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Republic of the Philippines

SUPREME COURT
Baguio City
FIRST DIVISION

G.R. No. 107508 April 25, 1996
PHILIPPINE NATIONAL BANK, petitioner,
vs.
COURT OF APPEALS, CAPITOL CITY DEVELOPMENT BANK, PHILIPPINE BANK OF
COMMUNICATIONS, and F. ABANTE MARKETING, respondents.

KAPUNAN, J.:p
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision
dated April 29, 1992 of respondent Court of Appeals in CA-G.R. CV No. 24776 and its resolution
dated September 16, 1992, denying petitioner Philippine National Bank's motion for reconsideration
of said decision.
The facts of the case are as follows.
A check with serial number 7-3666-223-3, dated August 7, 1981 in the amount of P97,650.00 was
issued by the Ministry of Education and Culture (now Department of Education, Culture and Sports
[DECS]) payable to F. Abante Marketing. This check was drawn against Philippine National Bank
(herein petitioner).
On August 11, 1981, F. Abante Marketing, a client of Capitol City Development Bank (Capitol),
deposited the questioned check in its savings account with said bank. In turn, Capitol deposited the
same in its account with the Philippine Bank of Communications (PBCom) which, in turn, sent the
check to petitioner for clearing.
Petitioner cleared the check as good and, thereafter, PBCom credited Capitol's account for the
amount stated in the check. However, on October 19, 1981, petitioner returned the check to PBCom
and debited PBCom's account for the amount covered by the check, the reason being that there was
a "material alteration" of the check number.
PBCom, as collecting agent of Capitol, then proceeded to debit the latter's account for the same
amount, and subsequently, sent the check back to petitioner. Petitioner, however, returned the
check to PBCom.
On the other hand, Capitol could not, in turn, debit F. Abante Marketing's account since the latter
had already withdrawn the amount of the check as of October 15, 1981. Capitol sought clarification
from PBCom and demanded the re-crediting of the amount. PBCom followed suit by requesting an
explanation and re-crediting from petitioner.

Since the demands of Capitol were not heeded, it filed a civil suit with the Regional Trial Court of
Manila against PBCom which, in turn, filed a third-party complaint against petitioner for
reimbursement/indemnity with respect to the claims of Capitol. Petitioner, on its part, filed a fourthparty complaint against F. Abante Marketing.
On October 3, 1989; the Regional Trial Court rendered its decision the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered as follows:
1.) On plaintiffs complaint, defendant Philippine Bank of Communications is ordered
to re-credit or reimburse plaintiff Capitol City Development Bank the amount of
P97,650.00, plus interest of 12 percent thereto from October 19, 1981 until the
amount is fully paid;
2.) On Philippine Bank of Communications third-party complaint third-party defendant
PNB is ordered to reimburse and indemnify Philippine Bank of Communications for
whatever amount PBCom pays to plaintiff;
3.) On Philippine National Bank's fourth-party complaint, F. Abante Marketing is
ordered to reimburse and indemnify PNB for whatever amount PNB pays to PBCom;
4.) On attorney's fees, Philippine Bank of Communications is ordered to pay Capitol
City Development Bank attorney's fees in the amount of Ten Thousand (P10,000.00)
Pesos; but PBCom is entitled to reimbursement/indemnity from PNB; and Philippine
National Bank to be, in turn reimbursed or indemnified by F. Abante Marketing for the
same amount;
5.) The Counterclaims of PBCom and PNB are hereby dismissed;
6.) No pronouncement as to costs.
SO ORDERED. 1
An appeal was interposed before the respondent Court of Appeals which rendered its decision on
April 29, 1992, the decretal portion of which reads:
WHEREFORE, the judgment appealed from is modified by exempting PBCom from
liability to plaintiff-appellee for attorney's fees and ordering PNB to honor the check
for P97,650.00, with interest as declared by the trial court, and pay plaintiff-appellee
attorney's fees of P10,000.00. After the check shall have been honored by PNB,
PBCom shall re-credit plaintiff-appellee's account with it with the amount. No
pronouncement as to costs.
SO ORDERED. 2
A motion for reconsideration of the decision was denied by the respondent Court in its resolution
dated September 16, 1992 for lack of merit. 3
Hence, petitioner filed the instant petition which raises the following issues:

I
WHETHER OR NOT AN ALTERATION OF THE SERIAL NUMBER OF A CHECK IS
A MATERIAL ALTERATION UNDER THE NEGOTIABLE INSTRUMENTS LAW.
II
WHETHER OR NOT A CERTIFICATION HEREIN ISSUED BY THE MINISTRY OF
EDUCATION CAN BE GIVEN WEIGHT IN EVIDENCE.
III
WHETHER OR NOT A DRAWEE BANK WHO FAILED TO RETURN A. CHECK
WITHIN THE TWENTY FOUR (24) HOUR CLEARING PERIOD MAY RECOVER
THE VALUE OF THE CHECK FROM THE COLLECTING BANK.
IV
WHETHER OR NOT IN THE ABSENCE OF MALICE OR ILL WILL PETITIONER
PNB MAY BE HELD LIABLE FOR ATTORNEY'S FEES. 4
We find no merit in the petition.
We shall first deal with the effect of the alteration of the serial number on the negotiability of the
check in question.
Petitioner anchors its position on Section 125 of the Negotiable Instruments Law (ACT No.
2031) 5 which provides:
Sec. 225. What constitutes a material alteration. Any alteration which changes:
(a) The date;
(b) The sum payable, either for principal or interest;
(c) The time or place of payment;
(d) The number or the relations of the parties;
(e) The medium or currency in which payment is to be made;
(f) Or which adds a place of payment where no place of payment is specified, or any
other change or addition which alters the effect of the instrument in any respect, is a
material alteration.
Petitioner alleges that there is no hard and fast rule in the interpretation of the aforequoted provision
of the Negotiable Instruments Law. It maintains that under Section 125(f), any change that alters the
effect of the instrument is a material alteration. 6
We do not agree.

(3) A change in the date from which interest is to run. Crystal Falls. In his book entitled "Pandect of Commercial Law and Jurisprudence. (6) An alteration in the maturity of a note. An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer. (7) An instrument was payable "First Nat'l Bank" the plaintiff added the word "Marion. Vitug opines that "an innocent alteration (generally. changes on items other than those required to be stated under Sec. N. 1.I. or order $9 fifty cents CTR" The insertion of the figure 5 before the figure 9. (4) A check was originally drawn as follows: "Iron County Bank. 8 In other words. Pay to G.L. but the holder may enforce it only according to its original tenor. (5) Adding the words "with interest" with or without a fixed rate. and (e) Where the instrument is addressed to a drawee." ." Justice Jose C.L. Aug.An alteration is said to be material if it alters the effect of the instrument. Mich. 1901. 5. or at a fixed or determinable future time. 7 It means an unauthorized change in an instrument that purports to modify in any respect the obligation of a party or an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. he must be named or otherwise indicated therein with reasonable certainty. the instrument being otherwise unchanged. Section 1 of the Negotiable Instruments Law provides: Sec. a material alteration is one which changes the items which are required to be stated under Section 1 of the Negotiable Instruments Law. — Form of negotiable instruments. (d) Must be payable to order or to bearer. (b) Must contain an unconditional promise or order to pay a sum certain in money. whether the time for payment is thereby curtailed or extended. 1.) and spoliation (alterations done by a stranger) will not avoid the instrument. (c) Must be payable on demand." 9 Reproduced hereunder are some examples of material and immaterial alterations: A." (2) Writing "protest waived" above blank indorsements. Material Alterations: (1) Substituting the words "or bearer" for "order.

(8) Plaintiff. The name of the drawer and the drawee were not altered." as a reference memorandum of a promise made by him to the principal maker at the time the words were written to extend the time of payment. struck out the name of the defendant as payee and inserted the name of the maker of the original note. (10) Substituting the address of the maker for the name of a co-maker. that: xxx xxx xxx . (4) Filling in the date of actual delivery where the makers of a note gave it with the date in blank. (2) Adding the word "annual" after the interest clause." (5) An alteration of the marginal figures of a note where the sum stated in words in the body remained unchanged. The intended payee was the same. (6) The insertion of the legal rate of interest where the note had a provision for "interest at _______ per cent. Immaterial Alterations: (1) Changing "I promise to pay" to "We promise to pay". however. 11 The case at bench is unique in the sense that what was altered is the serial number of the check in question. (9) Adding to an indorsee's name the abbreviation "Cash" when it had been agreed that the draft should be discounted by the trust company of which the indorsee was cashier. The sum of money due to the payee remained the same. The aforementioned alteration did not change the relations between the parties. "Extended to ________. is not an essential requisite for negotiability under Section 1 of the Negotiable Instruments Law. 1913. (11) An extension of time given by the holder of a note to the principal maker. 10 B. (9) Striking out the name of the payee and substituting that of the person who actually discounted the note." (7) A printed form of promissory note had on the margin the printed words. Despite these findings. petitioner insists. (10) The indorsement of a note by a stranger after its delivery to the payee at the time the note was negotiated to the plaintiff. an item which. without consent of the defendant. where there are two makers. without the consent of a surety co-maker. "July ____. it can readily be observed. (8) Where there was a blank for the place of payment. filling in the blank with the place desired. (3) Adding the date of maturity as a marginal notation." The holder on or after maturity wrote in the blank space the words "May 1.

Otherwise. It is issued by the Bureau of Treasury sizeable bundles of checks in booklet form with serial numbers different from other government office or agency. Dumlao and of the resident Auditor. And as (a) safety measure. thus cannot refuse to accept the check in question on the ground that the serial number was altered. for fictitious payee to succeed in its malicious intentions to defraud the government. The genuineness of the amount and the signatures therein of then Deputy Minister of Education Hermenegildo C. 13(Emphasis ours. The owner and issuer of the check is boldly and clearly printed on its face. Hence. The identity of the issuing government office or agency was not changed thereby and the amount of the check was not charged against the account of another government office or agency which had no liability under the check. therefore. every government office o(r) agency (is) assigned TCAA checks bearing different number series. it is through the serial numbers that (a) TCAA Check is determined to have been issued by a particular office or agency of the government. Thus. stated. Said certification reads: . It is petitioner's submission that the certification issued by Minrado C. Neither is the authenticity of the different codes appearing therein questioned . The ownership of the check is established without the necessity of recourse to the serial number. we quote with favor the findings of the respondent court: xxx xxx xxx If the purpose of the serial number is merely to identify the issuing government office or agency. .." These words are not alleged to have been falsely or fraudulently intercalated into the check. the name of the government agency which issued the subject check was prominently printed therein. its alteration in this case had no material effect whatsoever on the integrity of the check. Now. second line from the top: "MINISTRY OF EDUCATION AND CULTURE. The check's serial number is not the sole indication of its origin. We now go to the second issue. Penomio C.) Petitioner. A concrete example is that of the disbursements of the Ministry of Education and Culture. besides being a negotiable instrument itself. Neither there any proof that the amount of the check was erroneously charged against the account of a government office or agency other than the Ministry of Education and Culture. rendering the referral to the serial number redundant and inconsequential. the same being an immaterial or innocent one. Cashier III of the MEC clearly shows that the check was altered. & Culture. The check's issuer was therefore sufficiently identified. the alteration in the number of the check did not affect or change the liability of the Ministry of Education and Culture under the check and." and below the name of the payee are the rubber-stamped words: "Ministry of Educ. . is immaterial. 12 xxx xxx xxx Petitioner's arguments fail to convince. As succinctly found by the Court of Appeals. Batonghinog. all it need do is to get hold of a TCAA Check and have the serial numbers of portion (sic) thereof changed or altered to make it appear that the same was issued by the MEG. that a TCAA check by its very nature is the medium of exchange of governments (sic) instrumentalities of agencies. Alvarez are not challenged.It is an accepted concept.

The series number of said check was not included among those requisition by this Office from the Bureau of Treasury. SN7-3666223-3 dated August 7. Abante Marketing in the amount of NINETY (S)EVEN THOUSAND SIX HUNDRED FIFTY PESOS ONLY (P97.650. TCAA PNB Check Mo.) MINRADO C.00) was not issued by this Office nor released to the payee concerned. V e r y t r u l y y o u r s . BATONGHINOG C a s h i e r I . 1981 drawn in favor of F. (SGD.TO WHOM IT MAY CONCERN: This is to certify that according to the records of this Office.

as we previously emphasized. However. this Court finds that it would be fair and reasonable to impose interest at 12% per annum on the principal amount of the check computed from October 19. 15 We agree with the respondent court. Court of Appeals: 19 The award of attorney's fees lies within the discretion of the court and depends upon the circumstances of each case. Moreover. still the best evidence of the material alteration would be the disputed check itself and the serial number thereon. Anent the third issue — whether or not the drawee bank may still recover the value of the check from the collecting bank even if it failed to return the check within the twenty-four (24) hour clearing period because the check was tampered — suffice it to state that since there is no material alteration in the check. assigning the latter as one of the errors committed by the trial court.I I 1 4 Petitioner claims that even if the author of the certification issued by the Ministry of Education and Culture (MEG) was not presented. However. 16 Absent this proof. this Court finds that Capitol failed to adequately substantiate its claim.00 as attorney's fees is hereby deleted. However. The one who signed the certification was not presented before the trial court to prove that the said document was really the document he prepared and that the signature below the said document is his own signature. the discretion of the court to award attorney's fees under Article 2208 of the Civil Code of the Philippines demands factual. 18 The foregoing is in conformity with the guiding principles laid down in a long line of cases and reiterated recently inConsolidated Bank & Trust Corporation (Solidbank) v. legal and equitable justification. petitioner unambiguously questioned before it the award of attorney's fees. 1981 (the date PBCom debited Capitol's account) until the amount is fully paid and reasonable attorney's fees. 17 (Emphasis ours. the trial court and the Court of Appeals failed to explicitly state the rationale for the said award. Petitioner thus assails the refusal of respondent court to give weight to the certification because the author thereof was not presented to identify it and to be cross-examined thereon. What Capitol had presented was a self-serving. Neither did petitioner present an eyewitness to the execution of the questioned document who could possibly identify it.000. we cannot rule on the authenticity of the contents of the certification. The trial court merely ruled as follows: With respect to Capitol's claim for damages consisting of alleged loss of opportunity. petitioner has no right to dishonor it and return it to PBCom. unsubstantiated and speculative computation of what it allegedly could have earned or realized were it not for the debit made by PBCom which was triggered by the return and debit made by PNB.) And contrary to the Court of Appeal's resolution. It becomes a . without which the award is a conclusion without a premise and improperly left to speculation and conjecture. the amount of P10. In their respective decisions. the change of its serial number not being substantial to its negotiability. the same being in all respects negotiable. there was no material alteration on the check.

1. premises considered. p. 11 Id. JJ. pp. pp. Negotiable Instruments and other related Commercial Paper. Pandect of Commercial Law and Jurisprudence. 1992 ed. at 10-11. at 30-31. 403. 28. Jr. except for the deletion of the award of attorney's fees. the same shall be disallowed.. Vol. Commentaries & Jurisprudence on the COMMERCIAL LAWS OF THE PHILIPPINES.. Vitug and Hermosisima. 8 Nickles. Vol. it is necessary for the court to make findings of fact and law that would bring the case within the exception and justify the grant of the award (Refractories Corporation of the Philippines v. p. p. Intermediate Appellate Court. Footnotes 1 CA Rollo. 3 Id. 403-404. Vol. p. 168. 13 Rollo. v. Padilla. at 404-405. Inc. Commentaries and Jurisprudence on the COMMERCIAL LAWS OF THE PHILIPPINES. 78. 176 SCRA 539 [176 SCRA 539]). 1. WHEREFORE. 10 Agbayani. If it is stated only in the dispositive portion of the decision. the decision of the Court of Appeals is hereby AFFIRMED. concur. The reason for the award must be stated in the text of the court's decision. 1.. . Commentaries and Jurisprudence on the COMMERCIAL LAWS OF THE PHILIPPINES.) 6 Rollo.. 21-28. 1990 ed. 99-100. 188 SCRA 170 [1990]). As to the award of attorney's fees being an exception rather than the rule.. 7 Agbayani.. p. 55. (Agbayani. 2 Rollo.. 14 Rollo. pp. SO ORDERED. 9 Vitug. Intermediate Appellate Court. 4 Id. 11.violation of the proscription against the imposition of a penalty on the right to litigate (Universal Shipping Lines. 12 Rollo. 1992 ed. 1993 2nd ed. 26. 5 The Negotiable Instruments Law of the Philippines was patterned after the draft approved by the Commissioner on Uniform State Laws in the United States. p. p. 21-28.. p.. Bellosillo.

p. or by a person to whom the parties to the instrument had previously confessed the execution thereof .15 Ibid. . . (2) the person before whom its execution was acknowledged. The due execution of a document could be proved through the testimony of (1) the person who executed it. 19 246 SCRA 193 (1995). 1993 ed. Francisco. Evidence. 16 R. after its execution and delivery. Inc. p. See also. Decision of RTC. 15-16. 17 CA Rollo. 5. v. Brief of Appellant PNB. saw it and recognized the signatures. Toyota Shaw.J. or who.. 18 CA Rollo. CA. 505. pp. or (3) any person who was present and saw it executed and delivered. 244 SCRA 320 (1995 ) .

on the issue of the right of the drawer to recover from the drawee bank who pays a check with a forged indorsement of the payee. JR. affirmed the decision of the RTC on two grounds. the petitioner filed this petition under Rule 45 of the Rules of Court setting forth the following as the alleged errors of the respondent Court:1 I THE RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE NEGLIGENCE OF THE DRAWER IS THE PROXIMATE CAUSE OF THE RESULTING INJURY TO THE DRAWEE BANK. CV No. On March 5.: From the adverse decision * of the Court of Appeals (CA-G. which tried the case.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. rendered a decision on November 17. Concepcion. II .. Branch CXXVIII of Caloocan City.R. The Regional Trial Court. On appeal. Natividad Gempesaw.R. petitioner. Camins for petitioner. 1990. petitioner filed a Complaint against the private respondent Philippine Bank of Communications (respondent drawee Bank) for recovery of the money value of eighty-two (82) checks charged against the petitioner's account with the respondent drawee Bank on the ground that the payees' indorsements were forgeries. 92244 February 9. appealed to this Court in a Petition for Review. namely (1) that the plaintiff's (petitioner herein) gross negligence in issuing the checks was the proximate cause of the loss and (2) assuming that the bank was also negligent. No. the Court of Appeals in a decision rendered on February 22. J. THE HONORABLE COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS.B. 1987 dismissing the complaint as well as the respondent drawee Bank's counterclaim. respondents. L. vs. AND THE DRAWER IS PRECLUDED FROM SETTING UP THE FORGERY OR WANT OF AUTHORITY. 16447). 1985. the loss must nevertheless be borne by the party whose negligence was the proximate cause of the loss. 1993 NATIVIDAD GEMPESAW. 1990. petitioner. Abello. Regals & Cruz for private respondent CAMPOS. The records show that on January 23. debiting the same against the drawer's account. Angara.

1984 in the amount of P11. the respondent drawee Bank.89 WITH LEGAL INTEREST.33 (Exh.041.677.G. A-61) appellant's obligation was only P1. (3) in Check No. petitioner issued.895. Gempesaw (petitioner) owns and operates four grocery stores located at Rizal Avenue Extension and at Second Avenue. IS THE DIRECT AND PROXIMATE CAUSE OF THE DAMAGE TO PETITIONER WHOSE SAVING (SIC) ACCOUNT WAS DEBITED. (2) in Check No. a total of eighty-two (82) checks in favor of several suppliers. Her customary practice of issuing checks in payment of her suppliers was as follows: the checks were prepared and filled up as to all material particulars by her trusted bookkeeper. and honored by.672. Although the respondent drawee Bank notified her of all checks presented to and paid by the bank. 1) in Check No. A-83). In the course of her business operations covering a period of two years.G. . (Exh. petitioner did not verify he correctness of the returned checks. To facilitate payment of debts to her suppliers. Petitioner signed each and every check without bothering to verify the accuracy of the checks against the corresponding invoices because she reposed full and implicit trust and confidence on her bookkeeper. 7). The issuance and delivery of the checks to the payees named therein were left to the bookkeeper. A-60). III THE RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT ORDERING THE RESPONDENT BANK TO RESTORE OR RE-CREDIT THE CHECKING ACCOUNT OF THE PETITIONER IN THE CALOOCAN CITY BRANCH BY THE VALUE OF THE EIGHTY-TWO (82) CHECKS WHICH IS IN THE AMOUNT OF P1. petitioner draws checks against her checking account with the respondent bank as drawee. dated June 27. 1984 for the amount of P11.20 (Exh. B). the relevant facts are as follows: Petitioner Natividad O. 620450 dated May 10. Shopper's Mart and D.THE RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT FINDING AND RULING THAT IT IS THE GROSS AND INEXCUSABLE NEGLIGENCE AND FRAUDULENT ACTS OF THE OFFICIALS AND EMPLOYEES OF THE RESPONDENT BANK IN FORGING THE SIGNATURE OF THE PAYEES AND THE WRONG AND/OR ILLEGAL PAYMENTS MADE TO PERSONS. Most of the aforementioned checks were for amounts in excess of her actual obligations to the various payees as shown in their corresponding invoices. Petitioner maintains a checking account numbered 1300038-1 with the Caloocan City Branch of the respondent drawee Bank. (4) in Check No. appellant's actual obligation to said payee was only P895. A-31) her actual obligation . Whole Sale Mart. Respondent drawee Bank correspondingly debited the amounts thereof against petitioner's checking account numbered 30-00038-1.208. A-67) appellant's actual obligation to said payee was only P1. 589092 dated April 7.672. together with the corresponding invoice receipts which indicate the correct obligations due and payable to her suppliers. . 1984 in favor of Knotberry for P11. Alicia Galang.041.606. From the records. 652282 issued on September 18. following her usual practice stated above. OTHER THAN TO THE INTENDED PAYEES SPECIFIED IN THE CHECKS. After the bookkeeper prepared the checks.47 (Exh.10 (Exh. Caloocan City. 621127.47 in favor of Marchem (Exh.20 (Exh. 1984 in favor of Senson Enterprises in the amount of P11. Among these groceries are D. much less check if the payees actually received the checks in payment for the supplies she received. the completed checks were submitted to the petitioner for her signature.23 in favor of Kawsek Inc. To mention a few: . These checks were all presented by the indorsees as holders thereof to. an employee for more than eight (8) years. Petitioner admitted that she did not make any verification as to whether or not the checks were delivered to their respective payees.

651863 dated August 11. It was only after the lapse of more two (2) years that petitioner found out about the fraudulent manipulations of her bookkeeper. A-62).00 (Exhs. all the checks issued and honored by the respondent drawee bank were crossed checks.107. 1984 in the amount of P11. (9) in Check No.648. 2 Practically. attaching thereto all the cancelled checks she had issued and which were debited against her current account.335. Romero and Benito Lam in their respective branches. Sixty-three (63) out of the eighty-two (82) checks were deposited in Savings Account No. G). 00844-5 of Alfredo Y. her obligation was only P504.60 (Exh. under the name of Benito Lam at the Elcaño branch of the respondent drawee Bank. Boon.504. 589019 dated March 17. 1984 in favor of Grocer's International Food Corp. but the respective payees admitted that they did not receive those checks and therefore .606.16 (Exh. About thirty (30) of the payees whose names were specifically written on the checks testified that they did not receive nor even see the subject checks and that the indorsements appearing at the back of the checks were not theirs. who. petitioner made a written demand on respondent drawee Bank to credit her account with the money value of the eighty-two (82) checks totalling P1. 62033 dated May 23. Under the rules of the respondent drawee Bank. On January 23.107. On November 7. The team of auditors from the main office of the respondent drawee Bank which conducted periodic inspection of the branches' operations failed to discover.16 (Exh. The Branch Managers of the Ongpin and Elcaño branches accepted the deposits made in the Buendia branch and credited the accounts of Alfredo Y. A-73). 651862 dated August 9. Respondent drawee Bank refused to grant petitioner's demand. A-66).208. 1984. H-2). accepted them all for deposit at the Buendia branch to the credit and/or in the accounts of Alfredo Y. the latter also furnished her with a monthly statement of her transactions. How and by whom the forgeries were committed are not established on the record. her obligation was only P648. her obligation was only P1. Boon. (5) in Check No.10 (Exhs. 3 Aside from the daily notice given to the petitioner by the respondent drawee Bank. her obligation was only P1. C and C-1).00 in favor of Monde Denmark Biscuit (Exh. This is not a suit by the party whose signature was forged on a check drawn against the drawee bank. only a Branch Manager and no other official of the respondent drawee bank. Romero. 589028 dated March 10. A-34). Chief Accountant of respondent drawee Bank at the Buendia branch. E and E-1). The payees are not parties to the case. whose signature is genuine.00 in favor of the Yakult Philippines (Exh. 1985.00 (Exh.00 (Exh. D-2). 0443-4. Romero and Benito Lam. (7) in Check No. in the amount of P11. (8) in Check No. who instituted this action to recover from the drawee bank the money value of eighty-two (82) checks paid out by the drawee bank to holders of those checks where the indorsements of the payees were forged. Ernest L. and four (4) checks in his Savings Account No. All the eighty-two (82) checks with forged signatures of the payees were brought to Ernest L.was only P677. Rather. 1984 in favor of Malinta Exchange Mart for P11. petitioner filed the complaint with the Regional Trial Court. the latter's invoice was only P520.335. without authority therefor. (6) in Check No. I-1 and I-2). Boon. 32-81-9 at its Ongpin branch. may accept a second indorsement on a check for deposit. In the case at bar. Romero at the respondent drawee Bank's Buendia branch.520. The rest of the checks were deposited in Account No. 1984 for the amount of P11. 1984 in favor of Sophy Products in the amount of P11.60 (Exh. Boon was a very close friend of Alfredo Y. check or stop the unauthorized acts of Ernest L. all the deposit slips of the eighty-two (82) checks in question were initialed and/or approved for deposit by Ernest L. A-78).89 for having been wrongfully charged against her account.00 (Exh. it is the drawer.

and no right to retain the instrument. he cannot be made to pay because he never made the promise to pay. 8 Without the . Under the aforecited provision. can be acquired through or under such signature. a depositor is under a duty to set up an accounting system and a business procedure as are reasonably calculated to prevent or render difficult the forgery of indorsements. 5For his negligence or failure either to discover or to report promptly the fact of such forgery to the drawee. the forged signature of the payee or indorsee of a note or check.e. Such an indorsement prevents any subsequent party from acquiring any right as against any party whose name appears prior to the forgery. Or where a person's signature as a drawer of a check is forged. Her signing the checks made the negotiable instrument complete. not even by a holder in due course. Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument to the payee for the purpose of giving effect thereto. he cannot be held liable thereon by anyone. is called issuance of the instrument. unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. the drawer loses his right against the drawee who has debited his account under a forged indorsement. forgery is a real or absolute defense by the party whose signature is forged. 6 In other words. The applicable law is the Negotiable Instruments Law 4 (heretofore referred to as the NIL). However. Prior to signing the checks.. and (2) where the indorsement was forged by an agent of the drawer. In the case at bar. if a person's signature is forged as a maker of a promissory note. the law makes an exception to these rules where a party is precluded from setting up forgery as a defense. complete in form. And if the drawer (depositor) learns that a check drawn by him has been paid under a forged indorsement. it is wholly inoperative. not one of them can acquire rights against parties prior to the forgery. and were given to her for her signature. As a matter of practical significance. Thus. or to give a discharge therefor. Since under said provision a forged signature is "wholly inoperative". the drawer is under duty promptly to report such fact to the drawee bank. Since his signature does not appear in the instrument. i. And said section does not refer only to the forged signature of the maker of a promissory note and of the drawer of a check. Alicia Galang. While there is no duty resting on the depositor to look for forged indorsements on his cancelled checks in contrast to a duty imposed upon him to look for forgeries of his own name. there was no valid contract yet. to the payee who takes it as a holder. It covers also a forged indorsement. A party whose signature to an instrument was forged was never a party and never gave his consent to the contract which gave rise to the instrument. no one can gain title to the instrument through such forged indorsement. particularly by the depositor's own employees.never indorsed the same. he is precluded from using forgery as a basis for his claim for re-crediting of his account. petitioner admitted that the checks were filled up and completed by her trusted employee. problems arising from forged indorsements of checks may generally be broken into two types of cases: (1) where forgery was accomplished by a person not associated with the drawer — for example a mail robbery. This difference in situations would determine the effect of the drawer's negligence with respect to forged indorsements. the drawee bank cannot charge the amount thereof against the drawer's account because he never gave the bank the order to pay. Although rights may exist between and among parties subsequent to the forged indorsement. Section 23 of the NIL provides: When a signature is forged or made without the authority of the person whose signature it purports to be. Such forged indorsement cuts off the rights of all subsequent parties as against parties prior to the forgery. 7 The first delivery of the instrument. or to enforce payment thereof against any party thereto.

at which she notified the respondent drawee bank. It is highly improbable that in a period of two years. With such discovery. 13-00038-1. Furthermore. All the eighty-two (82) checks bearing the forged indorsements of the payees and the genuine second indorsements of Alfredo Y. Had this been done. and debited against petitioner's checking account No. although she regularly received her bank statements.89. and were deposited in the latter's accounts as earlier noted. The record fails to show the identity of the party who made the forged signatures.initial delivery of the instrument from the drawer of the check to the payee. The continued occurrence of business transactions of the same nature provides the opportunity for the agent/employee to commit the fraud after having developed familiarity with the signatures of the parties. It was established that the signatures of the payees as first indorsers were forged. there can be no valid and binding contract and no liability on the instrument. were credited and paid out by respondent drawee Bank to Alfredo Y. Most of the cases involving forgery by an agent or employee deal with the payee's indorsement. and did not compare them with the same invoices. to make an adequate investigation on the matter. Boon. the subsequent forgeries would not have been accomplished. Romero and Benito Lam were accepted for deposit at the Buendia branch of respondent drawee Bank to the credit of their respective savings accounts in the Buendia. The checks were then indorsed for the second time with the names of Alfredo Y. Otherwise. and did not even verify the accuracy of amounts of the checks she signed against the invoices attached thereto. An exception to this rule is where the drawer is guilty of such negligence which causes the bank to honor such a check or checks. some leak will show on the drawer's books. The drawer and the payee often time shave business relations of long standing. Romero and Benito Lam. Assuming that even one single complaint had been made. This is specially true when the agent perpetrates a series of forgeries as in the case at bar.606. As a rule. she apparently did not carefully examine the same nor the check stubs and the returned checks.208. not one of Petitioner's suppliers complained of non-payment. In the case at bar. as far as the respondent drawee Bank was concerned. sooner or later. However. Ongpin and Elcaño branches of the same bank. it is quite obvious that the drawer cannot possibly discover the forged indorsement by mere examination of his cancelled check. It was not until two years after the bookkeeper commenced her fraudulent scheme that petitioner discovered that eighty-two (82) checks were wrongfully charged to her account. he has no similar duty as to forged indorsements. a drawee bank who has paid a check on which an indorsement has been forged cannot charge the drawer's account for the amount of said check. a certain Ernest L. It will then be just a question of time until the fraud is discovered. petitioner would have been duty-bound. Romero and Benito Lam. A different situation arises where the indorsement was forged by an employee or agent of the drawer. or done with the active participation of the latter. Petitioner's failure to make such adequate inquiry constituted negligence which resulted in the bank's honoring of the subsequent checks with forged indorsements. Petitioner completed the checks by signing them as drawer and thereafter authorized her employee Alicia Galang to deliver the eighty-two (82) checks to their respective payees. she could have easily discovered the discrepancies between the checks and the documents serving as bases for the checks. sooner or later. Alicia Galang delivered them to the Chief Accountant of the Buendia branch of the respondent drawee Bank. represented by eighty-two (82) checks. The negligence of a depositor which will prevent recovery of an unauthorized payment is based on failure of the depositor to act as a prudent businessman would under the circumstances. The second indorsements were all genuine signatures of the alleged holders. This accounts for the rule that although a depositor owes a duty to his drawee bank to examine his cancelled checks for forgery of his own signature. The total amount of P1. If a check is stolen from the payee. the petitioner relied implicitly upon the honesty and loyalty of her bookkeeper. Caloocan branch. Instead of issuing the checks to the payees as named in the checks. On the other . the discrepancies would have been discovered.

or at least made random scrutiny of cancelled checks returned by respondent drawee Bank at the close of each month. Likewise had petitioner been more vigilant in going over her current account by taking careful note of the daily reports made by respondent drawee Bank in her issued checks. the check can only be deposited with the payee's bank which in turn must present it for payment against the drawee bank in the course of normal banking transactions between banks. Since the drawer was not negligent. But even in such a case.hand. The banking rule banning acceptance of checks for deposit or cash payment with more than one indorsement unless cleared by some bank officials does not invalidate the instrument. she could have easily discovered the fraud being perpetrated by Alicia Galang. Petitioner likewise contends that banking rules prohibit the drawee bank from having checks with more than one indorsement. The crossed check cannot be presented for payment but it can only be deposited and the drawee bank may only pay to another bank in the payee's or indorser's account. petitioner's negligence was the proximate cause of her loss. Thus. the facts may establish her negligence. she would have easily discovered that in some checks. and refrain from taking the steps that a careful and prudent businessman would take in such circumstances and if taken. the amounts did not tally with those appearing in the sales invoices. 10 Under Section 23 of the NIL. she should not have signed those checks. since the record mentions nothing about such a complaint. and could have reported the matter to the respondent drawee Bank. Hongkong & Shanghai Bank 11 is not applicable to the case at bar because in said case. It is more of a warning to the holder that the check cannot be presented to the drawee bank for payment in cash. neither was the forging of the payee's indorsement due to the drawer's negligence. particularly the invoice receipts. considering the length of a period of two (2) years. after knowledge has come to her that her funds seem to be disappearing or that there may be a leak in her business. cancelled checks. If she fails to take steps. it is hard to believe that petitioner did not know or realize that she was paying more than she should for the supplies she was actually getting. In effect. she would be estopped from recovering from the bank. she is now precluded from using the forgery to prevent the bank's debiting of her account. Instead. The drawer was not found to be negligent in the handling of its business affairs and the theft of the check by a total stranger was not attributable to negligence of the drawer. And since it was her negligence which caused the respondent drawee Bank to honor the forged checks or prevented it from recovering the amount it had already paid on the checks. petitioner cannot now complain should the bank refuse to recredit her account with the amount of such checks. check book stubs. the check was fraudulently taken and the signature of the payee was forged not by an agent or employee of the drawer. vs. Petitioner argues that respondent drawee Bank should not have honored the checks because they were crossed checks. neither does it invalidate the negotiation or transfer of the said check. Had the petitioner examined her records more carefully. 9 One thing is clear from the records — that the petitioner failed to examine her records with reasonable diligence whether before she signed the checks or after receiving her bank statements. and had she compared the sums written as amounts payable in the eighty-two (82) checks with the pertinent sales invoices. the possibility exists that the checks in question covered inexistent sales. and should have conducted an inquiry as to the reason for the irregular entries. and in that event. The doctrine in the case of Great Eastern Life Insurance Co. Had she noticed these discrepancies. the drawee was duty-bound to restore to the drawer's account the amount theretofore paid under the check with a forged payee's indorsement because the drawee did not pay as ordered by the drawer. A depositor may not sit idly by. The respondent drawee Bank then could have taken immediate steps to prevent further commission of such fraud. Issuing a crossed check imposes no legal obligation on the drawee not to honor such a check. would result in stopping the continuance of the fraudulent scheme. this rule destroys the negotiability of bills/checks by limiting their negotiation by indorsement of only the .

Article 1173 provides — . the prohibition to transfer or negotiate must be written in express words at the back of the instrument.payee. Sec. such bank may not legally refuse to honor a negotiable bill of exchange or a check drawn against it with more than one indorsement if there is nothing irregular with the bill or check and the drawer has sufficient funds. 36. it is clear that under the NIL. are liable for damages. Under the NIL. the drawee bank is bound by its internal banking rules and regulations which form part of any contract it enters into with any of its depositors. or xxx xxx xxx In this kind of restrictive indorsement. it contravened the tenor of its obligation at the very least. so that any subsequent party may be forewarned that ceases to be negotiable. petitioner is precluded from raising the defense of forgery by reason of her gross negligence. the restrictive indorsee acquires the right to receive payment and bring any action thereon as any indorser. but he can no longer transfer his rights as such indorsee where the form of the indorsement does not authorize him to do so. When it violated its internal rules that second endorsements are not to be accepted without the approval of its branch managers and it did accept the same upon the mere approval of Boon. But the drawee will make itself liable to a suit for damages at the instance of the drawer for wrongful dishonor of the bill or check. and those who in any manner contravene the tenor thereof. The article provides — Those who in the performance of their obligations are guilty of fraud. the fact that the respondent drawee Bank did not discover the irregularity with respect to the acceptance of checks with second indorsement for deposit even without the approval of the branch manager despite periodic inspection conducted by a team of auditors from the main office constitutes negligence on the part of the bank in carrying out its obligations to its depositors. she cannot point to the negligence of the respondent drawee Bank in the selection and supervision of its employees as being the cause of the loss because negligence is the proximate cause thereof and under Article 2179 of the Civil Code. he incurs no liability on the check unless he accepts it. if it were not actually guilty of fraud or negligence. However. But under Section 196 of the NIL. the only kind of indorsement which stops the further negotiation of an instrument is a restrictive indorsement which prohibits the further negotiation thereof. The drawee cannot be compelled to accept or pay the check by the drawer or any holder because as a drawee. When indorsement restrictive. Furthermore. There is no question that there is a contractual relation between petitioner as depositor (obligee) and the respondent drawee bank as the obligor. she may not be awarded damages. any case not provided for in the Act shall be governed by the provisions of existing legislation. under Article 1170 of the same Code the respondent drawee Bank may be held liable for damages. as far as the drawer-depositor is concerned. However. Thus. 12 Although the holder of a check cannot compel a drawee bank to honor it because there is no privity between them. a chief accountant. negligence or delay. Under the laws of quasi-delict. In the performance of its obligation. — An indorsement is restrictive which either (a) Prohibits further negotiation of the instrument.

2 Rollo. the fact that petitioner's negligence was found to be the proximate cause of her loss does not preclude her from recovering damages. De Pano. Regalado and Nocon. . Premises considered. With the foregoing provisions of the Civil Code being relied upon. Its liability as obligor is not merely vicarious but primary wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment. respondent drawee Bank cannot claim it exercised such a degree of diligence that is required of it. Associate Justices Nathanael P. See Notes 2-6 thereof. 1 Rollo. CA Decision. pp. Francisco. SO ORDERED. 20-21. Surely. if not the utmost diligence. respondent drawee Bank is adjudged liable to share the loss with the petitioner on a fifty-fifty ratio in accordance with Article 172 which provides: Responsibility arising from negligence in the performance of every kind of obligation is also demandable. We hold that banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount importance such that the appropriate standard of diligence must be a high degree of diligence. The reason why the decision dealt on a discussion on proximate cause is due to the error pointed out by petitioner as allegedly committed by the respondent court. the courts are not precluded from applying to the circumstances of the case the laws pertinent thereto.The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstance of the persons. considering that she partly benefited from the issuance of the questioned checks since the obligation for which she issued them were apparently extinguished.. p. but such liability may be regulated by the courts according to the circumstances. and Cezar D. such that only the excess amount over and above the total of these actual obligations must be considered as loss of which one half must be paid by respondent drawee bank to herein petitioner. There is no way We can allow it now to escape liability for such negligence. due diligence on the part of the defendant is not a defense. concur. of the time and of the place.. it is being made clear that the decision to hold the drawee bank liable is based on law and substantial justice and not on mere equity. Narvasa. . .11. pp. JJ.J. And although the case was brought before the court not on breach of contractual obligations. Feliciano. And in breaches of contract under Article 1173. . concurring. # Footnotes * Penned by Associate Justice Celso L. 2-3. Magsino. PREMISES CONSIDERED. C. Thus. Jr. the case is hereby ordered REMANDED to the trial court for the reception of evidence to determine the exact amount of loss suffered by the petitioner.

" in full or abbreviated.. 261 N. Wayne County & Home Savings Bank.E.R. In the former case. 663-664.). Erickson Co. 37. 247. between which are either the name of a bank or the words "and company. 9 Detroit Piston Ring Co.. Farmers' Bank v.W. 184 N. Johnson. Bank of California. 163. C. N. he must not pay it to any other than a banker. 233 N. Iowa Nat. pp. vs. vs. Black's Law Dictionary 301 (4th Ed. 30 L. Bills and Notes.C. 2031. citing 2 Steph. vs. vs.E. supra.A.. 4 Act No. in the latter case. 1911. 495 (1933).Y. note 3. 6 City of New York vs.S. 8 Ibid. Wayne County & Home Savings Bank. et al. 5 Britton. par. 697. Bronx County Trust Co. note C. 185 (1930). 180 Wash. 7 Exch. 2d 135 (1935). [1903] A.E. 12 NIL. 191. Detroit Piston Ring Co. Sec. 372 (1929). 169 N. 240. 252 Mich. National Surety Co. Bank 211 Iowa 495.W.A.3 A crossed check is defined as a check crossed with two (2) lines. vs. Comm. 68 S. 65. 7 NIL. 10 Defiance Lumber Co. 342 (1930). 41 P.Y. vs.. 486. 533. Erickson Co. the banker on whom it is drawn must not pay the money for the check to any other than the banker named. 118. enacted on February 3. 134 Ga. 11 43 Phil. King & Co.E. Iowa National Bank. Sec.. Sec.. 230 N. President and Directors of Manhattan Co. 16. . note 3. 143. N. 389. 10. supra. 64. 252 N.. Sec. 678 (1922).

ILUSORIO. HON.R. DECISION QUISUMBING.R. Branch XV (now the Regional Trial Court of Makati.634. J. Petitioner fired Eugenio immediately. 1999 by the Court of Appeals in CA-G. vs. xxx That the aforementioned checks were among those issued by Manilabank in favor of its client MR.3 Between the dates September 5. 06-09037-0. Razon’s affidavit states: That I have examined and scrutinized the following checks in accordance with prescribed verification procedures with utmost care and diligence by comparing the signatures affixed thereat against the specimen signatures of Mr. was the Managing Director of Multinational Investment Bancorporation and the Chairman and/or President of several other corporations. with an aggregate amount of P119. Dante Razon. CV No.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. through an affidavit executed by its employee. and was going out of the country a number of times. As he was then running about 20 corporations. 139130 November 27. COURT OF APPEALS. also lodged a complaint for estafa thru falsification of commercial documents against Eugenio on the basis of petitioner’s statement that his signatures in the checks were forged. and instituted a criminal action against her for estafa thru falsification before the Office of the Provincial Fiscal of Rizal. affirming the decision of the then Court of First Instance of Rizal.… . ILUSORIO. petitioner entrusted to his secretary. He was a depositor in good standing of respondent bank. 47942. 43907. No. Ramon K. under current Checking Account No. Eugenio. Katherine2 E.4 Mr. at the time material to this case. 1981. Ilusorio which we have on file at our said office on such dates. The facts as summarized by the Court of Appeals are as follows: Petitioner is a prominent businessman who. It was also Eugenio who verified and reconciled the statements of said checking account. for damages. and THE MANILA BANKING CORPORATION. petitioner. respondents.34. Private respondent. Mr. 1980 and January 23. Branch 138) dismissing Civil Case No. RAMON K. Eugenio was able to encash and deposit to her personal account about seventeen (17) checks drawn against the account of the petitioner at the respondent bank. the Manila Banking Corporation. Petitioner did not bother to check his statement of account until a business partner apprised him that he saw Eugenio use his credit cards. his credit cards and his checkbook with blank checks.: This petition for review seeks to reverse the decision1 promulgated on January 28. 2002 RAMON K.

this case would have to be. That I have met and known her as KATHERINE E. The appellate court held that petitioner’s own negligence was the proximate cause of his loss. ESTEBAN. Costs against the appellant. They testified that it is the bank’s standard operating procedure that whenever a check is presented for encashment or clearing. however. the signature on the check is first verified against the specimen signature cards on file with the bank. However. ILUSORIO in said Investment Corporation. RAMON K.7 Aggrieved. The appellate court disposed as follows: WHEREFORE. an executive secretary of MR.That the same were personally encashed by KATHERINE E.6 At the trial. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE RESPONDENT BANK IS ESTOPPED FROM RAISING THE DEFENSE THAT THERE WAS NO FORGERY OF THE SIGNATURES OF THE PETITIONER IN THE CHECK BECAUSE THE RESPONDENT FILED A . Several employees of Manila Bank were also called to the witness stand as hostile witnesses. After evaluating the evidence on both sides. 1994 with the following dispositive portion: WHEREFORE. attesting to the truth of the circumstances as narrated above. That MR. petitioner ascribes the following errors to the Court of Appeals: A. Petitioner. in the light of the foregoing considerations and established facts. and immediately after the dates of the questioned checks. finding no sufficient basis for plaintiff's cause herein against defendant bank. SO ORDERED. as it is hereby DISMISSED. Defendant’s counterclaim is likewise DISMISSED for lack of sufficient basis. petitioner testified on his own behalf. SO ORDERED. Manila Bank also sought the expertise of the National Bureau of Investigation (NBI) in determining the genuineness of the signatures appearing on the checks. The NBI then suggested that petitioner be asked to submit seven (7) or more additional standard signatures executed before or about. the court a quo rendered judgment on May 12. petitioner filed the instant case. the judgment appealed from is AFFIRMED. RAMON K. failed to comply with this request. and how he discovered the alleged forgeries. Hence. the NBI informed the trial court that they could not conduct the desired examination for the reason that the standard specimens submitted were not sufficient for purposes of rendering a definitive opinion.8 Before us. ESTEBAN the attending verifier when she personally encashed the above-mentioned checks at our said office. 1987. in a letter dated March 25. ILUSORIO executed an affidavit expressly disowning his signature appearing on the checks further alleged to have not authorized the issuance and encashment of the same. petitioner elevated the case to the Court of Appeals by way of a petition for review but without success.…5 Petitioner then requested the respondent bank to credit back and restore to its account the value of the checks which were wrongfully encashed but respondent bank refused.

taken on or about the date of the questioned checks. Said the appellate court: We cannot fault the court a quo for such declaration. the bank negates petitioner’s claim of estoppel. It is incumbent upon petitioner to establish the fact of forgery. AND THAT IT WAS NOT NEGLIGENT IN THE SELECTION AND SUPERVISION OF ITS EMPLOYEES. showing variances in the appellant’s unquestioned signatures. 1979 and 1981 (Exhibits "1". He adds that as a general rule a bank which has obtained possession of a check upon an unauthorized or forged endorsement of the payee’s signature and which collects the amount of the check from the drawee is liable for the proceeds thereof to the payee. in 1976. The burden to prove forgery was upon the plaintiff. petitioner has the burden of proving negligence on the part of the bank for failure to detect the discrepancy in the signatures on the checks.12 Essentially the issues in this case are: (1) whether or not petitioner has a cause of action against private respondent. by submitting his specimen signatures and comparing them with those on the questioned checks. in filing an estafa case against petitioner’s secretary. for examination and comparison with those of the subject checks. THE COURT OF APPEALS ERRED IN NOT HOLDING THE BURDEN OF PROOF IS WITH THE RESPONDENT BANK TO PROVE THE DUE DILIGENCE TO PREVENT DAMAGE. i. considering that the plaintiff’s evidence on the alleged forgery is not convincing enough. AND SHOULD BE MADE TO PAY PETITIONER.10 C. by his own inaction. Curiously though. as soon as it was informed by the appellant about his questioned signatures. WITH RECOURSE AGAINST KATHERINE EUGENIO ESTEBAN. He did not even submit his own specimen signatures. taken at various years. Manila Bank additionally points out that Section 2313 of the Negotiable Instruments Law is inapplicable. Aside from his own testimony.9 B. Lastly. Manila Bank is now estopped from asserting that the fact of forgery was never proven. Manila Bank contends that respondent appellate court did not depart from the accepted and usual course of judicial proceedings. "2". sought to borrow the questioned checks from the appellant for purposes of analysis and examination (Exhibit . is barred from raising the defense that the fact of forgery was not established.14 On the first issue.. was precluded from setting up forgery. 23. petitioner failed to submit additional specimen signatures as requested by the National Bureau of Investigation from which to draw a conclusive finding regarding forgery. we find that petitioner has no cause of action against Manila Bank. the appellant presented no other evidence to prove the fact of forgery. considering that the fact of forgery was never proven. For its part. Petitioner invokes the doctrine of estoppel.CRIMINAL COMPLAINT FOR ESTAFA THRU FALSIFICATION OF COMMERCIAL DOCUMENTS AGAINST KATHERINE EUGENIO USING THE AFFIDAVIT OF PETITIONER STATING THAT HIS SIGNATURES WERE FORGED AS PART OF THE AFFIDAVIT-COMPLAINT. NEGOTIABLE INSTRUMENTS LAW. "3" and "7"). The Court of Appeals found that petitioner. the appellee presented specimen signature cards of the appellant. TO THE PETITIONER. On the other hand. THE COURT OF APPEALS ERRED IN NOT APPLYING SEC. namely. hence there is no reason for the reversal of its ruling. To be entitled to damages. and (2) whether or not private respondent. saying that having itself instituted a forgery case against Eugenio. which burden he failed to discharge.11 D. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT BANK SHOULD BEAR THE LOSS. The evidence further shows that the appellee.e. Petitioner contends that Manila Bank is liable for damages for its negligence in failing to detect the discrepant checks.

The trouble is. we believe and so hold that if there were mistakes. including custody and possession of cancelled checks and reconciliation of accounts. check books. The bank’s employees in the present case did not have a hint as to Eugenio’s modus operandi because she was a regular customer of the bank.17 In the present case. the same were not deliberate. We find no palpable error that would warrant a reversal of the appellate court’s assessment of facts anchored upon the evidence on record. In the instant case. His testimony did not indicate that he was out of the country during the period covered by the checks. According to the appellate court. it is the same secretary who answers and confirms the checks.16 As borne by the records. Thus. the employees of the bank exercised due diligence in the performance of their duties. the verifier went further. it found that: The evidence on both sides indicates that TMBC’s employees exercised due diligence before encashing the checks. Of course it is possible that the verifiers of TMBC might have made a mistake in failing to detect any forgery -. . such as by referring to a more experienced verifier for further verification. by entrusting not only his credit cards with her but also his checkbook with blank checks. Negligence is the omission to do something which a reasonable man. Its verifiers first verified the drawer’s signatures thereon as against his specimen signature cards. but the same was denied by the appellant. petitioner’s contention that Manila Bank was remiss in the exercise of its duty as drawee lacks factual basis. through a letter dated July 14. It was also the former which sought the assistance of the NBI for an expert analysis of the signatures on the questioned checks.if indeed there was. are binding upon us19 and entitled to utmost respect20 and even finality. he had all the opportunities to verify his account as well as the cancelled checks issued thereunder -. or the doing of something which a prudent and reasonable man would do. bank statements."9"). since the bank took all the precautions. especially when affirmed by the appellate court. He also entrusted to her the verification and reconciliation of his account. it appears that petitioner accorded his secretary unusual degree of trust and unrestricted access to his credit cards. the appellant had introduced his secretary to the bank for purposes of reconciliation of his account. it was petitioner. passbooks. It was only then that he was minded to verify the records of his account. but the same was unsuccessful for lack of sufficient specimen signatures. the CA and the RTC found that Manila Bank employees exercised due diligence in cashing the checks. guided by those considerations which ordinarily regulate the conduct of human affairs. Consistently. until his partner asked him whether he had entrusted his credit card to his secretary because the said partner had seen her use the same. having been designated by petitioner himself to transact in his behalf. and when in doubt. he was not personally checking the same. the said secretary became a familiar figure in the bank. Further adding to his injury was the fact that while the bank was sending him the monthly Statements of Accounts. would do. Thus. However. 1980 (Exhibit "8"). who was negligent. not the bank. the appellant had put so much trust and confidence in the said secretary.month after month. a mistake is not equivalent to negligence if they were honest mistakes. Thus.15 Moreover. But he did not. 18 The abovecited findings are binding upon the reviewing court. We stress the rule that the factual findings of a trial court. In some instances the verifier made a confirmation by calling the depositor by phone. What is worse. Said the Court of Appeals on this matter: Moreover. whenever the bank verifiers call the office of the appellant. It is only after taking such precautionary measures that the subject checks were given to the teller for payment.

True. In a criminal action. All told. the fact of forgery was not established with certainty. he could have been alerted to any anomaly committed against him.R. no recovery could be had for damages. In the cited cases. CA24 to buttress his contention that respondent Manila Bank as the collecting or last endorser generally suffers the loss because it has the duty to ascertain the genuineness of all prior endorsements is misplaced. Petitioner’s reliance on Associated Bank vs. . In other words.21 In the instant case. CV No. or to enforce payment thereof against any party. the collecting banks were held to be negligent for failing to observe precautionary measures to detect the forgery. easy to understand that the filing of the estafa case by respondent bank was a last ditch effort to salvage its ties with the petitioner as a valuable client. can be acquired through or under such signature. as petitioner himself stated in his petition. the State is the plaintiff. On the second issue. we find no reversible error that can be ascribed to the Court of Appeals. the rule does provide for an exception. the fact that Manila Bank had filed a case for estafa against Eugenio would not estop it from asserting the fact that forgery has not been clearly established. it is a rule that when a signature is forged or made without the authority of the person whose signature it purports to be. In our view. 47942. or to give a discharge therefor. The assailed decision of the Court of Appeals dated January 28.25 Thus. Proximate cause is that cause. and that Manila Bank had no authority to pay the forged checks. due to his own negligence in entrusting to his secretary his credit cards and checkbook including the verification of his statements of account. unbroken by any efficient intervening cause. for the commission of a felony is an offense against the State. the bank was not shown to be remiss in its duty of sending monthly bank statements to petitioner so that any error or discrepancy in the entries therein could be brought to the bank’s attention at the earliest opportunity. Petitioner further contends that under Section 23 of the Negotiable Instruments Law a forged check is inoperative. under Section 2." In the instant case. But. assuming there is forgery.27 but without admitting that he had any personal knowledge of the alleged forgery. In view of Article 2179 of the New Civil Code. the instant petition is DENIED for lack of merit. In the present case. In the case before us. Petitioner cannot hold private respondent in estoppel for the latter is not the actual party to the criminal action." 26 Further. 1999 in CA-G. the check is wholly inoperative. in natural and continuous sequence. both courts below uniformly found that Manila Bank’s personnel diligently performed their duties. petitioner failed to examine these bank statements not because he was prevented by some cause in not doing so. but because he did not pay sufficient attention to the matter. Rule 110 of the Rules of Court the complaint or information filed in court is required to be brought in the name of the "People of the Philippines.Petitioner’s failure to examine his bank statements appears as the proximate cause of his own damage. In those cited cases. Court of Appeals23 and Philippine Bank of Commerce vs. It is. Had he done so. therefore. respondent bank filed the estafa case against Eugenio on the basis of petitioner’s own affidavit. is AFFIRMED. having compared the signature in the checks from the specimen signatures on record and satisfied themselves that it was petitioner’s.22 when the plaintiff’s own negligence was the immediate and proximate cause of his injury. the fact of forgery was not in issue. However. petitioner is precluded from setting up the forgery. namely: "unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. and without which the result would not have occurred. petitioner had sufficient opportunity to prevent or detect any misappropriation by his secretary had he only reviewed the status of his accounts based on the bank statements sent to him regularly. produces the injury. which. WHEREFORE. it is the exception that applies. by bolstering the estafa case which he filed against his secretary. No right to retain the instrument.

it is wholly inoperative.J. 49. Sr. 23.. 1983. (Chairman). or to give a discharge therefor. SO ORDERED. When a signature is forged or made without the authority of the person whose signature it purports to be. 6 Id. 16 Id. at 29. at 28. at 30. can be acquired through or under such signature. unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. 14 Rollo. JJ. pp. 9 Id. 11 Id. Austria-Martinez..Costs against petitioner. Footnotes 1 Rollo. October 6. p. at 17. 58. 12 Id. Forged signature. Acting C. Mendoza. 26-30. 3 Rollo. 7 Ibid. at 14. at 27. 108-109. 26. at 10. 2 Also spelled as "Catherine" in some parts of the record. 4 TSN. and Callejo. Bellosillo. 10 Id. concur. effect of. 5 Rollo. . p. 8 Id. pp. or to enforce payment thereof against any party thereto. 13 Sec. at 15.. p. and no right to retain the instrument. 15 Id.

21 Supra. he cannot recover damages. The complaint or information. 19 Lorenzana vs. 20 Ong vs. 18 Supra. 316 SCRA 65. 22 Art. Sandiganbayan. 657 (2000). note 17 at 659. 353 SCRA 396. in the name of the People of the Philippines and against all persons who appear to be responsible for the offense involved. note 16. SEC. Court of Appeals. 9. 100 (1999). 403 (2001).17 Bank of the Philippine Islands vs. 326 SCRA 641. 26 27 Rollo. 633 (1996). CA. 2179. People. 703-710 (1997). p. – The complaint or information shall be in writing. 2. 272 SCRA 725. … 23 252 SCRA 620. . 24 269 SCRA 695. 25 Binay vs. 730 (1997). When the plaintiff's own negligence was the immediate and proximate cause of his injury.

08. 1 Plaintiff Bank was later advised by the said bureau that the alleged indorsement on the reverse side of the aforesaid check by the payee. entitled "Republic Bank vs. 3 Plaintiff Bank was then requested by the Bureau of Treasury to refund the amount of P1. 1966.246. So plaintiff Bank sued defendant Ebrada before the City Court of Manila. The check was issued by the Bureau of Treasury. MAURICIA T. 1975 REPUBLIC BANK. for Third-Party plaintiff against Third-Party defendant. vs. filed on September 14. 69288.08 at the main office of the plaintiff Republic Bank at Escolta. Jr. Justina Tinio. that it is in estoppel. 508060 dated January 15. the City Court of Manila rendered judgment for the plaintiff Bank against defendant Ebrada. On March 21. Julio Baldonado for defendant-appellant. and for Fourth-Party plaintiff against Fourth-Party defendant. plaintiff-appellee. 5 About the same day. 1966 a Fourth-Party complaint against Justina Tinio.R. No.246. defendant Ebrada took an appeal to the Court of First Instance of Manila where the parties submitted a partial stipulation of facts as follows: . has acquired her rights from a holder in due course and therefore entitled to the proceeds thereof. Mauricia T. On July 11. Ebrada. 1963 for P1. 1963 defendant Mauricia T. Branch XXIII in Civil Case No." On or about February 27. 1966 defendant Ebrada filed a Third-Party complaint against Adelaida Dominguez who. She also alleged that the plaintiff Bank has no cause of action against her. 1967. Adelaida Dominguez.08. EBRADA. July 11. L-40796 July 31. in turn. Manila. or at the very least. plaintiff Bank made verbal and formal demands upon defendant Ebrada to account for the sum of P1.246. From the judgment of the City Court. Ebrada. Sabino de Leon.: Appeal on a question of law of the decision of the Court of First Instance of Manila. for plaintiff-appellee. MARTIN. encashed Back Pay Check No. 1952. defendant-appellant.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. defendant Ebrada filed her answer denying the material allegations of the complaint and as affirmative defenses alleged that she was a holder in due course of the check in question. or so negligent as not to be entitled to recover anything from her. J. "Martin Lorenzo" was a forgery 2 since the latter had allegedly died as of July 14. 4 To recover what it had refunded to the Bureau of Treasury. but said defendant refused to do so.

the dispositive portion of which reads as follows: WHEREFORE. payable to the order of one MARTIN LORENZO. 6. until fully paid. as evidenced by the receipt signed by her which will be marked as Exhibit "1-Dominguez".246. and drawn on the Republic Bank. for the purpose of encashment. which check will be marked as Exhibit "A" for the plaintiff. BP508060. 3. EBRADA by the Third-Party defendant and Fourth-Party plaintiff ADELAIDA DOMINGUEZ. 3) DELIA DOMINGUEZ. LORENZO. EBRADA. . in the sum of P1. Third-Party defendant and Fourth-Party plaintiff and unto this Honorable Court most respectfully submit the following: PARTIAL STIPULATION OF FACTS 1. 4. 5. in this order: 1) MARTIN LORENZO. That the parties hereto reserve the right to present evidence on any other fact not covered by the foregoing stipulations. EBRADA received the cash proceeds of said check in the sum of P1. That they admit their respective capacities to sue and be sued.08). 1969. 2. she immediately turned over the said amount to the third-party defendant and fourth-party plaintiff ADELAIDA DOMINGUEZ. 1963 the Treasury of the Philippines issued its Check No. 1963 when she encashed it with the plaintiff Bank. June 6. who in turn handed the said amount to the fourthparty defendant JUSTINA TINIO on the same date.08 from the plaintiff Bank. the trial court rendered a decision. and 4) MAURICIA T.246. That immediately after defendant MAURICIA T. That the back side of aforementioned check bears the following signatures. That the aforementioned check was delivered to the defendant MAURICIA T. Philippines. EBRADA was affixed on said check on February 27. Ebrada to pay the plaintiff the amount of ONE THOUSAND TWO FORTY-SIX 08/100 (P1. Based on the foregoing stipulation of facts and the documentary evidence presented. plus the costs in both instances against Mauricia T. defendant. That on January 15. That the signature of defendant MAURICIA T.246. the Court renders judgment ordering the defendant Mauricia T. Manila. and 7.08. 2) RAMON R. Ebrada.COME NOW the undersigned counsel for the plaintiff. plaintiff herein. 1966. with interest at the legal rate from the filing of the complaint on June 16.

It is clear from the provision that where the signature on a negotiable instrument if forged. or to give a discharge thereof against any party thereto. (b) That the instrument is at the time of his indorsement valid and subsisting. it is wholly inoperative. and (c) of the next preceding sections. the negotiation of the check is without force or effect. Martin Lorenzo was a forgery because he was already dead 7 almost 11 years before the check in question was issued by the Bureau of Treasury. defendant-appellant presses that the lower court erred: IN ORDERING THE APPELLANT TO PAY THE APPELLEE THE FACE VALUE OF THE SUBJECT CHECK AFTER FINDING THAT THE DRAWER ISSUED THE SUBJECT CHECK TO A PERSON ALREADY DECEASED FOR 11-½ YEARS AND THAT THE APPELLANT DID NOT BENEFIT FROM ENCASHING SAID CHECK. Likewise it is admitted that defendantappellant was the last indorser of the said check. The right of the estate of Dominguez to file the fourth-party complaint against Justina Tinio is also reserved.The right of Mauricia T. she was supposed to have warranted that she has good title to said check. Ebrada to file whatever claim she may have against Adelaida Dominguez in connection with this case is hereby reserved. xxx xxx xxx and under Section 65 of the same Act: Every indorser who indorses without qualification warrants to all subsequent holders in due course: (a) The matters and things mentioned in subdivisions (a). It turned out. But does this mean that the existence of one . for under Section 65 of the Negotiable Instruments Law: 6 Every person negotiating an instrument by delivery or by qualified indorsement. however. In her appeal. From the stipulation of facts it is admitted that the check in question was delivered to defendantappellant by Adelaida Dominguez for the purpose of encashment and that her signature was affixed on said check when she cashed it with the plaintiff Bank. Under action 23 of the Negotiable Instruments Law (Act 2031): When a signature is forged or made without the authority of the person whose signature it purports to be. and no right to retain the instruments. that the signature of the original payee of the check. can be acquired through or under such signature unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority. (b) That she has good title to it. warrants: (a) That the instrument is genuine and in all respects what it purports to be. SO ORDERED. (b). As such indorser.

Why should he be permitted to shift the loss due to his own fault in assuming the risk. Lorenzo to Adelaida Dominguez. It is not supposed to be its duty to ascertain whether the signatures of the payee or indorsers are genuine or not. it was held that it is only the negotiation based on the forged or unauthorized signature which is inoperative. On the next day. if. and then personally indorsed and presented the check to the Philippine National Bank where the amount of the check was placed to his (Maasin's) credit. the original payee. barring any claim of forgery. the second indorser. 196. the forgery would in all probability. or because he has sufficient confidence in the honesty and financial responsibility of the person who vouches for it. may recover the money paid from such negligent purchasers. Broadway Mut. As reasoned out above. 197. was duty-bound to ascertain whether the check in question was genuine before presenting it to plaintiff Bank for payment. In our jurisdiction We have a case of similar import. the Philippine National Bank . Farrel. yet if the encasher of the check had performed his duty. it was discovered that the signature of the payee was forged? Can the drawee bank recover from the one who encashed the check? In the case of State v. 282 S.W. This is because the indorser is supposed to warrant to the drawee that the signatures of the payee and previous indorsers are genuine. A certain E.forged signature therein will render void all the other negotiations of the check with respect to the other parties whose signature are genuine? In the case of Beam vs. One who purchases a check or draft is bound to satisfy himself that the paper is genuine and that by indorsing it or presenting it for payment or putting it into circulation before presentation he impliedly asserts that he has performed his duty and the drawee who has paid the forged check.00 on the Hongkong and Shanghai Banking Corporation payable to the order of Lazaro Melicor. In such cases the recovery is permitted because although the drawee was in a way negligent in failing to detect the forgery. had she performed the duty of ascertaining the genuineness of the check. to Ramon R. should be declared of no affect. or misplaced confidence was the sole cause of the loss. the defendant-appellant. 113 N.W. This means that the negotiation of the check in question from Martin Lorenzo. Maasin fraudulently obtained the check and forged the signature of Melicor. and from Adelaida Dominguez to the defendant-appellant who did not know of the forgery. If he is deceived he has suffered a loss of his cash or goods through his own mistake. without actual negligence on his part. it was held that the drawee of a check can recover from the holder the money paid to him on a forged instrument. 590. should be considered valid and enforceable. it can be safely concluded that it is only the negotiation predicated on the forged indorsement that should be declared inoperative. Bank. in the case before Us. 135 Iowa 670. where a check has several indorsements on it. the third indorser. Applying this principle to the case before Us. simply because of the accidental circumstance that the drawee afterwards failed to detect the forgery when the check was presented? 8 Similarly. upon receiving the check in question from Adelaida Dominguez. He accepts it only because he has proof that it is genuine. have been detected and the fraud defeated. Her failure to do so makes her liable for the loss and the plaintiff Bank may recover from her the money she received for the check. upon the drawee. 9 The Great Eastern Life Insurance Company drew its check for P2000. His own credulity or recklessness. but the negotiation of the aforesaid check from Ramon R. Lorenzo. The reason for allowing the drawee bank to recover from the encasher is: Every one with even the least experience in business knows that no business man would accept a check in exchange for money or goods unless he is satisfied that the check is genuine. in all probability the forgery would have been detected and the fraud defeated. after the drawee bank has paid the amount of the check to the holder thereof. as an indorser. warranty not extending only to holders in due course. M. What happens then.

C. Makasiar and Esguerra. JJ. who has forged the signature of the payee. . The Court held that the Hongkong and Shanghai Banking Corporation was liable to the insurance company for the amount of the check and that the Philippine National Bank was in turn liable to the Hongkong and Shanghai Banking Corporation. she acted as an accommodation party in the check for which she is also liable under Section 29 of the Negotiable Instruments Law (Act 2031). thus: . acceptor. Although the defendant-appellant to whom the plaintiff Bank paid the check was not proven to be the author of the supposed forgery. but it has the remedy to recover from the latter the amount it paid to her. P.indorsed the cheek to the Hongkong and Shanghai Banking Corporation which paid it and charged the amount of the check to the insurance company.J. Said the Court: Where a check is drawn payable to the order of one person and is presented to a bank by another and purports upon its face to have been duly indorsed by the payee of the check. concur. the loss falls upon the bank who cashed the check. p. SO ORDERED. p. and its only remedy is against the person to whom it paid the money. it is the duty of the bank to know that the check was duly indorsed by the original payee. 6 Act No. drawer. she has warranted that she has good title to it 10 even if in fact she did not have it because the payee of the check was already dead 11 years before the check was issued. Makalintal. 4 Exhibit "F-l". 5. The fact that immediately after receiving title cash proceeds of the check in question in the amount of P1. 5 ROA. 2031. defendant-appellant immediately turned over said amount to Adelaida Dominguez (Third-Party defendant and the Fourth-Party plaintiff) who in turn handed the amount to Justina Tinio on the same date would not exempt her from liability because by doing so. and for the purpose of lending his name to some other person. notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.. IN VIEW OF THE FOREGOING.An accommodation party is one who has signed the instrument as maker. 2. Such a person is liable on the instrument to a holder for value. yet as last indorser of the check.08 from the plaintiff Bank. With the foregoing doctrine We are to concede that the plaintiff Bank should suffer the loss when it paid the amount of the check in question to defendant-appellant. 2. or indorser. p. 2 ROA. Footnotes 1 ROA. the judgment appealed from is hereby affirmed in toto with costs against defendant-appellant. without receiving value therefor. and where the bank pays the amount of the check to a third person.246. 2. Castro. 3 ROA.

96 Am. National Bank of America v. 151 Mass. Bank of Georgia. 723. 280. 349. 104. 64 Am. Rep. 628.A. Rouvant v. Rep. Canadian Bank v. 12 S. 678. 60 L. . 716. 554. 58 Ohio St. Hongkong and Shanghai Banking Corporation. 450. 33. 8 Gloucester Bank v. Pampanga (Exhibit B). 8 Am. 22 Neb. 63 Tex. Salem Bank.7 He died July 14. Bank v. Bingham. 6 L. St. 610.E.R. par. Dec. First National Bank of Danvers v. 294.. 50 N.W. 299. Franklyn Bank. (b). Bangs. 3 Am. 43 Phil. 769. 384. Bank. Ellis & Morton v. 20 Wash. 4 Ohio St. Bank. 36 N. 439. 289. 24 N.A. Rep. 30 Ill. First National Bank v. Bank v. Ricker. Rep. 484. 43.W. 17 Mass. Bank of U. 6 L.. 441. 724.E. Bank v. 955. 10 Wheat 333. 65. Ed. (b) That he has a good title to it.S. Every person negotiating an instrument by delivery or by a qualified instrument warrants: (a) . Trust Co. 610. People's Bank v. Negotiable Instruments Law (Act 2031). 207. 44. Dec. 88 Tenn. St. 1952 as shown by the Certificate of Death issued by the Local Civil Registrar of the Municipality of Lubao. Rep. 196 Mass. 21 Am. Bank. 71 Ill. 17 Am St.. 9 Great Eastern Life Insurance Company vs. 10 Sec. 22 Am.R. 884. Bank. First National Bank of Salem. 71 Pac.

00 (Exh. PA660143451-C for P5. PA660143452-C for P1. corresponding to the value of the checks involved. 2001 LUIS S. However. respondents. "F").07.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.A.00.500.375. LPI would ship the calendars directly to the customers.07 difference. 1994 of the Court of Appeals in C. LPI refused to accept the checks as guarantees. the agents would come around to collect the payments. 1âw phi 1.375. respectively. Wong issued six (6) postdated checks totaling P18. PA660143463-C for P3. as follows: (1) Allied Banking Corporation (ABC) Check No. (LPI).2 Hence.00 (Exh. (6) ABC Check No. and sentencing him to imprisonment of four (4) months for each count. PA660143465-C for P1. (4) ABC Check No. After printing the calendars. Thereafter. vs.500.410. These checks were initially intended to guarantee the calendar orders of customers who failed to issue post-dated checks. "C").: For review on certiorari is the decision dated October 28. "G"). petitioner.00. with the legal rate of interest from the time of filing of the criminal charges. . Inc. all dated December 30. G. petitioner’s customers were required to issue postdated checks before LPI would accept their purchase orders. which he duly acknowledged in a confirmation receipt he co-signed with his wife. however. The agents would get the purchase orders of customers and forward them to LPI. 22 (the Bouncing Checks Law) violations. Instead. 1985 and drawn payable to the order of LPI. Branch 17. a manufacturer of calendars. and to pay private respondent the amounts of P5. 660143464-C for P6.3LPI waived the P52.100.077. following company policy. (3) ABC Check No.00 (Exh. the parties agreed to apply the checks to the payment of petitioner’s unremitted collections for 1984 amounting to P18. No. "B").R. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES.R. convicting petitioner on three (3) counts of Batas Pambansa Blg. "E"). P6.00. (2) ABC Check No.nêt The factual antecedents of the case are as follows: Petitioner Wong was an agent of Limtong Press. LPI would print sample calendars. In early December 1985.00 (Exh. 660143460-C for P540. Petitioner. then give them to agents to present to customers.410. (5) ABC Check No. CR 118561which affirmed the decision of the Regional Trial Court of Cebu City.00 (Exh.00 and P3.025. as well as to pay the costs.100. QUISUMBING. J. had a history of unremitted collections. 117857 February 2.00 (Exh. "D"). WONG.

upon advice of counsel.00). However. 1987. Pelrico Marketing (P1. the said accused.375. he and petitioner simply agreed to use the checks to pay petitioner’s unremitted collections to LPI.00). . Petitioner failed to make arrangements for payment within five (5) banking days. Golden Friendship Supermarket. Although these customers had already paid their respective orders. Contrary to law.00). The checks were returned for the reason "account closed. Inc.500. On June 20. make or draw Allied Banking Corporation Check No.00). 660143463 in the amount of P3. 660143464 for P6. petitioner reneged on his promise.00 Philippine Currency." The dishonor of the checks was evidenced by the RCBC return slip. general manager of LPI. CBU-12055 reads as follows:6 That on or about the 30th day of December.5 The Information in Criminal Case No." The version of the defense is that petitioner issued the six (6) checks to guarantee the 1985 calendar bookings of his customers. petitioner was charged with three (3) counts of violation of B. and P6. Both cases were raffled to the same trial court.375. he issued the checks not as payment for any obligation. Hence. 660143451 dated 12-30-85 in the amount of P5. Limtong in the amount of P5. In fact. According to Limtong. but to guarantee the orders of his customers. to the damage and prejudice of said Manuel T. Hence. but when the said check was presented with said bank. Manuel T. and within the jurisdiction of this Honorable Court.00. (P6.500.100. 12058 for ABC Check No. 1986. 224 under three separate Informations for the three checks amounting to P5. Trial ensued. Hence.Before the maturity of the checks.00. a few days before maturity of the checks. the same was dishonored for reason ‘ACCOUNT CLOSED’ and despite notice and demands made to redeem or make good said check. the face value of the six (6) postdated checks tallied with the total amount of the calendar orders of the six (6) customers of the accused. New Society Rice and Corn Mill (P5.100.500. 1985 and for sometime subsequent thereto. with intent of gain and of causing damage. said accused failed and refused. Blg.00). According to petitioner. Limtong averred that he refused to accept the personal checks of petitioner since it was against company policy to accept personal checks from agents. Cuesta Enterprises (P540. Philippines. Petitioner was similarly charged in Criminal Case No. with deliberate intent. Wong promised to replace them within thirty days. Upon arraignment. did then and there issue. in the City of Cebu. petitioner prevailed upon LPI not to deposit the checks and promised to replace them within 30 days. New Asia Restaurant P3.00.P.00).00 payable to Manuel T.500. Wong requested him to defer the deposit of said checks for lack of funds.375. namely. complainant through counsel notified the petitioner of the dishonor. On November 6. and in Criminal Case No. petitioner claimed LPI did not return the said checks to him. and New China Restaurant (P1. and up to the present time still fails and refuses to do so. LPI deposited the checks with Rizal Commercial Banking Corporation (RCBC).00. he deposited the checks which were subsequently returned on the ground of "account closed. Limtong.00. 1986. P3. Wong pleaded not guilty. but failed to do so. on June 5. testified on behalf of the company. Limtong which check was issued in payment of an obligation of said accused.410.410.410. knowing at the time of issue of the check she/he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. 12057 for ABC Check No.

this Court finds the accused Luis S."8 Petitioner appealed his conviction to the Court of Appeals. still bound under BP 22 to maintain his account long after 90 days from maturity of the checks? May the prosecution apply the prima facie presumption of "knowledge of lack of funds" against the drawer if the checks were belatedly deposited by the complainant 157 days after maturity. premises considered.9 Hence.if there is no more consideration or price or value – ever the binding tie that it is in contracts in general and in negotiable instruments in particular – behind the checks? – if even before he deposits the checks. 1990. the parties had agreed that the checks would be used to pay off petitioner’s unremitted collections. anymore" and "We have no more record. private respondent should have returned the checks to him. he has ceased to be a holder for value because the purchase orders (PO’s) guaranteed by the checks were already paid? Given the fact that the checks lost their reason for being. Limtong the sums of Five Thousand Five Hundred (P5. Petitioner’s contention that he did not demand the return of the checks because he trusted LPI’s good faith is contrary to human nature and sound business practice. On October 28. the present petition. He contends that private respondent is not a "holder for value" considering that the checks were deposited by private respondent after the customers already paid their orders.10 Petitioner raises the following questions of law -11 May a complainant successfully prosecute a case under BP 22 --. to pay Private Complainant Manuel T. as the drawer of the guarantee checks which lost their reason for being. the trial court issued its decision. according to the Solicitor General.500. 66[0]143464 and 660143463 all issued on December 30. 1994.On August 30. is it not then the duty of complainant – knowing he is no longer a holder for value – to return the checks and not to deposit them ever? Upon what legal basis then may such a holder deposit them and get paid twice? Is petitioner. 660143451. or will it be then necessary for the prosecution to show actual proof of "lack of funds" during the 90-day term? Petitioner insists that the checks were issued as guarantees for the 1985 purchase orders (PO’s) of his customers.410.375. 1985 together with the legal rate of interest from the time of the filing of the criminal charges in Court and pay the costs. The issue as to whether the checks were issued merely as guarantee or for payment of petitioner’s unremitted collections is a factual issue involving as it does the credibility of witnesses. disposing as follows:7 "Wherefore.00) Pesos corresponding to the amounts indicated in Allied Banking Checks Nos. Petitioner further assails the credibility of complainant considering that his answers to cross-examination questions included: "I cannot recall. it affirmed the trial court’s decisionin toto." In his Comment.00) Pesos and Three Thousand Three Hundred Seventy-Five (P3.00) Pesos. as above stated. Said factual . but upon the refusal of LPI to accept said personal checks per company policy. Wong GUILTY beyond reasonable doubt of the offense of Violations of Section 1 of Batas Pambansa Bilang 22 in THREE (3) Counts and is hereby sentenced to serve an imprisonment of FOUR (4) MONTHS for each count.12 the Solicitor General concedes that the checks might have been initially intended by petitioner to guarantee payments due from customers. Six Thousand Four Hundred Ten (P6. Instead of depositing the checks.

they found the checks were eventually used to settle the remaining obligations of petitioner with LPI. 22: (1) by making or drawing and issuing a check to apply on account or for value knowing at the time of issue that the check is not sufficiently funded. Court of Appeals.P. Blg. In cases elevated from the Court of Appeals. and (2) by having sufficient funds in or credit with the drawee bank at the time of issue but failing to keep sufficient funds therein or credit with said bank to cover the full amount of the check when presented to the drawee bank within a period of ninety (90) days.21 . 22 creates a presumption juris tantum that the second element prima facieexists when the first and third elements of the offense are present. As repeatedly held. pertinent to the present case. the RTC and CA having both ruled that the checks were in payment for unremitted collections. This flawed argument has no factual basis. the same must stand. Its findings of fact are generally conclusive.P.16 we held that "[t]o determine the reason for which checks are issued. this Court is not a trier of facts. Blg. and (3) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the same reason had not the drawer." Petitioner contends that the first element does not exist because the checks were not issued to apply for account or for value. Absent any showing that the findings by the respondent court are entirely devoid of any substantiation on record. and not as guarantee.15 Moreover.P. 22 under the first situation. So what the law punishes is the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance. the argument has no legal basis. There are two (2) ways of violating B. the maker’s knowledge is presumed from the dishonor of the check for insufficiency of funds. and bring about havoc in trade and in banking communities." Nothing herein persuades us to hold otherwise. The only issue for our resolution now is whether or not the prosecution was able to establish beyond reasonable doubt all the elements of the offense penalized under B.14 The lack of accounting between the parties is not the issue in this case. without any valid cause. Likewise.13 We find no cogent reason to depart from findings of both the trial and appellate courts.20 Thus. Although initially intended to be used as guarantee for the purchase orders of customers. Blg. The mere act of issuing a worthless check is malum prohibitum.P. ordered the bank to stop payment. drawer. will greatly erode the faith the public reposes in the stability and commercial value of checks as currency substitutes.issue has been settled by the trial court and Court of Appeals. B. drawing and issuance of any check to apply for account or for value.P.P. our review is confined to allege errors of law. are:18 "(1) The making. 22.19 As to the second element. in Llamado v. Blg. Blg. (2) The knowledge of the maker.17 The elements of B. Although Manuel Limtong was the sole witness for the prosecution. his testimony was found sufficient to prove all the elements of the offense charged. 22 punishes is the issuance of a bouncing check and not the purpose for which it was issued nor the terms and conditions relating to its issuance. 22 case by claiming that the checks were issued as guarantee and the obligations they were supposed to guarantee were already paid. or the terms and conditions for their issuance. or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment. for what B. He attempts to distinguish his situation from the usual "cut-and-dried" B.

the clear import of the law is to establish a prima facie presumption of knowledge of such insufficiency of funds under the following conditions (1) presentment within 90 days from date of the check. nowhere in said provision does the law require a maker to maintain funds in his bank account for only 90 days. or 157 days after the December 30. Blg. when presented within ninety (90) days from the date of the check. we find no error in the respondent court’s affirmance of his conviction by the trial court for violations of the Bouncing Checks Law. 1985 maturity date. There is. the maker or drawer makes arrangements for payment of the check by the bank or pays the holder the amount of the check. shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon. which took effect on November 21. "a check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay.P. – The making." By current banking practice.22 Contrary to petitioner’s assertions. Only the presumption of knowledge of insufficiency of funds was lost. 1986. . sufficient evidence that petitioner had knowledge of the insufficiency of his funds in or credit with the drawee bank at the time of issuance of the checks. drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. Under Section 186 of the Negotiable Instruments Law. but such knowledge could still be proven by direct or circumstantial evidence. That the check must be deposited within ninety (90) days is simply one of the conditions for the prima facie presumption of knowledge of lack of funds to arise. Blg. It is not an element of the offense. Private respondent herein deposited the checks 157 days after the date of the check. Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a reasonable time thereof. 22 should not apply to him. on record. After the checks were dishonored. private respondent did not deposit the checks because of the reassurance of petitioner that he would issue new checks. As found by the trial court. Since this involves a state of mind difficult to establish. 2000. However. He further claims that he should not be expected to keep his bank account active and funded beyond the ninety-day period. pursuant to the policy guidelines in Administrative Circular No. 22 provides: Evidence of knowledge of insufficient funds. the statute itself creates a prima facie presumption of such knowledge where payment of the check "is refused by the drawee because of insufficient funds in or credit with such bank when presented within ninety (90) days from the date of the check. Section 2 of B. and (2) the dishonor of the check and failure of the maker to make arrangements for payment in full within 5 banking days after notice thereof.23 or 180 days. the statute provides that such presumption shall not arise if within five (5) banking days from receipt of the notice of dishonor." To mitigate the harshness of the law in its application. or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee. the presumption of knowledge of lack of funds under Section 2 of B. a check becomes stale after more than six (6) months.Petitioner avers that since the complainant deposited the checks on June 5. Upon his failure to do so.P. petitioner was duly notified of such fact but failed to make arrangements for full payment within five (5) banking days thereof. And despite petitioner’s insistent plea of innocence. An essential element of the offense is "knowledge" on the part of the maker or drawer of the check of the insufficiency of his funds in or credit with the bank to cover the check upon its presentment. Rather. the penalty imposed on petitioner should now be modified to a fine of not less than but not more than double the amount of the checks that were dishonored. LPI was constrained to deposit the said checks. 12-2000. Hence said checks cannot be considered stale.

Court of Appeals.. Mendoza. p." 5 As to the three (3) remaining checks.000.820.750. Branch 14.00. 447-448 (1992). Branch 3 in Criminal Cases Nos. Petitioner Luis S. vs. pp. 13 Tadeo v. Benipayo. 89. (2) P12. People. 14 Bunag Jr. p. at 11-86. Labitoria.nêt SO ORDERED. 22 but the penalty imposed on him is hereby MODIFIED so that the sentence of imprisonment is deleted. Blg. 7 Rollo. 6 Records. concur. Morales vs. . CBU12055. concurred in by Justices Ricardo P. Finally. 25079-R. JJ. 749 (1998). and De Leon. 10 Id. at 198-199. at 88-108.00 with legal interest thereon from the time of filing the criminal charges in court.P. et. equivalent to double the amount of the check involved in Criminal Case No. CBU-12058. equivalent to double the amount of the check involved in Criminal Case No. 300 SCRA 744. 3 Id. 12 Id. 11 Id. the Regional Trial Court of Cebu City. 1âw phi1.025. 25078-R. al.WHEREFORE. 185-199. Bellosillo. Wong is found liable for violation of Batas Pambansa Blg. CBU-12057. 401 (1991). and 28440-R.. at 290-321. The MTC convicted petitioner but on appeal. 2 Records. Buena. 4 Otherwise known as "An Act Penalizing the Making or Drawing and Issuance of a Check without Sufficient Funds or Credit and for Other Purposes. 9 Id. as civil indemnity. at 17. equivalent to double the amount of the check involved in Criminal Case No. Footnotes: 1 Penned by Associate Justice Alfredo L. petitioner was also charged with violation of B. acquitted him for lack of proof beyond reasonable doubt. and (3) P11. Petitioner is ORDERED to pay a FINE of (1) P6. the petition is DENIED. at 130. as well as to pay the costs. Court of Appeals. with subsidiary imprisonment24 in case of insolvency to pay the aforesaid fines. Jr. petitioner is also ordered to pay to LPI the face value of said checks totaling P18. 119.00. 211 SCRA 440. 197 SCRA 391. 22 in the Municipal Trial Court of Cebu City. 8 Id. Galvez and Eugenio S..00.

No. September 18.M. 18 Lim v. 130038. 9.15 Aleria v. Court of Appeals.R. 298 SCRA 611. 16 270 SCRA 423. 431 (1997). . 1999. G. 2000. p. p. No. Blg. 2000. People. G. 330-331 (1986). G. G.R. 21 Vaca v. March 17. People. A. p. No. 22 Lozano v. p. 130038. 126670. 146 SCRA 323. 6. Martinez. 8. Apalit. Court of Appeals. June 8. 11. 22. 661 (1998). MTJ-00-1274. 2000. Velez. 17 Section 1. p. 618 (1998). 19 Dichaves v. September 18. Court of Appeals.P.R. 2000. B. 298 SCRA 657.R. 7. 125059. No. 24 Lim v. No. 23 Pacheco v. 20 Sycip Jr. v. December 2.

After some negotiations and computation. GUECO. LUZ E. Branch 33. The negotiations resulted in the further reduction of the outstanding loan to P150. On August 29.3 On appeal to the Regional Trial Court. 2001 THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE PHILIPPINES). Branch 45. Dr. The court further ordered the bank: . GUECO and MA. 658-95 for "Sum of Money with Prayer for a Writ of Replevin"1 before the Metropolitan Trial Court of Pasay City. 1âw phi 1. the RTC held that there was a meeting of the minds between the parties as to the reduction of the amount of indebtedness and the release of the car but said agreement did not include the signing of the joint motion to dismiss as a condition sine qua non for the effectivity of the compromise. the car was detained inside the bank's compound. as a result of the non-payment of the reduced amount on that date. Gueco went to the bank and talked with its Administrative Support. J. insisted that the joint motion to dismiss is standard operating procedure in their bank to effect a compromise and to preclude future filing of claims.00. the Bank filed on August 7. However. respondents. Petitioner. counterclaims or suits for damages. 1995 a civil action docketed as Civil Case No.00 but the car was not released because of his refusal to sign the Joint Motion to Dismiss. vs. Consequently. In its decision. 1989 Model. No.000. Gueco delivered a manager's check in amount of P150.a Nissan Sentra 1600 4DR. the Bank's Assistant Vice President demanded payment of the amount of P184. Auto Loans/Credit Card Collection Head. Dr. KAPUNAN.2 On August 25. the decision of the Metropolitan Trial Court was reversed. 1995. SPS.: The respondent Gueco Spouses obtained a loan from petitioner International Corporate Bank (now Union Bank of the Philippines) to purchase a car . Branch 227 of Quezon City. On August 28. The Metropolitan Trial Court dismissed the complaint for lack of merit.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. petitioner. In consideration thereof. FRANCIS S. Dr. the Spouses executed promissory notes which were payable in monthly installments and chattel mortgage over the car to serve as security for the notes. the respondents Gueco spouses initiated a civil action for damages before the Metropolitan Trial Court of Quezon City. 141968 February 12.00. 1995.R. It is the contention of the Gueco spouses and their counsel that Dr. Jefferson Rivera.000. Desi Tomas. After several demand letters and meetings with bank representatives.nêt The Spouses defaulted in payment of installments. the amount was lowered to P154. Francis Gueco was served summons and was fetched by the sheriff and representative of the bank for a meeting in the bank premises.000.00 which represents the unpaid balance for the car loan.000. Gueco need not sign the motion for joint dismissal considering that they had not yet filed their Answer. however. 1995.

000. Q-97-31176. for lack of any reversible error. is AFFIRMED in toto.5 The Court of Appeals essentially relied on the respect accorded to the finality of the findings of facts by the lower court and on the latter's finding of the existence of fraud which constitutes the basis for the award of damages. P25. 2. whereas the funds have long been paid by appellants to . premises considered. SO ORDERED. we find for the respondents.00 as attorney's fees. the decretal portion of which reads: WHEREFORE. which on February 17. 2000.000. to return immediately the subject car to the appellants in good working condition. over which appellants have no control. issued the assailed decision. Branch 227.4 The case was elevated to the Court of Appeals. II THE COURT OF APPEALS ERRED IN GRANTING MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES IN FAVOR OF THE RESPONDENTS. and 3.the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance. the petition for review on certiorari is hereby DENIED and the Decision of the Regional Trial Court of Quezon City. The issue as to what constitutes the terms of the oral compromise or any subsequent novation is a question of fact that was resolved by the Regional . to pay the appellants the sum of P50. III THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN THE SUBJECT CAR TO THE RESPONDENTS.00 as exemplary damages.000. In other respect. Appellee may deposit the Manager's check . in Civil Case No. Costs against petitioner. the decision of the Metropolitan Trial Court Branch 33 is hereby AFFIRMED.1. raising the following assigned errors: I THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO AGREEMENT WITH RESPECT TO THE EXECUTION OF THE JOINT MOTION TO DISMISS AS A CONDITION FOR THE COMPROMISE AGREEMENT. and P25.6 As to the first issue. WITHOUT MAKING ANY PROVISION FOR THE ISSUANCE OF THE NEW MANAGER'S/CASHIER'S CHECK BY THE RESPONDENTS IN FAVOR OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIER'S CHECK THAT ALREADY BECAME STALE.00 as moral damages.secure said Manager's Check. to pay the cost of suit. The petitioner comes to this Court by way of petition for review on certiorari under Rule 45 of the Rules of Court.

15) The Court has noted. that the trial court. 1996. The Court of Appeals made the factual findings in this wise: In support of its claim. This petitioner failed to do.000.Trial Court and the Court of Appeals in favor of respondents.000. did not make a factual finding that the compromise agreement included the condition of the signing of a joint motion to dismiss. even the Metropolitan Trial Court. the petitioner's claim to the contrary. 5). likewise. the dismissal of the case against him is for his own good and benefit. whereby the original claim of the bank of P184. 1995 included the stipulation that the parties would jointly file a motion to dismiss. in its findings of facts.985. especially when affirmed by the Court of Appeals. for after all. October 23. While it is true that herein defendant can unilaterally dismiss the case for collection of sum of money with replevin. it is equally true that there is nothing wrong for the plaintiff to affix his signature in the Joint Motion to Dismiss. failed to make a categorical finding on the issue. however. hence 'xxx On August 28. pp. petitioner has the burden of evidence to prove his claim that the oral compromise entered into by the parties on August 28. First. Gueco was aware that the signing of the draft of the Joint Motion to Dismiss was one of the conditions set by the bank for the acceptance of the reduced amount of indebtedness and the release of the car. 17-21.7 While there are exceptions to this rule. In fact. Yadao.00 and that upon payment of which. bank representative Jefferson Rivera and plaintiff entered into an oral compromise agreement. p. 7 [1992]).' (Rollo.09. while ruling in favor of the petitioner and thereby dismissing the complaint. Notably. clearly indicated that the agreement of the parties on August 28. are not entitled to the award of moral damages and exemplary damages as there is no showing that the defendant bank acted fraudulently or in bad faith. Being an affirmative allegation. notwithstanding. 1995 was merely for the lowering of the price.00 instead of its original claim of P184. he will recover his car.8 the present case does not fall under anyone of them. In dismissing the claim of damages of the respondents.985. Second. maintained that no such condition was ever discussed during their meeting of August 28. 1995. p. 1995 (Rollo. Plaintiffs. he will pay his obligation to the bank on its reduced amount of P150. et al. the plaintiffs could have avoided the renting of another car and could have avoided this litigation had he signed the Joint Motion to Dismiss. plaintiff was informed that the subject motor vehicle would be released to him. are binding upon this Court. it merely observed that respondents are not entitled to indemnity since it was their unjustified reluctance to sign of the Joint Motion to Dismiss that delayed the release of the car. 216 SCRA 1. First. plaintiffs' claim for damages is unavailing. whose factual findings are entitled to respect since it has the 'opportunity to directly observe the witnesses and to determine by their demeanor on the stand the probative value of their testimonies' (People vs. thus: 'As regards the third issue. The trial court. And third. Respondents. Jefferson Rivera who related that respondent Dr. (TSN. petitioner presented the testimony of Mr. the signing of the Joint Motion to Dismiss gives the plaintiff three (3) advantages. pp. however. It is well settled that the findings of fact of the lower court. p. 12) . the case against him will be dismissed. 18. The trial court opined. Rollo.09 was reduced to P150.' (Rollo. 32).

1995? (sic) [I]s a question whereby the answer up to now eludes this Court's comprehension.10 We disagree. for his family or legal counsel to see to be brought signed. as amended is the 'deliberate and intentional evasion of the normal fulfillment of obligation' When petitioner refused to release the car despite respondent's tender of payment in the form of a manager's check. upon being shown the Joint Motion to Dismiss. or a willful omission. as the appellees allege. the fraud referred to in Article 1170 of the Civil Code is the deliberate and intentional evasion of the normal fulfillment of obligation. Fraud under Article 1170 of the Civil Code of the Philippines. Rivera Rivera of the bank requirement of signing the joint motion on August 28. 1995. this can not in anyway have prejudiced Dr. Gueco. The only logical explanation for this inaction is that Dr.9 We see no reason to reverse. True. both . bolstering his claim that its signing was never put into consideration in reaching a compromise. being inconsistent with human experience. Gueco in the August 28. Considering the effect of the signing of the Joint Motion to Dismiss on the appellants' substantive right.000. to refuse to pay the Manager's Check and for the bank to refuse to accept the manager's check. Gueco was not shown the Joint Motion to Dismiss in the meeting of August 28. The motion to dismiss was in fact also for the . In dismissing petitioner's claim. In finding the petitioner liable for damages. Fraud has been defined as the deliberate intention to cause damage or prejudice. The appellees would like this Court to believe that Dr Gueco was informed by Mr. 1995 but he did not bother to show a copy thereof to his family or legal counsel that day August 28.the Regional Trial Court and the Court of Appeals ruled that there was fraud on the part of the petitioner. Gueco. Anent the issue of award of damages. However. The idea of a Joint Motion to Dismiss being signed as a condition to the pushing through a deal surfaced only on August 29. Such claim rests on too slender a frame. thus: 'If it is true.11 We fail to see how the act of the petitioner bank in requiring the respondent to sign the joint motion to dismiss could constitute as fraud. petitioner may have been remiss in informing Dr. 'This Court is not convinced by the appellees' posturing. knowing and intending the effects which naturally and necessarily arise from such act or omission. as well as attorney's fees.The lower court. It is the voluntary execution of a wrongful act. This part of the theory of appellee is too complicated for any simple oral agreement. on the other hand. 1995. 1995. The CA thus declared: The lower court's finding of fraud which became the basis of the award of damages was likewise sufficiently proven. 1995 meeting. the lower court declared. Gueco that the signing of a joint motion to dismiss is a standard operating procedure of petitioner bank. 1995. together with the P150. expressly made a finding that petitioner failed to include the aforesaid signing of the Joint Motion to Dismiss as part of the agreement. we find the claim of petitioner meritorious. it is only reasonable and logical to assume that the joint motion should have been shown to Dr.' xxx. the former intentionally evaded its obligation and thereby became liable for moral and exemplary damages. Gueco was not given a copy of the joint motion that day of August 28.00 in manager's check form to be submitted on the following day on August 29. Why Dr. it is more in accord with human experience to expect Dr. that the signing of the joint motion was a condition sine qua non for the reduction of the appellants' obligation.

the act of petitioner bank in lowering the debt of Dr.the proceeds of which have long been under the control of the issuing bank in favor of the appellee since its issuance. Gueco anytime. dated September 4. Gueco from P184. find for the petitioner with respect to the third assigned error.17it appears from the pleadings that said check has not been encashed.15 to which the former replied that the condition of signing the joint motion to dismiss must be satisfied and that they had kept the check which could be claimed by Dr.00. Gueco failed to present an iota of evidence to overcome this presumption. thus. Rudimentary sense of justice and fair play would not countenance respondents' position. In the case of a bill of exchange. Appellee may deposit the Manager's Check . Gueco refused to sign the joint motion to dismiss."13 We. moral damages may only be awarded when the breach was attended by fraud or bad faith. as the case filed by petitioner against it before the lower court would be dismissed with prejudice. 1995. In no way.000. A stale check is one which has not been presented for payment within a reasonable time after its issue. to return immediately the subject car to the appellants in good working condition.21 . It is valueless and.000. In fact. which was affirmed in toto by the Court of Appeals. presentment is sufficient if made within a reasonable time after the last negotiation thereof. 1995. The whole point of the parties entering into the compromise agreement was in order that Dr. an instrument not payable on demand must be presented for payment on the day it falls due. a representative of respondent bank. he was made to execute a statement to the effect that he was withholding the payment of the check. oppressive or malevolent. Under the negotiable instruments law. Gueco delivered a manager's check representing the reduced amount of P150. may the conduct of petitioner be characterized as "wanton. whereas the funds have long been paid by appellants to secure said Manager's Check over which appellants have no control. The joint motion to dismiss was but a natural consequence of the compromise agreement and simply stated that Dr. petitioner was negligent in opting not to deposit or use said check. In the meeting of August 29.16 While there is controversy as to whether the document evidencing the order to hold payment of the check was formally offered as evidence by petitioners. Desi Tomas. If respondent did suffer any damage. fraudulent. Gueco instructed the bank to disregard the 'hold order" letter and demanded the immediate release of his car.000. the claim for exemplary damages must fait. Gueco had fully settled his obligation. However. Gueco would pay his outstanding account and in return petitioner would return the car and drop the case for money and replevin before the Metropolitan Trial Court. in a letter addressed to Ms.12 The law presumes good faith. hence. Said check was given to Mr. Necessarily. Dr. orders the petitioner: 1. likewise.14 Subsequently.19 It is their position that delivery of the manager's check produced the effect of payment20 and. because of its own negligence. the dismissal of the case. presentment must be made within a reasonable time after its issue. It should. The decision of the Regional Trial Court. since Dr. should not be paid. Dr. Gueco.18 Respondents would make us hold that petitioner should return the car or its value and that the latter.benefit of Dr. he has only himself to blame. as a result of the withholding of his car by petitioner. vice president of the bank. therefore. likewise. respondent Dr. When the instrument is payable on demand. should suffer the loss occasioned by the fact that the check had become stale. Petitioner's act of requiring Dr. Gueco to sign the joint motion to dismiss can not be said to be a deliberate attempt on the part of petitioner to renege on the compromise agreement of the parties. reckless.00 to P150. Rivera.00 is indicative of its good faith and sincere desire to settle the case. be noted that in cases of breach of contract.

In a case. thus.23 The test is whether the payee employed such diligence as a prudent man exercises in his own affairs.. We see no bad faith or negligence in this position taken by the Bank.29 It is really the bank's own check and may be treated as a promissory note with the bank as a maker.32 Failure to present on time.00 to the petitioner upon surrender or cancellation of the manager's check in the latter's possession." regard is to be had to the nature of the instrument. If treated as promissory note. it becomes imperative that the circumstances that caused its non-presentment be determined. however.33 In the case at bar. failure to present for payment within a reasonable time will result to the discharge of the drawer only to the extent of the loss caused by the delay. the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance. In the case at bar.A check must be presented for payment within a reasonable time after its issue. the Gueco spouses have not alleged. In this case. it is a bill of exchange drawn by the cashier of a bank upon the bank itself. Pardo. and the facts of the particular case. It has been held that. .22 and in determining what is a "reasonable time. premises considered. even a delay of one (1) week27 or two (2) days.31 Even assuming that presentment is needed. a check payable on demand which was long overdue by about two and a half (2-1/2) years was considered a stale check. much less shown that they or the bank which issued the manager's check has suffered damage or loss caused by the delay or non-presentment. JJ. the check involved is not an ordinary bill of exchange but a manager's check. concur.30The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. SO ORDERED. A cashier's check is a check of the bank's cashier on his own or another check.. the original obligation to pay certainly has not been erased. there is no doubt that the petitioner bank held on the check and refused to encash the same because of the controversy surrounding the signing of the joint motion to dismiss. 26. the legal situation amounts to an acknowledgment of liability in the sum stated in the check. Definitely. does not totally wipe out all liability. In fact. and Ynares-Santiago. Footnotes 1 Rollo. 1âwphi1. Puno.000. the petition for review is given due course. The decision of the Court of Appeals affirming the decision of the Regional Trial Court is SET ASIDE. The mere issuance of it is considered an acceptance thereof. petitioner is to return the subject motor vehicle in good working condition.25 Failure of a payee to encash a check for more than ten (10) years undoubtedly resulted in the check becoming stale. In effect. Jr. and accepted in advance by the act of its issuance.nêt WHEREFORE. A manager's check is one drawn by the bank's manager upon the bank itself. It is similar to a cashier's check both as to effect and use.26 Thus. afterwhich.24 This is because the nature and theory behind the use of a check points to its immediate use and payability. Respondents are further ordered to pay the original obligation amounting to P150. p.28 under the specific circumstances of the cited cases constituted unreasonable time as a matter of law. if the check had become stale. the usage of trade or business with respect to such instruments. Davide.

et al.. 252 (1954). see also Tan v. 16 Id. 24 Jeff Bras. 10 Id. No. 13 Articles 2229 and 2232 of the NEW CIVIL CODE. By current banking practice. 3 Rollo. NIL. Court ofAppeals. (Pacheco v. 231. 5 Id.W. pp. Id. 15 Ibid. Jr. 14 Rollo. Court of Appeals. 17 Id.31-33. 21 Section 71. 22 Section 186. 7 Amigo. 28. 96 Phil. at 34 11 Legaspi Oil Co. 18 Id. 8 Ramos v. 223 SCRA 163 (1993). 20 Citing New Pacific Timber and Supply Co. Inc.. et al. (2d) 863.. v. 1108. Stones v. NIL.. v. Inc. 9 Rollo. Pepsi Cola. 12 Article 2220 of the NEW CIVIL CODE. 30. Severis. a check becomes stale after more than six (6) months. Court of Appeals. 224 SCRA 213. 4 Id. p. 69 S..2 This case was eventually dismissed for failure or lack of interest to prosecute (Annex 16). at 29. 101 SCRA 686 (1980). 1999).. 23 Section 193. p. 239 SCRA 310 (1994). at 28. 216 (1993). at 35. 30.126670. 195 289 (1967). at 11. Act No. at 112. G.R. 6 Id. vs. v. 19 The check was issued sometime in August 1995.. December 2. McCullough (1934) 188 Ark. . Teves.. at 158.. at 29. CA. Negotiable Instruments Law (NIL). Tibajio.

Grav. 26 Papa v. App. 213 Ill. 289 SCRA 643 (1998). Ins. 351. NIL. 856 (1961). 32 Section. 88 Phil. 30 Section 130.. Bank of Tupelo. 49.. 815. 186. 29 Anderson v.. A.113 Pac. 188 Ark. 178 (1951). Stevenson. 27 Parker v. 31 Ist National Bank v. 28 National Plumbing Supple Co.W.25 Montinola v.U. 68 S. . 135 Miss. 179. PNB. NIL. 100 So. Republic of the Philippines v. (2) 1023. 3 SCRA 851. Comm.. 33 Crystal v. Valencia and Co. Court of Appeals.. Inc. Co. 71 SCRA 443 (1976). Philippine National Bank. v.

[petitioner] obtained an additional loan of P50. DECISION CORONA. [petitioner]. liable for violation of Batas Pambansa Blg. this petition. [Cenizal] did not deposit the check immediately because [petitioner] promised [] that he would replace the check with cash. [Cenizal] referred the matter to a lawyer who wrote a letter giving [petitioner] three days from receipt thereof to pay the amount of the check. 1991. The head office of the Bank of the Philippine Islands through a letter dated December 5. Arceo. [Cenizal] executed an Affidavit of Loss regarding the loss of the check in question and the return slip.000. Petitioner sought reconsideration but it was denied.R. PEOPLE OF THE PHILIPPINES. The check in question and the return slip were however lost by [Cenizal] as a result of a fire that occurred near his residence on September 16. obtained a loan from private complainant Josefino Cenizal [] in the amount ofP100. (BP) 22. vs. As a consequence. 19601 affirming the trial court’s judgment finding petitioner Pacifico B. [Cenizal] executed on January 20. [Cenizal] went to the house of [petitioner] to inform him of the dishonor of the check but [Cenizal] found out that [petitioner] had left the place. [Cenizal] brought the check to the bank for encashment.3 After trial. Such promise was made verbally seven (7) times.R. this case for [v]iolation of [BP 22] was filed against [petitioner] on March 27. 2006 PACIFICO B.00 from [Cenizal]. So. 1992 before the office of the City Prosecutor of Quezon City his affidavit and submitted documents in support of his complaint for [e]stafa and [v]iolation of [BP 22] against [petitioner]. for P150. otherwise known as the "Bouncing Checks Law. CR No. 1999. Thereafter. ARCEO. Jr. 1991 came.00. When August 4. petitioner was found guilty as charged. 2000 resolution2 of the Court of Appeals in CA-G. on April 28. On March 14. When his patience ran out. J.: This petition for review on certiorari assails the April 28. postdated August 4.. 1992. Quezon City. he appealed to the Court of Appeals. respondent.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.000. 142641 July 17. Hence. [Petitioner] then issued in favor of Cenizal. 1991. 1992. 1999 decision1 and March 27. After due investigation. Aggrieved. JR." The facts of the case as found by the trial court and adopted by the Court of Appeals follow. [Petitioner] still failed to make good the amount of the check. However. informed [Cenizal] that the check bounced because of insufficient funds. the appellate court affirmed the trial court’s decision in toto. . at Cenizal’s house located at 70 Panay Avenue. Several weeks thereafter.000. No. Bank of the Philippine Islands [(BPI)] Check No. 1991.00. 163255. petitioner.

for which reason it is dishonored by the drawee bank. According to current banking practice. 1991). He also contends that he should not be held liable for the dishonor of the check because it was presented beyond the 90-day period provided under the law. or both such fine and imprisonment at the discretion of the court. Section 1 of BP 22 provides: SECTION 1. the check becomes stale and the drawer is discharged from liability thereon to the extent of the loss caused by the delay. Applicability of the Best Evidence Rule .4 the Court ruled that the 90-day period provided in the law is not an element of the offense. ordered the bank to stop payment. Thus. Significance of the 90-day Period For Presentment of the Check Petitioner asserts that there was no violation of BP 22 because the check was presented to the drawee bank only on December 5. Petitioner’s contentions have no merit. the reasonable period within which to present a check to the drawee bank is six months. petitioner asserts that he had already paid his obligation to Cenizal. Petitioner was freed neither from the obligation to keep sufficient funds in his account nor from liability resulting from the dishonor of the check. shall be punished by imprisonment of not less than thirty days but not more than one (1) year or by a fine of not less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred Thousand Pesos. In Wong v. Checks without sufficient funds Any person who makes or draws and issues any check to apply on account or for value. company or entity. Petitioner further questions his conviction since the notice requirement was not complied with and he was given only three days to pay. Finally. shall fail to keep sufficient funds or to maintain a credit to cover the full amount of the check if presented within a period of ninety (90) days from the date appearing thereon. which check is subsequently dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the same reason had not the drawer. the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act. Thereafter. having sufficient funds in or credit with the drawee bank when he makes or draws and issues a check. Cenizal’s presentment of the check to the drawee bank 120 days (four months) after its issue was still within the allowable period. The same penalty shall be imposed upon any person who. without any valid reason. 1991 or 120 days from the date thereof (August 4. Neither does it discharge petitioner from his duty to maintain sufficient funds in the account within a reasonable time from the date indicated in the check. Where the check is drawn by a corporation. We disagree.Petitioner claims that the trial and appellate courts erred in convicting him despite the failure of the prosecution to present the dishonored check during the trial. Court of Appeals. not five banking days as required by law. He argues that this was beyond the 90-day period provided under the law in connection with the presentment of the check. knowing at the time of issue that he does not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon its presentment.

the return slip and other pertinent documents before the Office of the City Prosecutor of Quezon City when he executed his complaint-affidavit during the preliminary investigation. Where the issue is the execution or existence of the document or the circumstances surrounding its execution.7 petitioner was charged for violating the first paragraph of BP 22. 1991 in the amount of P150. Cenizal testified that he presented the originals of the check.5 The gravamen of the offense is the act of drawing and issuing a worthless check. drawing and issuance of any check to apply to account or for value. Moreover. . or dishonor of the check for the same reason had not the drawer. The elements of the offense are: 1. drawer. subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit. ordered the bank to stop payment. 1992. of the Rules of Court. However. this was why. 2. 163255 postdated August 4.8 All these elements are present in this case.6 Hence. not its content. without any valid cause. Presence of the Elements of the Offense Based on the allegations in the information. it was dishonored by the drawee bank for having been drawn against insufficient funds. Petitioner anchors his argument on Rule 130. the best evidence rule does not apply and testimonial evidence is admissible.000 in consideration of a loan which he obtained from Cenizal. Cenizal. or issuer that at the time of issue he does not have sufficient funds in or credit with the drawee bank for the payment of the check in full upon its presentment. the making. the due execution and existence of the check were sufficiently established. knowledge of the maker. on maturity date. Here. He made this request and assurance seven times but repeatedly failed to make good on his promises despite the repeated accommodation granted him by the payee. existence and loss of the check and the return slip in an affidavit of loss as well as in his testimony during the trial of the case.Petitioner’s insistence on the presentation of the check in evidence as a condition sine qua non for conviction under BP 22 is wrong. otherwise known as the best evidence rule. he requested the payee not to encash it with the promise that he would replace it with cash. The City Prosecutor found a prima facie case against petitioner for violation of BP 22 and filed the corresponding information based on the documents. he was nevertheless able to adequately establish the due execution. Both the trial and appellate courts found that petitioner issued BPI check no. the subject of the inquiry is the fact of issuance or execution of the check. There was sufficient evidence on record that petitioner knew of the insufficiency of his funds in the drawee bank at the time of the issuance of the check. Section 3. and 3. Although the check and the return slip were among the documents lost by Cenizal in a fire that occurred near his residence on September 16. petitioner himself admited that he issued the check. In fact. When the check was deposited. the rule applies only where the content of the document is the subject of the inquiry. He never denied that the check was presented for payment to the drawee bank and was dishonored for having been drawn against insufficient funds.

02 February 2001. J. petitioner’s claim of payment was nothing more than a mere allegation. .Notice of Dishonor to Petitioner And Payment of the Obligation The trial court found that. The April 28. 351 SCRA 100. are not to be disturbed. pp. the check remained in the possession of the payee who demanded the satisfaction of petitioner’s obligation when the check became due as well as when the check was dishonored by the drawee bank. Buzon of the Former Third Division of the Court of Appeals. CR No.11 WHEREFORE. Azcuna. Footnotes 1 Penned by Associate Justice Jainal D. 555. No. Garcia. 19601 are AFFIRMED. 2000 resolution of the Court of Appeals in CA-G. He presented no proof to support it.10 Instead. Abesamis (retired) and concurred in by Associate Justices Conchita Carpio Morales (now a member of the Supreme Court) and Marina L.R. 117857.R. Sandoval-Gutierrez. 1995. the trial court found that the amount due thereon remained unpaid even after five banking days from his receipt of the notice of dishonor. Seventh Revised Edition. Despite receipt of the notice of dishonor and demand for payment. Moreover. 2 Penned by Associate Justice Bernardo P. p. rollo. If indeed there was payment. These findings (due notice to petitioner and nonpayment of the obligation) were confirmed by the appellate court.J. when affirmed by the appellate court. Rasul (retired) and concurred in by Associate Justices Conchita Carpio Morales (now a member of the Supreme Court) and Bernardo P. rollo. Regalado. contrary to petitioner’s claim. Remedial Law Compendium. concur. 5 Florenz D. Cenizal’s counsel had informed petitioner in writing of the check’s dishonor and demanded payment of the value of the check. Well-settled is the rule that the factual findings of the trial court. 26. 4 G. SO ORDERED. 17-24. This Court has no reason to rule otherwise. petitioner should have redeemed or taken the check back in the ordinary course of business. Volume II. This negated his claim that he had already paid Cenizal and should therefore be relieved of any liability. Petitioner cannot claim that he was deprived of the period of five banking days from receipt of notice of dishonor within which to pay the amount of the check. p. 3 CA decision. Puno.. pp. petitioner still failed to pay the amount of the check. Costs against petitioner. Chairperson. the petition is hereby DENIED. 1999 decision and March 27. rollo. Abesamis (retired) of the Third Division of the Court of Appeals. 17-24.9 While petitioner may have been given only three days to pay the value of the check.

506 (2001). 30 July 2004. CONTRARY TO LAW. Mendez. did not have sufficient funds therein. 7 The information read: The undersigned Assistant City Prosecutor accuses PACIFICO B. 760 (2002). drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank. supra. Arceo.00 Philippine Currency. 146513. 432 Phil. accused Pacifico B. the same was dishonored for the reason that the drawer thereof. and despite notice of dishonor thereof.000. in payment of an obligation.R. when presented within ninety (90) days from the date of the check. 435 SCRA 532. and within the jurisdiction of this Honorable Court. G. knowing fully well at the time of issue that [he] did not have the payment of such check. 359 Phil. ARCEO. Philippines. pp. did then and there. Court of Appeals. 11 Miranda v. 9 Section 2 of BP 22 provides: Section 2. draw and issue in favor of JOSEFINO CENIZAL a check no. 187 (1998). shall be prima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon. Mendez. (Rollo.. 163255 drawn against the Bank of the Philippine Island[. 1991. accused failed and refused and still fails and refuses to redeem or make good said check. willfully. Evidence of knowledge of insufficient funds.6 Tan v. Jr.) 8 Vaca v. postdated August 4. No. 22. 10 Tan v. of violation of Batas Pambansa Blg. committed as follows: That on or about the 15th day of April 1991. JR... that upon presentation of said check to said bank for payment. .] a duly established domestic banking institution[.] in the amount in the amount ofP150. the said accused. Jr. 420 Phil. Jr. 17-18. or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice that such check has not been paid by the drawee. ― The making. Besa. in Quezon City. unlawfully and feloniously make. Lim v. to the damage and prejudice of the said Josefino Cenizal in the amount aforementioned and in such other amount as may be awarded under the provisions of the Civil Code. People.

petitioner Allied Bank. On the same date. 2006 ALLIED BANKING CORPORATION. prompting ALLIED to file an action for a sum of money. BB640549 covered Men's Valvoline Training Suit that was in transit to West Germany (Uniger via Rotterdam) under Cont.: This petition for review on certiorari assails (a) the July 31.. drawn under a letter of credit No. On January 6. respondents. and (b) the January 17. (Alcron) executed their respective Letters of Guaranty. but claimed that they signed blank forms of the Letters of Guaranty and the Surety. Hongkong. respondents GGS and Nari Gidwani admitted the due execution of the export bill and the Letters of Guaranty in favor of ALLIED. 1996 Decision1 of the Court of Appeals. In their joint answer. The facts are undisputed. BDO-81-002 in the amount of US $20.085. The export bill was issued by Chekiang First Bank Ltd. and the blanks were only filled up by ALLIED after they had affixed their signatures.474. 125851 July 11. to reimburse petitioner US $20. payment was refused due to some material discrepancies in the documents submitted by GGS relative to the exportation covered by the letter of credit. No.G. respondents refused to pay.Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. . With the purchase of the bill. #73/S0299. J. and exonerating the guarantors from liability. the spouses Leon and Leticia de Villa and Nari Gidwani also executed a Continuing Guaranty/Comprehensive Surety (surety. The bill. ALLIED credited GGS the peso equivalent of the aforementioned bill amounting to P151. petitioner. When ALLIED negotiated the export bill to Chekiang.52 and the receipt of which was acknowledged by the latter in its letter dated June 22. Subsequently. They also added that the documents did not cover the transaction involving the subject export bill. DECISION QUISUMBING.G. COURT OF APPEALS.. 1981. ordering respondent G. holding themselves liable on the export bill if it should be dishonored or retired by the drawee for any reason. 1981. However. Consequently.R. SPORTSWEAR MANUFACTURING CORPORATION. Corporation (GGS). Sportswear Mfg. for brevity). SPOUSES LETICIA AND LEON DE VILLA AND ALCRON INTERNATIONAL LTD. vs. ALLIED demanded payment from all the respondents based on the Letters of Guaranty and Surety executed in favor of ALLIED. 1997 Resolution2 denying the motion for reconsideration.G. respondents Nari Gidwani and Alcron International Ltd.085. NARI GIDWANI. guaranteeing payment of any and all such credit accommodations which ALLIED may extend to GGS. Sportswear Manufacturing Corp. G. Manila (ALLIED) purchased Export Bill No.00 from respondent G.

for its part.4 The main issue raised before us is: Can respondents. Respondent Alcron. claimed that they were not aware of the existence of the export bill. SO ORDERED. this appeal.00. Consequently. The CA decision reads as follows: For the foregoing considerations. and providing its office in Hongkong with shipping arrangements and other details in connection with its office in Hongkong.474. appellee GGS is obliged to reimburse appellant Allied Bank the amount ofP151. GGS and Nari Gidwani filed a Motion for Summary Judgment on the ground that since the plaintiff admitted not having protested the dishonor of the export bill.G. they signed blank forms of the surety. WHEREFORE. The lower court however correctly exonerated the guarantors from their liability under their Letters of Guaranty. Hans-Joachim Schloer. be held jointly and severally liable under the Letters of Guaranty and Continuing Guaranty/Comprehensive Surety. but to no avail. in the absence of protest on the bill in accordance with Section 152 of the Negotiable Instruments Law?5 . A FOREIGN BILL OF EXCHANGE. in their capacity as guarantors and surety.085. the Court of Appeals modified the ruling of the trial court holding respondent GGS liable to reimburse petitioner ALLIED the peso equivalent of the export bill. the respondents.52 with interest thereon at the legal rate from the filing of the complaint. to wit: acting as a message center between its office in Hongkong and its clients in the Philippines.474. its branch in the Philippines is merely a liaison office confined to the following duties and responsibilities. But the trial court denied the motion. and the costs. What the guarantors guaranteed in the instant case was the bill which had been discharged. On appeal. spouses de Villa. had the authority to issue Letters of Guaranty for and in behalf of local entities and persons. Hence. It also invoked laches against petitioner ALLIED. only the spouses de Villa presented their evidence. Corporation to pay appellant the sum of P151. raising a single issue: WHETHER OR NOT RESPONDENTS NARI. Sportswear Mfg. After the presentation of evidence by the petitioner. conducting credit investigations on Filipino clients. The trial court dismissed the complaint.On the other hand. the guarantors should be correspondingly released. and averred that the guaranty was not meant to secure the export bill. DE VILLA AND ALCRON ARE LIABLE UNDER THE LETTERS OF GUARANTY AND THE CONTINUING GUARANTY/ COMPREHENSIVE SURETY NOTWITHSTANDING THE FACT THAT NO PROTEST WAS MADE AFTER THE BILL. it thereby discharged GGS from liability.3 The petitioner filed a Motion for Reconsideration. A guaranty is an accessory contract. WAS DISHONORED. judgment is hereby rendered ordering defendant-appellee G. Respondent Alcron further alleged that neither its liaison office in the Philippines nor its then representative. alleged that as a foreign corporation doing business in the Philippines.52 which was the equivalent of GGS's contracted obligation of US$20. The other respondents did not. but it exonerated the guarantors from their liabilities under the Letters of Guaranty.

6 However. and spouses Leon and Leticia de Villa as guarantors and/or sureties. provided they are not contrary to law. between petitioner ALLIED and respondent GGS. In such case the contract is called a suretyship. holding themselves jointly and severally liable on any and all credit accommodations. morals.8 Likewise. If a person binds himself solidarily with the principal debtor. the seller executes a draft and presents it together with the required documents to the issuing bank. we ruled that in a letter of credit transaction. (issuing bank). To get paid. it may still do so. In this case. instead of going to the issuing bank to claim payment. Art. good customs. Title I of this Book shall be observed. In this case. Respondents rely on Section 152 of the Negotiable Instruments Law to support their contention. credits and/or other obligation that may be granted by the petitioner ALLIED to respondent GGS. holding them liable on demand. The issuing bank redeems the draft and pays cash to the seller if it finds that the documents submitted by the seller conform with what the letter of credit requires. clauses. Previously. respondent GGS.The petitioner contends that part of the Court of Appeals' decision exonerating respondents Nari Gidwani. binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. terms and conditions as they may deem convenient. Chapter 3. to have the export bill purchased or discounted. as the beneficiary of the export bill. in consideration of the discounting arrangement. Nothing can prevent the negotiating bank from requiring additional requirements. loans.12 Here. The transaction is completed when the buyer reimburses the issuing bank and acquires the documents entitling him to the goods. went to petitioner ALLIED.11 Nothing can stop the parties from establishing stipulations. instead of going to Chekiang First Bank Ltd. At this juncture. like contracts of guaranty and surety. 2047 of the New Civil Code is pertinent.9 The surety also contained a clause whereby said sureties waive protest and notice of dishonor of any and all such instruments. By guaranty a person. in most cases. instruments. public order. called the guarantor.in case the subject export bill was dishonored or retired for any reason. we must stress that obligations arising from contracts have the force of law between the parties and should be complied with in good faith. The bank then obtains possession of the documents upon paying the seller. it required respondents Nari Gidwani and Alcron to execute Letters of Guaranty.. termed the negotiating bank. Our review of the records shows that what transpired in this case is a discounting arrangement of the subject export bill. advances.7 While the negotiating bank owes no contractual duty toward the beneficiary of the draft to discount or purchase it. or public policy. Art. credits and/or obligations. Alcron International Ltd. to have the draft discounted. once the credit is established. the provisions of Section 4. advances. 2047 states. respondents Nari Gidwani and spouses Leon and Leticia de Villa executed Continuing Guaranty/Comprehensive Surety. 2047. the buyer (or the beneficiary of the draft) may approach another bank. the seller ships the goods to the buyer and in the process secures the required shipping documents of title. the Letters of Guaranty and Surety clearly show that respondents undertook and bound themselves as guarantors and surety to pay the full amount of the export bill.10 These letters of guaranty and surety are now the basis of the petitioner's action. Art. Before ALLIED agreed to purchase the subject export bill. loans. .

except where required by the provisions of the contract of suretyship. which is what is involved in this case. Sportswear since the respondents held themselves liable upon demand in case the instrument was dishonored and on the surety. The contract of indorsement is primarily that of transfer. Section 152 of the Negotiable Instruments Law pertaining to indorsers. not those expressly governed by statutes. Said presumption acquires greater force in the case at bar where not only one document but several documents were executed at different times and at different places by the herein respondent guarantors and sureties.14 The liability of a guarantor/surety is broader than that of an indorser. the natural presumption is that one does not sign a document without first informing himself of its contents and consequences. As to the other respondents. they even waived notice of dishonor as stipulated in their Letters of Guarantee.Respondents claim that the petitioner did not protest13 upon dishonor of the export bill by Chekiang First Bank. as sureties. hence.20 In this case.G. having affixed their consenting signatures in several documents executed at different times.24 . no protest on the export bill is necessary to charge all the respondents jointly and severally liable with G.G. there can be no mistaking about respondents' intent. Respondents also aver that. As to respondent Alcron. Remedies in equity address only situations tainted with inequity. expressly contemplated a solidary obligation.15 On the other hand.19 In the present case. it is bound by the Letter of Guaranty executed by its representative HansJoachim Schloer. however. Last. Respondents' stance lacks merit. its application is controlled by equitable considerations. it is safe to presume that they had full knowledge of its terms and conditions. Rule 131 of the Rules of Court. relied on by respondents. they are precluded from asserting ignorance of the legal effects of the undertaking they assumed thereunder. Hence. since there was no protest made upon dishonor of the export bill. he will be discharged from liability thereon. Ltd. (2) they were never made aware that said documents will cover the payment of the export bill. loans. we find the defense of laches unavailing. it is presumed that a person takes ordinary care of his concerns.18 It is a cardinal rule that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties. not to be overlooked is the fact that. failed to show that the collection suit against them as sureties was inequitable. to be jointly and severally obligated with respondent G. Under Section 3 (d). According to respondents. a demand or notice of default is not required to fix the surety's liability. … which is/are now or may hereafter become due or owing … by the borrower".16 He cannot complain that the creditor has not notified him in the absence of a special agreement to that effect in the contract of suretyship. Unless the bill is promptly presented for payment at maturity and due notice of dishonor given to the indorser within a reasonable time. the literal meaning of its stipulation shall control. instruments. as indorsers were discharged under Section 152 of the Negotiable Instruments Law. The question of laches is addressed to the sound discretion of the court and since laches is an equitable doctrine. providing as it did that "… the sureties hereby guarantee jointly and severally the punctual payment of any and all such credit accommodations. Sportswear. (1) they only signed said documents in blank. There are well-defined distinctions between the contract of an indorser and that of a guarantor/surety of a commercial paper. while the contract of guaranty is that of personal security. is not pertinent to this case.17 Therefore. all of them.22 But here the records of this case do not support their claims. the "Suretyship Agreement" they executed.23Respondents. and (3) laches have set in. It is also presumed that private transactions have been fair and regular21 and that he who alleges has the burden of proving his allegation with the requisite quantum of evidence.

protest thereof in case of dishonor is unnecessary. 5 6 Bank of America. whether judicial or extra-judicial that might be instituted by the . Guerrero. No. if any. 152 – In what cases protest necessary – Where a foreign bill appearing on its face to be such is dishonored by non-acceptance. and Romeo A. with Associate Justices Minerva P. on demand. at 38.52 with interest at the legal rate from the filing of the complaint. Velasco. 2 Id. it must be duly protested for non-payment. December 10.R. 7 Id.J.. Penned by Associate Justice Alfredo L. Where a bill does not appear on its face to be a foreign bill. WHEREFORE. Jr. p.474. J. Carpio-Morales. 31-37. Brawner. Benipayo. 12.G. and Spouses Leon and Leticia de Villa are jointly and severally liable together with G. Court of Appeals. SO ORDERED. If it is not so protested. the drawer and indorsers are discharged. action or proceedings. the instant petition is GRANTED. while respondents Nari Gidwani.. is subsidiarily liable. pp. we are constrained to rule for the petitioner. 228 SCRA 357. Carpio. 4 Id. Brawner concurring. Gonzaga Reyes. and we hold that respondent Alcron International Ltd. G. my/our draft is not finally honored or retired by the drawee.After considering the facts of this case vis-à-vis the pertinent laws. Sec. at 369. 105395. I/We hereby further undertake and bind myself/ourselves to refund to you. and the costs. the full amount of this negotiation. 3 Rollo. Penned by Associate Justice Romeo A. 1993. The Letters of Guaranty provides that. at 23.The assailed Decision of the Court of Appeals is herebyMODIFIED. Footnotes 1 Rollo. with Associate Justices Buenaventura J. concur. and where such a bill which has not been previously been dishonored by non-acceptance is dishonored by non-payment. xxxx If for any reason. 366. and Buenaventura J. and to compensate you fully for any damages that you might incur arising out of any suit. Sportswear. p. Guerrero concurring. 36. to pay petitioner Bank the sum of P151. it must be duly protested for non-acceptance. Tinga. together with the corresponding interest thereon as well as your correspondent's charges and expenses thereon. 8 Records. NT & SA v.

2003 citing People v. 614. 103576. Rubber & Plastic Corp. No. 1999. No. June 29. 1990. the undersigned agree(s) to guarantee. 375 SCRA 579. p. Nos. Court of Appeals.R. February 1. at 14. 1159. p.buyer or importer on the ground of lack of faithful performance of the contract between said buyer or importer and myself/ourselves. . 1996. 1370. 719. advances. Sec. morals. Court of Appeals. 19 new civil code. No. . 260 SCRA 714.singularly or jointly and severally with others. Philippine National Bank. or public policy. 117913. September 13. 12 Id. at Art. Paragraph I of the surety provides: I. . 545. March 31. credits or other indebtedness or obligation herein-before referred to. and does hereby guarantee jointly and severally the punctual payment at maturity to you of any and all such credit accommodations. G. 520. 10 Id. Paragraph VIII of the surety provides: VIII. . No. . . 14. 189 SCRA 529.R. 269 SCRA 601. at 15. 288 SCRA 422. terms and conditions as they may deem convenient. . v.R. G.R. . 11 New Civil Code. G. 89561.R. 17 Palmares v. For and in consideration of any accommodation which you have extended and/or will extend to G. clauses. . protest and notice of dishonor of any and all such instruments. 133317. 2002. . March 31. 15 Supra note 5. 309 SCRA 509. Court of Appeals. G. August 22. 3 (p). OCA IPI No. (Emphasis supplied. 22 Heirs of Basanes v. 01-1065-P. hereinbefore referred to. G. . 14 Acme Shoe. 20 Lee v. Art. 21 Revised Rules of Court. Topaguen. No. The undersigned hereby waives . 601. Art. Cortes.) 9 Id. provided they are not contrary to law. 116596-98. Rule 131. March 31. loans. Court of Appeals.G. public order. 18 Records. instruments. 16 Umali v. . 13 Rollo. 126490. 439. . 1998. 23 Agra v. 158. The contracting parties may establish such stipulations.R. advances. loans. which is/are now or may hereafter become due or owing to you by the Borrower . Sportswear Manufacturing Corporation (hereinafter called the "Borrower") with or without security. good customs. 1997. credits and/or other obligations. 1306. G.

24 Id. .

608967 & 608968. In consideration thereof.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. respondents. Inc.00. 6 both in the amount of P100.100. 1979 respectively.000. petitioner agreed to purchase additional 2. King Tim Pua George (herein after referred to as George King). the private respondent in this case. 1978 issued crossed checks post dated sometime in March 1979 in the total amount of P820. petitioner.R.500 bales of tobacco leaves. On December 19 and 26. naming George King as payee to SIHI.. to deliver 2. BCCFI issued on March 30. INC..00. post dated March 31. drawn by petitioner in favor of George King. a stop payment order on all checks payable to George King. J. BCCFI. despite the supplier's failure to deliver in accordance with their earlier agreement. Again petitioner issued post dated crossed checks in the total amount of P1. THE COURT OF APPEALS and STATE INVESTMENT HOUSE. The foregoing decisions unanimously ruled in favor of SIHI. he sold at a discount check TCBT 551826 5 bearing an amount of P164. he again sold to respondent checks TCBT Nos. Inc. Bataan Cigar & Cigarette Factory. engaged one of its suppliers. (hereinafter referred to as SIHI) for collection on three unpaid checks issued by Bataan Cigar & Cigarette Factory. v. Petitioner. (BCCFI). 1978. Emanating from the records are the following facts. 1978.000.000 bales of tobacco leaf starting October 1978. Acaban & Sabado for private respondent.: For our review is the decision of the Court of Appeals in the case entitled "State Investment House. 1994 BATAAN CIGAR AND CIGARETTE FACTORY. 3 Relying on the supplier's representation that he would complete delivery within three months from December 5. In as much as George King failed to deliver the bales of tobacco leaf as agreed despite petitioner's demand. Inc. including check TCBT 551826. payable sometime in September 1979. a corporation involved in the manufacturing of cigarettes.00. drawn by petitioner.000. on July 13.00. On July 19. 93048 March 3. post dated September 15 & 30. 4 During these times. vs. 1979. Bataan Cigar & Cigarette Factory Inc. 1979. 1978. (hereinafter referred to as BCCFI).000. Inc. Teresita Gandiongco Oledan for petitioner. No. George King was simultaneously dealing with private respondent SIHI.. Subsequently. stop payment was also ordered on checks ." 1 affirming the decision of the Regional Trial Court 2 in a complaint filed by the State Investment House. INC. NOCON.

is a holder in due course. it instituted the present case. The trial court pronounced SIHI as having a valid claim being a holder in due course. According to commentators. as payee. Intermediate Appellate Court 7 wherein we made a discourse on the effects of crossing of checks. due to George King's failure to deliver the tobacco leaves. Efforts of SIHI to collect from BCCFI having failed. It may legally be negotiated from one person to another as long as the one who encashes the check with the drawee bank is another bank. acquired the title as holder in due course. the negotiability of a check is not affected by its being crossed. since he. a holder of crossed checks. the burden is on the holder to prove that he or some person under whom he claims. naming only BCCFI as party defendant. by the bank mentioned between the parallel lines. It further said that the non-inclusion of King Tim Pua George as party defendant is immaterial in this case. a check is defined by law as a bill of exchange drawn on a bank payable on demand. whether specially or generally. (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. if such was the fact. Inc. a second indorser. It may be crossed generally or specially. when it is shown that the title of any person who has negotiated the instrument was defective. (c) That he took it in good faith and for value. is not an indispensable party. BCCFI. respectively. As preliminary. and without notice that it had been previously dishonored. Veritably the Negotiable Instruments Law (NIL) does not mention "crossed checks. 8 There are a variety of checks. A check is crossed specially when the name of a particular banker or a company is written between the parallel lines drawn. However. . The main issue then is whether SIHI. It may be issued so that the presentment can be made only by a bank." although Article 541 9 of the Code of Commerce refers to such instruments. traveler's check and crossed check. 608967 & 608968 on September 14 & 28. 52 — 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. Section 59 of the NIL further states that every holder is deemed prima facie a holder in due course. The facts in this present case are on all fours to the case of State Investment House. thus: Sec. to be able to collect from the drawer. cashier's check. 10This is specially true in England where the Negotiable Instrument Law originated. or if it is specially crossed. The Negotiable Instruments Law states what constitutes a holder in due course. (the very respondent in this case) v. It is crossed generally when only the words "and company" are written or nothing is written at all between the parallel lines. 1979. the more popular of which are the memorandum check. (b) That he became the holder of it before it was overdue.TCBT Nos. Crossed check is one where two parallel lines are drawn across its face or across a corner thereof.

xxx xxx xxx That the subject checks had been issued subject to the condition that private respondents (Anita and her husband) on due date would make the back up deposit for said checks but which condition apparently was not made. 11 The foregoing was adopted in the case of SIHI v. there was no proper presentment. 14 Hence. In the present case. forging of checks. In that case. private respondent wife (Anita). constitutes a good defense against petitioner who is not a holder in due course. he is not a holder in due course. we then said: The three checks in the case at bar had been crossed generally and issued payable to New Sikatuna Wood Industries. we used to be beset with bouncing checks. however. no right of recourse is available to petitioner (SIHI) against the drawer of the subject checks. Inc.In the Philippine business setting.e. IAC. contrary to Sec. New Sikatuna Wood Industries. particularly those which name a specific payee. The foregoing does not mean. really. that respondent could not recover from the checks. respondent can collect from the immediate indorser. BCCFI cannot be obliged to pay the checks. considering that petitioner is not the proper party authorized to make presentment of the checks in question. Unless one is a valued client. (c) and the act of crossing the check serves aswarning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose. otherwise. . it was not the payee who presented the same for payment and therefore.. SIHI is not a holder in due course. the holder is declared guilty of gross negligence amounting to legal absence of good faith. however. 52(c) of the Negotiable Instruments Law. i. Apparently. Ruling that SIHI was not a holder in due course. The only disadvantage of a holder who is not a holder in due course is that the instrument is subject to defenses as if it were non-negotiable. There being failure of consideration. Thus. supra. a bank will not even accept second indorsements on checks. Consequently. and so forth that banks have become quite guarded in encashing checks. issued by Anita Peña Chua naming as payee New Sikatuna Wood Industries. BCCFI's defense in stopping payment is as good to SIHI as it is to George King. the payee named therein. 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. in this case. in the absence of due presentment. 12 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. which could only mean that the drawer had intended the same for deposit only by the rightful person. Inc. the drawer did not become liable. 13 and as such the consensus of authority is to the effect that the holder of the check is not a holder in due course. also sold at a discount to SIHI three post dated crossed checks. Failing in this respect. Because. and the liability did not attach to the drawer. thus resulting in the non-consummation of the loan intended to be granted by private respondents to New Sikatuna Wood Industries. Consequently. Inc. In order to preserve the credit worthiness of checks. (b) the check may be negotiated only once — to one who has an account with a bank. Inc. George King. the checks were issued with the intention that George King would supply BCCFI with the bales of tobacco leaf.

AGUEDO. Justices Josue N. presiding. 1987 Ed... Associated Bank v. 10 CAMPOS AND LOPEZ-CAMPOS. 3 Exhibit "1". 2 Judge Agusto E. 14. 1.. JJ.WHEREFORE. SO ORDERED.R. Negotiable Instruments Law. . 13 quoted supra. L-15126. 12 Id. 4-5. November 13. supra. Manila. 5 Annex "A". G. Vol. took no part. 14 Chan Wan v. 3 SCRA 603 (1961). 316-317. concurring. 3. p. #Footnotes 1 CA-G. 03032. Padilla. Folder of Exhibits. IAC. 208 SCRA 465.J. or only the words "and company". pp. Gatchalian. at pp. Folder of Exhibits. The decision of the Regional Trial Court as affirmed by the Court of Appeals is hereby REVERSED. Coquia. Cost against private respondent. G. 7 G. which he shall do by writing across the face the name of said banker or institution. the instant petition is hereby GRANTED. Branch XL. Commercial Laws of the Philippines. No. 11. finding that the court a quo erred in the application of law.R. Bellosillo and Venancio D. L-15380. 4 Exhibit "4". p.. 9 Article 541 -. Narvasa. ponente. Aldecoa.. 6 Annexes "B" and "C". Villarin. J.R. 8 Sec. p. Folder of Exhibits. National Capital Region. 446. p. 109 Phil.. 89802. Tan Kim and Chen So. SIHI v. Court of Appeals. Regalado and Puno. 72764. Justice Jorge R. 175 SCRA 310.The maker of any legal holder of a check shall be entitled to indicate therein that it be paid to a certain banker or institution. 706 (1960). concur. No. No. p. 1987. C. 574-575. IAC.R. SIHI v. 11 Ocampo v. 185. AGBAYANI. Folder of Exhibits. CV No. Negotiable Instruments Law. supra. Jr.

MARLYN P. petitioner filed an action for a sum of money and damages (Civil Case No.R. 1997 to withdraw money from her account. dishonored due to a material alteration when petitioner deposited the check on due date.2 When respondent went to ABC Salcedo Village Branch on June 30. On August 24. NITE. [Petitioner] Villanueva is hereby ordered to pay [Nite] — . vs. petitioner submits that the Court of Appeals (CA) erred in annulling and setting aside the Regional Trial Court (RTC) decision on the ground of extrinsic fraud. 1997. Respondent then filed a petition in the CA seeking to annul and set aside the trial court’s decision ordering ABC to pay petitioner the value of the ABC check. 1997. 2006 SINCERE Z. 1994 with the consent and concurrence of petitioner.000 to petitioner as partial payment of the loan. Q-94-21495) against ABC for the full amount of the dishonored check. premises considered. The facts follow.500 dated February 8. The check was duly received by petitioner on the same date. 1994. 1994. 148211 July 25. respondent issued petitioner an Asian Bank Corporation (ABC) check (Check No.Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 1997 of the public respondent is hereby ANNULLED and SET ASIDE for extrinsic fraud. respondent. remitted P235. On August 25. The balance of P174. ABC remitted to the sheriff a manager’s check amounting to P325. the RTC of Quezon City. the petition is GRANTED and the Decision dated May 23. On August 24.500 drawn on respondent’s account. VILLANUEVA. To secure the loan. And in a decision dated May 23. through her representative Emily P. however.1 Respondent allegedly took out a loan of P409. The check was.: In this petition for review on certiorari under Rule 45. AYA 020195) in the amount of P325.* respondent. Branch 101 ruled in his favor. she was unable to do so because the trial court had ordered ABC to pay petitioner the value of respondent’s ABC check. 1994. 000 was due on or before December 8. No. 1994. J.3 The CA ruled: WHEREFORE. however. petitioner. DECISION CORONA. Abojada. The date was later changed to June 8.000 from petitioner.

1) the sum of [P146,500] as actual damages plus interest at 12% per annum from August 25,
1997 until full payment;
2) the sum of [P75,000] as moral damages;
3) the sum of [P50,000] as exemplary damages; and
4) the sum of [P50,000] as attorney’s fees and cost of suit.
SO ORDERED.4
Thus, this petition. We find for respondent.
Annulment of judgment is a remedy in law independent of the case where the judgment sought to be
annulled is promulgated. It can be filed by one who was not a party to the case in which the assailed
judgment was rendered.Section 1 of Rule 47 provides:
Section 1. Coverage. – This Rule shall govern the annulment by the Court of Appeals of
judgments or final orders and resolutions in civil actions of Regional Trial Courts for which
the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies
are no longer available through no fault of the petitioner.
Respondent may avail of the remedy of annulment of judgment under Rule 47. The ordinary
remedies of new trial, appeal and petition for relief were not available to her for the simple reason
that she was not made a party to the suit against ABC. Thus, she was neither able to participate in
the original proceedings nor resort to the other remedies because the case was filed when she was
abroad.
Annulment of judgment may be based only on extrinsic fraud and lack of jurisdiction.5 Extrinsic or
collateral fraud pertains to such fraud which prevents the aggrieved party from having a trial or
presenting his case to the court, or is used to procure the judgment without fair submission of
the controversy.6 This refers to acts intended to keep the unsuccessful party away from the courts as
when there is a false promise of compromise or when one is kept in ignorance of the suit.7
We uphold the appellate court’s finding of extrinsic fraud:
Barely 6 days after receipt of the partial payment of P235,000.00 and agreeing that the
balance of P174,000.00 shall be paid on or before December 8, 1994, [Sincere] filed his
complaint against [ABC] for the full amount of the dishonored check in the sum of
P320,500.00 without impleading petitioner. The apparent haste by which [Sincere] filed his
complaint and his failure to implead [Marlyn] clearly shows his intent to prevent [Marlyn] from
opposing his action.
[A]t the time news about [Marlyn] having left the country was widespread, appearing even in
print media as early as May 1994, [Marlyn] paid [Sincere] the amount of P235,000.00 as
partial payment on [August 18, 1994], through a representative.
Notwithstanding the foregoing, SIX (6) days later or on [August 24, 1994, Sincere] instituted
an action for collection with damages for the whole amount of the issued check.

[Sincere] does not deny knowledge of such payment neither of the fact that he concurred in
settling the balance of P174,000.00 on December 8, 1994.
[His] actuation and pronouncement shows not only bad faith on his part but also of his
fraudulent intention to completely exclude [Marlyn] from the proceedings in the court a
quo. By doing what he did he prevented the [trial court] from fully appreciating the particulars
of the case.8
In any event, the RTC decision may be annulled for lack of jurisdiction over the person of
respondent. The pertinent provisions of the Negotiable Instruments Law are enlightening:
SEC. 185. Check, defined. – A check is a bill of exchange drawn on a bank payable on
demand. Except as herein otherwise provided, the provisions of this Act applicable to a bill of
exchange payable on demand apply to a check.9 (emphasis ours)
SEC. 189. When check operates as an assignment. – A check of itself does not operate as
an assignment of any part of the funds to the credit of the drawer with the bank, and the
bank is not liable to the holder, unless and until it accepts or certifies the
check. (emphasis ours)
If a bank refuses to pay a check (notwithstanding the sufficiency of funds), the payee-holder cannot,
in view of the cited sections, sue the bank. The payee should instead sue the drawer who might in
turn sue the bank. Section 189 is sound law based on logic and established legal principles: no
privity of contract exists between the drawee-bank and the payee. Indeed, in this case, there was no
such privity of contract between ABC and petitioner.
Petitioner should not have sued ABC. Contracts take effect only between the parties, their assigns
and heirs, except in cases where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law.10 None of the foregoing
exceptions to the relativity of contracts applies in this case.
The contract of loan was between petitioner and respondent. No collection suit could prosper without
respondent who was an indispensable party. Rule 3, Sec. 7 of the Rules of Court states:
Sec. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no
final determination can be had of an action shall be joined either as plaintiffs or
defendants. (emphasis ours)
An indispensable party is one whose interest in the controversy is such that a final decree will
necessarily affect his rights. The court cannot proceed without his presence.11 If an indispensable
party is not impleaded, any judgment is ineffective.12 On this, Aracelona v. Court of
Appeals13 declared:
Rule 3, Section 7 of the Rules of Court defines indispensable parties as parties-in-interest
without whom there can be no final determination of an action. As such, they must be joined
either as plaintiffs or as defendants. The general rule with reference to the making of parties
in a civil action requires, of course, the joinder of all necessary parties where possible, and
the joinder of all indispensable parties under any and all conditions, their presence
being sine qua non for the exercise of judicial power. It is precisely "when an indispensable
party is not before the court (that) the action should be dismissed." The absence of an
indispensable party renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals in CA-G.R. SP
No. 44971 isAFFIRMED in toto.
Costs against petitioner.
SO ORDERED.
Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, J.J., concur.

Footnotes
*

Some parts of the records refer to respondent as "Marilyn Nite."

1

CA Decision in CA-G.R. SP No. 44971, rollo, pp. 29-30.

2

Penned by Judge Pedro T. Santiago.

3

CA-G.R. SP No. 44971: Marlyn P. Nite v. Hon. Pedro T. Santiago, as Judge of the RTC, Br.
101, Quezon City, Sincere Z. Villanueva and Asian Bank Corporation.
4

Decision penned by Associate Justice Eliezer R. De Los Santos and concurred in by
Associate Justices Godardo A. Jacinto and Bernardo P. Abesamis of the Ninth Division of
the Court of Appeals; rollo, p. 35.
5

Rules of Court, Rule 47, Sec. 2.

6

Regalado, Remedial Law Compendium (1999), National Bookstore, Inc., Manila, pp. 380
and 557.
7

Id., pp. 380-381.

8

Rollo, pp. 32-33.

9

See Negotiable Instruments Law, Sections 126-183.
SEC. 126. Bill of exchange, defined. – A bill of exchange is an unconditional order in
writing addressed by one person to another, signed by the person giving it, requiring
the person to whom it is addressed to pay on demand or at a fixed or determinable
future time a sum certain in money or order or to bearer.
SEC. 127. Bill not an assignment in hands of drawee. – A bill of itself does not
operate as an assignment of the funds in the hands of the drawee available for the
payment thereof, and the drawee is not liable on the bill unless and until he
accepts the same. (emphasis ours)

10

Civil Code, Art. 1311.

250. . 12 Id. 267 (1997).11 Regalado. 13 345 Phil. at 83. supra note 6.

PCI Bank and its counsel failed to appear at the scheduled hearing. 0249188.000. petitioner. she received a check return-slip informing her that PCI Bank had stopped the payment of the said check on the ground of irregular issuance. thus. 0249188 in the amount of P225. Santa Ana District. requested PCI Bank to convert the proceeds thereof into a manager's check. respondent. 073661. furnishing copies of the same to PCI Bank which was directed to file its comment or objection.2 From PCI Bank's version. Ong presented to PCI Bank Magsaysay Avenue Branch said Check No. 156207 September 15. The trial court thereafter ordered Ong to formally offer her exhibits in writing. TCBT1 Check No. ROWENA ONG. 10983. 0249188 and requested Ong to return PCI Bank Manager's Check No. she received an affirmative answer. Ong was issued PCI Bank Manager's Check No. DECISION CHICO-NAZARIO. the same was met with refusal. vs.Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. One of these was PCI Bank Check No. damages and attorney's fees against PCI Bank. a PCI Bank General Santos City Branch. 8502-00347-6. 6 December 1991. 10983 in her account with Equitable Banking Corporation Davao City Branch. it immediately gave notice to Sarande and Ong about the return of Check No. she issued two checks drawn against the proceeds of TCBT Check No.3 After the pre-trial conference. According to PCI Bank. which the PCI Bank obliged. Ong filed a motion for summary judgment. under Account No. Upon inquiry by Serande at PCI Bank on 5 December 1991 on whether TCBT Check No. Whereupon. 0249188 on the ground that the account from which it was drawn had already been closed resulted in a failure or want of consideration for the issuance of PCI Bank Manager's Check No.000. TCBT-General Santos City Check No.R.00. J. No. 10983. On the same day. the value of Check No. The next day. Ong was constrained to file a Complaint for sum of money.5Neither did they file any written comment or opposition thereto. and instead of encashing it. Warliza Sarande deposited in her account at Philippine Commercial International (PCI) Bank Magsaysay Avenue. Relying on this assurance. 10983 dated 5 December 1991 for the sum of P132.00.00 which Sarande issued to respondent Rowena Ong Owing to a business transaction. 073661 dated 5 December 1991 for P132. 10983 inasmuch as the return of Check No. 073661. Despite several demands made by her to PCI Bank for the payment of the amount in PCI Bank Manager's Check No.6 . 2006 EQUITABLE PCI BANK (the Banking Entity into which Philippine Commercial International Bank was merged).4 Though they were duly furnished with a copy of the motion for summary judgment. 0249188 had been cleared. Davao City Branch. Ong deposited PCI Bank Manager's Check No. 0249188 was returned on 5 December 1991 at 5:00 pm on the ground that the account against which it was drawn was already closed.: On 29 November 1991.000. On 9 December 1991.

judgment in hereby rendered for the plaintiff against the defendant-bank ordering the latter: 1. WHETHER OR NOT THE COURT OF APPEALS WAS IN ERROR WHEN IT SUSTAINED THE LOWER COURT'S DECISION DATED 3 MAY 1999 GRANTING THE RELIEFS PRAYED FOR IN RESPONDENT ONG'S COMPLAINT INSPITE OF THE FACT THAT RESPONDENT ONG WOULD BE "UNJUSTLY ENRICHED" AT THE EXPENSE OF .00) as exemplary damages. 3. and as plaintiff has preponderantly established by competent evidence her claims in the Complaint. 10983.00) representing actual expenses. To pay the costs. and 5. Set the reception of the plaintiff's evidence with respect to the damages claimed in the complaint.Ong complied with the Order of the trial court.11 From this decision.000. To pay the plaintiff the sum of TWENTY THOUSAND PESOS (P20. MATERIAL AND FACTUAL ISSUES WHICH REQUIRE THE PRESENTATION OF EVIDENCE. PCI Bank then filed the present petition for review before this Court and raised the following issues: 1.00) as and for attorney's fee's.00) equivalent to the amount of PCIB Manager's Check No.9 After the reception of Ong's evidence in support of her claim for damages.000. but PCI Bank failed to file any comment or objection within the period given to it despite receipt of the same order. 2. ordering defendant Philippine Commercial International Bank to pay the plaintiff the amount of ONE HUNDRED THIRTY-TWO THOUSAND PESOS (P132. the trial court rendered its Decision10 dated 3 May 1999 wherein it ruled: IN LIGHT OF THE FOREGOIN CONSIDERATION. In a Decision12 dated 29 October 2002.000.500. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A GRAVE AND REVERSIBLE ERROR WHEN IT SUSTAINED THE LOWER COURT'S ORDER DATED 2 MARCH 1999 GRANTING RESPONDENT'S MOTION FOR SUMMARY JUDGMENT NOTWITHSTANDING THE GLARING FACT THAT THERE ARE GENUINE. Unperturbed.8 PCI Bank filed a Motion for Reconsideration which the trial court denied in its Order dated 11 April 1996. the motion for summary judgment is GRANTED. To pay the plaintiff the sum of FIFTY THOUSAND PESOS (P50. 2. To pay the plaintiff the sum of THREE THOUSAND FIVE HUNDRED PESOS (P3. it held: IN THE LIGHT OF THE FOREGOING. the appellate court denied the appeal of PCI Bank and affirmed the orders and decision of the trial court.00) in the concept of moral damages.7 The trial court then granted the motion for summary judgment and in its Order dated 2 March 1995.000. To pay the plaintiff the sum of TWENTY THOUSAND PESOS (P20. PCI Bank sought recourse before the Court of Appeals. 4.

Under the circumstances. except the amount of damages.15 Rule 35. A genuine issue has been defined as an issue of fact which calls for the presentation of evidence.PETITIONER BANK. The provision on summary judgment is found in Section 1.16 Certainly. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE LOWER COURT'S FACTUAL FINDING IN ITS DECISION DATED 3 MAY 1999 HOLDING RESPONDENT ONG A "HOLDER IN DUE COURSE" INSPITE OF THE FACT THAT THE REQUISITE OF "GOOD FAITH" AND FOR VALUE IS LACKING AND DESPITE THE ABSENCE OF A PROPER TRIAL TO DETERMINE SUCH FACTUAL ISSUE. when the facts as pleaded appear uncontested or undisputed. WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERRORS WHEN IT AFFIRMED THE COURT A QUO'S DECISIION DATED 3 MAY 1999 AWARDING DAMAGES TO RESPONDENT ONG AND HOLDING THAT RESPONDENT ONG HAD PREPONDERANTLY ESTABLISHED BY COMPETENT EVIDENCE HER CLAIMS IN THE COMPLAINT INSPITE OF THE FACT THAT THE EVIDENCE ON RECORD DOES NOT JUSTIFY THE AWARD OF DAMAGES. on motion of either party. 3. Thus. fictitious.17 By admitting it committed an error. . or cross-claim or to obtain a declaratory relief may. clearing the check of Sarande and issuing in favor of Ong not just any check but a manager's check for that matter. admissions. except for the amount of damages. WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT UPHELD THE LOWER COURT'S DECISION DATED 3 MAY 1999 DENYING PETITIONER EPCI BANK'S COUNTERCLAIM INSPITE OF THE FACT THAT IT WAS SHOWN THAT RESPONDENT ONG'S COMPLAINT LACKS MERIT. there appears from the pleadings. at any time after the pleading in answer thereto has been served. – A party seeking to recover upon a claim.14 A court may grant summary judgment to settle expeditiously a case if. then there's no real or genuine issue or question as to the facts. IF PETITIONER BANK WOULD BE REQUIRED TO PAY AN UNFUNDED CHECK. counterclaim. of the Rules of Court provides two requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact. PCI Bank's liability is fixed. Summary judgment for claimant. Rule 35 of the 1997 Rules of Court: SECTION 1. 5. depositions. contrived and patently unsubstantial so as not to constitute a genuine issue for trial. Section 3. upon a motion filed after the issues had been joined and on the basis of the pleadings and papers filed. and affidavits that no important issues of fact are involved. it has been held that a summary judgment is proper where. we find that summary judgment was proper and a hearing would serve no purpose. and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a matter of law. 4. the court finds that there is no genuine issue as to any material fact to except as to the amount of damages. move with supporting affidavits. as distinguished from an issue which is sham. depositions or admissions for a summary judgment in his favor upon all or any part thereof. and summary judgment is called for.13 We affirm the Decision of the trial court and the Court of Appeals.

depositions. defendant-bank as drawee bank is bound on the instrument upon certification and it is immaterial to such liability in favor of the plaintiff who is a holder in due course whether the drawer (Warliza Sarande) had funds or not with the defendant-bank (Security vs.000. the same was issued without consideration. admissions submitted by the movant. Therefore. or admissions that those issues are not genuine.20 It is based on the equitable postulate that it is unjust for a person to retain benefit without paying for it. there was a valid consideration. defendant-bank cannot interpose a defense of want or lack of consideration because that defense is equitable or personal and cannot prosper against a holder in due course pursuant to Section 28 of the Negotiable Instruments Law. 36). The main objective is to prevent one to enrich himself at the expense of another. 62 of the Negotiable Instruments Law which refers to liability of acceptor (Title Guarantee vs. on the basis of affidavits. and the Court has plenary discretion to determine the necessity therefore. 1983 in the amount of P132. Bank vs. 116 S. As asserted by PCI Bank under the fourth issue.00. 073661 for P132. and lack of cause.18 The property of summary judgment was further explained by this Court when it pronounced that: The theory of summary judgment is that although an answer may on its face appear to tender issues – requiring trial – yet if it is demonstrated by affidavits. not to receive evidence on the issues set up in the pleadings. 240 N. Emadee Realty Corp. Ong is not a holder in due course because the manager's check was drawn against a closed account..21 It is well to stress that the check of Sarande had been cleared by the PCI Bank for which reason the former issued the check to Ong.Y.000. 282) or the drawer was indebted to the bank for more than the amount of the check (Nat. admissions. This is not to say that a hearing may be regarded as a superfluity. It may be true that plaintiff's PCIB Check No. and those of the other party in opposition thereto.19 The second and fourth issues are inter-related and so they shall be resolved together. 880) as the certifying bank as all the liabilities under Sec. State Bank. Bank. The court is expected to act chiefly on the basis of the affidavits. the fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. A hearing is not thus de riguer. impoverishment on the part of the plaintiff. 154 N. and usually is.00 which was paid to her by Warliza Sarande was actually not funded but since plaintiff became a holder in due course. Schmelz.E. the Court is unjustified in dispensing with the trial and rendering summary judgment for plaintiff. therefore. The second issue has reference to PCI Bank's claim of unjust enrichment on the part of Ong if it would be compelled to make good the manager's check it had issued. It is not. The elements of this doctrine are: enrichment on the part of the defendant. depositions. The hearing contemplated (with 10-day notice) is for the purpose of determining whether the issues are genuine or not. A check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. On the matter of unjust enrichment. 073661 and since certification is equivalent to acceptance. The matter may be resolved.22 . when the aforementioned check was endorsed and presented by the plaintiff and certified to and accepted by defendant-bank in the purchase of PCIB Manager's Check No.W. Nat. depositions.That summary judgment is appropriate was incisively expounded by the trial court when it made the following observation: [D]efendant-bank had certified plaintiff's PCIB Check No. but sham or fictitious.

integrity and honor behind its issuance. Effect of want of consideration. and without notice it had been previously dishonored. Ong is a stranger as regards the transaction between PCI Bank and Sarande. Sec. 26. effect of. – Absence or failure of consideration is a matter of defense as against any person not a holder in due course. By its peculiar character and general use in commerce.24 A manager's check stands on the same footing as a certified check.25 The effect of certification is found in Section 187. – Where value has at any time been given for the instrument. Sec. 24. therefore. the holder is deemed a holder for value in respect to all parties who become such prior to that time. the certification is equivalent to an acceptance. What constitutes a holder in due course. – A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face. if such was the fact. Ong is not a holder in due course. 187. Sec. committing in effect its total resources. and partial failure of consideration is a defense pro tanto. became liable to Ong and it cannot allege want or failure of consideration between it and Sarande. (c) That he took it in good faith and for value. ergo.Having cleared the check earlier. whether the failure is an ascertained and liquidated amount or otherwise. Certification of check. 28.23 PCI Bank next insists that since there was no consideration for the issuance of the manager's check. What constitutes holder for value. PCI Bank. and every person whose signature appears thereon to have become a party thereto for value. A manager's check is an order of the bank to pay. Under settled jurisprudence. Negotiable Instruments Law.26 The effect of issuing a manager's check was incontrovertibly elucidated when we declared that: . The same law provides further: Sec. Pertinent provisions of the Negotiable Instruments Law are hereunder quoted: SECTION 52. – Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration. Easily discernible is that what Ong obtained from PCI Bank was not just any ordinary check but a manager's check. – Where a check is certified by the bank on which it is drawn. drawn upon itself. This claim is equally without basis. (d) That at the time it was negotiated to him. a manager's check is regarded substantially to be as good as the money it represents. (b) That he became the holder of it before it was overdue. Presumption of consideration. he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

with rights and duties of one in such situation. The mere issuance of it is considered an acceptance thereof. and shall continue good. by the certification." When the holder procures the check to be certified.. and this agreement is as binding on the bank as its notes circulation. the latter becomes the depositor of the drawee bank. 8791. By accepting PCI Bank Check No. and admits – (a) The existence of the drawer. . Seneris28: [S]ince the said check had been certified by the drawee bank. In effect. PCI Bank assumed the liabilities of an acceptor under Section 62 of the Negotiable Instruments Law which states: Sec. v. The object of certifying a check. It is similar to a cashier's check both as to effect and use.A manager's check is one drawn by the bank's manager upon the bank itself. the exception to the rule enunciated under Section 63 of the Central Bank Act to the effect "that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash in an amount equal to the amount credited to his account" shall apply in this case x x x. Where a check is certified by the bank on which it is drawn. of Republic Act No. and for all intents and purposes. – The acceptor by accepting the instruments engages that he will pay it according to the tenor of his acceptance. the funds represented by the check are transferred from the credit of the maker to that of the payee or holder. x x x. and accepted in advance by the act of its issuance. a certificate of deposit payable to the order of depositor. Said certification "implies that the check is drawn upon sufficient funds in the hands of the drawee. With the above jurisprudential basis. is to enable the holder to use it as money. and his capacity and authority to draw the instrument. Inc. A cashier's check is a check of the bank's cashier on his own or another check. In furtherance thereof." Hence. and (b) The existence of the payee and his then capacity to indorse. 62. the genuineness of his signature. that they have been set apart for its satisfaction. 073661 issued by Sarande to Ong and issuing in turn a manager's check in exchange thereof. it is a bill of exchange drawn by the cashier of a bank upon the bank itself. or any other obligation it can assume. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive.27 In the case of New Pacific Timber & Supply Co. It is an understanding that the check is good then. Liability of acceptor. Section 2. and that they shall be so applied whenever the check is presented for payment. the issues on Ong being not a holder in due course and failure or want of consideration for PCI Bank's issuance of the manager's check is out of sync. It is really the bank's own check and may be treated as a promissory note with the bank as a maker. dynamic and responsive to the demands of a developing economy. "the check operates as an assignment of a part of the funds to the creditors. the certification is equivalent to acceptance. The General Banking Law of 2000 decrees: SEC. Declaration of Policy. 2. – The State recognizes the vital role of banks in providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. as regards both parties.

x x x. if not the highest degree of diligence.In Associated Bank v. the culpable act of PCI Bank in having cleared the check of Serande and issuing the manager's check to Ong is undeniable. 2.30 (Emphasis supplied. In the case of Philippine National Bank v. besmirched reputation. Not having received any advice from the drawee bank within the regular clearing period for the return of locally cleared checks. On 5 December 1991.) From the foregoing. Ong suffered embarrassment and humiliation arising from the dishonor of the said check.33 The requisites for an award of moral damages are welldefined. banks have attained an ubiquitous presence among the people. Proximate cause is . Said check. the next question that needs to be addressed is: Did PCI Bank exercise the requisite degree of diligence required of it? From all indications. 024188 is treated as cleared. most of all.37 Secondly." Measured against these standards. mental or psychological suffering sustained by the claimant. it is palpable and readily apparent that PCI Bank failed to exercise the highest degree of care31required of it under the law. social humiliation.29 it was reiterated: "x x x the degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their relationship with their depositors is concerned. by refusing to make good the manager's check it has issued. secondly. fright. that the case is predicated on any of the instances expressed or envisioned by Article 221934 and Article 222035 of the Civil Code. evidence of besmirched reputation or physical. however. Warliza Sarande inquired whether TCBT Check No. PCI Bank distinctly made the following uncontested admission: 1. and fourthly.000. firstly. serious anxiety. Though incapable of pecuniary computation. moral shock. All these elements are present in the instant case. Court of Appeals. a culpable act or omission factually established.00. mental anguish. was inadvertently sent by PCI Bank through local clearing when it should have been sent through inter-regional clearing since the check was drawn at TCBT-General Santos City. we now resolve the question on the award of moral and exemplary damages by the trial court to the respondent. Having settled the other issues. PCI Bank advised her that Check No. who have come to regard them with respect and even gratitude and. On 29 November 1991. Tan. proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant. the proximate cause of the loss is attributable to PCI Bank." Indeed. the banking business is vested with the trust and confidence of the public. and similar injury.32 we declared: The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. one Warliza Sarande deposited to her savings account with PCI Bank's Magsaysay Avenue Branch. 0249188 for P225. moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission. and unaware then of the error of not having sent the check through inter-regional clearing. 0249188 had been cleared. Moral damages include physical suffering.36 In the first place. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce. confidence. thirdly. it did not. wounded feelings. TCBT-General Santos Branch Check No. Thirdly. thus. hence the "appropriate standard of diligence must be very high.

by way of example or correction for the public good. the proximate cause of the loss is the act of PCI Bank in having cleared the check of Sarande and its failure to exercise that degree of diligence required of it under the law which resulted in the loss to Ong. Callejo. who have come to regard them with respect and even gratitude and most of all. liquidated or exemplary damages may be adjudicated. the highest degree of diligence is expected. the Petition is DENIED and the Decision of the Court of Appeals dated 29 October 2002 in CA-G. Panganiban. concur.000. in addition to the moral.. the determination of the amount to be awarded (except liquidated damages) is left to the sound discretion of the court according to the circumstances of each case.00 is reasonable and justified. The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. there is no necessity of further discussing the last issue on the PCI Bank's counterclaim based on the supposed lack of merit of Ong's complaint. produces the injury.000. Austria-Martinez.38 In this case.. banks have attained an ubiquitous presence among the people. CV No. Sr. and high standards of integrity and performance are even required of it. in natural and continuous sequence. the award of exemplary damages is warranted. 2229.R. Article 2216 of the Civil Code provides: ART. J.40 Having failed in this respect. For this reason. Exemplary or corrective damages are imposed. Chairperson. and without which the result would not have occurred. C. The law allows the grant of exemplary damages to set an example for the public good. No proof of pecuniary loss is necessary in order that moral.39 Without a doubt. premises considered. banks should guard against injury attributable to negligence or bad faith on its part. nominal. Footnotes . WHEREFORE.J. The assessment of such damages. unbroken by any efficient intervening cause. SO ORDERED. according to the circumstances of each case. temperate.41 In the case before us. With the above disquisition. 2216. liquidated or compensatory damages. Based on the above provision. Article 2229 of the Civil Code states: Art.defined as that cause which. in Civil Case No. Branch 14. confidence. On exemplary damages. it has been repeatedly emphasized that since the banking business is impressed with public interest. except liquidated ones.J. temperate. 21458-92. is left to the discretion of the court.. of paramount importance thereto is the trust and confidence of the public in general.00 and exemplary damages in the amount of P20. are AFFIRMED. Consequently. of the Regional Trial Court of Davao City. Ynares-Santiago. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce. 65000 affirming the Decision dated 3 may 1999. we find that the award of moral damages in the amount of P50.

G. 21 Soler v. Court of Appeals. No. Asuncion with Associate Justice Conrado M. 16 Monetary Foods Corporation v. 410 SCRA 627. concurring. 11 September 2003. 90 Phil. G. 401.R. Jr. Layague. 23. C. Soriano. 129552. 144291. 77. 29 June 2005. 255-262. 192-198. No. 19 December 1989. No. 21 May 2001. 430 SCRA 227. 311 (1951). Inc. Alcantara and Sons. 180 SCRA 348. No.. 7 Id. G. Inc. 788. 12 Penned by Associate Justice Elvi John S. 145469. No. G.C. rollo. 4 Id. 18 Records.. Inc. citing Solidbank Corporation v. 15 Cotabato Timberland Co. 9 Records. p. 34 (2002). 20 April 2001. Inc. v. G. and Sergio L. 19 Carcon Development Corporation v.R. 14 Ley Construction and Development Corporation v.R. 2 Docketed as Civil Case No. 5 Id. Vasquez. 352. pp. 25. . Court of Appeals. p. 21458-92 filed before the Regional Trial Court of Davao City Branch 14. 462 SCRA 36. 439 Phil. 268. at 54. p. 389 Phil. Pestano. Santioago Syjuco. 798 (2000). 20 P. Eserjose. 123892. 223. 8 Rollo.1 The Consolidated Bank and Trust Corporation. 153126. No. Court of Appeals. 11 Records. 6 Id. 357 SCRA 395. 28 May 2004. 13 Id. v. 64. pp. Union Bank of the Philippines. 88218. at 60. 3 Records. at 471-472. 106. 633. at 72. Court of Appeals. citing De Leon v. G. Javier and Sons. 17 Evadel Realty and Development Corporation v. 10 Penned by Judge William M. 47. 358 SCRA 57. p.R.R.R.

L-41764. p. (3) Seduction. No. De Leon.R.R. 30 Records. Legal character . supra not 27. G. citing Bautista v. 34 Art.R. rape. 50. Moral damages may be recovered in the following and analogues cases: (1) A criminal offense resulting in physical injuries. 46.) 23 Hector M. G. Court of Appeals. citing Philippine Bank of Commerce v. 347 (1996). 32 . 351 SCRA 516. 326. p. 68. No. Gueco. Court of Appeals. 156940. (2) Quasi-delicts causing physical injuries. 25 Supra note 21 at 411. Vol. states: SEC. 24. 26 Id. 32 326 Phil. 336 Phil.22 Section 32 of Presidential Decree No. Picornell. 239 SCRA 310. v. 72 (Amending Republic Act Numbered Two Hundred and Sixty-Five. No. 322. 29 G. 33 Article 2217. 446 SCRA 282. 230 SCRA 16. (O. 326 SCRA 41. 223. 29 February 2000. p. 63. Inc. – Checks representing deposit money do not have legal tender power and their acceptance in the payment of debts. 10 February 1994. 2219. 716 (1922). 19 March 1990. Section sixty-three of the same Act is hereby amended to read as follows: "SEC. that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account. Mangaldan Rural Bank.R. 27 International Corporate Bank v. 667. both public and private. however. 19 December 1980. 291. 24 Tan v. No. Court of Appeals. 20 December 1994. Civil Code. 681 (1997). 693. 183 SCRA 360. THE PHILIPPINE NEGOTIABLE INSTRUMENTS LAW (and Allied Laws) Annotated (2004 ed. Jr. 108555. 12 February 2001.. No. 46 Phil. 112392. emphasis supplied. abduction.R. G. No. entitled. 31 Philippine Bank of Commerce v. cited in BPI v. "The Central Bank Act").G. G. 28 G. Court of Appeals. 101 SCRA 686. is at the option of the creditor: Provided. citing National Bank v. (4) Adultery or concubinage.). 21 and Simex International (Manila).R. or other lascivious acts. 14 December 2004. 528.R. No. . 366-367. Court of Appeals. G.. no. 88013. 100755. 141968. Inc.

272-273. 30. 34. p. 32. 149454. Casa Montessori Internationale. G. 36 Cagungun v. 2220. Casa Montessori Internationale. 171. Court of Appeals.R. 473 SCRA 259. 11. 39 Cagungun v. 29. supra not 34 at 273-274.(5) Illegal or arbitrary detention or arrest. 27. 38 Phil. 26. supra note 27. (10) Acts and actions referred to in articles 21. Bank of Commerce v. supra note 30. cited in Bank of the Philippine Islands v. p. 287. Court of Appeals. 158674. Willful injury to property may be a legal ground for awarding moral damages if the court should find that. Inc. 28 May 2004. 430 SCRA 261. No. slander or any other form of defamation. 40 Bank of the Philippine Islands v. under the circumstances. 35 Art. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (9) Acts mentioned in article 309. 41 Simex International (Manila). G. supra note 36. . Planters Development Bank.R. 28. 28 August 1997. (8) Malicious prosecution. records. Planters Development Bank. (6) Illegal search. and 35. 17 October 2005. No. 37 TSN. such damages are justly due. v. (7) Libel.