NEGOTIABLE INSTRUMENTS LAW (SEC 70-88) Sec. 79. When presentment not required to charge the drawer.
. 79. When presentment not required to charge the drawer. - Presentment for
Sec. 70. Effect of want of demand on principal debtor. - Presentment for payment is
not necessary in order to charge the person primarily liable on the instrument; but if the
instrument is, by its terms, payable at a special place, and he is able and willing to pay it
there at maturity, such ability and willingness are equivalent to a tender of payment upon
his part. But except as herein otherwise provided, presentment for payment is necessary
in order to charge the drawer and indorsers.
Sec. 71. Presentment where instrument is not payable on demand and where
payable on demand. - Where the instrument is not payable on demand, presentment
must be made on the day it falls due. Where it is payable on demand, presentment must
be made within a reasonable time after its issue, except that in the case of a bill of
exchange, presentment for payment will be sufficient if made within a reasonable time
after the last negotiation thereof.
Sec. 72. What constitutes a sufficient presentment. - Presentment for payment, to
be sufficient, must be made:
(a) By the holder, or by some person authorized to receive payment on his behalf;
(b) At a reasonable hour on a business day;
(c) At a proper place as herein defined;
(d) To the person primarily liable on the instrument, or if he is absent or inaccessible, to
any person found at the place where the presentment is made.
Sec. 73. Place of presentment. - Presentment for payment is made at the proper
place:
(a) Where a place of payment is specified in the instrument and it is there presented;
(b) Where no place of payment is specified but the address of the person to make
payment is given in the instrument and it is there presented;
(c) Where no place of payment is specified and no address is given and the instrument is
presented at the usual place of business or residence of the person to make payment;
(d) In any other case if presented to the person to make payment wherever he can be
found, or if presented at his last known place of business or residence.
Sec. 74. Instrument must be exhibited. - The instrument must be exhibited to the
person from whom payment is demanded, and when it is paid, must be delivered up to
the party paying it.
Sec. 75. Presentment where instrument payable at bank. - Where the instrument is
payable at a bank, presentment for payment must be made during banking hours, unless
the person to make payment has no funds there to meet it at any time during the day, in
which case presentment at any hour before the bank is closed on that day is sufficient.
Sec. 76. Presentment where principal debtor is dead. - Where the person primarily
liable on the instrument is dead and no place of payment is specified, presentment for
payment must be made to his personal representative, if such there be, and if, with the
exercise of reasonable diligence, he can be found.
Sec. 77. Presentment to persons liable as partners. - Where the persons primarily
liable on the instrument are liable as partners and no place of payment is specified,
presentment for payment may be made to any one of them, even though there has been
a dissolution of the firm.
Sec. 78. Presentment to joint debtors. - Where there are several persons, not
partners, primarily liable on the instrument and no place of payment is specified,
presentment must be made to them all.
payment is not required in order to charge the drawer where he has no right to expect or
require that the drawee or acceptor will pay the instrument.
Sec. 80. When presentment not required to charge the indorser. - Presentment is
not required in order to charge an indorser where the instrument was made or accepted
for his accommodation and he has no reason to expect that the instrument will be paid if
presented.
Sec. 81. When delay in making presentment is excused. - Delay in making
presentment for payment is excused when the delay is caused by circumstances beyond
the control of the holder and not imputable to his default, misconduct, or negligence.
When the cause of delay ceases to operate, presentment must be made with reasonable
diligence.
Sec. 82. When presentment for payment is excused. - Presentment for payment is
excused
(a) Where, after the exercise of reasonable diligence, presentment, as required by this
Act, cannot be made;
(b) Where the drawee is a fictitious person;
(c) By waiver of presentment, express or implied.
Sec. 83. When instrument dishonored by non-payment. - The instrument is
dishonored by non-payment when:chanroblesvirtuallawlibrary
(a) It is duly presented for payment and payment is refused or cannot be obtained; or
(b) Presentment is excused and the instrument is overdue and unpaid.
Sec. 84. Liability of person secondarily liable, when instrument dishonored. -
Subject to the provisions of this Act, when the instrument is dishonored by non-payment,
an immediate right of recourse to all parties secondarily liable thereon accrues to the
holder.
Sec. 85. Time of maturity. - Every negotiable instrument is payable at the time fixed
therein without grace. When the day of maturity falls upon Sunday or a holiday, the
instruments falling due or becoming payable on Saturday are to be presented for
payment on the next succeeding business day except that instruments payable on
demand may, at the option of the holder, be presented for payment before twelve o'clock
noon on Saturday when that entire day is not a holiday.
Sec. 86. Time; how computed. - When the instrument is payable at a fixed period after
date, after sight, or after that happening of a specified event, the time of payment is
determined by excluding the day from which the time is to begin to run, and by including
the date of payment.
Sec. 87. Rule where instrument payable at bank. - Where the instrument is made
payable at a bank, it is equivalent to an order to the bank to pay the same for the
account of the principal debtor thereon.
Sec. 88. What constitutes payment in due course. - Payment is made in due course
when it is made at or after the maturity of the payment to the holder thereof in good faith
and without notice that his title is defective.
G.R. No. L-36549 October 5, 1988
FAR EAST REALTY INVESTMENT INC., petitioner-appellant, vs. THE
HONORABLE COURT OF APPEALS, DY HIAN TAT, SIY CHEE and GAW SUY
AN, respondents-appellees.
This is a petition for review of the February 12, 1973 decision of the Court of
Appeals * in CA-G.R. No. 01031-SP, "Dy Hian Tat, et al. v. Hon. Alberto Francisco,
et als.", reversing the judgment of the Court of First Instance of Manila, which
ordered private respondents to pay, jointly and severally, the petitioner the sum of
P4,500.00 plus interest at the rate of 14% per annum, from September 13, 1960,
until fully paid, plus the sum of P1,000.00 as attorney's fees.
The dispositive portion of respondent appellate court's decision reads:
IN VIEW WHEREOF, this Court is constrained to grant as it now grants, the remedy
prayed for; the judgment sought to be reviewed is hereby reversed; complaint is
dismissed; but for lack of sufficient merit, the claim of defendants for attorney's
fees and damages is overruled; costs are however adjudged against plaintiff in all
instances.
IT IS SO ORDERED. (Rollo P. 126)
The antecedent facts of this case are as follows:
In its complaint dated May 9,1968, filed with the City Court of Manila, (Civil Case
No. 170859) against the private respondents for the collection and payment of
P4,500.00 representing the face value of an unpaid and dishonored cheek, the
petitioner alleged, among others, that on September 13, 1960, the private
respondents approached the petitioner at its office in Manila and asked the latter to
extend to them an accommodation loan in the sum of P4,500.00, Philippine
Currency, which they needed in their business, and which they promised to pay,
jointly and severally, in one month time; that they proposed to pay the petitioner
interest thereon at the rate of 14% per annum, as in fact they delivered to the
petitioner the China Banking Corporation Check No. VN-915564, dated September
13, 1960, for P4,500.00, drawn by Dy Hian Tat, and signed by them at the back of
said check, with the assurance that after one month from September 13, 1960, the
said check would be redeemed by them by paying cash in the sum of P4,500.00, or
the said check can be presented for payment on or immediately after one month
and said bank would honor the same; that, in order to accomodate the private
respondents, the petitioner agreed and actually extended to the private respondents
an accommodation loan in the sum of P4,500.00 under the aforesaid conditions
proposed by the private respondents, which amount was delivered to the later; that
on March 5, 1964, the aforesaid check was presented for payment to the China
Banking Corporation, but said check bounced and was not cashed by said bank, for
the reason that the current account of the drawer thereof had already been closed;
and that subsequently, the petitioner demanded from the private respondents the
payment of their aforesaid loan obligation, but the latter failed and refused to pay
notwithstanding repeated demands therefor (Rollo, pp. 35-37).
Private respondent Gaw Suy An filed an answer with compulsory counterclaim dated
July 8, 1968 denying the material allegations contained in the complaint and by way
of special and affirmative defenses alleged that the petitioner has no cause of action
against him because as it appears on the endorsement at the back of CBC Check
No. VN-915564, he signed said endorsement for his principal, the Victory Hardware
and not for his own individual account, hence, could not be made personally liable
therefor and granting that he acted in his own capacity as the endorser, he has
been wholly discharged by delay in presentment of the check for payment. (Rollo,
pp. 39-40).
Private respondent Dy Hian Tat likewise filed his answer with compulsory
counterclaim, dated February 27, 1970, denying the material allegations contained
in the complaint and by way of special and affirmative defenses alleged that he
never had any transaction or negotiation of any check with the petitioner at
anytime, so it could not be true that he and the other defendants approached the
petitioner on September 13, 1960, for an accommodation loan of P4,500.00 for
which they delivered to the petitioner CBC Check No. VN-915564 dated September
13, 1960 because as far as he could remember, said check was delivered by him to
Sin Chin Juat Grocery and not to the petitioner; that the manner the said check was
negotiated is clearly evident by the endorsement at its back which clearly belies the
claim of the petitioner that he (Dy Hian Tat) was one of those who approached the
petitioner at its office on September 13, 1960 to deliver the check in exchange for
an accommodation loan of P4,500.00; that according to the immediate endorser,
Gaw Suy An, who endorsed the check for his principal, Victory Hardware, this check
was delivered to the Asian Surety & Insurance Co., Inc., to be applied to the
indebtedness of the Victory Hardware with said Insurance Company; and that
petitioner not being a holder of the check for value, has no recourse against the
immediate endorser, and neither with the drawer thereof, and considering that this
check in question was dated September 13, 1960 and deposited only for payment
on March 5, 1964, this unreasonable delay in presentment wholly discharged not
only the endorser but also the drawer (Rollo, pp. 43-44).
On March 31, 1970, private respondent Siy CHEE was declared in default
(Rollo, p. 45).
After hearing, the City Court of Manila ** rendered its decision in favor of the
petitioner, the dispositive portion of which reads:
After considering the evidence presented by the parties, judgment is hereby
rendered, ordering the three defendants to pay the plaintiff, jointly and severally,
the sum of P4,500.00 with interest thereon at the legal rate from September 13,
1960 until the said amount is fully paid; plus the sum of P500.00 by way of
attorney's fees, plus the costs of suit.
The counterclaim filed by the defendants Gaw Suy An and Dy Hiat Tat are hereby
dismissed for lack of basis.
SO ORDERED. (Rollo, p. 45).
The decision of the city court was appealed by the private respondents to the Court
of First Instance of Manila, where the case was heard de novo for lack of transcript
of stenographic notes taken in the city court.
After trial, the Court of First Instance of Manila, Branch IX, *** rendered a decision
in Civil Case No. 80583, dated October 15, 1971, affirming the decision of the city
court, the dispositive portion of which reads as follows:
WHEREFORE' in view of all the foregoing considerations, judgment is hereby
rendered in favor of the plaintiff and against defendants Dy Hian Tat, Gaw Suy An
and Siy Chee ordering the latter to pay, jointly and severally, the plaintiff the sum
of P4,500.00, plus interest at the rate of 14% per annum, from September 13,
1960, until fully paid, plus the sum of Pl,000.00 in the concept of attorney's fees;
and costs of suit.
SO ORDERED. (Rollo, p. 9).
The private respondents filed a petition for review of the foregoing decision with the
Court of Appeals.
On February 12, 1973, the appellate court, finding that the questioned check was
not given as collateral to guarantee a loan secured by the three private respondents
who allegedly came as a group to the Far East Realty Investment, Inc., on
September 13, 1960, but passed through other hands before reaching the petitioner
and the said check was not presented within a reasonable time and after its
issuance, reversed the decision of the Court of First Instance (Rollo, p. 126).
Its motion for reconsideration having been denied, petitioner filed the instant
petition.
The main issue in this case is whether or not presentment for payment and notice of
dishonor of the questioned check were made within reasonable time.
The petitioner argues that presentment for payment may be dispensed with if it will
be useless. Hence, the drawer is liable upon a check although it has not been
presented to the bank for payment and although payment has not been refused,
where such a presentment would be useless because of the conduct or action of the
drawer in the matter or where the check is drawn on insufficient funds or no funds.
Likewise, presentment for payment is not required in order to charge the drawer,
and that notice of dishonor is not required to be given to the drawer where he has
no right to expect or require that the drawee or acceptor wig pay or honor the
instrument. Therefore, where presentment for payment and notice of dishonor are
not necessary as when funds are insufficient to meet a check, the drawer is liable,
whether such presentment and notice be totally omitted or merely delayed.
However, in a situation where the presentment and/or notice is required to be made
without unreasonable delay, the drawer is discharged "pro tanto" or only up to the
degree of the loss suffered, by reason of delay. Since discharge is the exception to
the general rule, the loss must be proven by the drawer. The drawer in the instant
case has not presented in evidence any loss which he may have suffered by reason
of the delay.
On the other hand, the private respondents maintain that the questioned check was
in fact drawn by Dy Bun Kim son of Dy Hiat Tat, and delivered to the Sin Chin Juat
Grocery in payment of grocery goods for the Goodyear Climber and not to the Far
East with which private respondents have no transaction of any kind. Such being
the case, said check was not delivered directly to the Far East in exchange for the
alleged P4,500.00 as claimed by William Li Yao. Therefore, the alleged cash of
P4,500.00 claimed to have been delivered by Li Yao on September 13, 1960 could
not in fact be considered as the consideration for Far East as holder of the check
because said delivery of the check in exchange for the alleged P4,500.00 is contrary
to the findings of fact by the Court of Appeals. Petitioner, therefore, cannot be
considered a holder of the check for value and in due course. Whether there was
due presentment or not of the check, or whether there was notice of dishonor or not
to the drawer and endorsers, the petitioner cannot recover the amount of P4,500.00
which was in fact not delivered to the private respondents nor the amount of the
check for lack of consideration.
It is further argued by the private respondents that in order to charge the persons
secondarily liable, such as drawer and endorsers, the instrument must be presented
for payment on the date and period therein mentioned in the instrument, if it is
payable on a fixed date, or within a reasonable time after issue, otherwise, the
drawer and endorsers are discharged from liability. The questioned check was dated
September 13, 1960. Granting that it was agreed that it will only be deposited after
one month from its date, it should have been deposited for payment after one
month and not only on March 5, 1964. This delay in the presentment for payment of
the check cannot be construed as a reasonable time.
The petition is devoid of merit.
Where the instrument is not payable on demand, presentment must be made on the
day it fags due. Where it is payable on demand, presentment must be made within
a reasonable time after issue, except that in the case of a bill of exchange,
presentment for payment will be sufficient if made within a reasonable time after
the last negotiation thereof. (Section 71, Negotiable Instruments Law).
Notice may be given as soon as the instrument is dishonored; and unless delay is
excused must be given within the time fixed by the law (Section 102, Negotiable
Instruments Law).
No hard and fast demarcation line can be drawn between what may be considered
as a reasonable or an unreasonable time, because "reasonable time" depends upon
the peculiar facts and circumstances in each case (Tolentino, Commentaries and
Jurisprudence on Commercial Laws of the Philippines, Vol. I, Eighth Edition, p. 327).
It is obvious in this case that presentment and notice of dishonor were not made
within a reasonable time.
"Reasonable time" has been defined as so much time as is necessary under the
circumstances for a reasonable prudent and diligent man to do, conveniently, what
the contract or duty requires should be done, having a regard for the rights, and
possibility of loss, if any, to the other party (Citizens' Bank Bldg. v. L & E.
Wertheirmer 189 S.W. 361, 362, 126 Ark, 38, Ann. Cas. 1917 E, 520).
In the instant case, the check in question was issued on September 13, 1960, but
was presented to the drawee bank only on March 5, 1964, and dishonored on the
same date. After dishonor by the drawee bank, a formal notice of dishonor was
made by the petitioner through a letter dated April 27, 1968. Under these
circumstances, the petitioner undoubtedly failed to exercise prudence and diligence
on what he ought to do al. required by law. The petitioner likewise failed to show
any justification for the unreasonable delay.
PREMISES CONSIDERED, the petition is DENIED and the decision of the Court of
Appeals is AFFIRMED. SO ORDERED.
G.R. No. L-4388 August 13, 1952
PHILIPPINE NATIONAL BANK, petitioner, vs. BENITO SEETO, respondent.
On March 13, 1948, respondent Benito Seeto called at the branch of the Philippine
National Bank, petitioner herein, at Surigao, and presented a check, No. A-21096,
in the amount of P5,000 dated at Cebu on March 10, 1948, payable to cash or
bearer, and drawn by one Gan Yek Kiao against the Cebu branch of the Philippine
National Bank of Communications. After consultation with the employees of the
branch, Seeto made a general and unqualified indorsement of the check, and
petitioner's agency accepted it and paid respondent the amount of P5,000 therefor.
The check was mailed to petitioner's Cebu branch on March 20, 1948, and was
presented to the drawee bank for payment on April 9, 1948, but the check was
dishonored for "insufficient funds." So the check was returned to petitioner's
Surigao agency, and upon receipt thereof by it on April 14, 1948, said branch
immediately sent a letter to the respondent herein demanding immediate refund of
in the value of the check. A second communication of the same tenor was sent on
April 26, 1948, to which respondent answered asking that plaintiff's contemplated
suit be deferred while he was making inquiries about the reasons for the dishonor of
the check. Thereafter, respondent refused to make the refund demanded, claiming
that at the time of the negotiation o the check the drawer had sufficient funds in the
drawee bank, and that the petitioner's Surigao agency not delayed to forward the
check until the drawer's funds were exhausted, the same would have been paid.
Thereupon petitioner presented a complaint in the Court of First Instance of
Surigao, alleging that respondent Benito Seeto gave assurance to petitioner's
agency in Surigao that the drawer of the check had sufficient funds with the drawee
bank, and that upon these assurances petitioner's agency delivered the P5,000 to
the respondent after the latter had made a general and unqualified indorsement
thereon. Respondent denied having made the alleged assurances. Upon this issue
petitioner submitted two witnesses at the time of the trial, who testified that it was
not the practice of petitioner's agency to cash out of town checks, and that the
check was cashed because of the assurances given by the respondent that the
drawer had sufficient funds, and that he (respondent) would refund the amount paid
by petitioner's agency in case the check is dishonored. Respondent denied having
given the assurances. The trial court found notwithstanding respondent's denial to
the contrary, that the respondent made an undertaking to refund the amount of the
checks in the event of dishonor. In support of this finding it found that as the
drawee bank is not in Cebu, it was impossible for petitioner's agency to make an
independent verification of the drawer's solvency, and must have taken precautions
to protect itself against loss by requiring the respondent to give assurances that he
would return the amount of the check in the case of nonpayment. It also found that
there was no unreasonable delay in the presentation of the check, and, therefore,
rendered judgment sentencing respondent to refund the amount he had received for
the check.
On appeal to the Court of Appeals, this court held that petitioner was guilty of
unreasonably retaining and with-holding the check, and that the delay in the
presentment for payment was inexcusable, so that respondent was thereby
discharged from liability. It also held that parol evidence is incompetent to show
that one signing of a check as indorser is merely a surety or guarantor, rejecting the
evidence adduced at the trial court about the respondent's assurance and promise
to refund. It, therefore, reversed the judgment of the trial court and dismissed the
complaint, with costs. Against this judgment an appeal by certiorari has been
brought to this Court, petitioner Philippine National Bank contending that the Court
of Appeals erred in applying sections 143 and 144 of the Negotiable Instruments
Law and declaring respondent Benito Seeto discharged of his liability as indorser of
the check, and in not admitting parol evidence to show that respondent made oral
assurances to refund the value of the check in case of dishonor.
In support of petitioner's first assignment of error, it is argued that inasmuch as a
check need not to be presented for acceptance, unlike a bill of exchange as required
by Section 143, Section 144 of the law is not applicable to the case at bar but
Section 84, which provides:
SEC. 84. Liability of person secondarily liable, when instrument dishonored.
Subject to the provisions of this Act, when the instrument is dishonored by
nonpayment, as immediate right of recourse to all parties secondarily liable thereon
accrues to the holder.
It is true that Section 143 and 144 of the law are not applicable, because these are
provisions having to do with the presentation of a bill of exchange for acceptance,
and are not applicable to a check, as to which presentment for acceptance is not
required.
It is also true that Section 84 is applicable, but its application is subject to the
condition imposed by Section 186, to the effect that the check must be presented
for payment within a reasonable time after its issue.
SEC. 186. Within what time a check must be presented. A check must be
presented for payment within a reasonable time after its issue or the drawer will be
discharged from liability thereon to the extent of the loss caused by the delay.
Counsel for the petitioner, however, argues that inasmuch as the above section
expressly provides for the discharge of the drawer from liability to the extent of the
loss caused by the delay, and, on the other hand, it is silent as to the liability of the
indorser, the latter may not be considered discharged from liability by reason of the
delay in the presentment of payment under the general principle inclusio unius est
exclusion alterius. We find no reason nor merit in the argument. The silence of
Section 186 as to the indorser is due to the fact that his discharge is already
expressly covered by the provision of Section 84, the indorser being a person
secondarily liable on the instrument. The reason for the difference between the
liability of the indorser and that of the drawer in case of dishonor is that the drawer
is not probably or necessarily prejudiced thereby, while an indorser is, actually or by
legal presumption.
Innumerable decisions have already been rendered in the state courts of the United
States to the effect that although the drawer of a check is discharged only to the
extent of loss caused by unreasonable delay in presentment, an indorser is wholly
discharged thereby irrespective of any question of loss or injury. ( Swift & Co. vs.
Miller, 62 Ind. App. 312, 113 N.E. 447, cited in Brannan's Negotiable Instruments
Law, p. 1134, Nuzum vs. Sheppard, 87 W. Va. 243, 104 S.E. 587, 11 A.L.R. 1024,
Ibid.)
The proposition maintained in the reported case (Nuzum vs. Sheppard., ante. 1024)
that the indorser of a check, unlike the drawer, is relieved of liability thereon by an
unreasonable delay in presenting the same for payment, whether or not he is
injured by the delay, is supported by the great weight of authority, (Cases cited.)
The Court, in Gough v. Staats (N.Y.) supra, says: "Upon the question of due
diligence to charge an indorser, whether he has been prejudiced or not by the delay
is perfectly immaterial. It is not inquired into. The law presumes he has been
prejudiced." According to the Court in Caroll v. Sweet (1891) 128 N.Y. 19, 13 L.R.A.
43, 27 N.E. 763, "presentment to due time as fixed by the law merchant was a
condition upon performance of which the liability of the defendant, as indorser,
depended, and this delay was not excused, although the drawer of the check had no
funds, or was insolvent, or because presentment would not been unavailing as a
means of procuring payment." Only where there is affirmative proof that the
indorser knew when he cashed the check that there would be no funds in the bank
to meet it can the rule be avoided. Otherwise, the failure to present the check in
due course of payment will discharge the indorser even though such presentment
would have been unavailing. Start v. Tupper (Vt.) supra. (11 A.L.R. Annotation, pp.
1028-1029.)
We have been unable to find any authority sustaining the proposition that an
indorser of a check is not discharged from liability for an unreasonable delay in
presentation for payment. This is contrary to the essential nature and character of
negotiable instruments their negotiability. They are supposed to be passed on
with promptness in the ordinary course of business transactions; not to be retained
or kept for such time as the holder may want, otherwise the smooth flow of
commercial transactions would be hindered.
There seems to be an intimation in the decision appealed from that inasmuch as the
check was drawn payable elsewhere than at the place of business of the drawer, it
must be presented for acceptance or negotiable within a reasonable time, and upon
failure to do so the drawer and all indorsers thereof are discharged pursuant to
Section 144 of the law. Against this insinuation the petitioner argues that the
application of sections 143 and 144 is not proper, and that it may not be presumed
that the check in question was not drawn and executed in Cebu, the residence or
place of business of the drawer. There is no evidence at all as to the place where
the check was drawn. However, we have already pointed out above that neither
Section 143 nor Section 144 is applicable. But our ruling that respondent was
discharged upon the dishonor of the check is based on Sections 84 and 186, the
latter expressly requiring that a check must be presented for payment within a
reasonable time after issue.
It is not claimed by the petitioner on this appeal that the conclusion of the Court of
Appeals that there was unreasonable delay in the presentation of the check for
payment at the drawee bank is erroneous. The petitioner concedes the correctness
of this conclusion, although for purposes of argument merely. We find that the
conclusion is correct. The fact, admitted by the witnesses for the petitioner, the
checks for the drawer issued subsequent to March 13, 1948, drawn against the
same bank and cashed at the same Surigao agency, were not dishonored positively
shows that the drawer had enough funds when he issued the check in question, and
that had it not been for the unreasonable delay in its presentation for payment, the
petitioner herein would have been able to receive payment therefor. The check is
dated March 10, and was cashed by the petitioner's agency on March 13, 1948. It
was not mailed until seven days thereafter, i.e., on March 20, 1948, or ten days
after issue. No excuse was given for this delay. Assuming that it took one week, or
say ten days, or until March 30, for the check to reach Cebu, neither can there be
any excuse for not presenting it for payment at the drawee bank until April 9, 1948,
or 10 days after it reached Cebu. We, therefore, find no reason for disturbing the
conclusion of the Court of Appeals that there was unreasonable delay in the
presentation of the check for payment at the drawee bank, and that is a
consequence thereof, the indorser, respondent herein, was thereby discharged.
With respect to the second assignment of error, petitioner argues that the verbal
assurances given by the respondent to the employees of the bank that he was
ready to refund the amount if the check should be dishonored by the drawee bank is
a collateral agreement, separate and distinct from the indorsement, by virtue of
which petitioner herein was induced to cash the check, and, therefore, admissible as
an exception that the parol evidence rule. Petitioners contention in this respect is
not entirely unfounded. In the case of Tan Machan vs. De La Trinidad, et al., 4 Phil.,
684, this court held that parol evidence is admissible to show that parties signing as
principals merely did so as sureties. In the case of Robles vs. Lizarraga Hermanos,
50 Phil., 387, it was also held by this court that parol evidence is admissible to
prove "an independent thereof." (Ibid., p. 395.) In Philips vs. Preston, 5 How. (U.S.)
278, 12 L. ed, 152, the Supreme Court of the United States held that any prior or
contemporaneous conversation in connection with a note or its indorsement, may
be proved by parol evidence. And Wigmore states that "an extrinsic agreement
between indorser and indorsee which cannot be embodied in the instrument without
impairing its credit is provable by parol." (9 Wigmore 148, section 2445 [3].) If,
therefore, the supposed assurances that the drawer had funds and that the
respondent herein would refund the amount of the check if the drawer had no
funds, were the considerations or reasons that induced the branch agency of the
petitioners to go out of its ordinary practice of not cashing out of town checks and
accept the check and to pay its face value, the same would be provable by parol,
provided, of course, that the assurances or inducements offered would not vary,
alter, or destroy the obligations attached by law to the indorsement.
We find, however, that the supposed assurances of refund in case of dishonor of the
check are precisely the ordinary obligations of an indorser, and these obligations
are, under the law, considered discharged by an unreasonable delay in the
presentation of the check for payment.
SEC. 66. Liability of general indorser. . . . .
And, in addition, he engages that on due presentment, it shall be accepted or paid,
or both, as the case may be, according to its tenor, and that if it be dishonored, and
the necessary proceedings on dishonor be duly taken, he will pay the amount
thereof to the holder, or to any subsequent indorser who may be compelled to pay
it. (Emphasis ours.)
There was no express obligation assumed by the respondent herein that the drawer
would always have funds, or that he (the indorser) would refund the amount of the
check even if there was delay in its presentation, so that while the Court of Appeals
may have committed an error in disregarding the evidence submitted by petitioner
at the trial of the assurances made by respondent herein at the time of the
negotiation of the check, such error was without prejudice, because the supposed
assurances given were part of his obligations as an indorser, which were discharged
by the unreasonable delay in the presentation of the check for payment.
The judgment appealed from is, therefore, affirmed, with costs against the
petitioner.
G.R. No. L-35767 June 18, 1976
RAYMUNDO A. CRYSTAL, petitioner, vs. COURT OF APPEALS and PELAGIA
OCANG, PACITA, TEODULO, FELICISIMO, PABLO, LYDIA, DIOSCORA and
RODRIGO, all surnamed DE GRACIA, respondents.
Motion for reconsideration of the decision of this Court in this case promulgated on
February 25, 1975 affirming the decision of the Court of Appeals in favor of private
respondents which held that petitioner's redemption of the property acquired by
said respondents in an execution sale pursuant to a final judgment of the trial court
in Civil Case No. R-1666, Court of First Instance of Cebu, was invalid inasmuch as
the check which petitioner had used in paying the redemption price had been either
dishonored or had become state, hence its value was never this upholding in the
process the jurisdiction of the trial court to rule on the question of validity of the
redemption in question notwithstanding that by order of that same court, said
matter had been made the subject of a separate suit, Civil as No. 62-T also of the
Court of First Instance of Cebu, filed on August 9, 1960.
In his motion for reconsideration, petitioner insists that it was an act in excess of
jurisdiction on the part of the trial court in R-1666, to issue on May 31, 1971 the
writ of possession sought by private respondents, thru Pelagia Ocang, in her motion
of August 15, 1970, considering that court had previously pointedly observed in its
order of March 24, 1960 that "the question as to whether or not the redemption
allegedly made by Mr. Crystal by paying the amount to Mrs. Pelagia Ocang without
using the said P11,200 deposited with the sheriff is legal and effective" has to be
decided in "another proper case" and, furthermore, in its order of June 4, 1960 in
the same case, the same court had more definitely ruled that "the question of
ownership of Mr. Raymundo Crystal, the redemptioner, is not a proper matter to be
decided in this case but in another case where the legality or validity of the alleged
deed of redemption executed in favor of Mr. Crystal will be amply raised and
threshed out" and, accordingly, in attention to such observations and ruling,
petitioner did file Civil Case No. 62-T, which is still pending trial.
While, as already explained in Our decision, such pose of petitioner has its merits,
We deem it in advisable to this point to modify Our ruling that there is really no
issuance of jurisdiction involved here and that it is preferable, under the peculiar
circumstances obtaining in this particular case, that the root of the controversy
between the parties be inquired into and (determined in the incident already taken
cognizance of by the trial court in Civil Case No. R-1666 regarding tile light of
possession over tile alert in dispute. In this connection, it is to be noted that even
after he had filed Civil Case No. 62-T, in of hat he must have considered as his right
a redemption i of the property sold in execution a judgment in Civil Case No. R-
1666, petitioner regained possession of the four (4) parcels of land in question
without the torture of the court, taking the same from Pelagia Ocang who his taken
it from him also extrajudicially that she had legally acquired the same precisely in
the same execution and that petitioner redemption as null and void because the
cheek he used to pay the redemption price had been dishonored for lack of
sufficient funds. In other words both petitioner and Ocang, predicating their
respective claims to rightful possession on the same sale on execution in the same
case, Civil Case No. R-l666, had alternately taken the law in their hands to obtain
possession of the lands in question in disregard of the toilet for the complete
satisfaction of that significant of the court in that case. In the light of these peculiar
circumstances, it does appear to be more that since it is the Case in that Civil Case
No. R-1666, that rendered the judgment and subsequently ordered the execution
from which the redemption was made, it should to the people to settle the whole
controversy among all the interested statistics including even the judgment leftors
'the heirs of Nicolas Rafols themselves, who, according to the records, have claim of
that own relative to the same redemption, which might just as well be inquired into
in said case, rather than in Case No. 62-T in which they are not parties. Otherwise,
stated, in issuing the impugned writ of possession, the court took the bull by the
horns, so to speak, thereby overturning its own previous stand on the matter
announced in its orders of March 24 and June 4, 1960 aforementioned.
Consequently, We overrule the argument of jurisdiction or even abuse of discretion
raised by petitioner and reiterate what We have said in regard thereto ni Our
decision.
This is not to say that the procedure followed by Ocang and sactioned by the trial
court of resorting to the issuance of a writ of possession is not open to question,
since a writ of possession is not always available in all controversies concerning
possession of real estate. But We see no need to resolve that point here. More
importantly, what impresses Us in the motion for reconsideration is the possible
injustice that might result from our unqualified reliance in our decision on the
finding of the Court of Appeals that the check for P11,200 paid by petitioner for the
redemption in dispute had been dishonored, in the face of the other finding in the
same decision of the Court of Appeals indicating that instead of having been
dishonored, the said check had become state, albeit it was being replaced with new
ones from time to time. Surely, for a check to the dishonored upon presentment on
the one hand, and to be state for not being presented at all in time, on the other,
are incompatible developments that naturally have variant legal consequences.
Thus, if needed the check in question had been dishonored, then there can be no
doubt that petitioner's redemption was null and void. On the oher hand, if it had
only become stale, then it becomes imperative that the circumstances that caused
its non-presentment be determined, for if this was not due to the fault of the
petitioner, then it would be unfair to deprive him of the rights he had acquired as
redemptioner, particularly, the value of the check has otherwise been received or
realized by the party concerned. From the motion for reconsideration and its
annexes, We gather that petitioner has ready evidence showing that when Pelagia
Ocang secured the writ of possession in question, she had already been paid the full
amount of the check in dispute. What is more, there are a number of circumstances
pointed out in said motion, apparaently supported by corresponding evidence,
tending to show that a compromise had already been agreed upon by the parties,
although not yet approved by the court, or, at least, that Ocang has made
admissions which indicate that the issue regarding the supposed dishonorign or
becomeing state of the repeatedly mentioned check is no longer of any legal
significance and, for that matter, the observations we made in our decision in
regard to the duties of the sheriff in the premises have been rendered academic.
Needless to say, the Supreme Court should not allow any of its decision to become
final when it is properly made to appear in a motion for reconsideration based on
relevant facts and circumstances not previously brought to its attention, although
demonstrable from the records, that even if the technical consideration on which it
is based is well taken, substantial jusitce might be sacrificed, if further proceedings
are not ordered to be held to verify undeniable facts which might have escaped the
eyes of the Court of Appeals. In the instant case, We took it as proven, per
statements of fact in the decision of the Court of Appeals, that the check with which
petitioner redeemed the property in dispute had been dishonored. On that premise
and seeing that even if We upheld the technical point of jurisdiction raised by
petitioner, the final outcome of the controversy between the parties would not be
different, We proceeded to decide the merits of the respective substantive claims of
the parties. We felt that in view of the findings of fact of the Court of Appeals,
equity demanded that the case be earlier terminated by ignoring not only whatever
flaw ther was in the procedure adopted by the court below but also the seemingly
unusual departure by the Court of Appeals from the orthodox rule requiring courts
to confine its scrutiny in certiorari cases only to the specific point of jurisdiction
complained of.
Now, however, there is a strong showing in the motion for reconsideration,
presmised on no less than other portions of the very decision of the intermediate
court and other apparently credible evidence, that not only was said check not
dishonored, although it became stale, but that repondent Pelagia Ocang had
actually been paid already the full value thereof. And in this connection, it is notable
that in the comment of respondents on petitioner's motion for reconsideration, there
is no clear and categorical denial of these important and decisive facts.
One more point. In our decision, We assumed that the findings of fact of the Court
of Appeals were the result of an exhaustive consideration of evidence presented in
due course by the parties. It turns out now, that inasmuch as the trial court itself
had previously ruled that the validity of the redemption in controversy should be the
subject of a separate action and that, in fact, such separate action had already been
filed by petitioner, it was in this other case that petitioner was present the
corresponding evidencence. Hence, whatever evidence was before the trial court in
Case No. R-1666 when it issued the subject writ of possession could not have been
complete, much less incontrovertible.
With these substantial consideration in view, We find no just alternative than to
reconsider Our decision in so far as the matter of validity or invalidity of petitioner's
redemption is concerned. It being shown that the pivotal finding of the Court of
Appeals regarding the check in question might actually be belied in a more
appropriate proceeding, the foundation of Our own decision has been shaken.
Indeed, We are now convinced that is but fair and just that the trial court should be
allowed to receive all relevant and competent evidence the parties may wish to
present relative to the issue of whether or not respondent Pelagia Ocang has
already received in one form or another, directly or indirectly, the full amount of
P11,200 as redemption price of the four (4) parcels of land in dispute, as well as to
all other facts which might affect the validity of the redemption here in controversy.
Withal, should it be found by the trial court that the redemption was invalid,
because the redemption price has not been fully paid, it should further determine
who made the improvements found on said lands, in order that if it should turn out
that they were introduced by petitioner, possession may not be awarded to
respondents unless said improvements are first properly and fully reimbursed to
petitioner. It goes without saying that the proceedings herein contemplated are to
be held in Civil Case No. R-1666. Correspondingly, Civil Case No. 62-T and the other
case reviewing the same should be deemed academic.
WHEREFORE, the decision of this Court of February 25, 1975 is hereby reconsidered
and modified in line with the foregoing opinion and this case is remanded to the trial
court for further proceedings as therein indicated.
[G.R. No. 105188. January 23, 1998]
MYRON C. PAPA, Administrator of the Testate Estate of Angela M. Butte,
petitioner, vs. A. U. VALENCIA and CO. INC., FELIX PEARROYO, SPS.
ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents.
In this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioner Myron C. Papa seeks to reverse and set aside 1) the Decision dated 27
January 1992 of the Court of Appeals which affirmed with modification the decision
of the trial court; and, 2) the Resolution dated 22 April 1992 of the same court,
which denied petitioners motion for reconsideration of the above decision.
The antecedent facts of this case are as follows:
Sometime in June 1982, herein private respondents A.U. Valencia and Co., Inc.
(hereinafter referred to as respondent Valencia, for brevity) and Felix Pearroyo
(hereinafter called respondent Pearroyo), filed with the Regional Trial Court of Pasig,
Branch 151, a complaint for specific performance against herein petitioner Myron C.
Papa, in his capacity as administrator of the Testate Estate of one Angela M. Butte.
The complaint alleged that on 15 June 1973, petitioner Myron C. Papa, acting as
attorney-in-fact of Angela M. Butte, sold to respondent Pearroyo, through
respondent Valencia, a parcel of land, consisting of 286.60 square meters, located
at corner Retiro and Cadiz Streets, La Loma, Quezon City, and covered by Transfer
Certificate of Title No. 28993 of the Register of Deeds of Quezon City; that prior to
the alleged sale, the said property, together with several other parcels of land
likewise owned by Angela M. Butte, had been mortgaged by her to the Associated
Banking Corporation (now Associated Citizens Bank); that after the alleged sale, but
before the title to the subject property had been released, Angela M. Butte passed
away; that despite representations made by herein respondents to the bank to
release the title to the property sold to respondent Pearroyo, the bank refused to
release it unless and until all the mortgaged properties of the late Angela M. Butte
were also redeemed; that in order to protect his rights and interests over the
property, respondent Pearroyo caused the annotation on the title of an adverse
claim as evidenced by Entry No. P.E. - 6118/T-28993, inscribed on 18 January
1977.
The complaint further alleged that it was only upon the release of the title to the
property, sometime in April 1977, that respondents Valencia and Pearroyo
discovered that the mortgage rights of the bank had been assigned to one Tomas L.
Parpana (now deceased), as special administrator of the Estate of Ramon Papa, Jr.,
on 12 April 1977; that since then, herein petitioner had been collecting monthly
rentals in the amount of P800.00 from the tenants of the property, knowing that
said property had already been sold to private respondents on 15 June 1973; that
despite repeated demands from said respondents, petitioner refused and failed to
deliver the title to the property. Thereupon, respondents Valencia and Pearroyo filed
a complaint for specific performance, praying that petitioner be ordered to deliver to
respondent Pearroyo the title to the subject property (TCT 28993); to turn over to
the latter the sum of P72,000.00 as accrued rentals as of April 1982, and the
monthly rental of P800.00 until the property is delivered to respondent Pearroyo; to
pay respondents the sum of P20,000.00 as attorneys fees; and to pay the costs of
the suit.
In his Answer, petitioner admitted that the lot had been mortgaged to the
Associated Banking Corporation (now Associated Citizens Bank). He contended,
however, that the complaint did not state a cause of action; that the real property
in interest was the Testate Estate of Angela M. Butte, which should have been
joined as a party defendant; that the case amounted to a claim against the Estate
of Angela M. Butte and should have been filed in Special Proceedings No. A-17910
before the Probate Court in Quezon City; and that, if as alleged in the complaint,
the property had been assigned to Tomas L. Parpana, as special administrator of the
Estate of Ramon Papa, Jr., said estate should be impleaded. Petitioner, likewise,
claimed that he could not recall in detail the transaction which allegedly occurred in
1973; that he did not have TCT No. 28993 in his possession; that he could not be
held personally liable as he signed the deed merely as attorney-in-fact of said
Angela M. Butte. Finally, petitioner asseverated that as a result of the filing of the
case, he was compelled to hire the services of counsel for a fee of P20,000.00, for
which respondents should be held liable.
Upon his motion, herein private respondent Delfin Jao was allowed to intervene in
the case. Making common cause with respondents Valencia and Pearroyo,
respondent Jao alleged that the subject lot which had been sold to respondent
Pearroyo through respondent Valencia was in turn sold to him on 20 August 1973
for the sum of P71,500.00, upon his paying earnest money in the amount of
P5,000.00. He, therefore, prayed that judgment be rendered in favor of respondents
Valencia and Pearroyo; and, that after the delivery of the title to said respondents,
the latter in turn be ordered to execute in his favor the appropriate deed of
conveyance covering the property in question and to turn over to him the rentals
which aforesaid respondents sought to collect from petitioner Myron C. Papa.
Respondent Jao, likewise, averred that as a result of petitioners refusal to deliver
the title to the property to respondents Valencia and Pearroyo, who in turn failed to
deliver the said title to him, he suffered mental anguish and serious anxiety for
which he sought payment of moral damages; and, additionally, the payment of
attorneys fees and costs.
For his part, petitioner, as administrator of the Testate Estate of Angela M. Butte,
filed a third-party complaint against herein private respondents, spouses Arsenio B.
Reyes and Amanda Santos (respondent Reyes spouses, for short). He averred,
among others, that the late Angela M. Butte was the owner of the subject property;
that due to non-payment of real estate tax said property was sold at public auction
by the City Treasurer of Quezon City to the respondent Reyes spouses on 21
January 1980 for the sum of P14,000.00; that the one-year period of redemption
had expired; that respondents Valencia and Pearroyo had sued petitioner Papa as
administrator of the estate of Angela M. Butte, for the delivery of the title to the
property; that the same aforenamed respondents had acknowledged that the price
paid by them was insufficient, and that they were willing to add a reasonable
amount or a minimum of P55,000.00 to the price upon delivery of the property,
considering that the same was estimated to be worth P143,000.00; that petitioner
was willing to reimburse respondent Reyes spouses whatever amount they might
have paid for taxes and other charges, since the subject property was still
registered in the name of the late Angela M. Butte; that it was inequitable to allow
respondent Reyes spouses to acquire property estimated to be worth P143,000.00,
for a measly sum of P14,000.00. Petitioner prayed that judgment be rendered
cancelling the tax sale to respondent Reyes spouses; restoring the subject property
to him upon payment by him to said respondent Reyes spouses of the amount of
P14,000.00, plus legal interest; and, ordering respondents Valencia and Pearroyo to
pay him at least P55,000.00 plus everything they might have to pay the Reyes
spouses in recovering the property.
Respondent Reyes spouses in their Answer raised the defense of prescription of
petitioners right to redeem the property.
At the trial, only respondent Pearroyo testified. All the other parties only submitted
documentary proof.
On 29 June 1987, the trial court rendered a decision, the dispositive portion of
which reads:
WHEREUPON, judgment is hereby rendered as follows:
1) Allowing defendant to redeem from third-party defendants and ordering the latter
to allow the former to redeem the property in question, by paying the sum of
P14,000.00 plus legal interest of 12% thereon from January 21, 1980;
2) Ordering defendant to execute a Deed of Absolute Sale in favor of plaintiff Felix
Pearroyo covering the property in question and to deliver peaceful possession and
enjoyment of the said property to the said plaintiff, free from any liens and
encumbrances;
Should this not be possible, for any reason not attributable to defendant, said
defendant is ordered to pay to plaintiff Felix Pearroyo the sum of P45,000.00 plus
legal interest of 12% from June 15, 1973;
3) Ordering plaintiff Felix Pearroyo to execute and deliver to intervenor a deed of
absolute sale over the same property, upon the latters payment to the former of the
balance of the purchase price of P71,500.00;
Should this not be possible, plaintiff Felix Pearroyo is ordered to pay intervenor the
sum of P5,000.00 plus legal interest of 12% from August 23, 1973; and
4) Ordering defendant to pay plaintiffs the amount of P5,000.00 for and as
attorneys fees and litigation expenses.
SO ORDERED.[1]
Petitioner appealed the aforesaid decision of the trial court to the Court of Appeals,
alleging among others that the sale was never consummated as he did not encash
the check (in the amount of P40,000.00) given by respondents Valencia and
Pearroyo in payment of the full purchase price of the subject lot. He maintained that
what said respondents had actually paid was only the amount of P5,000.00 (in
cash) as earnest money.
Respondent Reyes spouses, likewise, appealed the above decision. However, their
appeal was dismissed because of failure to file their appellants brief.
On 27 January 1992, the Court of Appeals rendered a decision, affirming with
modification the trial courts decision, thus:
WHEREFORE, the second paragraph of the dispositive portion of the appealed
decision is MODIFIED, by ordering the defendant-appellant to deliver to plaintiff-
appellees the owners duplicate of TCT No. 28993 of Angela M. Butte and the
peaceful possession and enjoyment of the lot in question or, if the owners duplicate
certificate cannot be produced, to authorize the Register of Deeds to cancel it and
issue a certificate of title in the name of Felix Pearroyo. In all other respects, the
decision appealed from is AFFIRMED. Costs against defendant-appellant Myron C.
Papa.
SO ORDERED.[2]
In affirming the trial courts decision, respondent court held that contrary to
petitioners claim that he did not encash the aforesaid check, and therefore, the sale
was not consummated, there was no evidence at all that petitioner did not, in fact,
encash said check. On the other hand, respondent Pearroyo testified in court that
petitioner Papa had received the amount of P45,000.00 and issued receipts
therefor. According to respondent court, the presumption is that the check was
encashed, especially since the payment by check was not denied by defendant-
appellant (herein petitioner) who, in his Answer, merely alleged that he can no
longer recall the transaction which is supposed to have happened 10 years ago.[3]
On petitioners claim that he cannot be held personally liable as he had acted merely
as attorney-in-fact of the owner, Angela M. Butte, respondent court held that such
contention is without merit. This action was not brought against him in his personal
capacity, but in his capacity as the administrator of the Testate Estate of Angela M.
Butte.[4]

On petitioners contention that the estate of Angela M. Butte should have been
joined in the action as the real party in interest, respondent court held that
pursuant to Rule 3, Section 3 of the Rules of Court, the estate of Angela M. Butte
does not have to be joined in the action. Likewise, the estate of Ramon Papa, Jr., is
not an indispensable party under Rule 3, Section 7 of the same Rules. For the fact is
that Ramon Papa, Jr., or his estate, was not a party to the Deed of Absolute Sale,
and it is basic law that contracts bind only those who are parties thereto.[5]
Respondent court observed that the conditions under which the mortgage rights of
the bank were assigned are not clear. In any case, any obligation which the estate
of Angela M. Butte might have to the estate of Ramon Papa, Jr. is strictly between
them. Respondents Valencia and Pearroyo are not bound by any such obligation.
Petitioner filed a motion for reconsideration of the above decision, which motion was
denied by respondent Court of Appeals.
Hence, this petition wherein petitioner raises the following issues:
I. THE CONCLUSION OR FINDING OF THE COURT OF APPEALS THAT THE SALE IN
QUESTION WAS CONSUMMATED IS GROUNDED ON SPECULATION OR
CONJECTURE, AND IS CONTRARY TO THE APPLICABLE LEGAL PRINCIPLE.
II. THE COURT OF APPEALS, IN MODIFYING THE DECISION OF THE TRIAL COURT,
ERRED BECAUSE IT, IN EFFECT, CANCELLED OR NULLIFIED AN ASSIGNMENT OF
THE SUBJECT PROPERTY IN FAVOR OF THE ESTATE OF RAMON PAPA, JR. WHICH IS
NOT A PARTY IN THIS CASE.
III. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE ESTATE OF
ANGELA M. BUTTE AND THE ESTATE OF RAMON PAPA, JR. ARE INDISPENSABLE
PARTIES IN THIS CASE.[6]
Petitioner argues that respondent Court of Appeals erred in concluding that the
alleged sale of the subject property had been consummated. He contends that such
a conclusion is based on the erroneous presumption that the check (in the amount
of P40,000.00) had been cashed, citing Art. 1249 of the Civil Code, which provides,
in part, that payment by checks shall produce the effect of payment only when they
have been cashed or when through the fault of the creditor they have been
impaired.[7] Petitioner insists that he never cashed said check; and, such being the
case, its delivery never produced the effect of payment. Petitioner, while admitting
that he had issued receipts for the payments, asserts that said receipts, particularly
the receipt of PCIB Check No. 761025 in the amount of P40,000.00, do not prove
payment. He avers that there must be a showing that said check had been
encashed. If, according to petitioner, the check had been encashed, respondent
Pearroyo should have presented PCIB Check No. 761025 duly stamped received by
the payee, or at least its microfilm copy.
Petitioner finally avers that, in fact, the consideration for the sale was still in the
hands of respondents Valencia and Pearroyo, as evidenced by a letter addressed to
him in which said respondents wrote, in part:
x x x. Please be informed that I had been authorized by Dr. Ramon Papa, Jr., heir of
Mrs. Angela M. Butte to pay you the aforementioned amount of P75,000.00 for the
release and cancellation of subject propertys mortgage. The money is with me and
if it is alright with you, I would like to tender the payment as soon as possible. x x
x.[8]
We find no merit in petitioners arguments.
It is an undisputed fact that respondents Valencia and Pearroyo had given petitioner
Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in cash on 24 May
1973, and Forty Thousand Pesos (P40,000.00) in check on 15 June 1973, in
payment of the purchase price of the subject lot. Petitioner himself admits having
received said amounts,[9] and having issued receipts therefor.[10] Petitioners
assertion that he never encashed the aforesaid check is not subtantiated and is at
odds with his statement in his answer that he can no longer recall the transaction
which is supposed to have happened 10 years ago. After more than ten (10) years
from the payment in part by cash and in part by check, the presumption is that the
check had been encashed. As already stated, he even waived the presentation of
oral evidence.
Granting that petitioner had never encashed the check, his failure to do so for more
than ten (10) years undoubtedly resulted in the impairment of the check through
his unreasonable and unexplained delay.
While it is true that the delivery of a check produces the effect of payment only
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if
the debtor is prejudiced by the creditors unreasonable delay in presentment. The
acceptance of a check implies an undertaking of due diligence in presenting it for
payment, and if he from whom it is received sustains loss by want of such diligence,
it will be held to operate as actual payment of the debt or obligation for which it was
given.[11] It has, likewise, been held that if no presentment is made at all, the
drawer cannot be held liable irrespective of loss or injury[12] unless presentment is
otherwise excused. This is in harmony with Article 1249 of the Civil Code under
which payment by way of check or other negotiable instrument is conditioned on its
being cashed, except when through the fault of the creditor, the instrument is
impaired. The payee of a check would be a creditor under this provision and if its
non-payment is caused by his negligence, payment will be deemed effected and the
obligation for which the check was given as conditional payment will be
discharged.[13]
Considering that respondents Valencia and Pearroyo had fulfilled their part of the
contract of sale by delivering the payment of the purchase price, said respondents,
therefore, had the right to compel petitioner to deliver to them the owners duplicate
of TCT No. 28993 of Angela M. Butte and the peaceful possession and enjoyment of
the lot in question.
With regard to the alleged assignment of mortgage rights, respondent Court of
Appeals has found that the conditions under which said mortgage rights of the bank
were assigned are not clear. Indeed, a perusal of the original records of the case
would show that there is nothing there that could shed light on the transactions
leading to the said assignment of rights; nor is there any evidence on record of the
conditions under which said mortgage rights were assigned. What is certain is that
despite the said assignment of mortgage rights, the title to the subject property has
remained in the name of the late Angela M. Butte.[14] This much is admitted by
petitioner himself in his answer to respondents complaint as well as in the third-
party complaint that petitioner filed against respondent-spouses Arsenio B. Reyes
and Amanda Santos.[15] Assuming arquendo that the mortgage rights of the
Associated Citizens Bank had been assigned to the estate of Ramon Papa, Jr., and
granting that the assigned mortgage rights validly exist and constitute a lien on the
property, the estate may file the appropriate action to enforce such lien. The cause
of action for specific performance which respondents Valencia and Pearroyo have
against petitioner is different from the cause of action which the estate of Ramon
Papa, Jr. may have to enforce whatever rights or liens it has on the property by
reason of its being an alleged assignee of the banks rights of mortgage.
Finally, the estate of Angela M. Butte is not an indispensable party. Under Section 3
of Rule 3 of the Rules of Court, an executor or administrator may sue or be sued
without joining the party for whose benefit the action is presented or defended,
thus:
Sec. 3. Representative parties. - A trustee of an express trust, a guardian, executor
or administrator, or a party authorized by statute, may sue or be sued without
joining the party for whose benefit the action is presented or defended; but the
court may, at any stage of the proceedings, order such beneficiary to be made a
party. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the contract
involves things belonging to the principal.[16]
Neither is the estate of Ramon Papa, Jr. an indispensable party without whom, no
final determination of the action can be had. Whatever prior and subsisting
mortgage rights the estate of Ramon Papa, Jr. has over the property may still be
enforced regardless of the change in ownership thereof.
WHEREFORE, the petition for review is hereby DENIED and the Decision of the Court
of Appeals, dated 27 January 1992 is AFFIRMED. SO ORDERED.
[G.R. No. 141968. February 12, 2001]
THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE
PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E.
GUECO, respondents.
The respondents Gueco Spouses obtained a loan from petitioner International
Corporate Bank (now Union Bank of the Philippines) to purchase a car a Nissan
Sentra 1600 4DR, 1989 Model. In consideration thereof, the Spouses executed
promissory notes which were payable in monthly installments and chattel mortgage
over the car to serve as security for the notes.
The Spouses defaulted in payment of installments. Consequently, the Bank filed on
August 7, 1995 a civil action docketed as Civil Case No. 658-95 for Sum of Money
with Prayer for a Writ of Replevin[1] before the Metropolitan Trial Court of Pasay
City, Branch 45.[2] On August 25, 1995, Dr. Francis Gueco was served summons
and was fetched by the sheriff and representative of the bank for a meeting in the
bank premises. Desi Tomas, the Banks Assistant Vice President demanded payment
of the amount of P184,000.00 which represents the unpaid balance for the car loan.
After some negotiations and computation, the amount was lowered to P154,000.00,
However, as a result of the non-payment of the reduced amount on that date, the
car was detained inside the banks compound.
On August 28, 1995, Dr. Gueco went to the bank and talked with its Administrative
Support, Auto Loans/Credit Card Collection Head, Jefferson Rivera. The negotiations
resulted in the further reduction of the outstanding loan to P150,000.00.
On August 29, 1995, Dr. Gueco delivered a managers check in the amount of
P150,000.00 but the car was not released because of his refusal to sign the Joint
Motion to Dismiss. It is the contention of the Gueco spouses and their counsel that
Dr. Gueco need not sign the motion for joint dismissal considering that they had not
yet filed their Answer. Petitioner, however, insisted that the joint motion to dismiss
is standard operating procedure in their bank to effect a compromise and to
preclude future filing of claims, counterclaims or suits for damages.
After several demand letters and meetings with bank representatives, the
respondents Gueco spouses initiated a civil action for damages before the
Metropolitan Trial Court of Quezon City, Branch 33. The Metropolitan Trial Court
dismissed the complaint for lack of merit.[3]
On appeal to the Regional Trial Court, Branch 227 of Quezon City, the decision of
the Metropolitan Trial Court was reversed. In its decision, the RTC held that there
was a meeting of the minds between the parties as to the reduction of the amount
of indebtedness and the release of the car but said agreement did not include the
signing of the joint motion to dismiss as a condition sine qua non for the effectivity
of the compromise. The court further ordered the bank:
1. to return immediately the subject car to the appellants in good working
condition; Appellee may deposit the Managers check the proceeds of which have
long been under the control of the issuing bank in favor of the appellee since its
issuance, whereas the funds have long been paid by appellants to secure said
Managers Check, over which appellants have no control;
2. to pay the appellants the sum of P50,000.00 as moral damages; P25,000.00 as
exemplary damages, and P25,000.00 as attorneys fees, and
3. to pay the cost of suit.
In other respect, the decision of the Metropolitan Trial Court Branch 33 is hereby
AFFIRMED.[4]
The case was elevated to the Court of Appeals, which on February 17, 2000, issued
the assailed decision, the decretal portion of which reads:
WHEREFORE, premises considered, the petition for review on certiorari is hereby
DENIED and the Decision of the Regional Trial Court of Quezon City, Branch 227, in
Civil Case No. Q-97-31176, for lack of any reversible error, is AFFIRMED in toto.
Costs against petitioner. SO ORDERED.[5]
The Court of Appeals essentially relied on the respect accorded to the finality of the
findings of facts by the lower court and on the latter's finding of the existence of
fraud which constitutes the basis for the award of damages.
The petitioner comes to this Court by way of petition for review on certiorari under
Rule 45 of the Rules of Court, raising the following assigned errors:
I THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO AGREEMENT
WITH RESPECT TO THE EXECUTION OF THE JOINT MOTION TO DISMISS AS A
CONDITION FOR THE COMPROMISE AGREEMENT.
II THE COURT OF APPEALS ERRED IN GRANTING MORAL AND EXEMPLARY
DAMAGES AND ATTORNEYS FEES IN FAVOR OF THE RESPONDENTS.

III THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER RETURN
THE SUBJECT CAR TO THE RESPONDENTS, WITHOUT MAKING ANY PROVISION FOR
THE ISSUANCE OF THE NEW MANAGERS/CASHIERS CHECK BY THE RESPONDENTS
IN FAVOR OF THE PETITIONER IN LIEU OF THE ORIGINAL CASHIERS CHECK THAT
ALREADY BECAME STALE.[6]
As to the first issue, we find for the respondents. The issue as to what constitutes
the terms of the oral compromise or any subsequent novation is a question of fact
that was resolved by the Regional Trial Court and the Court of Appeals in favor of
respondents. It is well settled that the findings of fact of the lower court, especially
when affirmed by the Court of Appeals, are binding upon this Court.[7] While there
are exceptions to this rule,[8] the present case does not fall under any one of them,
the petitioners claim to the contrary, notwithstanding.
Being an affirmative allegation, petitioner has the burden of evidence to prove his
claim that the oral compromise entered into by the parties on August 28, 1995
included the stipulation that the parties would jointly file a motion to dismiss. This
petitioner failed to do. Notably, even the Metropolitan Trial Court, while ruling in
favor of the petitioner and thereby dismissing the complaint, did not make a factual
finding that the compromise agreement included the condition of the signing of a
joint motion to dismiss.
The Court of Appeals made the factual findings in this wise:
In support of its claim, petitioner presented the testimony of Mr. Jefferson Rivera
who related that respondent Dr. Gueco was aware that the signing of the draft of
the Joint Motion to Dismiss was one of the conditions set by the bank for the
acceptance of the reduced amount of indebtedness and the release of the car. (TSN,
October 23, 1996, pp. 17-21, Rollo, pp. 18, 5). Respondents, however, maintained
that no such condition was ever discussed during their meeting of August 28, 1995
(Rollo, p. 32).
The trial court, whose factual findings are entitled to respect since it has the
opportunity to directly observe the witnesses and to determine by their demeanor
on the stand the probative value of their testimonies (People vs. Yadao, et al. 216
SCRA 1, 7 [1992]), failed to make a categorical finding on the issue. In dismissing
the claim of damages of the respondents, it merely observed that respondents are
not entitled to indemnity since it was their unjustified reluctance to sign of the Joint
Motion to Dismiss that delayed the release of the car. The trial court opined, thus:
As regards the third issue, plaintiffs claim for damages is unavailing. First, the
plaintiffs could have avoided the renting of another car and could have avoided this
litigation had he signed the Joint Motion to Dismiss. While it is true that herein
defendant can unilaterally dismiss the case for collection of sum of money with
replevin, it is equally true that there is nothing wrong for the plaintiff to affix his
signature in the Joint Motion to Dismiss, for after all, the dismissal of the case
against him is for his own good and benefit. In fact, the signing of the Joint Motion
to Dismiss gives the plaintiff three (3) advantages. First, he will recover his car.
Second, he will pay his obligation to the bank on its reduced amount of P150,000.00
instead of its original claim of P184,985.09. And third, the case against him will be
dismissed. Plaintiffs, likewise, are not entitled to the award of moral damages and
exemplary damages as there is no showing that the defendant bank acted
fraudulently or in bad faith. (Rollo, p. 15)
The Court has noted, however, that the trial court, in its findings of facts, clearly
indicated that the agreement of the parties on August 28, 1995 was merely for the
lowering of the price, hence -
xxx On August 28, 1995, bank representative Jefferson Rivera and plaintiff entered
into an oral compromise agreement, whereby the original claim of the bank of
P184,985.09 was reduced to P150,000.00 and that upon payment of which, plaintiff
was informed that the subject motor vehicle would be released to him. (Rollo, p.
12)
The lower court, on the other hand, expressly made a finding that petitioner failed
to include the aforesaid signing of the Joint Motion to Dismiss as part of the
agreement. In dismissing petitioners claim, the lower court declared, thus:
If it is true, as the appellees allege, that the signing of the joint motion was a
condition sine qua non for the reduction of the appellants obligation, it is only
reasonable and logical to assume that the joint motion should have been shown to
Dr. Gueco in the August 28, 1995 meeting. Why Dr. Gueco was not given a copy of
the joint motion that day of August 28, 1995, for his family or legal counsel to see
to be brought signed, together with the P150,000.00 in managers check form to be
submitted on the following day on August 29, 1995? (sic) [I]s a question whereby
the answer up to now eludes this Courts comprehension. The appellees would like
this Court to believe that Dr. Gueco was informed by Mr. Rivera of the bank
requirement of signing the joint motion on August 28, 1995 but he did not bother to
show a copy thereof to his family or legal counsel that day August 28, 1995. This
part of the theory of appellee is too complicated for any simple oral agreement. The
idea of a Joint Motion to Dismiss being signed as a condition to the pushing through
a deal surfaced only on August 29, 1995.
This Court is not convinced by the appellees posturing. Such claim rests on too
slender a frame, being inconsistent with human experience. Considering the effect
of the signing of the Joint Motion to Dismiss on the appellants substantive right, it is
more in accord with human experience to expect Dr. Gueco, upon being shown the
Joint Motion to Dismiss, to refuse to pay the Managers Check and for the bank to
refuse to accept the manager's check. The only logical explanation for this inaction
is that Dr. Gueco was not shown the Joint Motion to Dismiss in the meeting of
August 28, 1995, bolstering his claim that its signing was never put into
consideration in reaching a compromise. xxx.[9]
We see no reason to reverse.
Anent the issue of award of damages, we find the claim of petitioner meritorious. In
finding the petitioner liable for damages, both the Regional Trial Court and the Court
of Appeals ruled that there was fraud on the part of the petitioner. The CA thus
declared:
The lower court's finding of fraud which became the basis of the award of damages
was likewise sufficiently proven. Fraud under Article 1170 of the Civil Code of the
Philippines, as amended is the deliberate and intentional evasion of the normal
fulfillment of obligation When petitioner refused to release the car despite
respondent's tender of payment in the form of a manager's check, the former
intentionally evaded its obligation and thereby became liable for moral and
exemplary damages, as well as attorneys fees.[10]
We disagree.

Fraud has been defined as the deliberate intention to cause damage or prejudice. It
is the voluntary execution of a wrongful act, or a willful omission, knowing and
intending the effects which naturally and necessarily arise from such act or
omission; the fraud referred to in Article 1170 of the Civil Code is the deliberate and
intentional evasion of the normal fulfillment of obligation.[11] We fail to see how the
act of the petitioner bank in requiring the respondent to sign the joint motion to
dismiss could constitute as fraud. True, petitioner may have been remiss in
informing Dr. Gueco that the signing of a joint motion to dismiss is a standard
operating procedure of petitioner bank. However, this can not in anyway have
prejudiced Dr. Gueco. The motion to dismiss was in fact also for the benefit of Dr.
Gueco, as the case filed by petitioner against it before the lower court would be
dismissed with prejudice. The whole point of the parties entering into the
compromise agreement was in order that Dr. Gueco would pay his outstanding
account and in return petitioner would return the car and drop the case for money
and replevin before the Metropolitan Trial Court. The joint motion to dismiss was but
a natural consequence of the compromise agreement and simply stated that Dr.
Gueco had fully settled his obligation, hence, the dismissal of the case. Petitioner's
act of requiring Dr. Gueco to sign the joint motion to dismiss can not be said to be a
deliberate attempt on the part of petitioner to renege on the compromise
agreement of the parties. It should, likewise, be noted that in cases of breach of
contract, moral damages may only be awarded when the breach was attended by
fraud or bad faith.[12] The law presumes good faith. Dr. Gueco failed to present an
iota of evidence to overcome this presumption. In fact, the act of petitioner bank in
lowering the debt of Dr. Gueco from P184,000.00 to P150,000.00 is indicative of its
good faith and sincere desire to settle the case. If respondent did suffer any
damage, as a result of the withholding of his car by petitioner, he has only himself
to blame. Necessarily, the claim for exemplary damages must fail. In no way, may
the conduct of petitioner be characterized as wanton, fraudulent, reckless,
oppressive or malevolent.[13]
We, likewise, find for the petitioner with respect to the third assigned error. In the
meeting of August 29, 1995, respondent Dr. Gueco delivered a managers check
representing the reduced amount of P150,000.00. Said check was given to Mr.
Rivera, a representative of respondent bank. However, since Dr. Gueco refused to
sign the joint motion to dismiss, he was made to execute a statement to the effect
that he was withholding the payment of the check.[14]Subsequently, in a letter
addressed to Ms. Desi Tomas, vice president of the bank, dated September 4, 1995,
Dr. Gueco instructed the bank to disregard the hold order letter and demanded the
immediate release of his car,[15] to which the former replied that the condition of
signing the joint motion to dismiss must be satisfied and that they had kept the
check which could be claimed by Dr. Gueco anytime.[16] While there is controversy
as to whether the document evidencing the order to hold payment of the check was
formally offered as evidence by petitioners,[17] it appears from the pleadings that
said check has not been encashed.
The decision of the Regional Trial Court, which was affirmed in toto by the Court of
Appeals, orders the petitioner:
1. to return immediately the subject car to the appellants in good working condition.
Appellee may deposit the Managers Check the proceeds of which have long been
under the control of the issuing bank in favor of the appellee since its issuance,
whereas the funds have long been paid by appellants to secure said Managers
Check over which appellants have no control.[18]
Respondents would make us hold that petitioner should return the car or its value
and that the latter, because of its own negligence, should suffer the loss occasioned
by the fact that the check had become stale.[19] It is their position that delivery of
the managers check produced the effect of payment[20] and, thus, petitioner was
negligent in opting not to deposit or use said check. Rudimentary sense of justice
and fair play would not countenance respondents position.
A stale check is one which has not been presented for payment within a reasonable
time after its issue. It is valueless and, therefore, should not be paid. Under the
negotiable instruments law, an instrument not payable on demand must be
presented for payment on the day it falls due. When the instrument is payable on
demand, presentment must be made within a reasonable time after its issue. In the
case of a bill of exchange, presentment is sufficient if made within a reasonable
time after the last negotiation thereof.[21]
A check must be presented for payment within a reasonable time after its issue,[22]
and in determining what is a reasonable time, regard is to be had to the nature of
the instrument, the usage of trade or business with respect to such instruments,
and the facts of the particular case.[23] The test is whether the payee employed
such diligence as a prudent man exercises in his own affairs.[24] This is because
the nature and theory behind the use of a check points to its immediate use and
payability. In a case, a check payable on demand which was long overdue by about
two and a half (2-1/2) years was considered a stale check.[25] Failure of a payee to
encash a check for more than ten (10) years undoubtedly resulted in the check
becoming stale.[26] Thus, even a delay of one (1) week[27] or two (2) days,[28]
under the specific circumstances of the cited cases constituted unreasonable time as
a matter of law.
In the case at bar, however, the check involved is not an ordinary bill of exchange
but a managers check. A managers check is one drawn by the banks manager upon
the bank itself. It is similar to a cashiers check both as to effect and use. A cashiers
check is a check of the banks cashier on his own or another check. In effect, it is a
bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted
in advance by the act of its issuance.[29] It is really the banks own check and may
be treated as a promissory note with the bank as a maker.[30] The check becomes
the primary obligation of the bank which issues it and constitutes its written
promise to pay upon demand. The mere issuance of it is considered an acceptance
thereof. If treated as promissory note, the drawer would be the maker and in which
case the holder need not prove presentment for payment or present the bill to the
drawee for acceptance.[31]
Even assuming that presentment is needed, failure to present for payment within a
reasonable time will result to the discharge of the drawer only to the extent of the
loss caused by the delay.[32] Failure to present on time, thus, does not totally wipe
out all liability. In fact, the legal situation amounts to an acknowledgment of liability
in the sum stated in the check. In this case, the Gueco spouses have not alleged,
much less shown that they or the bank which issued the managers check has
suffered damage or loss caused by the delay or non-presentment. Definitely, the
original obligation to pay certainly has not been erased.
It has been held that, if the check had become stale, it becomes imperative that the
circumstances that caused its non-presentment be determined.[33] In the case at
bar, there is no doubt that the petitioner bank held on the check and refused to
encash the same because of the controversy surrounding the signing of the joint
motion to dismiss. We see no bad faith or negligence in this position taken by the
Bank.
WHEREFORE, premises considered, the petition for review is given due course. The
decision of the Court of Appeals affirming the decision of the Regional Trial Court is
SET ASIDE. Respondents are further ordered to pay the original obligation
amounting to P150,000.00 to the petitioner upon surrender or cancellation of the
managers check in the latters possession, afterwhich, petitioner is to return the
subject motor vehicle in good working condition. SO ORDERED.
G.R. No. L-26001 October 29, 1968
PHILIPPINE NATIONAL BANK, petitioner, vs. THE COURT OF APPEALS and
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, respondents.
The Philippine National Bank hereinafter referred to as the PNB seeks the
review by certiorari of a decision of the Court of Appeals, which affirmed that of the
Court of First Instance of Manila, dismissing plaintiff's complaint against the
Philippine Commercial and Industrial Bank hereinafter referred to as the PCIB
for the recovery of P57,415.00.
A partial stipulation of facts entered into by the parties and the decision of the Court
of Appeals show that, on about January 15, 1962, one Augusto Lim deposited in his
current account with the PCIB branch at Padre Faura, Manila, GSIS Check No.
645915- B, in the sum of P57,415.00, drawn against the PNB; that, following an
established banking practice in the Philippines, the check was, on the same date,
forwarded, for clearing, through the Central Bank, to the PNB, which did not return
said check the next day, or at any other time, but retained it and paid its amount to
the PCIB, as well as debited it against the account of the GSIS in the PNB; that,
subsequently, or on January 31, 1962, upon demand from the GSIS, said sum of
P57,415.00 was re-credited to the latter's account, for the reason that the
signatures of its officers on the check were forged; and that, thereupon, or on
February 2, 1962, the PNB demanded from the PCIB the refund of said sum, which
the PCIB refused to do. Hence, the present action against the PCIB, which was
dismissed by the Court of First Instance of Manila, whose decision was, in turn,
affirmed by the Court of Appeals.
It is not disputed that the signatures of the General Manager and the Auditor of the
GSIS on the check, as drawer thereof, are forged; that the person named in the
check as its payee was one Mariano D. Pulido, who purportedly indorsed it to one
Manuel Go; that the check purports to have been indorsed by Manuel Go to Augusto
Lim, who, in turn, deposited it with the PCIB, on January 15, 1962; that, thereupon,
the PCIB stamped the following on the back of the check: "All prior indorsements
and/or Lack of Endorsement Guaranteed, Philippine Commercial and Industrial
Bank," Padre Faura Branch, Manila; that, on the same date, the PCIB sent the check
to the PNB, for clearance, through the Central Bank; and that, over two (2) months
before, or on November 13, 1961, the GSIS had notified the PNB, which
acknowledged receipt of the notice, that said check had been lost, and, accordingly,
requested that its payment be stopped.
In its brief, the PNB maintains that the lower court erred: (1) in not finding the PCIB
guilty of negligence; (2) in not finding that the indorsements at the back of the
check are forged; (3) in not finding the PCIB liable to the PNB by virtue of the
former's warranty on the back of the check; (4) in not holding that "clearing" is not
"acceptance", in contemplation of the Negotiable Instruments law; (5) in not finding
that, since the check had not been accepted by the PNB, the latter is entitled to
reimbursement therefor; and (6) in denying the PNB's right to recover from the
PCIB.
The first assignment of error will be discussed later, together with the last,with
which it is interrelated.
As regards the second assignment of error, the PNB argues that, since the
signatures of the drawer are forged, so must the signatures of the supposed
indorsers be; but this conclusion does not necessarily follow from said premise.
Besides, there is absolutely no evidence, and the PNB has not even tried to prove
that the aforementioned indorsements are spurious. Again, the PNB refunded the
amount of the check to the GSIS, on account of the forgery in the signatures, not of
the indorsers or supposed indorsers, but of the officers of the GSIS as drawer of the
instrument. In other words, the question whether or not the indorsements have
been falsified is immaterial to the PNB's liability as a drawee, or to its right to
recover from the PCIB,1 for, as against the drawee, the indorsement of an
intermediate bank does not guarantee the signature of the drawer,2 since the
forgery of the indorsement is not the cause of the loss.3
With respect to the warranty on the back of the check, to which the third
assignment of error refers, it should be noted that the PCIB thereby guaranteed "all
prior indorsements," not the authenticity of the signatures of the officers of the
GSIS who signed on its behalf, because the GSIS is not an indorser of the check,
but its drawer.4 Said warranty is irrelevant, therefore, to the PNB's alleged right to
recover from the PCIB. It could have been availed of by a subsequent indorsee5 or
a holder in due course6 subsequent to the PCIB, but, the PNB is neither.7 Indeed,
upon payment by the PNB, as drawee, the check ceased to be a negotiable
instrument, and became a mere voucher or proof of payment.8
Referring to the fourth and fifth assignments of error, we must bear in mind that, in
general, "acceptance", in the sense in which this term is used in the Negotiable
Instruments Law9 is not required for checks, for the same are payable on
demand.10 Indeed, "acceptance" and "payment" are, within the purview of said
Law, essentially different things, for the former is "a promise to perform an act,"
whereas the latter is the "actual performance" thereof.11 In the words of the
Law,12 "the acceptance of a bill is the signification by the drawee of his assent to
the order of the drawer," which, in the case of checks, is the payment, on demand,
of a given sum of money. Upon the other hand, actual payment of the amount of a
check implies not only an assent to said order of the drawer and a recognition of the
drawer's obligation to pay the aforementioned sum, but, also, a compliance with
such obligation.
Let us now consider the first and the last assignments of error. The PNB maintains
that the lower court erred in not finding that the PCIB had been guilty of negligence
in not discovering that the check was forged. Assuming that there had been such
negligence on the part of the PCIB, it is undeniable, however, that the PNB has,
also, been negligent, with the particularity that the PNB had been guilty of a greater
degree of negligence, because it had a previous and formal notice from the GSIS
that the check had been lost, with the request that payment thereof be stopped.
Just as important, if not more important and decisive, is the fact that the PNB's
negligence was the main or proximate cause for the corresponding loss.
In this connection, it will be recalled that the PCIB did not cash the check upon its
presentation by Augusto Lim; that the latter had merely deposited it in his current
account with the PCIB; that, on the same day, the PCIB sent it, through the Central
Bank, to the PNB, for clearing; that the PNB did not return the check to the PCIB the
next day or at any other time; that said failure to return the check to the PCIB
implied, under the current banking practice, that the PNB considered the check good
and would honor it; that, in fact, the PNB honored the check and paid its amount to
the PCIB; and that only then did the PCIB allow Augusto Lim to draw said amount
from his aforementioned current account.

Thus, by not returning the check to the PCIB, by thereby indicating that the PNB
had found nothing wrong with the check and would honor the same, and by actually
paying its amount to the PCIB, the PNB induced the latter, not only to believe that
the check was genuine and good in every respect, but, also, to pay its amount to
Augusto Lim. In other words, the PNB was the primary or proximate cause of the
loss, and, hence, may not recover from the PCIB.13

It is a well-settled maxim of law and equity that when one of two (2) innocent
persons must suffer by the wrongful act of a third person, the loss must be borne by
the one whose negligence was the proximate cause of the loss or who put it into the
power of the third person to perpetrate the wrong.14

Then, again, it has, likewise, been held that, where the collecting (PCIB) and the
drawee (PNB) banks are equally at fault, the court will leave the parties where it
finds them.15

Lastly, Section 62 of Act No. 2031 provides:

The acceptor by accepting the instrument engages that he will pay it according to
the tenor of his acceptance; and admits:

(a) The existence of the drawer, the genuineness of his signature, and his
capacity and authority to draw the instrument; and

(b) The existence of the payee and his then capacity to indorse.

The prevailing view is that the same rule applies in the case of a drawee who pays a
bill without having previously accepted it.16

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the
Philippine National Bank. It is so ordered.