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G.R. No.

187769 June 4, 2014

ALVIN PATRIMONIO, Petitioner, vs. NAPOLEON 6. Marasigan sought recovery from Gutierrez, to no avail.
GUTIERREZ and OCTAVIO MARASIGAN III, Respondents. He thereafter sent several demand letters to the petitioner
BRION, J. asking for the payment of P200,000.00, but his demands
likewise went unheeded. Consequently, he filed a criminal case
NATURE: Petition for review on certiorari assailing the decision for violation of B.P. 22 against the petitioner.
and the resolution of the CA which affirmed the decision of
RTC dismissing the complaint for declaration of nullity of loan 7. Petitioner filed before the RTC a Complaint for
filed by petitioner Alvin Patrimonio and ordering him to pay Declaration of Nullity of Loan and Recovery of Damages against
respondent Octavio Marasigan III Gutierrez and co-respondent Marasigan.

FACTS: 8. RTC--- in favor of Marasigan. It found that the

1. The petitioner and the respondent Gutierrez entered into petitioner, in issuing the pre-signed blank checks, had the
a business venture under the name of Slam Dunk Corporation, intention of issuing a negotiable instrument, albeit with
a production outfit that produced mini-concerts and shows specific instructions to Gutierrez not to negotiate or issue the
related to basketball. check without his approval. RTC declared Marasigan as a
holder in due course and accordingly dismissed the petitioners
2. The petitioner pre-signed several checks to answer for complaint for declaration of nullity of the loan. It ordered the
the expenses of Slam Dunk. Although signed, these checks had petitioner to pay Marasigan the face value of the check with a
no payees name, date or amount. The blank checks were right to claim reimbursement from Gutierrez. CA--- affirmed
entrusted to Gutierrez with the specific instruction not to fill the RTC ruling.
them out without previous notification to and approval by the
petitioner. ISSUE: Whether or not Marasigan is a holder in due course
thus may hold Petitioner liable
3. Without the petitioners knowledge and consent,
Gutierrez went to Marasigan to secure a loan in the amount of HELD: NO.
P200,000.00 on the excuse that the petitioner needed the
money for the construction of his house. In addition to the RATIO:
payment of the principal, Gutierrez assured Marasigan that he Section 14 of the Negotiable Instruments Law provides for
would be paid an interest of 5% per month. when blanks may be filled. This provision applies to an
incomplete but delivered instrument. Under this rule, if the
4. Marasigan acceded to Gutierrez request and gave him maker or drawer delivers a pre-signed blank paper to another
P200,000.00. Gutierrez simultaneously delivered to Marasigan person for the purpose of converting it into a negotiable
one of the blank checks the petitioner pre-signed with Pilipinas instrument, that person is deemed to have prima facie
Bank with the blank portions filled out with the words "Cash" authority to fill it up. It merely requires that the instrument be
"Two Hundred Thousand Pesos Only", and the amount of in the possession of a person other than the drawer or maker
"P200,000.00." and from such possession, together with the fact that the
instrument is wanting in a material particular, the law
5. Marasigan deposited the check but it was dishonored for presumes agency to fill up the blanks.
the reason "ACCOUNT CLOSED." It was later revealed that
petitioners account with the bank had been closed.
In order however that one who is not a holder in due course his assignor's acquisition of title, although he did not have
can enforce the instrument against a party prior to the notice of the particular wrong that was committed.
instruments completion, two requisites must exist: (1) that the
blank must be filled strictly in accordance with the authority The term bad faith does not necessarily involve furtive
given; and (2) it must be filled up within a reasonable time. If it motives, but means bad faith in a commercial sense. Although
was proven that the instrument had not been filled up strictly gross negligence does not of itself constitute bad faith, it is
in accordance with the authority given and within a reasonable evidence from which bad faith may be inferred.
time, the maker can set this up as a personal defense and
avoid liability. However, if the holder is a holder in due course, In the present case, Marasigans knowledge that the petitioner
there is a conclusive presumption that authority to fill it up is not a party or a privy to the contract of loan, and
had been given and that the same was not in excess of correspondingly had no obligation or liability to him, renders
authority. him dishonest, hence, in bad faith. Since he knew that the
underlying obligation was not actually for the petitioner, the
In the present case, the petitioner contends that there is no rule that a possessor of the instrument is prima facie a holder
legal basis to hold him liable both under the contract and loan in due course is inapplicable. As correctly noted by the CA, his
and under the check because: first, the subject check was not inaction and failure to verify, despite knowledge of that the
completely filled out strictly under the authority he has given petitioner was not a party to the loan, may be construed as
and second, Marasigan was not a holder in due course. gross negligence amounting to bad faith.

Section 52(c) of the NIL states that a holder in due course is Yet, it does not follow that simply because he is not a holder in
one who takes the instrument "in good faith and for value." It due course, Marasigan is already totally barred from recovery.
also provides in Section 52(d) that in order that one may be a The NIL does not provide that a holder who is not a holder in
holder in due course, it is necessary that at the time it was due course may not in any case recover on the instrument. The
negotiated to him he had no notice of any infirmity in the only disadvantage of a holder who is not in due course is that
instrument or defect in the title of the person negotiating it. the negotiable instrument is subject to defenses as if it were
non-negotiable. Among such defenses is the filling up blank
Acquisition in good faith means taking without knowledge or not within the authority.
notice of equities of any sort which could beset up against a
prior holder of the instrument. It means that he does not have While under the law, Gutierrez had a prima facie authority to
any knowledge of fact which would render it dishonest for him complete the check, such prima facie authority does not extend
to take a negotiable paper. The absence of the defense, when to its use (i.e., subsequent transfer or negotiation) once the
the instrument was taken, is the essential element of good check is completed. In other words, only the authority to
faith. complete the check is presumed. Further, the law used the
term "prima facie" to underscore the fact that the authority
In order to show that the defendant had "knowledge of such which the law accords to a holder is a presumption juris
facts that his action in taking the instrument amounted to bad tantumonly; hence, subject to subject to contrary proof. Thus,
faith," it is not necessary to prove that the defendant knew the evidence that there was no authority or that the authority
exact fraud that was practiced upon the plaintiff by the granted has been exceeded may be presented by the maker in
defendant's assignor, it being sufficient to show that the order to avoid liability under the instrument.
defendant had notice that there was something wrong about
Notably, Gutierrez was only authorized to use the check for Bucton v. Rural Bank of El Salvador, Inc., G.R. No. 179625,
business expenses; thus, he exceeded the authority when he 24 February 2014.
used the check to pay the loan he supposedly contracted for
the construction of petitioner's house. This is a clear violation Facts:
of the petitioner's instruction to use the checks for the On April 29, 1988, petitioner Nicanora G. Bucton filed with the
expenses of Slam Dunk. It cannot therefore be validly RTC of Cagayan de Oro a case4 for Annulment of Mortgage,
concluded that the check was completed strictly in accordance Foreclosure, and Special Power of Attorney (SPA) against
with the authority given by the petitioner. Erlinda Concepcion (Concepcion) and respondents Rural Bank
of El Salvador, Misamis Oriental, and Sheriff Reynaldo
Considering that Marasigan is not a holder in due course, the Cuyong.5
petitioner can validly set up the personal defense that the Petitioner alleged that she is the owner of a parcel of land,
blanks were not filled up in accordance with the authority he covered by Transfer Certificate of Title (TCT) No. T-3838,
gave. Consequently, Marasigan has no right to enforce located in Cagayan de Oro City;6 that on June 6, 1982,
payment against the petitioner and the latter cannot be obliged Concepcion borrowed the title on the pretext that she was
to pay the face value of the check. going to show it to an interested buyer;7 that Concepcion
obtained a loan in the amount of P30,000.00 from respondent
WHEREFORE, in view of the foregoing, judgment is hereby bank;8 that as security for the loan, Concepcion mortgaged
rendered GRANTING the petitioner Alvin Patrimonio's petition petitioners house and lot to respondent bank using a SPA9
for review on certiorari. The appealed Decision dated allegedly executed by petitioner in favor of Concepcion;10 that
September 24, 2008 and the Resolution dated April 30, 2009 of Concepcion failed to pay the loan;11 that petitioners house
the Court of Appeals are consequently ANNULLED AND SET and lot were foreclosed by respondent sheriff
ASIDE. Costs against the respondents. SO ORDERED. During the trial, petitioner testified that a representative of
respondent bank went to her house to inform her that the loan
secured by her house and lot was long overdue.26 Since she
did not mortgage any of her properties nor did she obtain a
loan from respondent bank, she decided to go to respondent
bank on June 22, 1987 to inquire about the matter.27 It was
only then that she discovered that her house and lot was
mortgaged by virtue of a forged SPA.28She insisted that her
signature and her husbands signature on the SPA were
forged29 and that ever since she got married, she no longer
used her maiden name, Nicanora Gabar, in signing
documents.30 Petitioner also denied appearing before the
notary public, who notarized the SPA.31 She also testified that
the property referred to in the SPA, TCT No. 3838, is a vacant
lot and that the house, which was mortgaged and foreclosed, is
covered by a different title, TCT No. 3839.32
To support her claim of forgery, petitioner presented Emma
Nagac who testified that when she was at Concepcions
boutique, she was asked by the latter to sign as a witness to
the SPA;33 that when she signed the SPA, the signatures of
petitioner and her husband had already been affixed;34 and face, that it was signed by Concepcion in her own name and in
that Lugod instructed her not to tell petitioner about the SPA. her own personal capacity. In fact, there is nothing in the
On February 23, 1998, the RTC issued a Decision46 document to show that she was acting or signing as an agent
sustaining the claim of petitioner that the SPA was forged as of petitioner. Thus, consistent with the law on agency and
the signatures appearing on the SPA are different from the established jurisprudence, petitioner cannot be bound by the
genuine signatures presented by petitioner. The RTC opined acts of Concepcion.
that the respondent bank should have conducted a thorough In light of the foregoing, there is no need to delve on the issues
inquiry on the authenticity of the SPA considering that of forgery of the SPA and the nullity of the foreclosure sale. For
petitioners residence certificate was not indicated in the even if the SPA was valid, the Real Estate Mortgage would still
acknowledgement of the SPA. It declared void the SPA and the not bind petitioner as it was signed by Concepcion in her
Mortgage. personal capacity and not as an agent of petitioner. Simply
Dissatisfied, respondent bank elevated the case to the CA. On put, the Real Estate Mortgage is void and unenforceable
August 17, 2005, the CA reversed the findings of the RTC. against petitioner.
Hence this petition. Respondent bank was negligent.
At this point, we find it significant to mention that respondent
Issue: bank has no one to blame but itself.1wphi1 Not only did it act
with undue haste when it granted and released the loan in less
Whether or not a mortgage executed by an agent who than three days, it also acted negligently in preparing the Real
signed it under his own name and failed to indicate that he did Estate Mortgage as it failed to indicate that Concepcion was
so in behalf of another is binding upon the principal signing it for and on behalf of petitioner. We need not belabor
that the words "as attorney-in-fact of," "as agent of," or "for and
Held: on behalf of," are vital in order for the principal to be bound by
the acts of his agent. Without these words, any mortgage,
The Petition is meritorious. The Real Estate Mortgage was although signed by the agent, cannot bind the principal as it is
entered into by Concepcion in her own personal considered to have been signed by the agent in his personal
capacity. capacity.
As early as the case of Philippine Sugar Estates Development A mortgage executed by an authorized agent who signed in his
Co. v. Poizat,76 we already ruled that "in order to bind the own name without indicating that he acted for and on behalf of
principal by a deed executed by an agent, the deed must upon his principal binds only the agent and not the principal.
its face purport to be made, signed and sealed in the name of
the principal."77 In other words, the mere fact that the agent
was authorized to mortgage the property is not sufficient to
bind the principal, unless the deed was executed and signed by
the agent for and on behalf of his principal. This ruling was
adhered to and reiterated with consistency in the cases of
Rural Bank of Bombon (Camarines Sur), Inc. v. Court of
Appeals,78 Gozun v. Mercado,79 and Far East Bank and Trust
Company (Now Bank of the Philippine Island) v. Cayetano.80
Similarly, in this case, the authorized agent failed to indicate in
the mortgage that she was acting for and on behalf of her
principal. The Real Estate Mortgage, explicitly shows on its
Bicol Savings and Loan Association vs. CA

Juan de Jesus was the owner of a parcel of land in Naga
City. He executed a Special Power of Attorney in favor of Jose
de Jesus, his son, wherein the latter could negotiate and
mortgage the formers property in any bank preferably in the
Bicol Savings and Loan Association. By virtue of such
document, Jose was able to obtain P20,000 from Bicol Savings.
To secure payment, he executed a deed of mortgage wherein it
was stipulated that upon the mortgagors failure or refusal to
pay the obligation, the mortgagee may immediately foreclose
the property. Juan de Jesus died and the loan obligation was
not paid. As a result, Bicol Savings extrajudicially foreclosed
the mortgaged property. The bank won as the highest bidder
during the auction sale. Jose and the other heirs failed to
redeem the property. Thereafter, they tried to negotiate with
Bicol Savings but the parties did not come up to an agreement.
Bicol Savings sold the property to another person. Hence, Jose
filed for annulment of the foreclosure sale. The lower court
dismissed the case. On appeal, the CA reversed RTCs decision.
Hence, this appeal.

Whether or not the extrajudicial foreclosure sale of the
property was valid.

Yes. Art 1879 of the CC which states that special power
to sell excludes the power to mortgage and vice versa is
inapplicable in the case. What it proscribes is a voluntary and
independent contract of sale and not an auction sale resulting
from extrajudicial foreclosure caused by the default of the
mortgagor. The power to foreclose is not an ordinary agency
but is primarily conferred upon the mortgagee for its
protection. The right of the bank to foreclose is independent of
the mortgage contract as it is recognized by the Rules of Court.