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ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioner, vs. PHILIPPINE EXPORT ordering the then (sic) to pay, jointly and severally, the plaintiff the sum of P3,621.187.52
AND FOREIGN LOAN GUARANTEE CORPORATION, respondent. representing the total obligation of defendants in favor of plaintiff Philguarantee as of
December 31, 1984 with interest at the stipulated rate of 16% per annum and stipulated
DECISION penalty charges of 16% per annum computed from January 1, 1985 until the amount is fully
paid. With costs.
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court is the
decision of the Court of Appeals in CA-G.R. CV No. 41274, [1] affirming the decision of the The trial court observed that if Roxas really intended to sign the instruments merely in
Regional Trial Court (Branch 147) of Makati, then Metro Manila, whereby petitioners Peter his capacity as President of Astro, then he should have signed only once in the promissory
Roxas and Astro Electronics Corp. (Astro for brevity) were ordered to pay respondent note.[8]
Philippine Export and Foreign Loan Guarantee Corporation (Philguarantee), jointly and
severally, the amount of P3,621,187.52 with interests and costs. On appeal, the Court of Appeals affirmed the RTC decision agreeing with the trial court
that Roxas failed to explain satisfactorily why he had to sign twice in the contract and
The antecedent facts are undisputed. therefore the presumption that private transactions have been fair and regular must be
Astro was granted several loans by the Philippine Trust Company (Philtrust) amounting
to P3,000,000.00 with interest and secured by three promissory notes: PN NO. PFX-254 dated In the present petition, the principal issue to be resolved is whether or not Roxas should
December 14, 1981 for P600,000.00, PN No. PFX-258 also dated December 14, 1981 for be jointly and severally liable (solidary) with Astro for the sum awarded by the RTC.
P400,000.00 and PN No. 15477 dated August 27, 1981 for P2,000,000.00. In each of these
promissory notes, it appears that petitioner Roxas signed twice, as President of Astro and in The answer is in the affirmative.
his personal capacity.[2] Roxas also signed a Continuing Surety ship Agreement in favor of
Philtrust Bank, as President of Astro and as surety. [3] Astros loan with Philtrust Bank is secured by three promissory notes. These promissory
notes are valid and binding against Astro and Roxas. As it appears on the notes, Roxas signed
Thereafter, Philguarantee, with the consent of Astro, guaranteed in favor of Philtrust the twice: first, as president of Astro and second, in his personal capacity. In signing his name
payment of 70% of Astros loan, [4] subject to the condition that upon payment by aside from being the President of Asro, Roxas became a co-maker of the promissory notes
Philguanrantee of said amount, it shall be proportionally subrogated to the rights of Philtrust and cannot escape any liability arising from it. Under the Negotiable Instruments Law,
against Astro.[5] persons who write their names on the face of promissory notes are makers, [10] promising that
they will pay to the order of the payee or any holder according to its tenor. [11] Thus, even
As a result of Astros failure to pay its loan obligations, despite demands, Philguarantee without the phrase personal capacity, Roxas will still be primarily liable as a joint and several
paid 70% of the guaranteed loan to Philtrust. Subsequently, Philguarantee filed against Astro debtor under the notes considering that his intention to be liable as such is manifested by
and Roxas a complaint for sum of money with the RTC of Makati. the fact that he affixed his signature on each of the promissory notes twice which necessarily
would imply that he is undertaking the obligation in two different capacities, official and
In his Answer, Roxas disclaims any liability on the instruments, alleging, inter alia, that personal.
he merely signed the same in blank and the phrases in his personal capacity and in his
official capacity were fraudulently inserted without his knowledge. [6] Unnoticed by both the trial court and the Court of Appeals, a closer examination of the
signatures affixed by Roxas on the promissory notes, Exhibits A-4 and 3-A and B-4 and 4-A
After trial, the RTC rendered its decision in favor of Philguarantee with the following readily reveals that portions of his signatures covered portions of the typewritten words
dispositive portion: personal capacity indicating with certainty that the typewritten words were already existing
at the time Roxas affixed his signatures thus demolishing his claim that the typewritten
words were just inserted after he signed the promissory notes. If what he claims is true, then
WHEREFORE, in view of all the foregoing, the Court hereby renders judgment in favor or (sic)
portions of the typewritten words would have covered portions of his signatures, and not vice
the plaintiff and against the defendants Astro Electronics Corporation and Peter T. Roxas,

As to the third promissory note, Exhibit C-4 and 5-A, the copy submitted is not clear so Subrogation is the transfer of all the rights of the creditor to a third person, who
that this Court could not discern the same observations on the notes, Exhibits A-4 and 3-A substitutes him in all his rights. [19] It may either be legal or conventional. Legal subrogation is
and B-4 and 4-A. that which takes place without agreement but by operation of law because of certain acts.
Instances of legal subrogation are those provided in Article 1302 of the Civil
Nevertheless, the following discussions equally apply to all three promissory notes. Code. Conventional subrogation, on the other hand, is that which takes place by agreement
of the parties.[21]
The three promissory notes uniformly provide: FOR VALUE RECEIVED, I/We jointly,
severally and solidarily, promise to pay to PHILTRUST BANK or order... [12] An instrument which Roxas acquiescence is not necessary for subrogation to take place because the instant
begins with I, We, or Either of us promise to pay, when signed by two or more persons, case is one of the legal subrogation that occurs by operation of law, and without need of the
makes them solidarily liable. [13] Also, the phrase joint and several binds the makers jointly debtors knowledge.[22] Further, Philguarantee, as guarantor, became the transferee of all the
and individually to the payee so that all may be sued together for its enforcement, or the rights of Philtrust as against Roxas and Astro because the guarantor who pays is subrogated
creditor may select one or more as the object of the suit. [14] Having signed under such terms, by virtue thereof to all the rights which the creditor had against the debtor. [23]
Roxas assumed the solidary liability of a debtor and Philtrust Bank may choose to enforce the
notes against him alone or jointly with Astro. WHEREFORE, finding no error with the decision of the Court of Appeals dated
December 10, 1998, the same is hereby AFFIRMED in toto.
Roxas claim that the phrases in his personal capacity and in his official capacity were
inserted on the notes without his knowledge was correctly disregarded by the RTC and the SO ORDERED.
Court of Appeals. It is not disputed that Roxas does not deny that he signed the notes
twice. As aptly found by both the trial and appellate court, Roxas did not offer any Bellosillo, (Chairman), Callejo, Sr., and Tinga, JJ., concur.
explanation why he did so. It devolves upon him to overcome the presumptions that private
transactions are presumed to be fair and regular [15] and that a person takes ordinary care of
his concerns.[16] Aside from his self-serving allegations, Roxas failed to prove the truth of such
allegations. Thus, said presumptions prevail over his claims. Bare allegations, when
unsubstantiated by evidence, documentary or otherwise, are not equivalent to proof under
our Rules of Court.[17]

Roxas is the President of Astro and reasonably, a businessman who is presumed to take
ordinary care of his concerns. Absent any countervailing evidence, it cannot be gainsaid that
he will not sign document without first informing himself of its contents and
consequences. Clearly, he knew the nature of the transactions and documents involved as he
not only executed these notes on two different dates but he also executed, and again, signed
twice, a continuing Surety ship Agreement notarized on July 31, 1981, wherein he 55.
guaranteed, jointly and severally with Astro the repayment of P3,000,000.00 due to
Philtrust. Such continuing suretyship agreement even re-enforced his solidary liability
Philtrust because as a surety, he bound himself jointly and severally with Astros obligation.
Roxas cannot now avoid liability by hiding under the convenient excuse that he merely G.R. No. 101163 January 11, 1993
signed the notes in blank and the phrases in personal capacity and in his official capacity
were fraudulently inserted without his knowledge. STATE INVESTMENT HOUSE, INC., petitioner,
Lastly, Philguarantee has all the right to proceed against petitioner, it is subrogated to COURT OF APPEALS and NORA B. MOULIC, respondents.
the rights of Philtrust to demand for and collect payment from both Roxas and Astro since it
already paid the value of 70% of roxas and Astro Electronics Corp.s loan obligation. In Escober, Alon & Associates for petitioner.
compliance with its contract of Guarantee in favor of Philtrust.
Martin D. Pantaleon for private respondents.

We are not persuaded.

BELLOSILLO, J.: The negotiability of the checks is not in dispute. Indubitably, they were negotiable. After all,
at the pre-trial, the parties agreed to limit the issue to whether or not STATE was a holder of
The liability to a holder in due course of the drawer of checks issued to another merely as the checks in due course. 1
security, and the right of a real estate mortgagee after extrajudicial foreclosure to recover
the balance of the obligation, are the issues in this Petition for Review of the Decision of In this regard, Sec. 52 of the Negotiable Instruments Law provides
respondent Court of Appeals.
Sec. 52. What constitutes a holder in due course. A holder in due course is
Private respondent Nora B. Moulic issued to Corazon Victoriano, as security for pieces of a holder who has taken the instrument under the following conditions: (a)
jewelry to be sold on commission, two (2) post-dated Equitable Banking Corporation checks That it is complete and regular upon its face; (b) That he became the holder
in the amount of Fifty Thousand Pesos (P50,000.00) each, one dated 30 August 1979 and the of it before it was overdue, and without notice that it was previously
other, 30 September 1979. Thereafter, the payee negotiated the checks to petitioner State dishonored, if such was the fact; (c) That he took it in good faith and for
Investment House. Inc. (STATE). value; (d) That at the time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating it.
MOULIC failed to sell the pieces of jewelry, so she returned them to the payee before
maturity of the checks. The checks, however, could no longer be retrieved as they had Culled from the foregoing, a prima facie presumption exists that the holder of a negotiable
already been negotiated. Consequently, before their maturity dates, MOULIC withdrew her instrument is a holder in due course. 2 Consequently, the burden of proving that STATE is not
funds from the drawee bank. a holder in due course lies in the person who disputes the presumption. In this regard,
MOULIC failed.
Upon presentment for payment, the checks were dishonored for insufficiency of funds. On 20
December 1979, STATE allegedly notified MOULIC of the dishonor of the checks and The evidence clearly shows that: (a) on their faces the post-dated checks were complete and
requested that it be paid in cash instead, although MOULIC avers that no such notice was regular: (b) petitioner bought these checks from the payee, Corazon Victoriano, before their
given her. due dates; 3 (c) petitioner took these checks in good faith and for value, albeit at a
discounted price; and, (d) petitioner was never informed nor made aware that these checks
On 6 October 1983, STATE sued to recover the value of the checks plus attorney's fees and were merely issued to payee as security and not for value.
expenses of litigation.
Consequently, STATE is indeed a holder in due course. As such, it holds the instruments free
In her Answer, MOULIC contends that she incurred no obligation on the checks because the from any defect of title of prior parties, and from defenses available to prior parties among
jewelry was never sold and the checks were negotiated without her knowledge and consent. themselves; STATE may, therefore, enforce full payment of the checks. 4
She also instituted a Third-Party Complaint against Corazon Victoriano, who later assumed
full responsibility for the checks. MOULIC cannot set up against STATE the defense that there was failure or absence of
consideration. MOULIC can only invoke this defense against STATE if it was privy to the
On 26 May 1988, the trial court dismissed the Complaint as well as the Third-Party purpose for which they were issued and therefore is not a holder in due course.
Complaint, and ordered STATE to pay MOULIC P3,000.00 for attorney's fees.
That the post-dated checks were merely issued as security is not a ground for the discharge
STATE elevated the order of dismissal to the Court of Appeals, but the appellate court of the instrument as against a holder in due course. For the only grounds are those outlined
affirmed the trial court on the ground that the Notice of Dishonor to MOULIC was made in Sec. 119 of the Negotiable Instruments Law:
beyond the period prescribed by the Negotiable Instruments Law and that even if STATE did
serve such notice on MOULIC within the reglementary period it would be of no consequence Sec. 119. Instrument; how discharged. A negotiable instrument is
as the checks should never have been presented for payment. The sale of the jewelry was discharged: (a) By payment in due course by or on behalf of the principal
never effected; the checks, therefore, ceased to serve their purpose as security for the debtor; (b) By payment in due course by the party accommodated, where the
jewelry. instrument is made or accepted for his accommodation; (c) By the intentional
cancellation thereof by the holder; (d) By any other act which will discharge a

simple contract for the payment of money; (e) When the principal debtor In addition, the Negotiable Instruments Law was enacted for the purpose of facilitating, not
becomes the holder of the instrument at or after maturity in his own right. hindering or hampering transactions in commercial paper. Thus, the said statute should not
be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the
Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible grounds for the necessities in a single case. 9
discharge of the instrument. But, the intentional cancellation contemplated under paragraph
(c) is that cancellation effected by destroying the instrument either by tearing it up, 5 burning The drawing and negotiation of a check have certain effects aside from the transfer of title or
it, 6 or writing the word "cancelled" on the instrument. The act of destroying the instrument the incurring of liability in regard to the instrument by the transferor. The holder who takes
must also be made by the holder of the instrument intentionally. Since MOULIC failed to get the negotiated paper makes a contract with the parties on the face of the instrument. There
back possession of the post-dated checks, the intentional cancellation of the said checks is is an implied representation that funds or credit are available for the payment of the
altogether impossible. instrument in the bank upon which it is drawn. 10 Consequently, the withdrawal of the money
from the drawee bank to avoid liability on the checks cannot prejudice the rights of holders in
On the other hand, the acts which will discharge a simple contract for the payment of money due course. In the instant case, such withdrawal renders the drawer, Nora B. Moulic, liable to
under paragraph (d) are determined by other existing legislations since Sec. 119 does not STATE, a holder in due course of the checks.
specify what these acts are, e.g., Art. 1231 of the Civil Code 7 which enumerates the modes
of extinguishing obligations. Again, none of the modes outlined therein is applicable in the Under the facts of this case, STATE could not expect payment as MOULIC left no funds with
instant case as Sec. 119 contemplates of a situation where the holder of the instrument is the drawee bank to meet her obligation on the checks, 11 so that Notice of Dishonor would be
the creditor while its drawer is the debtor. In the present action, the payee, Corazon futile.
Victoriano, was no longer MOULIC's creditor at the time the jewelry was returned.
The Court of Appeals also held that allowing recovery on the checks would constitute unjust
Correspondingly, MOULIC may not unilaterally discharge herself from her liability by the mere enrichment on the part of STATE Investment House, Inc. This is error.
expediency of withdrawing her funds from the drawee bank. She is thus liable as she has no
legal basis to excuse herself from liability on her checks to a holder in due course. The record shows that Mr. Romelito Caoili, an Account Assistant, testified that the obligation
of Corazon Victoriano and her husband at the time their property mortgaged to STATE was
Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is of no moment. extrajudicially foreclosed amounted to P1.9 million; the bid price at public auction was only
The need for such notice is not absolute; there are exceptions under Sec. 114 of the P1 million. 12 Thus, the value of the property foreclosed was not even enough to pay the debt
Negotiable Instruments Law: in full.

Sec. 114. When notice need not be given to drawer. Notice of dishonor is Where the proceeds of the sale are insufficient to cover the debt in an extrajudicial
not required to be given to the drawer in the following cases: (a) Where the foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the
drawer and the drawee are the same person; (b) When the drawee is a debtor. 13 The step thus taken by the mortgagee-bank in resorting to an extra-judicial
fictitious person or a person not having capacity to contract; (c) When the foreclosure was merely to find a proceeding for the sale of the property and its action cannot
drawer is the person to whom the instrument is presented for payment: (d) be taken to mean a waiver of its right to demand payment for the whole debt. 14 For, while
Where the drawer has no right to expect or require that the drawee or Act 3135, as amended, does not discuss the mortgagee's right to recover such deficiency, it
acceptor will honor the instrument; (e) Where the drawer had does not contain any provision either, expressly or impliedly, prohibiting recovery. In this
countermanded payment. jurisdiction, when the legislature intends to foreclose the right of a creditor to sue for any
deficiency resulting from foreclosure of a security given to guarantee an obligation, it so
Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve the checks when expressly provides. For instance, with respect to pledges, Art. 2115 of the Civil Code 15 does
she returned the jewelry. She simply withdrew her funds from her drawee bank and not allow the creditor to recover the deficiency from the sale of the thing pledged. Likewise,
transferred them to another to protect herself. After withdrawing her funds, she could not in the case of a chattel mortgage, or a thing sold on installment basis, in the event of
have expected her checks to be honored. In other words, she was responsible for the foreclosure, the vendor "shall have no further action against the purchaser to recover any
dishonor of her checks, hence, there was no need to serve her Notice of Dishonor, which is unpaid balance of the price. Any agreement to the contrary will be void". 16
simply bringing to the knowledge of the drawer or indorser of the instrument, either verbally
or by writing, the fact that a specified instrument, upon proper proceedings taken, has not It is clear then that in the absence of a similar provision in Act No. 3135, as amended, it
been accepted or has not been paid, and that the party notified is expected to pay it. 8 cannot be concluded that the creditor loses his right recognized by the Rules of Court to take

action for the recovery of any unpaid balance on the principal obligation simply because he
has chosen to extrajudicially foreclose the real estate mortgage pursuant to a Special Power
of Attorney given him by the mortgagor in the contract of mortgage. 17

The filing of the Complaint and the Third-Party Complaint to enforce the checks against
MOULIC and the VICTORIANO spouses, respectively, is just another means of recovering the
unpaid balance of the debt of the VICTORIANOs.

In fine, MOULIC, as drawer, is liable for the value of the checks she issued to the holder in
due course, STATE, without prejudice to any action for recompense she may pursue against
the VICTORIANOs as Third-Party Defendants who had already been declared as in default.

WHEREFORE, the petition is GRANTED. The decision appealed from is REVERSED and a new
one entered declaring private respondent NORA B. MOULIC liable to petitioner STATE
INVESTMENT HOUSE, INC., for the value of EBC Checks Nos. 30089658 and 30089660 in the
total amount of P100,000.00, P3,000.00 as attorney's fees, and the costs of suit, without
prejudice to any action for recompense she may pursue against the VICTORIANOs as Third-
Party Defendants.

Costs against private respondent.


56. Under the promissory note (Exhibit "F") defendant corporation Pinch
(formerly Worldwide) is ordered to pay the plaintiff bank the sum of
G.R. No. 93073 December 21, 1992 P140,000.00 with interest at 16% per annum from November 27, 1980 until
fully paid.
vs. Defendant Pinch (formely Worldwide) is hereby ordered to pay the plaintiff
COURT OF APPEALS and FERMIN CANLAS, respondents. the sum of P231,120.81 with interest at 12% per annum from July 1, 1981,
until fully paid and the sum of P331,870.97 with interest from March 28,
1981, until fully paid.

CAMPOS, JR., J.: All the defendants are also ordered to pay, jointly and severally, the plaintiff
the sum of P100,000.00 as and for reasonable attorney's fee and the further
sum equivalent to 3% per annum of the respective principal sums from the
This is an appeal by way of a Petition for Review on Certiorari from the decision * of the Court
dates above stated as penalty charge until fully paid, plus one percent (1%)
of Appeals in CA G.R. CV No. 07302, entitled "Republic Planters Bank.Plaintiff-Appellee vs.
of the principal sums as service charge.
Pinch Manufacturing Corporation, et al., Defendants, and Fermin Canlas, Defendant-
Appellant", which affirmed the decision ** in Civil Case No. 82-5448 except that it completely
absolved Fermin Canlas from liability under the promissory notes and reduced the award for With costs against the defendants.
damages and attorney's fees. The RTC decision, rendered on June 20, 1985, is quoted
hereunder: SO ORDERED. 1

WHEREFORE, premises considered, judgment is hereby rendered in favor of From the above decision only defendant Fermin Canlas appealed to the then Intermediate
the plaintiff Republic Planters Bank, ordering defendant Pinch Manufacturing Court (now the Court Appeals). His contention was that inasmuch as he signed the
Corporation (formerly Worldwide Garment Manufacturing, Inc.) and promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing,
defendants Shozo Yamaguchi and Fermin Canlas to pay, jointly and severally, Inc, he should not be held personally liable for such authorized corporate acts that he
the plaintiff bank the following sums with interest thereon at 16% per annum performed. It is now the contention of the petitioner Republic Planters Bank that having
from the dates indicated, to wit: unconditionally signed the nine (9) promissory notes with Shozo Yamaguchi, jointly and
severally, defendant Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the
Under the promissory note (Exhibit "A"), the sum of P300,000.00 with nine notes.
interest from January 29, 1981 until fully paid; under promissory note (Exhibit
"B"), the sum of P40,000.00 with interest from November 27, 1980; under the We find merit in this appeal.
promissory note (Exhibit "C"), the sum of P166,466.00 which interest from
January 29, 1981; under the promissory note (Exhibit "E"), the sum of From the records, these facts are established: Defendant Shozo Yamaguchi and private
P86,130.31 with interest from January 29, 1981; under the promissory note respondent Fermin Canlas were President/Chief Operating Officer and Treasurer respectively,
(Exhibit "G"), the sum of P12,703.70 with interest from November 27, 1980; of Worldwide Garment Manufacturing, Inc.. By virtue of Board Resolution No.1 dated August
under the promissory note (Exhibit "H"), the sum of P281,875.91 with interest 1, 1979, defendant Shozo Yamaguchi and private respondent Fermin Canlas were authorized
from January 29, 1981; and under the promissory note (Exhibit "I"), the sum to apply for credit facilities with the petitioner Republic Planters Bank in the forms of export
of P200,000.00 with interest from January 29, 1981. advances and letters of credit/trust receipts accommodations. Petitioner bank issued nine
promissory notes, marked as Exhibits A to I inclusive, each of which were uniformly worded in
Under the promissory note (Exhibit "D") defendants Pinch Manufacturing the following manner:
Corporation (formerly named Worldwide Garment Manufacturing, Inc.), and
Shozo Yamaguchi are ordered to pay jointly and severally, the plaintiff bank ___________, after date, for value received, I/we, jointly and severaIly promise
the sum of P367,000.00 with interest of 16% per annum from January 29, to pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila,
1980 until fully paid Philippines, the sum of ___________ PESOS(....) Philippine Currency...

On the right bottom margin of the promissory notes appeared the signatures of Shozo Under the Negotiable lnstruments Law, persons who write their names on the face of
Yamaguchi and Fermin Canlas above their printed names with the phrase "and (in) his promissory notes are makers and are liable as such. 3 By signing the notes, the maker
personal capacity" typewritten below. At the bottom of the promissory notes appeared: promises to pay to the order of the payee or any holder 4 according to the tenor
"Please credit proceeds of this note to: thereof. 5 Based on the above provisions of law, there is no denying that private respondent
Fermin Canlas is one of the co-makers of the promissory notes. As such, he cannot escape
________ Savings Account ______XX Current Account liability arising therefrom.

No. 1372-00257-6 Where an instrument containing the words "I promise to pay" is signed by two or more
persons, they are deemed to be jointly and severally liable thereon. 6 An instrument which
of WORLDWIDE GARMENT MFG. CORP. begins" with "I" ,We" , or "Either of us" promise to, pay, when signed by two or more persons,
makes them solidarily liable. 7 The fact that the singular pronoun is used indicates that the
promise is individual as to each other; meaning that each of the co-signers is deemed to
These entries were separated from the text of the notes with a bold line which ran
have made an independent singular promise to pay the notes in full.
horizontally across the pages.

In the case at bar, the solidary liability of private respondent Fermin Canlas is made clearer
In the promissory notes marked as Exhibits C, D and F, the name Worldwide Garment
and certain, without reason for ambiguity, by the presence of the phrase "joint and several"
Manufacturing, Inc. was apparently rubber stamped above the signatures of defendant and
as describing the unconditional promise to pay to the order of Republic Planters Bank. A joint
private respondent.
and several note is one in which the makers bind themselves both jointly and individually to
the payee so that all may be sued together for its enforcement, or the creditor may select
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to change its one or more as the object of the suit. 8 A joint and several obligation in common law
corporate name to Pinch Manufacturing Corporation. corresponds to a civil law solidary obligation; that is, one of several debtors bound in such
wise that each is liable for the entire amount, and not merely for his proportionate
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of money share. 9 By making a joint and several promise to pay to the order of Republic Planters Bank,
covered among others, by the nine promissory notes with interest thereon, plus attorney's private respondent Fermin Canlas assumed the solidary liability of a debtor and the payee
fees and penalty charges. The complainant was originally brought against Worldwide may choose to enforce the notes against him alone or jointly with Yamaguchi and Pinch
Garment Manufacturing, Inc. inter alia, but it was later amended to drop Worldwide Manufacturing Corporation as solidary debtors.
Manufacturing, Inc. as defendant and substitute Pinch Manufacturing Corporation it its place.
Defendants Pinch Manufacturing Corporation and Shozo Yamaguchi did not file an Amended As to whether the interpolation of the phrase "and (in) his personal capacity" below the
Answer and failed to appear at the scheduled pre-trial conference despite due notice. Only signatures of the makers in the notes will affect the liability of the makers, We do not find it
private respondent Fermin Canlas filed an Amended Answer wherein he, denied having necessary to resolve and decide, because it is immaterial and will not affect to the liability of
issued the promissory notes in question since according to him, he was not an officer of Pinch private respondent Fermin Canlas as a joint and several debtor of the notes. With or without
Manufacturing Corporation, but instead of Worldwide Garment Manufacturing, Inc., and that the presence of said phrase, private respondent Fermin Canlas is primarily liable as a co-
when he issued said promissory notes in behalf of Worldwide Garment Manufacturing, Inc., maker of each of the notes and his liability is that of a solidary debtor.
the same were in blank, the typewritten entries not appearing therein prior to the time he
affixed his signature.
Finally, the respondent Court made a grave error in holding that an amendment in a
corporation's Articles of Incorporation effecting a change of corporate name, in this case
In the mind of this Court, the only issue material to the resolution of this appeal is whether from Worldwide Garment manufacturing Inc to Pinch Manufacturing Corporation extinguished
private respondent Fermin Canlas is solidarily liable with the other defendants, namely Pinch the personality of the original corporation.
Manufacturing Corporation and Shozo Yamaguchi, on the nine promissory notes.

The corporation, upon such change in its name, is in no sense a new corporation, nor the
We hold that private respondent Fermin Canlas is solidarily liable on each of the promissory successor of the original corporation. It is the same corporation with a different name, and its
notes bearing his signature for the following reasons: character is in no respect changed.10

The promissory motes are negotiable instruments and must be governed by the Negotiable
Instruments Law. 2

A change in the corporate name does not make a new corporation, and whether effected by filled up strictly in accordance with the authority given and within a
special act or under a general law, has no affect on the identity of the corporation, or on its reasonable time...
property, rights, or liabilities. 11
Proof that the notes were signed in blank was only the self-serving testimony of private
The corporation continues, as before, responsible in its new name for all debts or other respondent Fermin Canlas, as determined by the trial court, so that the trial court ''doubts
liabilities which it had previously contracted or incurred. 12 the defendant (Canlas) signed in blank the promissory notes". We chose to believe the bank's
testimony that the notes were filled up before they were given to private respondent Fermin
As a general rule, officers or directors under the old corporate name bear no personal liability Canlas and defendant Shozo Yamaguchi for their signatures as joint and several promissors.
for acts done or contracts entered into by officers of the corporation, if duly authorized. For signing the notes above their typewritten names, they bound themselves as
Inasmuch as such officers acted in their capacity as agent of the old corporation and the unconditional makers. We take judicial notice of the customary procedure of commercial
change of name meant only the continuation of the old juridical entity, the corporation banks of requiring their clientele to sign promissory notes prepared by the banks in printed
bearing the same name is still bound by the acts of its agents if authorized by the Board. form with blank spaces already filled up as per agreed terms of the loan, leaving the
Under the Negotiable Instruments Law, the liability of a person signing as an agent is borrowers-debtors to do nothing but read the terms and conditions therein printed and to
specifically provided for as follows: sign as makers or co-makers. When the notes were given to private respondent Fermin
Canlas for his signature, the notes were complete in the sense that the spaces for the
Sec. 20. Liability of a person signing as agent and so forth. Where the material particular had been filled up by the bank as per agreement. The notes were not
instrument contains or a person adds to his signature words indicating that incomplete instruments; neither were they given to private respondent Fermin Canlas in
he signs for or on behalf of a principal , or in a representative capacity, he is blank as he claims. Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.
not liable on the instrument if he was duly authorized; but the mere addition
of words describing him as an agent, or as filling a representative character, The ruling in case of Reformina vs. Tomol relied upon by the appellate court in reducing the
without disclosing his principal, does not exempt him from personal liability. interest rate on the promissory notes from 16% to 12% per annum does not squarely apply
to the instant petition. In the abovecited case, the rate of 12% was applied to forebearances
Where the agent signs his name but nowhere in the instrument has he disclosed the fact that of money, goods or credit and court judgemets thereon, only in the absence of any
he is acting in a representative capacity or the name of the third party for whom he might stipulation between the parties.
have acted as agent, the agent is personally liable to take holder of the instrument and
cannot be permitted to prove that he was merely acting as agent of another and parol or In the case at bar however , it was found by the trial court that the rate of interest is 9% per
extrinsic evidence is not admissible to avoid the agent's personal liability. 13 annum, which interest rate the plaintiff may at any time without notice, raise within the limits
allowed law. And so, as of February 16, 1984 , the plaintiff had fixed the interest at 16% per
On the private respondent's contention that the promissory notes were delivered to him in annum.
blank for his signature, we rule otherwise. A careful examination of the notes in question
shows that they are the stereotype printed form of promissory notes generally used by This Court has held that the rates under the Usury Law, as amended by Presidential Decree
commercial banking institutions to be signed by their clients in obtaining loans. Such printed No. 116, are applicable only to interests by way of compensation for the use or forebearance
notes are incomplete because there are blank spaces to be filled up on material particulars of money. Article 2209 of the Civil Code, on the other hand, governs interests by way of
such as payee's name, amount of the loan, rate of interest, date of issue and the maturity damages. 15 This fine distinction was not taken into consideration by the appellate court,
date. The terms and conditions of the loan are printed on the note for the borrower-debtor 's which instead made a general statement that the interest rate be at 12% per annum.
perusal. An incomplete instrument which has been delivered to the borrower for his signature
is governed by Section 14 of the Negotiable Instruments Law which provides, in so far as Inasmuch as this Court had declared that increases in interest rates are not subject to any
relevant to this case, thus: ceiling prescribed by the Usury Law, the appellate court erred in limiting the interest rates at
12% per annum. Central Bank Circular No. 905, Series of 1982 removed the Usury Law
Sec. 14. Blanks: when may be filled. Where the instrument is wanting in ceiling on interest rates. 16
any material particular, the person in possesion thereof has a prima
facie authority to complete it by filling up the blanks therein. ... In order, In the 1ight of the foregoing analysis and under the plain language of the statute and
however, that any such instrument when completed may be enforced against jurisprudence on the matter, the decision of the respondent: Court of Appeals absolving
any person who became a party thereto prior to its completion, it must be private respondent Fermin Canlas is REVERSED and SET ASIDE. Judgement is hereby

rendered declaring private respondent Fermin Canlas jointly and severally liable on all the
nine promissory notes with the following sums and at 16% interest per annum from the dates
indicated, to wit:

Under the promissory note marked as exhibit A, the sum of P300,000.00 with interest from
January 29, 1981 until fully paid; under promissory note marked as Exhibit B, the sum of
P40,000.00 with interest from November 27, 1980: under the promissory note denominated
as Exhibit C, the amount of P166,466.00 with interest from January 29, 1981; under the
promissory note denominated as Exhibit D, the amount of P367,000.00 with interest from
January 29, 1981 until fully paid; under the promissory note marked as Exhibit E, the amount
of P86,130.31 with interest from January 29, 1981; under the promissory note marked as
Exhibit F, the sum of P140,000.00 with interest from November 27, 1980 until fully paid;
under the promissory note marked as Exhibit G, the amount of P12,703.70 with interest from
November 27, 1980; the promissory note marked as Exhibit H, the sum of P281,875.91 with
interest from January 29, 1981; and the promissory note marked as Exhibit I, the sum of
P200,000.00 with interest on January 29, 1981.

The liabilities of defendants Pinch Manufacturing Corporation (formerly Worldwide Garment

Manufacturing, Inc.) and Shozo Yamaguchi, for not having appealed from the decision of the
trial court, shall be adjudged in accordance with the judgment rendered by the Court a quo.

With respect to attorney's fees, and penalty and service charges, the private respondent
Fermin Canlas is hereby held jointly and solidarity liable with defendants for the amounts
found, by the Court a quo. With costs against private respondent.


Narvasa, C.J., (Chairman), Feliciano, Regalado and Nocon, JJ., concur.


G.R. No. 74451 May 25, 1988 of cash payment. Accordingly, on December 22, 1975, defendant Casville,
through its president, defendant Casals, ordered from plaintiff two units of
EQUITABLE BANKING CORPORATION, petitioner, garrett skidders ...
THE HONORABLE INTERMEDIATE APPELLATE COURT and THE EDWARD J. NELL The purchase order for the garrett skidders bearing No. 0051 and dated
CO., respondents. December 22, 1975 (Exhibit "A") contained the following terms and
William R. Veto for petitioner.
Two (2) units GARRETT Skidders Model 30A complete as basically described
Pelaez, Adriano & Gregorio for respondents. in the bulletin

PRICE: F.O.B. dock

MELENCIO-HERRERA, J.: Manila P485,000.00/unit

In this Petition for Review on certiorari petitioner, Equitable Banking Corporation, prays that For two (2) units P970,000.00
the adverse judgment against it rendered by respondent Appellate Court, 1 dated 4 October
1985, and its majority Resolution, dated 28 April 1986, denying petitioner's Motion for SHIPMENT: We will inform you the date and name of the vessel as soon as
Reconsideration, 2 be annulled and set aside. arranged.

The facts pertinent to this Petition, as summarized by the Trial Court and adopted by TERMS: By irrevocable domestic letter of credit to be issued in favor of THE
reference by Respondent Appellate Court, emanated from the case entitled "Edward J. Nell EDWARD J. NELL CO. or ORDER payable in thirty six (36) months and will be
Co. vs. Liberato V. Casals, Casville Enterprises, Inc., and Equitable Banking Corporation" of opened within ninety (90) days after date of shipment. at first installment will
the Court of First Instance of Rizal (Civil Case No. 25112), and read: be due one hundred eighty (180) days after date of shipment. Interest-14%
per annum (Exhibit A)
From the evidence submitted by the parties, the Court finds that sometime in
1975 defendant Liberato Casals went to plaintiff Edward J. Nell Company and xxx xxx xxx
told its senior sales engineer, Amado Claustro that he was interested in
buying one of the plaintiff's garrett skidders. Plaintiff was a dealer of ... in a letter dated April 21, 1976, defendants Casals and Casville requested
machineries, equipment and supplies. Defendant Casals represented himself from plaintiff the delivery of one (1) unit of the bidders, complete with tools
as the majority stockholder, president and general manager of Casville and cables, to Cagayan de Oro, on or before Saturday, April 24,1976, on
Enterprises, Inc., a firm engaged in the large scale production, procurement board a Lorenzo shipping vessel, with the information that an irrevocable
and processing of logs and lumber products, which had a plywood plant in Domestic Letter of Credit would be opened in plaintiff's favor on or before
Sta. Ana, Metro Manila. June 30, 1976 under the terms and conditions agreed upon (Exhibit "B")

After defendant Casals talked with plaintiff's sales engineer, he was referred On May 3, 1976, in compliance with defendant Casvile's recognition request,
to plaintiffs executive vice-president, Apolonio Javier, for negotiation in plaintiff shipped to Cagayan de Oro City a Garrett skidder. Plaintiff paid the
connection with the manner of payment. When Javier asked for cash shipping cost in the amount of P10,640.00 because of the verbal assurance
payment for the skidders, defendant Casals informed him that his of defendant Casville that it would be covered by the letter of credit soon to
corporation, defendant Casville Enterprises, Inc., had a credit line with be opened.
defendant Equitable Banking Corporation. Apparently, impressed with this
assertion, Javier agreed to have the skidders paid by way of a domestic letter xxx xxx xxx
of credit which defendant Casals promised to open in plaintiffs favor, in lieu

On July 15, 1976, defendant Casals handed to plaintiff a check in the amount a) On sight Letter of Credit for P485,000.00; b) One 36 months Letter of
of P300,000.00 postdated August 4, 1976, which was followed by another Credit for P606,000.00; c) P300,000.00 CASH marginal deposit1 d) Real
check of same date. Plaintiff considered these checks either as partial Estate Collateral to secure the Trust Receipts; e) We shall chattel mortgage
payment for the skidder that was already delivered to Cagayan de Oro or as the equipments purchased even after payment of the first L/C as additional
reimbursement for the marginal deposit that plaintiff was supposed to pay. security for the balance of the second L/C and f) Other conditions you deem
necessary to protect the interest of the bank."
In a letter dated August 3, 1976 (Exhibit "C"), defendants Casville informed
the plaintiff that their application for a letter of credit for the payment of the In a letter dated August 11, 1976 (Exhibit "D-l"), defendant bank replied
Garrett skidders had been approved by the Equitable Banking Corporation. stating that it was ready to open the letters of credit upon defendant's
However, the defendants said that they would need the sum of P300,000.00 compliance of the following terms and conditions:
to stand as collateral or marginal deposit in favor of Equitable Banking
Corporation and an additional amount of P100,000.00, also in favor of c) 30% cash margin deposit; d) Acceptable Real Estate Collateral to secure
Equitable Banking Corporation, to clear the title of the Estrada property the Trust Receipts; e) Chattel Mortgage on the equipment; and Ashville f)
belonging to defendant Casals which had been approved as security for the Other terms and conditions that our bank may impose.
trust receipts to be issued by the bank, covering the above-mentioned
equipment. Defendant Casville sent a copy of the foregoing letter to the plaintiff
enclosing three postdated checks. In said letter, plaintiff was informed of the
Although the marginal deposit was supposed to be produced by defendant requirements imposed by the defendant bank pointing out that the "cash
Casville Enterprises, plaintiff agreed to advance the necessary amount in marginal required under paragraph (c) is 30% of Pl,091,000.00 or
order to facilitate the transaction. Accordingly, on August 5,1976, plaintiff P327,300.00 plus another P100,000.00 to clean up the Estrada property or a
issued a check in the amount of P400,000.00 (Exhibit "2") drawn against the total of P427,300.00" and that the check covering said amount should be
First National City Bank and made payable to the order of Equitable Banking made payable "to the Order of EQUITABLE BANKING CORPORATION for the
Corporation and with the following notation or memorandum: account of Casville Enterprises Inc." Defendant Casville also stated that the
three (3) enclosed postdated checks were intended as replacement of the
a/c of Casville Enterprises Inc. for Marginal deposit and checks that were previously issued to plaintiff to secure the sum of
payment of balance on Estrada Property to be used as P427,300.00 that plaintiff would advance to defendant bank for the account
security for trust receipt for opening L/C of Garrett Skidders of defendant Casville. All the new checks were postdated November 19, 1976
in favor of the Edward J. Nell Co." Said check together with and drawn in the sum of Pl45,500.00 (Exhibit "F"), P181,800.00 (Exhibit "G")
the cash disbursement voucher (Exhibit "2-A") containing the and P100,000.00 (Exhibit "H").
On the same occasion, defendant Casals delivered to plaintiff TCT No. 11891
Payment for marginal deposit and other expenses re opening of the Register of Deeds of Quezon City and TCT No. 50851 of the Register of
of L/C for account of Casville Ent.. Deeds of Rizal covering two pieces of real estate properties.

A covering letter (Exhibit "3") was also sent and when the three documents Subsequently, Cesar Umali, plaintiffs credit and collection manager,
were presented to Severino Santos, executive vice president of defendant accompanied by a representative of defendant Casville, went to see Severino
bank, Santos did not accept them because the terms and conditions required Santos to find out the status of the credit line being sought by defendant
by the bank for the opening of the letter of credit had not yet been agreed Casville. Santos assured Umali that the letters of credit would be opened as
on. soon as the requirements imposed by defendant bank in its letter dated
August 11, 1976 had been complied with by defendant Casville.
On August 9, 1976, defendant Casville wrote the bank applying for two
letters of credit to cover its purchase from plaintiff of two Garrett skidders, On August 16, 1976, plaintiff issued a check for P427,300.00, payable to the
under the following terms and conditions: "order of EQUITABLE BANKING CORPORATION A/C CASVILLE ENTERPRISES,
INC." and drawn against the first National City Bank (Exhibit "E-l"). The check

did not contain the notation found in the previous check issued by the What is left for the Court to determine, therefore, is only the liability of
plaintiff (Exhibit "2") but the substance of said notation was reproduced in a defendant bank to plaintiff.
covering letter dated August 16,1976 that went with the check (Exhibit
"E").<re||an1w> Both the check and the covering letter were sent to xxx xxx xxx
defendant bank through defendant Casals. Plaintiff entrusted the delivery of
the check and the latter to defendant Casals because it believed that no one, Resolving that issue, the Trial Court rendered judgment, affirmed by Respondent Court in
including defendant Casals, could encash the same as it was made payable toto, the pertinent portion of which reads:
to the defendant bank alone. Besides, defendant Casals was known to the
bank as the one following up the application for the letters of credit.
xxx xxx xxx

Upon receiving the check for P427,300.00 entrusted to him by plaintiff

Defendants Casals and Casville Enterprises and Equitable Banking
defendant Casals immediately deposited it with the defendant bank and the
Corporation are ordered to pay plaintiff, jointly and severally, the sum of
bank teller accepted the same for deposit in defendant Casville's checking
P427,300.00, representing the amount of plaintiff's check which defendant
account. After depositing said check, defendant Casville, acting through
bank erroneously credited to the account of defendant Casville and which
defendant Casals, then withdrew all the amount deposited.
defendants Casal and Casville misappropriated, with 12% interest thereon
from April 5, 1977, until the said sum is fully paid.
Meanwhile, upon their presentation for encashment, plaintiff discovered that
the three checks (Exhibits "F, "G" and "H") in the total amount of
Defendant Equitable Banking Corporation is ordered to pay plaintiff
P427,300.00, that were issued by defendant Casville as collateral were all
attorney's fees in the sum of P25,000.00 .
dishonored for having been drawn against a closed account.

Proportionate cost against all the defendants.

As defendant Casville failed to pay its obligation to defendant bank, the latter
foreclosed the mortgage executed by defendant Casville on the Estrada
property which was sold in a public auction sale to a third party. SO ORDERED.

Plaintiff allowed some time before following up the application for the letters The crucial issue to resolve is whether or not petitioner Equitable Banking Corporation
of credit knowing that it took time to process the same. However, when the (briefly, the Bank) is liable to private respondent Edward J. Nell Co. (NELL, for short) for the
three checks issued to it by defendant Casville were dishonored, plaintiff value of the second check issued by NELL, Exhibit "E-l," which was made payable
became apprehensive and sent Umali on November 29, 1976, to inquire
about the status of the application for the letters of credit. When plaintiff was to the order of EQUITABLE Ashville BANIUNG CORPORATION A/C OF CASVILLE
informed that no letters of credit were opened by the defendant bank in its ENTERPRISES INC.
favor and then discovered that defendant Casville had in the meanwhile
withdrawn the entire amount of P427,300.00, without paying its obligation to and which the Bank teller credited to the account of Casville.
the bank plaintiff filed the instant action.
The Trial Court found that the amount of the second check had been erroneously credited to
While the the instant case was being tried, defendants Casals and Casville the Casville account; held the Bank liable for the mistake of its employees; and ordered the
assigned the garrett skidder to plaintiff which credited in favor of defendants Bank to pay NELL the value of the check in the sum of P427,300.00, with legal interest.
the amount of P450,000.00, as partial satisfaction of plaintiff's claim against Explained the Trial Court:
The Court finds that the check in question was payable only to the defendant
Defendants Casals and Casville hardly disputed their liability to plaintiff. Not bank and to no one else. Although the words "A/C OF CASVILLE ENTERPRISES
only did they show lack of interest in disputing plaintiff's claim by not INC. "appear on the face of the check after or under the name of defendant
appearing in most of the hearings, but they also assigned to plaintiff the bank, the payee was still the latter. The addition of said words did not in any
garrett skidder which is an action of clear recognition of their liability. way make Casville Enterprises, Inc. the Payee of the instrument for the words

merely indicated for whose account or in connection with what account the ambiguity is to be taken contra proferentem that is, construed against NELL who caused the
check was issued by the plaintiff. ambiguity and could have also avoided it by the exercise of a little more care. Thus, Article
1377 of the Civil Code, provides:
Indeed, the bank teller who received it was fully aware that the check was
not negotiable since he stamped thereon the words "NON-NEGOTIABLE For Art. 1377. The interpretation of obscure words or stipulations in a contract
Payee's Account Only" and "NON-NEGOTIABLE TELLER NO. 4, August 17,1976 shall not favor the party who caused the obscurity.
2) Contrary to the finding of respondent Appellate Court, the subject check was, initially, not
But said teller should have exercised more prudence in the handling of Id non-negotiable. Neither was it a crossed check. The rubber-stamping transversall on the face
check because it was not made out in the usual manner. The addition of the of the subject check of the words "Non-negotiable for Payee's Account Only" between two (2)
words A/C OF CASVILLE ENTERPRISES INC." should have placed the teller on parallel lines, and "Non-negotiable, Teller- No. 4, August 17, 1976," separately boxed, was
guard and he should have clarified the matter with his superiors. Instead of made only by the Bank teller in accordance with customary bank practice, and not by NELL
doing so, however, the teller decided to rely on his own judgment and at the as the drawer of the check, and simply meant that thereafter the same check could no longer
risk of making a wrong decision, credited the entire amount in the name of be negotiated.
defendant Casville although the latter was not the payee named in the
check. Such mistake was crucial and was, without doubt, the proximate 3) NELL's own acts and omissions in connection with the drawing, issuance and delivery of
cause of plaintiffs defraudation. the 16 August 1976 check, Exhibit "E-l," and its implicit trust in Casals, were the proximate
cause of its own defraudation: (a) The original check of 5 August 1976, Exhibit "2," was
xxx xxx xxx payable to the order solely of "Equitable Banking Corporation." NELL changed the payee in
the subject check, Exhibit "E", however, to "Equitable Banking Corporation, A/C of Casville
Respondent Appellate Court upheld the above conclusions stating in addition: Enterprises Inc.," upon Casals request. NELL also eliminated both the cash disbursement
voucher accompanying the check which read:
1) The appellee made the subject check payable to appellant's order, for the
account of Casville Enterprises, Inc. In the light of the other facts, the Payment for marginal deposit and other expense re opening of L/C for
directive was for the appellant bank to apply the value of the check as account of Casville Enterprises.
payment for the letter of credit which Casville Enterprises, Inc. had previously
applied for in favor of the appellee (Exhibit D-1, p. 5). The issuance of the and the memorandum:
subject check was precisely to meet the bank's prior requirement of payment
before issuing the letter of credit previously applied for by Casville a/c of Casville Enterprises Inc. for Marginal deposit and payment of balance
Enterprises in favor of the appellee; on Estrada Property to be used as security for trust receipt for opening L/C of
Garrett Skidders in favor of the Edward Ashville J Nell Co.
xxx xxx xxx
Evidencing the real nature of the transaction was merely a separate covering letter, dated 16
We disagree. August 1976, which Casals, sinisterly enough, suppressed from the Bank officials and teller.

1) The subject check was equivocal and patently ambiguous. By making the check read: (b) NELL entrusted the subject check and its covering letter, Exhibit "E," to Casals who,
obviously, had his own antagonistic interests to promote. Thus it was that Casals did not
Pay to the EQUITABLE BANKING CORPORATION Order of A/C OF CASVILLE purposely present the subject check to the Executive Vice-President of the Bank, who was
ENTERPRISES, INC. aware of the negotiations regarding the Letter of Credit, and who had rejected the previous
check, Exhibit "2," including its three documents because the terms and conditions required
the payee ceased to be indicated with reasonable certainty in contravention of Section 8 of by the Bank for the opening of the Letter of Credit had not yet been agreed on.
the Negotiable Instruments Law. 3 As worded, it could be accepted as deposit to the account
of the party named after the symbols "A/C," or payable to the Bank as trustee, or as an (c) NELL was extremely accommodating to Casals. Thus, to facilitate the sales transaction,
agent, for Casville Enterprises, Inc., with the latter being the ultimate beneficiary. That NELL even advanced the marginal deposit for the garrett skidder. It is, indeed, abnormal for

the seller of goods, the price of which is to be covered by a letter of credit, to advance the
marginal deposit for the same.

(d) NELL had received three (3) postdated checks all dated 16 November, 1976 from Casvine
to secure the subject check and had accepted the deposit with it of two (2) titles of real
properties as collateral for said postdated checks. Thus, NELL was erroneously confident that
its interests were sufficiently protected. Never had it suspected that those postdated checks
would be dishonored, nor that the subject check would be utilized by Casals for a purpose
other than for opening the letter of credit.

In the last analysis, it was NELL's own acts, which put it into the power of Casals and Casville
Enterprises to perpetuate the fraud against it and, consequently, it must bear the loss
(Blondeau, et al., vs. Nano, et al., 61 Phil. 625 [1935]; Sta. Maria vs. Hongkong and Shanghai
Banking Corporation, 89 Phil. 780 [1951]; Republic of the Philippines vs. Equitable Banking
Corporation, L-15895, January 30,1964, 10 SCRA 8).

... As between two innocent persons, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his act of
confidence must bear the loss.

WHEREFORE, the Petition is granted and the Decision of respondent Appellate Court, dated 4
October 1985, and its majority Resolution, dated 28 April 1986, denying petitioner's Motion
for Reconsideration, are hereby SET ASIDE. The Decision of the then Court of First Instance of
Rizal, Branch XI. is modified in that petitioner Equitable Banking Corporation is absolved from
any and all liabilities to the private respondent, Edward J. Nell Company, and the Amended
Complaint against petitioner bank is hereby ordered dismissed. No costs.


Yap, C.J., Paras and Sarmiento, J.J., concur.

Padilla, J., took no part.


58. the Court of First Instance of Manila. On the basis of this allegation it is prayed, as a special
G.R. No. L-16968 July 31, 1962 defense, that the estate of said deceased Vicente L. Legarda be included as party-defendant.
The court in its decision ruled that the inclusion of said defendant is unnecessary and
PHILIPPINE NATIONAL BANK, plaintiff-appellee, immaterial, in accordance with the provisions of Article 1216 of the Deny Civil Code and
vs. CONCEPCION MINING COMPANY, INC., ET AL., defendants-appellants. section 17 (g) of the Negotiable Instruments Law.

LABRADOR, J.: A motion to reconsider this decision was denied and thereupon defendants presented a
petition for relief, asking that the effects of the judgment be suspended for the reason that
Appeal from a judgment or decision of the Court of First Instance of Manila, Hon. Gustavo the deceased Vicente L. Legarda should have been included as a party-defendant and his
Victoriano, presiding, sentencing defendants Concepcion Mining Company and Jose Sarte to liability should be determined in pursuance of the provisions of the promissory note. This
pay jointly and severally to the plaintiff the amount of P7,197.26 with interest up to motion for relief was also denied, hence defendant appealed to this Court.
September 29, 1959, plus a daily interest of P1.3698 thereafter up to the time the amount is
fully paid, plus 10% of the amount as attorney's fees, and costs of this suit. Section 17 (g) of the Negotiable Instruments Law provides as follows:

The present action was instituted by the plaintiff to recover from the defendants the face of a SEC. 17. Construction where instrument is ambiguous. Where the language of the
promissory note the pertinent part of which reads as follows: instrument is ambiguous or there are omissions therein, the following rules of
construction apply:
Manila, March 12, 1954
xxx xxx xxx
NINETY DAYS after date, for value received, I promise to pay to the order of the Philippine
National Bank . . . . (g) Where an instrument containing the word "I promise to pay" is signed by two or
more persons, they are deemed to be jointly and severally liable thereon.
In case it is necessary to collect this note by or through an attorney-at-law, the makers and
indorsers shall pay ten percent (10%) of the amount due on the note as attorney's fees, And Article 1216 of the Civil Code of the Philippines also provides as follows:
which in no case shall be less than P100.00 exclusive of all costs and fees allowed by law as
stipulated in the contract of real estate mortgage. Demand and Dishonor Waived. Holder ART. 1216. The creditor may proceed against any one of the solidary debtors or some
may accept partial payment reserving his right of recourse again each and all indorsers. of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others so long as
(Purpose mining industry) the debt has not been fully collected.
By: In view of the above quoted provisions, and as the promissory note was executed jointly and
(Sgd.) VICENTE LEGARDA severally by the same parties, namely, Concepcion Mining Company, Inc. and Vicente L.
President Legarda and Jose S. Sarte, the payee of the promissory note had the right to hold any one or
(Sgd.) VICENTE LEGARDA any two of the signers of the promissory note responsible for the payment of the amount of
(Sgd.) JOSE S SARTE the note. This judgment of the lower court should be affirmed.

"Please issue check to Our attention has been attracted to the discrepancies in the printed record on appeal. We
Mr. Jose S. Sarte" note, first, that the names of the defendants, who are evidently the Concepcion Mining Co.,
Inc. and Jose S. Sarte, do not appear in the printed record on appeal. The title of the
Upon the filing of the complaint the defendants presented their answer in which they allege complaint set forth in the record on appeal does not contain the name of Jose Sarte, when it
that the co-maker the promissory note Don Vicente L. Legarda died on February 24, 1946 should, as two defendants are named in the complaint and the only defense of the
and his estate is in the process of judicial determination in Special Proceedings No. 29060 of defendants is the non-inclusion of the deceased Vicente L. Legarda as a defendant in the
action. We also note that the copy of the promissory note which is set forth in the record on

appeal does not contain the name of the third maker Jose S. Sarte. Fortunately, the brief of defendant Mercator Finance Corporation for and in consideration of certain loans, and/or
appellee on page 4 sets forth said name of Jose S. Sarte as one of the co-maker of the other forms of credit accommodations obtained from the Mortgagee (defendant Mercator
promissory note. Evidently, there is an attempt to mislead the court into believing that Jose Finance Corporation) amounting to EIGHT HUNDRED FORTY-FOUR THOUSAND SIX HUNDRED
S. Sarte is no one of the co-makers. The attorney for the defendants Atty. Jose S. Sarte TWENTY-FIVE & 78/100 (P844,625.78) PESOS, Philippine Currency and to secure the payment
himself and he should be held primarily responsible for the correctness of the record on of the same and those others that the MORTGAGEE may extend to the MORTGAGOR
appeal. We, therefore, order the said Atty. Jose S. Sarte to explain why in his record on appeal (plaintiffs) x x x."5 It contended that since petitioners and Embassy Farms signed the
his own name as one of the defendants does not appear and neither does his name appear promissory note6 as co-makers, aside from the Continuing Suretyship
as one of the co-signers of the promissory note in question. So ordered. Agreement7 subsequently executed to guarantee the indebtedness of Embassy Farms, and
the succeeding promissory notes8 restructuring the loan, then petitioners are jointly and
59. severally liable with Embassy Farms. Due to their failure to pay the obligation, the foreclosure
G.R. No. 148864 August 21, 2003 and subsequent sale of the mortgaged properties are valid.

SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA, Petitioners, Respondents Salazar and Lamecs asserted that they are innocent purchasers for value and in
vs. good faith, relying on the validity of the title of Mercator. Lamecs admitted the prior
MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMEC'S** REALTY AND ownership of petitioners of the subject parcels of land, but alleged that they are the present
DEVELOPMENT CORP. and the REGISTER OF DEEDS OF BULACAN, Respondents. registered owner. Both respondents likewise assailed the long silence and inaction by
petitioners as it was only after a lapse of almost ten (10) years from the foreclosure of the
DECISION property and the subsequent sales that they made their claim. Thus, Salazar and Lamecs
averred that petitioners are in estoppel and guilty of laches. 9
During pre-trial, the parties agreed on the following issues:
Petitioners, Spouses Evangelista ("Petitioners"), are before this Court on a Petition for Review
on Certiorari under Rule 45 of the Revised Rules of Court, assailing the decision of the Court a. Whether or not the Real Estate Mortgage executed by the plaintiffs in favor of
of Appeals dismissing their petition. defendant Mercator Finance Corp. is null and void;

Petitioners filed a complaint1 for annulment of titles against respondents, Mercator Finance b. Whether or not the extra-judicial foreclosure proceedings undertaken on subject
Corporation, Lydia P. Salazar, Lamecs Realty and Development Corporation, and the Register parcels of land to satisfy the indebtedness of Embassy Farms, Inc. is (sic) null and
of Deeds of Bulacan. Petitioners claimed being the registered owners of five (5) parcels of void;
land2 contained in the Real Estate Mortgage3 executed by them and Embassy Farms, Inc.
("Embassy Farms"). They alleged that they executed the Real Estate Mortgage in favor of c. Whether or not the sale made by defendant Mercator Finance Corp. in favor of
Mercator Financing Corporation ("Mercator") only as officers of Embassy Farms. They did not Lydia Salazar and that executed by the latter in favor of defendant Lamecs Realty
receive the proceeds of the loan evidenced by a promissory note, as all of it went to Embassy and Development Corp. are null and void;
Farms. Thus, they contended that the mortgage was without any consideration as to them
since they did not personally obtain any loan or credit accommodations. There being no d. Whether or not the parties are entitled to damages.10
principal obligation on which the mortgage rests, the real estate mortgage is void. 4 With the
void mortgage, they assailed the validity of the foreclosure proceedings conducted by After pre-trial, Mercator moved for summary judgment on the ground that except as to the
Mercator, the sale to it as the highest bidder in the public auction, the issuance of the amount of damages, there is no factual issue to be litigated. Mercator argued that petitioners
transfer certificates of title to it, the subsequent sale of the same parcels of land to had admitted in their pre-trial brief the existence of the promissory note, the continuing
respondent Lydia P. Salazar ("Salazar"), and the transfer of the titles to her name, and lastly, suretyship agreement and the subsequent promissory notes restructuring the loan, hence,
the sale and transfer of the properties to respondent Lamecs Realty & Development there is no genuine issue regarding their liability. The mortgage, foreclosure proceedings and
Corporation ("Lamecs"). the subsequent sales are valid and the complaint must be dismissed. 11

Mercator admitted that petitioners were the owners of the subject parcels of land. It, Petitioners opposed the motion for summary judgment claiming that because their personal
however, contended that "on February 16, 1982, plaintiffs executed a Mortgage in favor of liability to Mercator is at issue, there is a need for a full-blown trial. 12

The RTC granted the motion for summary judgment and dismissed the complaint. It held: The court a quo erred and acted with grave abuse of discretion amounting to lack or excess
of jurisdiction in affirming in toto the May 4, 1998 order of the trial court granting
A reading of the promissory notes show (sic) that the liability of the signatories thereto are respondents motion for summary judgment despite the existence of genuine issues as to
solidary in view of the phrase "jointly and severally." On the promissory note appears (sic) material facts and its non-entitlement to a judgment as a matter of law, thereby deciding the
the signatures of Eduardo B. Evangelista, Epifania C. Evangelista and another signature of case in a way probably not in accord with applicable decisions of this Honorable Court. 18
Eduardo B. Evangelista below the words Embassy Farms, Inc. It is crystal clear then that the
plaintiffs-spouses signed the promissory note not only as officers of Embassy Farms, Inc. but we affirm.
in their personal capacity as well(.) Plaintiffs(,) by affixing their signatures thereon in a dual
capacity have bound themselves as solidary debtor(s) with Embassy Farms, Inc. to pay Summary judgment "is a procedural technique aimed at weeding out sham claims or
defendant Mercator Finance Corporation the amount of indebtedness. That the principal defenses at an early stage of the litigation."19 The crucial question in a motion for summary
contract of loan is void for lack of consideration, in the light of the foregoing is untenable. 13 judgment is whether the issues raised in the pleadings are genuine or fictitious, as shown by
affidavits, depositions or admissions accompanying the motion. A genuine issue means "an
Petitioners motion for reconsideration was denied for lack of merit. 14 Thus, petitioners went issue of fact which calls for the presentation of evidence, as distinguished from an issue
up to the Court of Appeals, but again were unsuccessful. The appellate court held: which is fictitious or contrived so as not to constitute a genuine issue for trial." 20 To forestall
summary judgment, it is essential for the non-moving party to confirm the existence of
The appellants insistence that the loans secured by the mortgage they executed were not genuine issues where he has substantial, plausible and fairly arguable defense, i.e., issues of
personally theirs but those of Embassy Farms, Inc. is clearly self-serving and misplaced. The fact calling for the presentation of evidence upon which a reasonable finding of fact could
fact that they signed the subject promissory notes in the(ir) personal capacities and as return a verdict for the non-moving party. The proper inquiry would therefore be whether the
officers of the said debtor corporation is manifest on the very face of the said documents of affirmative defenses offered by petitioners constitute genuine issue of fact requiring a full-
indebtedness (pp. 118, 128-131, Orig. Rec.). Even assuming arguendo that they did not, the blown trial.21
appellants lose sight of the fact that third persons who are not parties to a loan may secure
the latter by pledging or mortgaging their own property (Lustan vs. Court of Appeals, 266 In the case at bar, there are no genuine issues raised by petitioners. Petitioners do not deny
SCRA 663, 675). x x x. In constituting a mortgage over their own property in order to secure that they obtained a loan from Mercator. They merely claim that they got the loan as officers
the purported corporate debt of Embassy Farms, Inc., the appellants undeniably assumed the of Embassy Farms without intending to personally bind themselves or their property.
personality of persons interested in the fulfillment of the principal obligation who, to save the However, a simple perusal of the promissory note and the continuing suretyship agreement
subject realities from foreclosure and with a view towards being subrogated to the rights of shows otherwise. These documentary evidence prove that petitioners are solidary obligors
the creditor, were free to discharge the same by payment (Articles 1302 [3] and 1303, Civil with Embassy Farms.
Code of the Philippines).15 (emphases in the original)
The promissory note22 states:
The appellate court also observed that "if the appellants really felt aggrieved by the
foreclosure of the subject mortgage and the subsequent sales of the realties to other parties, For value received, I/We jointly and severally promise to pay to the order of MERCATOR
why then did they commence the suit only on August 12, 1997 (when the certificate of sale FINANCE CORPORATION at its office, the principal sum of EIGHT HUNDRED FORTY-FOUR
was issued on January 12, 1987, and the certificates of title in the name of Mercator on THOUSAND SIX HUNDRED TWENTY-FIVE PESOS & 78/100 (P 844,625.78), Philippine currency,
September 27, 1988)?" Petitioners "procrastination for about nine (9) years is difficult to x x x, in installments as follows:
understand. On so flimsy a ground as lack of consideration, (w)e may even venture to say
that the complaint was not worth the time of the courts." 16
September 16, 1982 - P154,267.8

A motion for reconsideration by petitioners was likewise denied for lack of merit. 17 Thus, this October 16, 1982 - P154,267.8
petition where they allege that:
November 16, 1982 - P154,267.8

December 16, 1982 - P154,267.8

January 16, 1983 - P154,267.8

February 16, 1983 - P154,267.8


xxx xxx xxx Petitioners further allege that there is an ambiguity in the wording of the promissory note
and claim that since it was Mercator who provided the form, then the ambiguity should be
The note was signed at the bottom by petitioners Eduardo B. Evangelista and Epifania C. resolved against it.
Evangelista, and Embassy Farms, Inc. with the signature of Eduardo B. Evangelista below it.
Courts can interpret a contract only if there is doubt in its letter. 25 But, an examination of the
The Continuing Suretyship Agreement 23
also proves the solidary obligation of petitioners, viz: promissory note shows no such ambiguity. Besides, assuming arguendo that there is an
ambiguity, Section 17 of the Negotiable Instruments Law states, viz:
(Embassy Farms, Inc.)
Principal SECTION 17. Construction where instrument is ambiguous. Where the language of the
instrument is ambiguous or there are omissions therein, the following rules of construction
(Eduardo B. Evangelista) apply:
xxx xxx xxx
(Epifania C. Evangelista)
Surety (g) Where an instrument containing the word "I promise to pay" is signed by two or more
persons, they are deemed to be jointly and severally liable thereon.
(Mercator Finance Corporation)
Creditor Petitioners also insist that the promissory note does not convey their true intent in executing
the document.1wphi1 The defense is unavailing. Even if petitioners intended to sign the
To: MERCATOR FINANCE COPORATION note merely as officers of Embassy Farms, still this does not erase the fact that they
subsequently executed a continuing suretyship agreement. A surety is one who is solidarily
liable with the principal.26 Petitioners cannot claim that they did not personally receive any
(1) For valuable and/or other consideration, EDUARDO B. EVANGELISTA and
consideration for the contract for well-entrenched is the rule that the consideration
EPIFANIA C. EVANGELISTA (hereinafter called Surety), jointly and severally
necessary to support a surety obligation need not pass directly to the surety, a consideration
unconditionally guarantees (sic) to MERCATOR FINANCE COPORATION
moving to the principal alone being sufficient. A surety is bound by the same consideration
(hereinafter called Creditor), the full, faithful and prompt payment and
that makes the contract effective between the principal parties thereto. 27 Having executed
discharge of any and all indebtedness of EMBASSY FARMS, INC. (hereinafter
the suretyship agreement, there can be no dispute on the personal liability of petitioners.
called Principal) to the Creditor.

Lastly, the parol evidence rule does not apply in this case. 28 We held in Tarnate v. Court of
xxx xxx xxx
Appeals,29 that where the parties admitted the existence of the loans and the mortgage
deeds and the fact of default on the due repayments but raised the contention that they
(3) The obligations hereunder are joint and several and independent of the were misled by respondent bank to believe that the loans were long-term accommodations,
obligations of the Principal. A separate action or actions may be brought and then the parties could not be allowed to introduce evidence of conditions allegedly agreed
prosecuted against the Surety whether or not the action is also brought and upon by them other than those stipulated in the loan documents because when they reduced
prosecuted against the Principal and whether or not the Principal be joined in their agreement in writing, it is presumed that they have made the writing the only
any such action or actions. repository and memorial of truth, and whatever is not found in the writing must be
understood to have been waived and abandoned.
xxx xxx xxx
IN VIEW WHEREOF, the petition is dismissed. Treble costs against the petitioners.
The agreement was signed by petitioners on February 16, 1982. The promissory
notes24 subsequently executed by petitioners and Embassy Farms, restructuring their loan, SO ORDERED.
likewise prove that petitioners are solidarily liable with Embassy Farms.

Assailed in this petition for review on certiorari is the decision 1 of the Court of Appeals affirming the
decision 2rendered by Branch 168 of the Regional Trial Court of Pasig in Civil Case No. 35231 in favor of
private respondents.

The controversy before this Court finds its origins in a Land Development and Construction Contract which
was entered into on June 23, 1977 by A. Francisco Realty & Development Corporation (AFRDC), of which
petitioner Adalia Francisco (Francisco) is the president, and private respondent Herby Commercial &
Construction Corporation (HCCC), represented by its President and General Manager private respondent
Jaime C. Ong (Ong), pursuant to a housing project of AFRDC at San Jose del Monte, Bulacan, financed
by the Government Service Insurance System (GSIS). Under the contract, HCCC agreed to undertake the
construction of 35 housing units and the development of 35 hectares of land. The payment of HCCC for its
services was on a turn-key basis, that is, HCCC was to be paid on the basis of the completed houses and
developed lands delivered to and accepted by AFRDC and the GSIS. To facilitate payment, AFRDC
executed a Deed of Assignment in favor of HCCC to enable the latter to collect payments directly from the
GSIS. Furthermore, the GSIS and AFRDC put up an Executive Committee Account with the Insular Bank
of Asia & America (IBAA) in the amount of P4,000,000.00 from which checks would be issued and co-
signed by petitioner Francisco and the GSIS Vice-President Armando Diaz (Diaz).

On February 10, 1978, HCCC filed a complaint 3 with the Regional Trial Court of Quezon City against
Francisco, AFRDC and the GSIS for the collection of the unpaid balance under the Land Development
and Construction Contract in the amount of P515,493.89 for completed and delivered housing units and
land development. However, the parties eventually arrived at an amicable settlement of their differences,
which was embodied in a Memorandum Agreement executed by HCCC and AFRDC on July 21, 1978.
Under the agreement, the parties stipulated that HCCC had turned over 83 housing units which have been
accepted and paid for by the GSIS. The GSIS acknowledged that it still owed HCCC P520,177.50
representing incomplete construction of housing units, incomplete land development and 5% retention,
which amount will be discharged when the defects and deficiencies are finally completed by HCCC. It was
also provided that HCCC was indebted to AFRDC in the amount of P180,234.91 which the former agreed
would be paid out of the proceeds from the 40 housing units still to be turned over by HCCC or from any
amount due to HCCC from the GSIS. Consequently, the trial court dismissed the case upon the filing by
the parties of a joint motion to dismiss.

G.R. No. 116320 November 29, 1999 Sometime in 1979, after an examination of the records of the GSIS, Ong discovered that Diaz and
Francisco had executed and signed seven checks 4, of various dates and amounts, drawn against the
ADALIA FRANCISCO, petitioner, IBAA and payable to HCCC for completed and delivered work under the contract. Ong, however, claims
vs. that these checks were never delivered to HCCC. Upon inquiry with Diaz, Ong learned that the GSIS gave
COURT OF APPEALS, HERBY COMMERCIAL & CONSTRUCTION CORPORATION AND JAIME C. Francisco custody of the checks since she promised that she would deliver the same to HCCC. Instead,
ONG, respondents. Francisco forged the signature of Ong, without his knowledge or consent, at the dorsal portion of the said
checks to make it appear that HCCC had indorsed the checks; Francisco then indorsed the checks for a
second time by signing her name at the back of the checks and deposited the checks in her IBAA savings
account. IBAA credited Francisco's account with the amount of the checks and the latter withdrew the
amount so credited.

On June 7, 1979, Ong filed complaints with the office of the city fiscal of Quezon City, charging Francisco
with estafa thru falsification of commercial documents. Francisco denied having forged Ong's signature on

the checks, claiming that Ong himself indorsed the seven checks in behalf of HCCC and delivered the indorsement in the savings account of Francisco. However, the trial court allowed IBAA recourse against
same to Francisco in payment of the loans extended by Francisco to HCCC. According to Francisco, she Francisco, who was ordered to reimburse the IBAA for any sums it shall have to pay to private
agreed to grant HCCC the loans in the total amount of P585,000.00 and covered by eighteen promissory respondents. 5
notes in order to obviate the risk of the non-completion of the project. As a means of repayment, Ong
allegedly issued a Certification authorizing Francisco to collect HCCC's receivables from the GSIS. Both Francisco and IBAA appealed the trial court's decision, but the Court of Appeals dismissed IBAA's
Assistant City Fiscal Ramon M. Gerona gave credence to Francisco's claims and accordingly, dismissed appeal for its failure to file its brief within the 45-day extension granted by the appellate court. IBAA's
the complaints, which dismissal was affirmed by the Minister of Justice in a resolution issued on June 5, motion for reconsideration and petition for review on certiorari filed with this Court were also similarly
1981. denied. On November 21, 1989, IBAA and HCCC entered into a Compromise Agreement which was
approved by the trial court, wherein HCCC acknowledged receipt of the amount of P370,475.00 in full
The present case was brought by private respondents on November 19, 1979 against Francisco and IBAA satisfaction of its claims against IBAA, without prejudice to the right of the latter to pursue its claims
for the recovery of P370,475.00, representing the total value of the seven checks, and for damages, against Francisco.
attorney's fees, expenses of litigation and costs. After trial on the merits, the trial court rendered its
decision in favor of private respondents, the dispositive portion of which provides On June 29, 1992, the Court of Appeals affirmed the trial court's ruling, hence this petition for review
on certiorari filed by petitioner, assigning the following errors to the appealed decision
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants INSULAR BANK OF ASIA & AMERICA and ATTY. 1. The respondent Court of Appeals erred in concluding that private
ADALIA FRANCISCO, to jointly and severally pay the plaintiffs the amount of respondents did not owe Petitioner the sum covered by the
P370.475.00 plus interest thereon at the rate of 12% per annum from the date of the Promissory Notes Exh. 2-2-A-2-P (FRANCISCO). Such conclusion
filing of the complaint until the full amount is paid; moral damages to plaintiff Jaime Ong was based mainly on conjectures, surmises and speculation contrary
in the sum of P50,000.00; exemplary damages of P50,000.00; litigation expenses of to the unrebutted pleadings and evidence presented by petitioner.
P5,000.00; and attorney's fees of P50,000.00.
2. The respondent Court of Appeals erred in holding that Petitioner
With respect to the cross-claim of the defendant IBAA against its co-defendant Atty. falsified the signature of private respondent ONG on the checks in
Adalia Francisco, the latter is ordered to reimburse the former for the sums that the question without any authority therefor which is patently contradictory
Bank shall pay to the plaintiff on the forged checks including the interests paid thereon. to the unrebutted pleading and evidence that petitioner was expressly
authorized by respondent HERBY thru ONG to collect all receivables
Further, the defendants are ordered to pay the costs. of HERBY from GSIS to pay the loans extended to them. (Exhibit 3).

Based upon the findings of handwriting experts from the National Bureau of Investigation (NBI), the trial 3. That respondent Court of Appeals erred in holding that the seven
court held that Francisco had indeed forged the signature of Ong to make it appear that he had indorsed checks in question were not taken up in the liquidation and
the checks. Also, the court ruled that there were no loans extended, reasoning that it was unbelievable reconciliation of all outstanding account between AFRDC and HERBY
that HCCC was experiencing financial difficulties so as to compel it to obtain the loans from AFRDC in as acknowledged by the parties in Memorandum Agreement (Exh. 5)
view of the fact that the GSIS had issued checks in favor of HCCC at about the same time that the alleged is a pure conjecture, surmise and speculation contrary to the
advances were made. The trial court stated that it was plausible that Francisco concealed the fact of unrebutted evidence presented by petitioners. It is an inference made
issuance of the checks from private respondents in order to make it appear as if she were accommodating which is manifestly mistaken.
private respondents, when in truth she was lending HCCC its own money.
4. The respondent Court of Appeals erred in affirming the decision of
With regards to the Memorandum Agreement entered into between AFRDC and HCCC in Civil Case No. the lower court and dismissing the appeal. 6
Q-24628, the trial court held that the same did not make any mention of the forged checks since private
respondents were as of yet unaware of their existence, that fact having been effectively concealed by The pivotal issue in this case is whether or not Francisco forged the signature of Ong on the seven
Francisco, until private respondents acquired knowledge of Francisco's misdeeds in 1979. checks. In this connection, we uphold the lower courts' finding that the subject matter of the present case,
specifically the seven checks, drawn by GSIS and AFRDC, dated between October to November 1977, in
IBAA was held liable to private respondents for having honored the checks despite such obvious the total amount of P370,475.00 and payable to HCCC, was not included in the Memorandum Agreement
irregularities as the lack of initials to validate the alterations made on the check, the absence of the executed by HCCC and AFRDC in Civil Case No. Q-24628. As observed by the trial court, aside from
signature of a co-signatory in the corporate checks of HCCC and the deposit of the checks on a second there being absolutely no mention of the checks in the said agreement, the amounts represented by said

checks could not have been included in the Memorandum Agreement executed in 1978 because private 1. When an obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
respondents only discovered Francisco's acts of forgery in 1979. The lower courts found that Francisco forbearance of money, the interest due should be that which may have been stipulated in writing.
was able to easily conceal from private respondents even the fact of the issuance of the checks since she Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
was a co-signatory thereof. 7 We also note that Francisco had custody of the checks, as proven by the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
check vouchers bearing her uncontested signature, 8 by which she, in effect, acknowledged having judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
received the checks intended for HCCC. This contradicts Francisco's claims that the checks were issued
to Ong who delivered them to Francisco already indorsed. 9 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of six percent
As regards the forgery, we concur with the lower courts', finding that Francisco forged the signature of Ong (6%) per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when
on the checks to make it appear as if Ong had indorsed said checks and that, after indorsing the checks or until the demand can be established with reasonable certainty. Accordingly, where the demand is
for a second time by signing her name at the back of the checks, Francisco deposited said checks in her established with reasonable certainty, the interest shall begin to run from the time the claim is made
savings account with IBAA. The forgery was satisfactorily established in the trial court upon the strength of judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
the findings of the NBI handwriting expert. 10 Other than petitioner's self-serving denials, there is nothing in established at the time the demand is made, the interest shall begin to run only from the date the
the records to rebut the NBI's findings. Well-entrenched is the rule that findings of trial courts which are judgment of the court is made (at which time the quantification of damages may be deemed to have been
factual in nature, especially when affirmed by the Court of Appeals, deserve to be respected and affirmed reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the
by the Supreme Court, provided it is supported by substantial evidence on record, 11 as it is in the case at amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
Petitioner claims that she was, in any event, authorized to sign Ong's name on the checks by virtue of the legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be twelve percent
Certification executed by Ong in her favor giving her the authority to collect all the receivables of HCCC (12%) per annum from such finality until its satisfaction, this interim period being deemed to be by then an
from the GSIS, including the questioned checks. 12 Petitioner's alternative defense must similarly fail. The equivalent to a forbearance of credit.
Negotiable Instruments Law provides that where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as to negative personal liability. 13 An agent, when We also sustain the award of exemplary damages in the amount of P50,000.00. Under Article 2229 of the
so signing, should indicate that he is merely signing in behalf of the principal and must disclose the name Civil Code, exemplary damages are imposed by way of example or correction for the public good, in
of his principal; otherwise he shall be held personally liable. 14 Even assuming that Francisco was addition to the moral, temperate, liquidated or compensatory damages. Considering petitioner's fraudulent
authorized by HCCC to sign Ong's name, still, Francisco did not indorse the instrument in accordance with act, we hold that an award of P50,000.00 would be adequate, fair and reasonable. The grant of exemplary
law. Instead of signing Ong's name, Francisco should have signed her own name and expressly indicated damages justifies the award of attorney's fees in the amount of P50,000.00, and the award of P5,000.00
that she was signing as an agent of HCCC. Thus, the Certification cannot be used by Francisco to validate for litigation
her act of forgery. expenses. 21

Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the The appellate court's award of P50,000.00 in moral damages is warranted. Under Article 2217 of the Civil
latter for the same. 15 Due to her forgery of Ong's signature which enabled her to deposit the checks in her Code, moral damages may be granted upon proof of physical suffering, mental anguish, fright, serious
own account, Francisco deprived HCCC of the money due it from the GSIS pursuant to the Land anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. 22 Ong
Development and Construction Contract. Thus, we affirm respondent court's award of compensatory testitified that he suffered sleepless nights, embarrassment, humiliation and anxiety upon discovering that
damages in the amount of P370,475.00, but with a modification as to the interest rate which shall be six the checks due his company were forged by petitioner and that petitioner had filed baseless criminal
percent (6%) per annum, to be computed from the date of the filing of the complaint since the amount of complaints against him before the fiscal's office of Quezon City which disrupted HCCC's business
damages was alleged in the complaint; 16 however, the rate of interest shall be twelve percent (12%) per operations. 23
annum from the time the judgment in this case becomes final and executory until its satisfaction and the
basis for the computation of this twelve percent (12%) rate of interest shall be the amount of P370,475.00. WHEREFORE, we AFFIRM the respondent court's decision promulgated on June 29, 1992, upholding the
This is in accordance with the doctrine enunciated in Eastern Shipping Lines, Inc. vs. Court of Appeals, et February 16, 1988 decision of the trial court in favor of private respondents, with the modification that the
al., 17 which was reiterated in Philippine National Bank vs. Court of Appeals, 18 Philippine interest upon the actual damages awarded shall be at six percent (6%) per annum, which interest rate
Airlines, Inc. vs. Court of Appeals 19 and in Keng Hua Paper Products Co., Inc. vs. Court of shall be computed from the time of the filing of the complaint on November 19, 1979. However, the
Appeals, 20 which provides that interest rate shall be twelve percent (12%) per annum from the time the judgment in this case becomes
final and executory and until such amount is fully paid. The basis for computation of the six percent and
twelve percent rates of interest shall be the amount of P370,475.00. No pronouncement as to costs.


Melo, Vitug, Panganiban and Purisima, JJ., concur.