in default when there was no proper order for him to plead in the interpleader case. petitioner charges it with "gratuitous excursions into these non-issues. compelling petitioner and respondent Jose Go to file their Answers setting forth their respective claims. Subsequently. how can he be compelled to litigate against Jose Go who is not even a party to the check? Such argument is trite and ridiculous if we have to consider that neither his name or Jose Go's name appears on the check. IAC did not act therefore beyond the scope of the remedy sought in the petition.. Alampay and Gutierrez. petitioner concealed the circumstances known to him and now that private respondent bank brought these circumstances out in court (which eventually rendered its decision in the light of these facts). Before it resorted to Interpleader. Both parties were given an opportunity to present their sides. Following such line of argument. What else is the purpose of a law suit but to litigate? LLphil The records of the case show that respondent bank had to resort to details in support of its action for Interpleader. the Order of the trial court requiring the parties to file their answers is to all intents and purposes an order to interplead.
000. mysteriously obliterated and in its place. February 26. the amount of the aforesaid check. 1944 or the first days of January. Luciano. the check was long overdue by about 2-1/2 years. MONTINOLA.. National Bank" now appearing on the face of the check were added or placed in the instrument after it was issued by the Provincial Treasurer L to R. Jarencio. Second Assistant Corporate Counsel Hilarion U. Philippine National Bank. on the Philippines National Bank as drawee. Rosete & Lucena. L in his capacity as Provincial Treasurer of Misamis Oriental as drawer.000 of the check to m for P90. There now appears on the face of said check the words in parenthesis "Agent. M instituted an action against the Philippine National Bank and the Provincial Treasurer of Misamis Oriental to collect the sum of P100. of which only P45. The . This writing was. THE PHILIPPINE NATIONAL BANK. a supposed indorsement appearing on the back of the check was made. Held: The words "Agent. MATERIAL ALTERATION WHICH DISCHARGES THE INSTRUMENT. for appellant. SYLLABUS 1. plaintiff-appellant. vs.000 Japanese Military notes. The check was issued by only as Provincial Treasure and as an official of the Government. 1942. for appellee Solicitor General Felix Bautista Angelo and Solicitor Augusto M.000. Quijano. The writing made by R at the back of the check was to the effect that he was assigning only P30.000 to m and to deposit the balance to R's credit. Phil.for appellee Provincial Treasurer of Misamis Oriental. — On May 2.] ENRIQUE P. R sold P30. At the time of the transfer of this check to M about the last days of December. No. 1947.000 of the value of the document with an instruction to the bank to pay P30. 1845. however.000 was paid by M. which was under obligation to provide the USAFE with advance funds. 1951. L-2861. Phil. defendants-appellees. National Bank" under the signature of L purportedly showing that L issued the check as agent of the Philippine National Bank. In August. ET AL. issued a check to R in the sum of P100. which had no such obligation.NEGOTIABLE INSTRUMENT.EN BANC [G. and not as agent of the bank.R.
the negotiation constitutes a breach of trust. Exhibit B.." M may. depended on the presence of the words "Agent. it was long overdue. 2. INSTRUMENT ISSUED TO DISTRIBUTION OFFICER OF USAFE. 4. — Where the indorsement of a check is only for a part of the amount payable. showed marked discrepancies between Exhibits A and B as to the . not be regarded as an indorse. constitutes a material alteration of the instrument without the consent of the parties liable thereon. ASSIGNEE IS NOT A PAYEE. When M received the check. 5.ID." which converts the bank from a mere drawee to a drawer and therefore changes its liability. But the photostatic copy. he has no right to indorse the instrument personally and if he does. 3.. Phil. Exhibit A. National Bank" under the signature of L.000 sold to him by R.ID. And. The insertion of the words "Agent. At most he may be regarded as a mere assignee of the P30. admittedly taken before Exhibit A was burned and torn. one of which is that he became the holder before it was overdue. HOLDER IN DUE COURSE. and he transfers nothing to the indorse. M is not even a holder because section 191 of the same law defines holder as the payee or indorse of a bill or note and m is not a payee. HOLDER WHO HAS TAKEN THE INSTRUMENT AFTER IT WAS LONG OVERDUE. it is not legally negotiated within the meaning of section 32 of the Negotiable Instruments Law which provides that "the indorsement must be an indorsement of the entire instrument.. INDORSEMENT OF PART OF AMOUNT PAYABLE. An indorsement which purports to transfer to the indorse a part only of the amount payable does not operate as a negotiation of the instrument. as such Provincial Treasurer of Misamis Oriental against R. in which case. Phil. National Bank. Neither is he an indorse. DISCREPANCIES BETWEEN PHOTOSTATIC COPY TAKEN BEFORE TEARING AND BURNING OF CHECK AND PRESENT CONDITION THEREOF SHOW WORDS IN QUESTION WERE INSERTED AFTER SAID TEARING AND BURNING. therefore. WHO HAS NO RIGHT TO INDORSE IT PERSONALLY. — Where an instrument was issued to R not as a person but as the disbursing officer of the USAFE. — Neither can M de considered as a holder in due course because section 52 of the Negotiable Instruments Law defines a holder in due course as a holder who taken the instrument under certain conditions. — Recovery on a check.ID. and so discharges the instrument. for being only indorse he is considered merely as an assignee. at time Exhibit A was drawn.QUESTIONED DOCUMENTS.addition of those words was made after the check had been transferred by R to M. IS NOT NEGOTIATION OF INSTRUMENT BUT MAY BE REGARDED AS MERE ASSIGNMENT.
National Bank" were inserted after the check was burned and torn. Enrique P. Laya did not have enough cash to . Provincial Treasurer of Lanao did not have that amount in cash. Phil. Ramos was inducted into the United States Armed Forces in the Far East (USAFFE) as disbursing officer of an army division. V.000 in emergency notes and a check for P500. J : p In August. There is no dispute as to the following facts. thru the recommendation of Provincial Treasurer Laya. Held: The inference is plain that the words "Agent. went to the neighboring Province of Lanao to procure a cash advance in the amount of P800. V. 1942 by the Mindanao Emergency Currency Board by authority of the late President Quezon. 1947. In April of that year 1942.000 for the use of the USAFFE in Cagayan de Misamis. M. In April and May. As such disbursing officer. Ramos worked under him as assistant agent in the bank branch aforementioned. Pedro Encarnacion. 1382 issued on May 2.000. the amount of Check No.000.position of the words in question in relation to the words "Provincial Treasurer". Ramos on April 30. he gave Ramos P300. So. Ramos and supposedly indorsed to Montinola. was the emergency currency which had been issued since January. the court rendered a decision dismissing the complaint with costs against plaintiff-appellant. the currency being used in Mindanao. On May 2. As such Provincial Treasurer he was ex officio agent of the Philippine National Bank branch in that province. 1942. Ubaldo D. Montinola has appealed from that decision directly to this Court inasmuch as the amount in controversy exceeds P50. 1942 by the Provincial Treasurer of Misamis Oriental to Mariano V. Laya was the Provincial Treasurer of Misamis Oriental.000. 1942. 1942. After hearing. Montinola filed a complaint in the Court of First Instance of Manila against the Philippine National Bank and the Provincial Treasurer of Misamis Oriental to collect the sum of P100. his assistant agent M. About April 26. DECISION MONTEMAYOR. 1942 Ramos went to the office of Provincial Treasurer Laya at Misamis Oriental to encash the check for P500. particularly Misamis Oriental and Lanao which had not yet been occupied by the Japanese invading forces.000 which he had received from the Provincial Treasurer of Lanao. Mariano V.
Ramos had no opportunity to cash the check because in the evening of the same day the check was issued to him. offered to sell him the check. that he and Ramos finally agreed to the sale of the check for P850. 1382 for P100. the edges of the check appear to have been burned. M. 1945. payable in installments. he was released and he resumed his status as a civilian. 1944 or the first days of January. to be sure that it was genuine and negotiable. M. but there are words stamped apparently in rubber stamp . Montinola. Montinola' in typewriting which is approximately 5/8 of an inch below the stamped words 'pay to the order of'. Montinola. namely. V.000 was paid in kind. Below 'Enrique P.000 was paid to Ramos in Japanese military notes in five installments.000 emergency notes in the Philippine National Bank branch in Cebu and he expected to have the check issued by him cashed in Cebu against said deposit.000 drawn on the Philippine National Bank. that upon payment of the full price. each bottle containing 1.000 in emergency notes and a check No. According to Laya he had previously deposited P500.000 tablets. 'pay to the order of ' — in rubber stamp and in violet color are placed about one inch from the top. that after examining it President Carmona told him that it was negotiable but that he should not let the Japanese catch him with it because possession of the same would indicate that he was still waiting for the return of the Americans to the Philippines. 1944. after which. Ramos allegedly indorsed this check No. Ramos. V. This indorsement which now appears on the back of the document is described in detail by the trial court as follows: "The endorsement now appearing at the back of the check (see Exhibit A-1) may be described as follows: The words. Montinola'. '517 Isabel Street' and about 1/8 of an inch therefrom. About the last days of December. This is followed by the words 'Enrique P. 1382 to Enrique P. needing money with which to buy foodstuffs and medicine. went to see President Carmona of the Philippine National Bank in Manila about said check. and each tablet valued at P100.cover the check so he gave Ramos P400. sometime in June. P450. The circumstances and conditions under which the negotiation or transfer was made are in controversy. accompanied by his agents and by Ramos himself. 1943. four bottles of sulphatiasole. in typewriting are the words and figures also in typewriting. 1942. Ramos was made a prisoner of war until February 12. Ramos duly indorsed the check to him. that of this amount. the USAFFE forces to which he was attached surrendered.000 Japanese military notes. and the balance of P400. and on June 10. According to Montinola's version. the Japanese forces entered the capital of Misamis Oriental.
blotted.000 was issued by Montinola. evidencing said payment.000. was to pay Ramos P90. Montinola P30. However.which. leaving a balance unpaid of P45.000 only. that when the first check for P20. Ramos.000 was issued by Montinola. The balance to be deposited in the Philippine National Bank to the credit of M. V.000 in Japanese military notes. and so in lieu thereof he filed a supposed photostatic copy.000 of the check. Ramos is handprinted in green ink.000 of the check and for this reason.000 and P25. V. both signed by Montinola and M. There is a signature which apparently reads 'M. with the understanding that the balance of P45. V. Exhibit A. and its condition can best be . he asked Ramos to handprint it because Ramos' signature was not clear. under the signature.000 Montinola would pay him P90. Before going into a discussion of the merits of the version given by Ramos and Montinola as to the indorsement or writing at the back of the check. Ramos in his turn told the court that the agreement between himself and Montinola regarding the transfer of the check was that he was selling only P30.000.000 would be paid in a few days. Ramos' also in green ink but made in handwriting. According to Montinola. Simeon Ramos Jr." Ramos further said that in exchange for this assignment of P30. he (Simeon) prepared another document with two copies. who told the court that the agreement between Ramos and Montinola was that the latter. that when the second check for P25. In this he was corroborated by Atty. What appears thereon is the indorsement testified to by Montinola and described by the trial court as reproduced above. Ramos. according to Montinola.000. it is well to give a further description of it as we shall do later. at the back of the document he wrote in longhand the following: "Pay to the order of Enrique P. he presented the check itself and had its face marked Exhibit A and the back thereof Exhibit A-1.000 in Japanese military notes but that Montinola gave him only two checks of P20. But the check is badly mutilated. V. are a facsimile of the signature of Ramos. When Montinola filed his complaint in 1947 he stated therein that the check had been lost." To the above description we may add that the name of M. one for Montinola and the other for Ramos. he (Simeon) prepared a document evidencing said payment of P20. torn and partly burned. Ramos which had been written by him at the back of the check. V. does not now appear at the back of said check. for the sale to him of P30. The indorsement or writing described by M. at the trial.
appreciated by seeing it. blotting and smearing and pasting of the check renders it difficult if not impossible to read some of the words and figures on the check. V. finally. Ramos — according to the latter — does not now appear at the back of the check. there is a big blot with indelible ink about the right middle portion. which seems to have penetrated to the back of the check (Exhibit A-1). It has already been described in detail. all this tearing. in its well-prepared decision. where cut bear traces of burning and searing. Roughly. Ramos'. the circumstances surrounding its preparation. we agree with the trial court that the original writing of Ramos on the back of the check was to the effect that he was assigning only P30. which back bears a larger smear right under the blot. . Exhibit A-1. and that in order to justify the non-delivery of the document and to discourage Ramos from getting it back. and in its place was placed the present indorsement appearing thereon. even death by himself or his guerrilla forces if he did not return said check. Ramos in it and the writing originally appearing on the reverse side of the check. V. he (Montinola) had to resort to the mutilation of the document. it may be stated that looking at the face of the check (Exhibit A) we see that the left third portion of the paper has been cut off perpendicularly and severed from the remaining 2/3 portion. we quote with approval what the trial court presided over by Judge Conrado V. burning. the supposed participation of M. As to how said present indorsement came to be written. and to keep and attach this triangular portion and the rectangular 1/3 portion to the rest of the document. Sanchez. V. says on these points: "The alleged indorsement: 'Pay to the order of Enrique P. The balance to be deposited to the credit of M. as aforesaid.000 only. This writing was in some mysterious way obliterated. signed by M. but not as black and sharp as the blot itself. As to what was really written at the back of the check which Montinola claims to be a full indorsement of the check.000 of the value of the document and that he was instructing the bank to deposit to his credit the balance. now appears. threatening Montinola with bodily harm. a triangular portion of the upper right hand corner of said remaining 2/3 portion has been similarly cut off and severed. the edges of the severed portions as well as of the remaining major portion. the entire check is pasted on both sides with cellophane. Montinola the amount of P30. Ramos demanded the return of the check to him. In explanation of the mutilation of the check Montinola told the court that several months after indorsing and delivering the check to him. A different indorsement. Said present indorsement occupies a good portion of the back of the check.
and it was on the table of the upper floor of the house. and that as far as he could remember this writing did not appear on the instrument and he had no knowledge as to how it happened to be there. Cortado. the oval line in violet. testified that Ramos typewrote the words 'Enrique P. and with portions thereof burned . the rubber stamp was already in the house of Montinola. "(c)Another circumstance which bears heavily upon the claim of plaintiff Montinola that he acquired the full value of the check and paid the full consideration therefor is the present condition of said check. Atadero. in his own house. Montinola and Ramos returned in group to the house of Montinola. "The acts done by the very plaintiff on a document so important and valuable to him.' of the words 'Enrique P. Cortado stated that when he (Cortado). Montinola' and the line in the form of cane handle crossing the word 'street' in the words and figures '517 Isabel Street' in the endorsement Exhibit A-1. are 'unusual' to him. speaking of the endorsement as it now appears at the back of the check (Exh. Montinola. and stamped it in his house. Speaking of the rubber stamp used at the back of the check and which produced the words 'pay to the order of'. "(b)Again Cortado. Montinola' and '517 Isabel Street'. "(a)According to plaintiff's witness Gregorio A. "The unusually big space occupied by the indorsement on the back of the check and the discrepancies in the versions of Montinola and his witness Cortado just noted."Had Montinola really paid in full the sum of P850. blotted with ink on both sides torn into three parts. testified that Ramos carried in his pocket the said rubber stamp as well as the ink pad. 517 Isabel Street'. The only reason advanced by plaintiff as to why he tore the check. that is. Montinola. enclosing 'P. approximate intentional cancellation. Obviously Cortado had no recollection as to how such marks ever were stamped at the back of the check.000 in Japanese Military Notes as consideration for the check? The following observations are in point:. and finally sign his name too far below the main indorsement. Montinola. in a nearby house. on the other hand. the alleged owner thereof. it is pasted in cellophane. burned the torn . and which according to him involves his life savings. One thing difficult to understand is why Ramos should go into the laborious task of placing the rubber stamp 'Pay to the order of' and afterwards move to the typewriter and write the words 'Enrique P. create doubts as to whether or not really Ramos made the indorsement as it now appears at the back of Exhibit A. A-1) stated that Ramos typewrote these words outside of the premises of Montinola. It is now so unclean and discolored. on the other hand.all done by plaintiff. together with the stamp pad used to stamp the same.
if really Ramos did not have anything more to do with this check for the reason that Montinola had obtained in full the amount thereof. the most logical conclusion is that Ramos wanted the check at all costs because Montinola did not acquire the check to such an extent that it borders on intentional cancellation thereof (see Sections 119. burned the sides with a parrafin candle to show traces of burning. And then. discolored and pasted with cellophane. What is worse is that Montinola's excuse as to how it was lost. the question is: Why should Montinola be afraid of Ramos? Montinola claims that Ramos went there about April. and that upon the return of Ramos the next day he showed the two parts of the check. Under the circumstances. considering the fact that it involves his life savings. partially blotted. badly mutilated. and upon seeing the condition thereof Ramos did not bother to get the check back.edges and blotted out the registration at the back. that is. that the same night he tore the check into three parts. that when he informed Ramos that he did not have it in the house. so much so that a photostatic copy thereof was merely attached to the complaint (see paragraph 7 of the complaint). that it was mixed up with household effects is not plausible. He also said that he placed the blots in indelible ink to prevent Ramos — if he would be forced to surrender the middle part of the check — from seeing that it was registered in the General Auditing Office. "But a comparison between the photostatic copy and the original check reveals discrepancies between the two. At the time of the filing of the complaint the check was allegedly lost. If he believed he was standing by his rights. he could have very well sought police protection or transferred to some place where Ramos could not bother him. . "Conceding at the moment these facts to be true. is found in the following: That Ramos came to his house. during the trial the original check Exhibit A was produced in court. 1945. and that before the alleged loss. during liberation. there could not be any reason why Ramos should have threatened Montinola as stated by the latter.123 Negotiable Instruments Law) there is room to believe that Montinola did not have so much investments in that check as to have adopted an 'what do I care?' attitude. threatened his life and demanded from him the return of the check. The condition of the check as it was produced is such that it was partially burned. but in some deposit outside thereof and that Ramos promised to return the next day. armed with a revolver. he took extreme pains and precautions to save the check from the possible ravages of the war. Yet. "And there is the circumstance of the alleged loss of the check. the triangle on the right upper part and the torn piece on the left part.
registered said check with the General Auditing Office and he knew that Ramos. In that letter Exhibit 3.had it photographed. stated that he issued the check only as Provincial Treasurer.000 worth of sulphatiazole in January 1945 to complete the alleged consideration of P850. because as drawee alone. inasmuch as the bank has not yet accepted or certified the check. 14-20. pp. In court he testified that he paid P450. and Montinola evidently is trying to hold the Philippine National Bank liable in that capacity of drawer. was not after the possession of that check. Montinola did not mention the cash that he paid for the check.' In said letter Exhibit 3. it may yet avoid payment. etc. "From the foregoing the court concludes that plaintiff Montinola came into the possession of the check in question about the end of December 1944 by reason of the fact that M. received by him for the use of the guerrillas. those words did not appear under the signature of Ubaldo D. on A.. Brief of Appellee. medicine. Phil. A) we now find the words in parenthesis "Agent. V. Erhibit 8 of the record. Ramos sold to him P30. obviously he overlooked a letter he wrote to the provincial treasurer of Cagayan. In this he was corroborated by the payee M.000 in cash from June to December 1944. 3133. Laya. we stated that as Provincial Treasurer of Misamis Oriental. testifying in court. Oriental Misamis. "(d)It seems that Montinola was not so sure as to what he had testified to in reference to the consideration he paid for the check. Laya. V. When Montinola testified this way in court. Ubaldo D. and that the words in parenthesis "Agent. then the bank is not only drawee but also a drawer of the check. Laya was ex officio agent of the Philippine National Bank branch in that province. and P400. Phil. 1947.000. pp.) At the beginning of this decision.000 (in Japanese money) was actually paid by said plaintiff to Ramos. On the face of the check (Exh. Ramos who equally assured the court that when he received the check and then delivered it to Montinola. National Bank" now appearing under his signature did not appear on the check when he issued the same. since liberation.000 Japanese money. of which only one-half or P45. If this is true. National Bank" under the signature of Laya. Montinola told Provincial Treasurer Elizalde of Misamis Oriental that 'Ramos endorsed it (referring to check) to me for goods in kind. purportedly showing that he issued the check as agent of the Philippine National Bank." (R. dated May 1. We again quote with approval the pertinent portion of the trial court's decision: ..000 of the face value thereof in consideration of the sum of P90.
Laya already knew that Cebu and Manila were already occupied.000 in emergency notes and the P100. National Bank' below the signature of Laya and the printed words 'Provincial Treasurer'. 'certified check' or 'cashier's check. and this is borne by the fact that the signature of Laya was countersigned by the provincial auditor. the court finds that the preponderance of the evidence supports Laya's testimony. 'Agent. Laya assured the court that there could not be any mistake as to this. Laya . Exhibit A is not what we may term in business parlance. The Provincial Auditor at that time had no connection in any capacity with the Misamis Oriental agency of the Philippine National Bank. too there is the circumstance that this check was issued by the provincial treasurer of Lanao to Ramos who requisitioned the said funds in his capacity as disbursing officer of the USAFFE. his testimony was corroborated by the payee M. He could not have therefore issued the check — as a bank employee — payable at the central office of the Philippine National Bank. For. according to Laya. In the first place. Laya credited his depository accounts as provincial treasurer with the corresponding credit entry. National Bank' were added after Laya had issued the check. not the bank cashier. when he issued checks in his capacity as agent of the Misamis Oriental agency of the Philippine National Bank the said check must be countersigned by the cashier of the said agency — not by the provincial auditor. The check. "After considering the testimony of the one and the other. at the time the check was issued. And then. "Upon the foregoing circumstances the court concludes that the words 'Agent. In a straightforward manner and without vacillation Laya positively testified that the check Exhibit A was issued by him in his capacity as Provincial Treasurer of Misamis Oriental and that the words 'Agent. V. Phil. so much so that upon the delivery of the P400."The question is reduced to whether or not the words. National Bank' below the signature of Ubaldo D.'. Phil. In the normal course of events the check could not have been issued by the bank. National Bank' which now appear on the check Exhibit A were not typewritten below his signature when he signed the said check and delivered the same to Ramos. Ramos. But what renders more probable the testimony of Laya and Ramos is the fact that the money for which the check was issued was expressly for the use of the USAFFE of which Ramos was then disbursing officer. He also testified that the said check was issued by him in his capacity as provincial treasurer of Misamis Oriental and that is why the same was countersigned by Provincial Auditor Flores. Phil.000 check to Remos. "Besides. Plaintiff Montinola on the other hand testified that when he received the check Exhibit A it already bore the words 'Agent. Phil.
Naturally. Ramos must have known the procedure followed there as to the issuance of checks. Ramos add or place those words below the signature of Laya before transferring the check to Montinola? Let us bear in mind that Ramos before his induction into the USAFFE had been working as assistant of Treasurer Laya as ex-officio agent of the Misamis Oriental branch of the Philippine National Bank. but that if the Provincial Treasurer issues a check as agent of the Philippine National Bank. A) as agent of the Philippine National Bank. we may safely conclude as we do that the words "Agent. it is countersigned by the Provincial Auditor as was done on the check (Exhibit A). which was not done in this case. as part of the advance funds for the USAFFE in Cagayan de Misamis. V. Phil. There is no reason known to us why Provincial Treasurer Laya should issue the check (Exh. A). made part of plaintiff's complaint. It is not likely. did M. and later introduced in evidence for him as Exhibit E states that Laya issued the check "in his capacity as Provincial Treasurer of Misamis Oriental". A) were added or placed in the instrument after it was issued by Provincial Treasurer Laya to M.and the printed words 'Provincial Treasurer' were added in the check after the same was issued by the Provincial Treasurer of Misamis Oriental. the check is countersigned not by the Provincial Auditor who has nothing to do with the bank. Said USAFFE were being financed not by the Bank but by the Government and.000 was issued to complete the payment of the other check for P500. and not by the Philippine National Bank which had no such obligation. namely. that when a check is issued by the Provincial Treasurer as such. obviously. The balance of P400. he expected to have it cashed at said Cebu bank branch against his deposit of P500. according to Provincial Treasurer Laya. and that in issuing the check (Exh. but by the bank cashier. National Bank" after he received the check. that Ramos had made the insertion of the words "Agent. The logical conclusion.000 of said currency in the Philippine National Bank branch in Cebu. Now. V. National Bank" now appearing on the face of the check (Exh." From all the foregoing. therefore. not of the bank but of the Provincial Treasury.000. Phil. The very Annex C.000 issued by the Provincial Treasurer of Lanao to Ramos. upon receiving a relatively considerable amount of these emergency notes for his office. not as agent of the Bank. As already stated. one of the reasons for the issuance of the emergency notes in Mindanao was for this purpose.000 in cash was paid to Ramos by Laya from the funds. presumably. because he should . he deposited P500. Ramos. is that the check was issued by Laya only as Provincial Treasurer and as an official of the Government which was under obligation to provide the USAFFE with advance funds. Said check for P100. therefore.
National Bank" does not appear under the signature of the provincial treasurer. Referring to the mimeographed record on appeal filed by the plaintiffappellant. We tried to verify this discrepancy by going over the original records of the Court of First Instance so as to compare the copy of Annex A in the complaint. particularly the face of it (Exhibit A) in the complaint. It is therefore more logical to believe and to find that the addition of those words was made after the check had been transferred by Ramos to Montinola. Of course. said phrase did not appear on the face of the check. there are other facts and circumstances involved in the case which support this view. the check having been issued by Laya as Provincial Treasurer. 1382 particularly the face thereof (Exhibit A). but said original Annex A appears to be missing from the record. If Annex A also marked Exhibit B is the photostatic copy of the original check No. It is therefore evident that the Annex A now available is not the same original Annex A attached to the complaint in 1947. That probably was the reason why the bank in its motion to dismiss dated September 2. contended that if the check in question had been issued by the provincial treasurer in his capacity as agent of the Philippine National Bank. and not as agent of the bank. Phil. the phrase "Agent. allegedly attached to the complaint a photostatic copy of said check and marked it as Annex A. the inference is. particularly of the phrase . Phil. and since the check bears the countersignature not of the Bank cashier but of the Provincial Auditor. now we have in the list of exhibits a photostatic copy marked Annex A and Exhibit B. National Bank" could not change the status and responsibility of the bank. said treasurer would have placed below his signature the words "Agent of the Philippine National Bank". Unless the plaintiff in making this copy or transcription in the complaint committed a serious omission which is decisive as far as the bank is concerned. Phil. with the original Annex A. but according to the manifestation of counsel for the plaintiff dated October 15. the addition of the words "Agent. There is one other circumstance.have realized that following the practice already described. 1948. in compliance with the verbal order of the trial court. said photostatic copy now marked Annex A and Exhibit B was submitted on October 15. that at the time the complaint was filed. 1947. the words "Agent. Moreover. the photostatic copy. then said photostatic copy should be a faithful and accurate reproduction of the check. How it disappeared is not explained. National Bank" now appearing on the face of the check under the signature of the Provincial Treasurer. is missing. The plaintiff because of the alleged loss of the check. important and worth noting. we find that in transcribing and copying the check. 1948. But in transcribing and copying said Annex A in his complaint.
000 of the check to Enrique P. as regards the relative position of the phrase "Agent. Phil. especially with the aid of a hand lens. The letter "N" of the word "National" on Exhibit A is underneath the space between "Provincial" and "Treasurer". The closing parenthesis ")" on Exhibit A is a little far from the perpendicular green border line and appears to be double instead of one single line. The letter "k" of the word "Bank" in Exhibit A is after the green perpendicular border line near the lower righthand corner of the edge of the check (Exh. on Exhibit B is on the very border line itself or even before said border line. But a minute examination of and comparison between Annex A. 1944. this same letter "k" however. on Exhibit A.000 Japanese military notes. 1945. At the time of the transfer of this check (Exh. Exhibit B. Exhibit A. the photostatic copy also marked Exhibit B and the face of the check. of which only P45. Exhibit A was issued by Laya in his capacity as Provincial Treasurer of Misamis Oriental as drawer on the Philippine National Bank as drawee. but the same letter "a" in Exhibit "B" is just below the space between the words "Provincial" and "Treasurer". this same letter "A" however in Exhibit B is directly under said tail. but the same letter "N" is directly under the letter "I" of the word "Provincial" in Exhibit B. show notable differences and discrepancies. being a negotiable instrument. with the title Provincial Treasurer. the letter A of the word "Agent" is toward the right of the tail of the beginning letter of the signature of Ubaldo D. The first letter "a" of the word "National" is under "T" of the word "Treasurer" in Exhibit A. a . The writing made by Ramos at the back of the check was an instruction to the bank to pay P30. For instance. the check which. There are other notable discrepancies between the check Annex A and the photostatic copy. This writing was obliterated and in its place we now have the supposed indorsement appearing on the back of the check (Exh. was payable on demand. giving ground to the doubt that Exhibit B is a photostatic copy of the check (Exhibit A). National Bank" now appearing under the signature of the Provincial Treasurer on the face of the original check (Exhibit A). was long overdue by about 2 1/2 years. Ramos sold P30. A). Phil. We then have the following facts.000 was paid by Montinola. Montinola for P90. this same ")" on Exhibit B appears in a single line and is relatively nearer to the border line."Agent. Laya. It may therefore be considered even then.000 to Montinola and to deposit the balance to his (Ramos) credit. National Bank". or the first days of January. A) to Montinola about the last days of December. A-1).
The insertion of the words "Agent. Neither can Montinola be considered as a holder in due course because section 52 of said law defines a holder in due course as a holder who has taken the instrument under certain conditions. he is subject to all defenses available to the drawer Provincial Treasurer of Misamis Oriental and against Ramos. constitutes a material alteration of the instrument without the consent of the parties liable thereon. at most he can be considered only as assignee. after liberation. M. in which case. and so discharges the instrument. around August or September. Neither could it be said that he took it in good faith. President Carmona on the witness stand flatly denied Montinola's claim and assured the court that the first time that he saw Montinola was after the Philippine National Bank. V. Montinola is not even a holder because section 191 of the same law defines holder as the payee or indorsee of a bill or note and Montinola is not a payee. An indorsement which purports to transfer to the indorsee a part only of the amount payable. Montinola must have known that at the time the check was issued in May. At most he may be regarded as a mere assignee of the P30. of which he was President. Phil. Neither is he an indorsee for as already stated.stale check. Montinola speculated on the check and took a chance on its being paid after the war. Ramos also told the court that it is not true that he ever went with Montinola to see President Carmona about the check in 1944. he has not paid the full amount of P90. Montinola claims that about June.000 for which Ramos sold him P30. And. he (Montinola) consulted President Carmona of the Philippine National Bank who assured him that the check was good and negotiable. as such assignee. . National Bank" which converts the bank from a mere drawee to a drawer and therefore changes its liability. As already stated. and that when shown the check he told Montinola that it was stale. it was long overdue. .000 of the value of the check. one of which is that he became the holder before it was overdue. reopened. as was stated by the trial court in its decision. On the basis of the facts above related there are several reasons why the complaint of Montinola cannot prosper. Section 32 of the same law provides that "the indorsement must be an indorsement of the entire instrument. the money circulating in Mindanao and the Visayas was only the emergency notes and that the check . The check was not legally negotiated within the meaning of the Negotiable Instruments Law." Montinola may therefore not be regarded as an indorsee. Of course. 1944 when Ramos supposedly approached him for the purpose of negotiating the check. However. . 1945.000 sold to him by Ramos. (as in this case) does not operate as a negotiation of the instrument. When Montinola received the check. In the second place. 1942. (Section 124 of the Negotiable Instruments Law).
In view of all the foregoing. he had no right to indorse it personally to plaintiff. Ramos had he retained the check may not now collect its value because it had been issued to him as disbursing officer.J.. As already stated. hence he transferred nothing to the plaintiff. A) for him to keep. let the Clerk of Court transmit to the city fiscal the check (Exh. In view of said opposition this Court by resolution of March 6. C. expressing his willingness to submit it to the Court whenever needed for examination and verification. In the prayer for relief contained at the end of the brief for the Philippine National Bank dated September 27. finding no reversible error in the decision appealed from. Exhibit A. Montinola dated February 27. As observed by the trial court. 1949. once the decision becomes final. it is absolutely necessary for the court to examine the original in order to see the actual alterations supposedly made thereon." Subsequently. Ramos not as a person but M. concur. Feria. as a mere assignee Montinola is subject to all the defenses available against assignor Ramos. Acting upon the petition contained in the bank's brief already mentioned. Therefore. denied said petition for withdrawal. and that should this Court grant the prayer contained in the bank's brief that the check be later referred to the city fiscal for appropriate action. Pablo. we find this prayer:. 1950. Reyes and Bautista Angelo. in a petition signed by plaintiff-appellant Enrique P. A) together with all pertinent papers and documents in this case. for any action he may deem proper in the premises. Tuason. 1950 opposed the said petition on the ground that inasmuch as the appellant's cause of action in this case is based on the said check. V. JJ. Also. Bengzon. And.was intended to be payable in that currency. and that at the time that Ramos sold a part of the check to him. the check was issued to M. the same is hereby affirmed with costs. "It is also respectfully prayed that this Honorable Court refer the check. Ramos was no longer connected with the USAFFE but already a civilian who needed the money only for himself and his family. Ramos as the disbursing officer of the USAFFE. Padilla..000 could not have been issued to Ramos in his private capacity but rather in his capacity as disbursing officer of the USAFFE. he should have known that a check for such a large amount of P100. V. Moran. Paras. to the City Fiscal's Office for appropriate criminal action against the plaintiff-appellant if the facts so warrant. It was negotiated in breach of trust. 1950 he asked this Court to allow him to withdraw the original check (Exh. . The bank on March 2. said check may no longer be available if the appellant is allowed to withdraw said document.
SATISFIED IN CASE AT BAR. having complied with the requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas. or order and as such. the instrument is payable only to the person designated therein and is therefore nonnegotiable. IFC Leasing and Acceptance Corp. Jr.THIRD DIVISION [G. vs. this Court had the occasion to clearly distinguish between a negotiable and a non-negotiable instrument. Without the words "or order" or "to the order of". — The questioned promissory note shows that it is a negotiable instrument.95 monthly for 36 months due and payable on the 21st day of each month starting March 21.R. 1980 thru and inclusive of Feb. Loyola. REQUISITES. 1983." [d] it is payable to Violago Motor Sales Corporation.e. — In the case of Consolidated Plywood Industries Inc. No. NEGOTIABLE AND NON-NEGOTIABLE INSTRUMENT.. COURT OF APPEALS and FILINVEST FINANCE & LEASING CORPORATION. must be payable to 'order' or 'bearer.ID.138. for petitioner. 1990. Among others. Any subsequent purchaser thereof will not enjoy the advantages of being a holder of a negotiable instrument.20. [e] the drawee is named or indicated with certainty. SYLLABUS 1. DISTINGUISHED.. Labaguis. 21. HON. Arsenio C.COMMERCIAL LAW. but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. January 22. 2. Villalon. there are only two ways by which an instrument may be made payable to order. NEGOTIABLE INSTRUMENT. petitioner. v. [c] it is payable at a fixed or determinable future time which is "P1.'" Under Section 8 of the Negotiable Instruments Law. respondents.. . 76788.] JUANITA SALAS. [b] it contains an unconditional promise to pay the amount of P58. Angara & Associates for private respondent. the instrument in order to be considered negotiable must contain the so-called "words of negotiability — i.614.
the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation. and [d] when it was negotiated to Filinvest. and may enforce payment of the instrument for the full amount thereof. C. NEGOTIABLE INSTRUMENTS.20 as evidenced by a promissory note. APPLICABLE IN THE CASE AT BAR. [c] it took the same in good faith and for value. Pampanga in Civil Case No. — Respondent corporation holds the instrument free from any defect of title of prior parties. a collection suit between the same parties.ID.R.-G. which modified the decision of the Regional Trial Court of San Fernando. and free from defenses available to prior parties among themselves. this matter cannot be passed upon in the case before us. Salas".A. 1980 allegedly due to a discrepancy in the engine and chassis numbers of the vehicle delivered to her and those indicated in the sales invoice. CV No.. and without notice that it had previously been dishonored. REQUISITES OF HOLDER IN DUE COURSE.. 1980. DECISION FERNAN. 5915. 00757 entitled "Filinvest Finance & Leasing Corporation v.ID. Juanita Salas (hereinafter referred to as petitioner) bought a motor vehicle from the Violago Motor Sales Corporation (VMS for brevity) for P58. This being so. — A holder in due course. Petitioner defaulted in her installments beginning May 21. Records disclose that on February 6. This note was subsequently endorsed to Filinvest Finance & Leasing Corporation (hereinafter referred to as private respondent) which financed the purchase. [b] it became the holder thereof before it was overdue. RIGHT OF A HOLDER IN DUE COURSE. where the VMS was never impleaded as a party. petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS.J : p Assailed in this petition for review on certiorari is the decision of the Court of Appeals in C.138.3. ID. Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in that the vehicle she purchased was different from that actually delivered to her. having taken the instrument under the following conditions: [a] it is complete and regular upon its face. 4. certificate of registration and deed of ..
24 SCRA 1018). Admissions made by the parties in the pleadings. 2. copied in or attached to the corresponding pleading as provided in the preceding section.chattel mortgage. In its decision dated September 10. 1986. and in view of all the foregoing. 5915 for a sum of money against petitioner before the Regional Trial Court of San Fernando. thus: "WHEREFORE.40 with interest thereon at the rate of 14% from October 2. statements. Aug. Imputing fraud. Revised Rules of Court. 31. which fact she discovered when the vehicle figured in an accident on 9 May 1980. A party cannot subsequently take a position contradictory of. Ana vs. judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P28. the pertinent portion of which is quoted hereunder: "The allegations. Sta. 227).414. under oath. L-23023. the genuineness and due execution of the instrument shall be deemed admitted unless the adverse party. On October 27. the Court of Appeals rendered its assailed decision. 1980 until the said sum is fully paid. "With costs against defendant." 1 Both petitioner and private respondent appealed the aforesaid decision to the Court of Appeals. or inconsistent with his pleadings (Cunanan vs. Amparo. bad faith and misrepresentation against VMS for having delivered a different vehicle to petitioner. "When an action or defense is founded upon a written instrument. or in the course of the trial or other proceedings. . and the further amount of P1. Pampanga. or admissions contained in a pleading are conclusive as against the pleader. 80 Phil.00 as attorney's fees. "The counterclaim of defendant is dismissed. the trial court held. 1968.000. 1982. This failure to pay prompted private respondent to initiate Civil Case No. Rule 129. the latter prayed for a reversal of the trial court's decision so that she may be absolved from the obligation under the contract. Maliwat. do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistake (Sec.
2916-0.specifically denied them. 3 Petitioner argues that in the light of the provision of the law on sales by description 4 which she alleges is applicable here. The decision is AFFIRMED in all other respects.00 as shown in the sales invoice and petitioner's initial downpayment of P17. 1980 until full payment.138.644. bad faith and misrepresentation of Violago Motor Sales Corporation in the conduct of its business and which fraud.30 representing the difference between the agreed consideration of P49. With costs to defendant.95 for 36 months.229. petitioner assigns twelve (12) errors which focus on the alleged fraud. and sets forth what he claims to be the facts (Sec.30 at 14% per annum from October 2.614. bad faith and misrepresentation supposedly released petitioner from any liability to private respondent who should instead proceed against VMS. Hibbered vs. the present recourse. to implead VMS as a party to the case before it can be made to answer for damages because VMS was earlier sued by her for "breach of contract with damages" before the Regional Trial Court of Olongapo City." 2 Petitioner's motion for reconsideration was denied..90.000. docketed as Civil Case No.70 allegedly evidenced . no contract ever existed between her and VMS and therefore none had been assigned in favor of private respondent. LLphil In the petition before us. 476). Revised Rules of Court. she is therefore liable to pay the remaining balance of P54. the monthly amortization of which is P1.20 stated in the promissory note is the amount assumed by the plaintiff in financing the purchase of defendant's motor vehicle from the Violago Motor Sales Corp.908.908. Rohde and Mc Millian. Considering that the defendant was able to pay twice (as admitted by the plaintiff. 1980) or in the total sum of P3. the appealed decision is hereby modified ordering the defendant to pay the plaintiff the sum of P54. hence. 32 Phil.855. Branch LXXII. She cites as authority the decision therein where the court originally ordered petitioner to pay the remaining balance of the motor vehicle installments in the amount of P31. 8. Rule 8. considering the foregoing. defendant's account became delinquent only beginning May. She contends that it is not necessary. "WHEREFORE. "A perusal of the evidence shows that the amount of P58. 1980 until full payment. as opined by the appellate court.30 at 14%per annum from October 2.
must be payable to 'order' or 'bearer. as inevitable as it is clearly established. Any subsequent purchaser thereof will not enjoy the . 6 this Court had the occasion to clearly distinguish between a negotiable and a non-negotiable instrument.70. Parenthetically. Said decision was however reversed later on.by a receipt.'" Under Section 8 of the Negotiable Instruments Law.e. The records reveal that involved herein is not a simple case of assignment of credit as petitioner would have it appear. with the same court ordering defendant VMS instead to return to petitioner the sum of P17.. docketed as AC-G. Petitioner's liability on the promissory note. the instrument in order to be considered negotiable must contain the so-called "words of negotiability — i. No.855. where the assignee merely steps into the shoes of. under the foregoing factual milieu. and that the judgment in the "breach of contract" suit cannot be invoked as an authority as the same is still pending determination in the appellate court.. Recently. prays for the dismissal of the petition and counters that the issues raised and the allegations adduced therein are a mere rehash of those presented and already passed upon in the court below. the assignor-vendor. 02922. in the case of Consolidated Plywood Industries Inc. There must always be a specified person named in the instrument and the bill or note is to be paid to the person designated in the instrument or to any person to whom he has indorsed and delivered the same. We see no cogent reason to disturb the challenged decision. LLjur Among others. v. IFC Leasing and Acceptance Corp. the due execution and genuineness of which she never denied under oath is. Without the words "or order" or "to the order of". 5 Private respondent in its comment. said decision is still pending consideration by the First Civil Case Division of the Court of Appeals. is open to all defenses available against and can enforce payment only to the same extent as. upon an appeal by VMS.R. The pivotal issue in this case is whether the promissory note in question is a negotiable instrument which will bar completely all the available defenses of the petitioner against private respondent. the instrument is payable only to the person designated therein and is therefore non-negotiable. there are only two ways by which an instrument may be made payable to order.
advantages of being a holder of a negotiable instrument.138. however. Such being the situation in the abovecited case. it was held that therein private respondent is not a holder in due course but a mere assignee against whom all defenses available to the assignor may be raised.20) Philippine currency. I/We jointly and severally.614. Indubitably. 7 In the case at bar. 1980 "For value received. The pertinent portion of the note reads: "PROMISSORY NOTE (MONTHLY) "P58. Pampanga. 1980 thru and inclusive of February 21. at its office in San Fernando. in installments of the amounts following and at the dates hereinafter set forth.138. the situation is different. but will merely "step into the shoes" of the person designated in the instrument and will thus be open to all defenses available against the latter. 1983. Philippines Feb. to be payable. ___________ 198 __________ thru and inclusive of _______. which amount includes interest at 14% per annum based on the diminishing balance. Pampanga. promise to pay Violago Motor Sales Corporation or order. to wit: P1. the sum of FIFTY EIGHT THOUSAND ONE HUNDRED THIRTY EIGHT & 20/100 ONLY (P58. xxx xxx xxx "Maker:Co-Maker: (SIGNED) JUANITA SALAS_____________________________ Address: .20 San Fernando. the basis of private respondent's claim against petitioner is a promissory note which bears all the earmarks of negotiability. 11. the said principal sum. P __________ monthly for ___________ month due and payable on the ___________ day of each months starting _____________.95 months for "36" monthly due and payable on the 21st day of each month starting March 21. without need of notice or demand. 198 __________ provided that interest at 14% per annum shall be added on each unpaid installment from maturity hereof until fully paid.
1983.614. and may enforce payment of the instrument for the full amount thereof. 1980 thru and inclusive of Feb." [d] it is payable to Violago Motor Sales Corporation. 11 Under the circumstances. [b] it became the holder thereof before it was overdue. petitioner cannot set up against respondent the defense of nullity of the contract of sale between her and VMS. and free from defenses available to prior parties among themselves. having complied with the requisites under the law as follows: [a] it is in writing and signed by the maker Juanita Salas. [b] it contains an unconditional promise to pay the amount of P58. 13 This being so. the latter had no notice of any infirmity in the instrument or defect in the title of VMS Corporation. respondent corporation holds the instrument free from any defect of title of prior parties.20. and [d] when it was negotiated to Filinvest. [c] it took the same in good faith and for value. or order and as such. 21. 12 Accordingly. [e] the drawee is named or indicated with certainty. 9 It was negotiated by indorsement in writing on the instrument itself payable to the Order of Filinvest Finance and Leasing Corporation 10 and it is an indorsement of the entire instrument. and without notice that it had previously been dishonored.95 monthly for 36 months due and payable on the 21st day of each month starting March 21. there appears to be no question that Filinvest is a holder in due course.___________________________________________________ "WITNESSES SIGNED: ILLEGIBLESIGNED:ILLEGIBLE TAN #TAN # "PAY TO THE ORDER OF FILINVEST FINANCE AND LEASING CORPORATION "VIOLAGO MOTOR SALES CORPORATION By: (SIGNED) GENEVEVA V. BALTAZAR Cash Manager" 8 A careful study of the questioned promissory note shows that it is a negotiable instrument. [c] it is payable at a fixed or determinable future time which is "P1.138. prcd . having taken the instrument under the following conditions: [a] it is complete and regular upon its face.
Folder of Exhibits. 21. 8. . 4.. Indeed.Even assuming for the sake of argument that there is an iota of truth in petitioner's allegation that there was in fact deception made upon her in that the vehicle she purchased was different from that actually delivered to her. Gutierrez. 7. 1481. With costs against petitioner. where the VMS was never impleaded as a party. p. 23-24. 3. She should have impleaded Violago Motor Sales. improper and unconstitutional.149 SCRA 459 (1987).Art. pp. 5. to denial of due process. the assailed decision is hereby AFFIRMED. llcd SO ORDERED. Hence.Rollo. Footnotes 1. Feliciano. we reach a similar opinion as did respondent court when it held: "We can only extend our sympathies to the defendant (herein petitioner) in this unfortunate incident. p.Rollo.Ex. this matter cannot be passed upon in the case before us. 10. "7".Ibid. New Civil Code. concur. JJ." 14 IN VIEW OF THE FOREGOING. To even discuss the issue as to whether or not the Violago Motor Sales Corporation is liable in the transaction in question would amount.. 6. Jr.Rollo. 2. hence. pp. Bidin and Cortes.Rollo. 57-59. there is nothing We can do as far as the Violago Motor Sales Corporation is concerned since it is not a party in this case. Whatever issue is raised or claim presented against VMS must be resolved in the "breach of contract" case.
v.Rollo. Consolidated Plywood Industries. 10. NIL.Section 31. . 12.emphasis supplied. pp. Negotiable Instruments Law. Negotiable Instruments Law. NIL. Inc.Section 1.Section 52. IFC Leasing and Acceptance Corporation (supra).9. 11.Section 32. 13. NIL.Section 57. 14. 22-23.
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