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1.Case Title : MYRON C. PAPA, Administrator of the Testate Estate of Angela M.

Syllabi Class : Civil Law|Commercial Law|Loan|Check|Actions|Compromise


Butte, petitioner, vs. A.U. VALENCIA and CO., INC., FELIX PEÑARROYO, SPS. Agreement|Nature of Compromise Agreement|Garnishment|Litis
ARSENIO B. REYES & AMANDA SANTOS, and DELFIN JAO, respondents. Pendentia|Res Judicata
Syllabi:
Case Nature : PETITION for review on certiorari of a decision of the Court of 1. Civil Law; Commercial Law; Loan; In a money market transaction, the
Appeals. investor is a lender who loans his money to a borrower through a middleman or
dealer.-
Syllabi Class : Negotiable Considering the nature of a money market transaction, the above-quoted
Instruments|Actions|Checks|Presumptions|Obligations|Parties|Settlement of provision should be applied in the present controversy. As held in Perez vs. Court
Estates of Appeals, a “money market is a market dealing in standardized short-term
Syllabi: credit instruments (involving large amounts) where lenders and borrowers do
1. Negotiable Instruments; Checks; Presumptions; After more than ten (10) not deal directly with each other but through a middle man or dealer in open
years from the payment in part by cash and in part by check, the presumption is market. In a money market transaction, the investor is a lender who loans his
that the check had been encashed.- money to a borrower through a middleman or dealer.
It is an undisputed fact that respondents Valencia and Peñarroyo had given 2. Civil Law; Commercial Law; Loan; Check; A check is not a legal tender, and
petitioner Myron C. Papa the amounts of Five Thousand Pesos (P5,000.00) in therefore cannot constitute valid tender of payment.-
cash on 24 May 1973, and Forty Thousand Pesos (P40,000.00) in check on 15 In a loan transaction, the obligation to pay a sum certain in money may be paid
June 1973, in payment of the purchase price of the subject lot. Petitioner himself in money, which is the legal tender or, by the use of a check. A check is not a
admits having received said amounts, and having issued receipts therefor. legal tender, and therefore cannot constitute valid tender of payment. In the
Petitioner’s assertion that he never encashed the aforesaid check is not case of Philippine Airlines, Inc. vs. Court of Appeals, this Court held: “Since a
substantiated and is at odds with his statement in his answer that “he can no negotiable instrument is only a substitute for money and not money, the
longer recall the transaction which is supposed to have happened 10 years ago.” delivery of such an instrument does not, by itself, operate as payment (citation
After more than ten (10) years from the payment in part by cash and in part by omitted). A check, whether a manager’s check or ordinary check, is not legal
check, the presumption is that the check had been encashed. As already stated, tender, and an offer of a check in payment of a debt is not a valid tender of
he even waived the presentation of oral evidence. payment and may be refused receipt by the obligee or creditor. Mere delivery of
2. Negotiable Instruments; Checks; Failure of a payee to encash a check for checks does not discharge the obligation under a judgment. The obligation is not
more than ten (10) years undoubtedly resulted in the impairment of the check extinguished and remains suspended until the payment by commercial
through his unreasonable and unexplained delay.- document is actually realized (Art. 1249, Civil Code, par. 3.)”
Granting that petitioner had never encashed the check, his failure to do so for 3. Civil Law; Actions; Compromise Agreement; Nature of Compromise
more than ten (10) years undoubtedly resulted in the impairment of the check Agreement; The compromise agreement could not bind a party who did not sign
through his unreasonable and unexplained delay. the compromise agreement nor avail of its benefits.-
3. Negotiable Instruments; Checks; Obligations; The acceptance of a check A compromise is a contract whereby the parties, by making reciprocal
implies an undertaking of due diligence in presenting it for payment, and if he concessions, avoid a litigation or put an end to one already commenced. It is an
from whom it is received sustains loss by want of such diligence, it will be held to agreement between two or more persons who, for preventing or putting an end
operate as actual payment of the debt or obligation for which it was given.- to a lawsuit, adjust their difficulties by mutual consent in the manner which they
While it is true that the delivery of a check produces the effect of payment only agree on, and which everyone of them prefers in the hope of gaining, balanced
when it is cashed, pursuant to Art. 1249 of the Civil Code, the rule is otherwise if by the danger of losing. The compromise agreement could not bind a party who
the debtor is prejudiced by the creditor’s unreasonable delay in presentment. did not sign the compromise agreement nor avail of its benefits. Thus, the
The acceptance of a check implies an undertaking of due diligence in presenting stipulations in the compromise agreement is unenforceable against Vicente
it for payment, and if he from whom it is received sustains loss by want of such Alegre, not a party thereto. His money could not be the subject of an agreement
diligence, it will be held to operate as actual payment of the debt or obligation between CIFC and BPI. Although Alegre’s money was in custody of the bank, the
for which it was given. It has, likewise, been held that if no presentment is made bank’s possession of it was not in the concept of an owner. BPI cannot validly
at all, the drawer cannot be held liable irrespective of loss or injury unless appropriate the money as its own.
presentment is otherwise excused. This is in harmony with Article 1249 of the 4. Civil Law; Actions; Garnishment; Garnishment is an attachment by means of
Civil Code under which payment by way of check or other negotiable instrument which the plaintiff seeks to subject to his claim the property of the defendant in
is conditioned on its being cashed, except when through the fault of the creditor, the hands of a third person or money owed to such third person or a garnishee
the instrument is impaired. The payee of a check would be a creditor under this to the defendant; Tender of payment involves a positive and unconditional act
provision and if its non-payment is caused by his negligence, payment will be by the obligor of offering legal tender currency as payment to the obligee for the
deemed effected and the obligation for which the check was given as former’s obligation and demanding that the latter accept the same.-
conditional payment will be discharged. BPI’s confiscation of Alegre’s money constitutes garnishment without the parties
4. Actions; Parties; Settlement of Estates; An executor or administrator may sue going through a valid proceeding in court. Garnishment is an attachment by
or be sued without joining the party for whose benefit the action is presented or means of which the plaintiff seeks to subject to his claim the property of the
defended.- defendant in the hands of a third person or money owed to such third person or
The estate of Angela M. Butte is not an indispensable party. Under Section 3 of a garnishee to the defendant. The garnishment procedure must be upon proper
Rule 3 of the Rules of Court, an executor or administrator may sue or be sued order of RTC-Makati, Branch 62, the court who had jurisdiction over the
without joining the party for whose benefit the action is presented or defended. collection suit filed by BPI against Alegre. In effect, CIFC has not yet tendered a
valid payment of its obligation to the private respondent. Tender of payment
Division: FIRST DIVISION involves a positive and unconditional act by the obligor of offering legal tender
currency as payment to the obligee for the former’s obligation and demanding
Docket Number: G.R. No. 105188 that the latter accept the same. Tender of payment cannot be presumed by a
mere inference from surrounding circumstances.
Counsel: Quijano & Padilla, Jimenez, Kintanar & Asuncion Law Offices 5. Civil Law; Actions; Litis Pendentia; Requisites for litis pendentia to be a
ground for the dismissal of an action.-
Ponente: KAPUNAN With regard to the third issue, for litis pendentia to be a ground for the dismissal
of an action, the following requisites must concur: (a) identity of parties or at
Dispositive Portion: least such as to represent the same interest in both actions; (b) identity of rights
WHEREFORE, the petition for review is hereby DENIED and the Decision of the asserted and relief prayed for, the relief being founded on the same acts; and (c)
Court of Appeals, dated 27 January 1992 is AFFIRMED. the identity in the two cases should be such that the judgment which may be
rendered in one would, regardless of which party is successful, amount to res
2. Case Title : CEBU INTERNATIONAL FINANCE CORPORATION, petitioner, vs. judicata in the other.
COURT OF APPEALS, VICENTE ALEGRE, respondents.Case Nature : PETITION for 6. Civil Law; Actions; Res Judicata; The general rule is that a compromise has
review on certiorari of a decision of the Court of Appeals. upon the parties the effect and authority of res judicata, with respect to the
matter definitely stated therein, or which by implication from its terms should be
deemed to have been included therein even if the agreement has not been The taking or conversion of public funds for personal use must be affirmatively
judicially approved.- proved. When there is no shortage, taking, appropriation, conversion or loss,
The compromise agreement between CIFC and BPI, categorically provided that there is no malversation.
“In case plaintiff is adjudged liable to Vicente Alegre in Civil Case No. 92-515 3. Criminal Law; Malversation; Elements.-
arising from the alleged dishonor of BPI Check No. 513397, plaintiff (CIFC) The elements of malversation, essential for the conviction of an accused, under
cannot go after the defendant (BPI); otherwise stated, the defendant shall not the above penal provision are that: (a) the offender is a public officer; (b) he has
be liable to the plaintiff.” Clearly, this stipulation expressed that CIFC had the custody or control of funds or property by reason of the duties of his office;
already abandoned any further claim against BPI with respect to the value of BPI (c) the funds or property involved are public funds or property for which he is
Check No. 513397. To ask this Court to allow BPI to be a party in the case at bar, accountable; and (d) he has appropriated, taken or misappropriated, or has
would amount to res judicata and would violate terms of the compromise consented to, or through abandonment or negligence permitted, the taking by
agreement between CIFC and BPI. The general rule is that a compromise has another person of, such funds or property.
upon the parties the effect and authority of res judicata, with respect to the 4. Criminal Law; Malversation; Words and Phrases; Standard text in accounting
matter definitely stated therein, or which by implication from its terms should be defines “Cash” as consisting of those items that serve as a medium of exchange
deemed to have been included therein. This holds true even if the agreement has and provide a basis for accounting measurement, and to be reported as “cash,”
not been judicially approved. an item must be readily available and not restricted for use in the payment of
current obligations.-
Division: SECOND DIVISION The auditor’s finding of a “cash shortage” is definitely wrong. In fact and under
accounting principles, there is no cash shortage. The cash and other valid cash
Docket Number: G.R. No. 123031 items were produced by petitioner and counted by the auditors in the total
amount of P170,195.26. The amount is intact in cash. The assumed shortage of
Counsel: Villanueva, Pacis, Mondragon & Cana Law Offices, Marlito C. Altuna P107,229.02 represented “vales,” “chits” and “disbursement vouchers”
considered as part of the general fund. This is an auditing error. It is a generally
Ponente: QUISUMBING accepted auditing principle that cash means “cash on hand or in bank.”
Standard text in accounting defines “Cash” as consisting of those items that
Dispositive Portion: serve as a medium of exchange and provide a basis for accounting
WHEREFORE, the instant petition is hereby DENIED. The Decision of the Court of measurement. To be reported as “cash,” an item must be readily available and
Appeals in CA-G.R. CV No. 44085 is AFFIRMED. Costs against petitioner. not restricted for use in the payment of current obligations. A general guideline
is whether an item is acceptable for deposit at face value by a bank or other
financial institution. “Items that are classified as cash include coin and currency
3. Case Title : JUAN A. RUEDA, JR., petitioner, vs. HONORABLE SANDIGAN- on hand, and unrestricted funds available on deposit in a bank, which are often
BAYAN and PEOPLE OF THE PHILIPPINES, respondents.Case Nature : PETITION called demand deposits since they can be withdrawn upon demand. Petty cash
for review on certiorari of a decision of the Sandiganbayan. funds or change funds and negotiable instruments, such as personal checks,
Syllabi Class : Courts|Criminal travelers’ checks, cashiers’ checks, bank drafts, and money orders are also items
Law|Sandiganbayan|Evidence|Malversation|Public Officers|Words and commonly reported as cash. The total of these items plus undeposited coin and
Phrases|Presumption of Innocence currency is sometimes called cash on hand. Interest-bearing accounts, or time
Syllabi: deposits, also are usually classified as cash, even though a bank legally can
1. Courts; Sandiganbayan; Evidence; Generally, the factual findings of the demand prior notification before a withdrawal can be made. In practice, banks
Sandiganbayan are conclusive on the Supreme Court, but in instances where the generally do not exercise this legal right.
exceptions obtain, the Supreme Court is bound to review the facts in order to 5. Criminal Law; Malversation; It is a mistake for auditors to include as cash
avoid a miscarriage of justice.- items collectibles in the form of “vales” and “chits” and “disbursement
Generally, the factual findings of the Sandiganbayan are conclusive on the vouchers” for legitimate expenses of the municipality.-
Court. However, there are established exceptions to that rule, such as, sans There was no shortage on peti-tioner’s cash accountability. “Evidence of
preclusion, when (1) the conclusion is a finding grounded entirely on speculation, shortage is necessary before there could be any taking, appropriation,
surmise and conjecture; (2) the inference made is manifestly an error or founded conversion, or loss of public funds that would amount to malversation.” The law
on a mistake; (3) there is grave abuse of discretion; (4) the judgment is based on requires that the shortage must be clearly established as a fact that over and
misapprehension of facts; and (5) the findings of fact are premised on the above the funds found by the auditors in the actual possession of the
absence of evidence and are contradicted by evidence on record. In these accountable officers, there is an additional amount which could not be produced
instances, this Court is bound to review the facts in order to avoid a miscarriage or accounted for at the time of audit. In this case, there was absolutely no
of justice. The instant case falls within such exceptions. shortage as to petitioner’s cash accountability. The auditors mistakenly included
2. Criminal Law; Malversation; Public Officers; The mere fact that a public as cash items collectibles in the form of “vales” and “chits” and “disbursement
officer signed the report of cash examination is not an admission of vouchers” for legitimate expenses of the municipality.
“shortgage”—his signature is only evidence that he received a copy of the 6. Criminal Law; Malversation; To be held accountable the public officer must
report; When absence of funds was not due to personal use, the presumption receive the money or property, and later fails to account for it.-
that the public officer put public funds to personal use is completely destroyed.- An accountable officer under Article 217 of the Revised Penal Code must receive
After an assiduous scrutiny, we find petitioner not guilty of malversation of money or property of the government which he is bound to account for. It is the
public funds. The Sandiganbayan found that petitioner admitted his nature of the duties of, not the nomenclature used for, or the relative
accountability and failed to have duly forthcoming his cash shortage in the significance of the title to, the position, which controls in that determination.
amount of P107,299.02 with which he is chargeable, and that he did not tender Based on this definition, to be held accountable the public officer must receive
the required written explanation as to why the shortage was incurred. His failure the money or property, and later fails to account for it. When a public officer is
to do so instantly created a prima facie evidence pursuant to the last paragraph asked to account for the cash in his accountability, this necessarily means that
of Article 217 of the Revised Penal Code that he had put such missing funds to he has to produce the cash in bills and coins and other cash items that he
personal use. We disagree. Petitioner did not admit any shortage. The mere fact received. It does not include collectibles and receivables or even promissory
that he signed the dorsal side of the report of cash examination is not an notes.
admission of “shortage.” His signature was only evidence that he received a 7. Criminal Law; Malversation; Words and Phrases; “Liquidation” simply means
copy of the report. Thus, it is incorrect to say that petitioner admitted his the settling of indebtedness—it does not necessarily signify payment, and to
shortage when he signed the audit report prepared by the audit team. For one liquidate an account, can mean to ascertain the balance due, to whom it is due,
thing, he was made to sign it right away; for another, his signature only meant and to whom it is payable; hence, an account that has been liquidated can also
an acknowledgment that a demand from him to produce all his cash, money and mean that the item has been made certain as to what, and how much, is
paid vouchers had been made. It did not mean that he admitted any shortage. In deemed to be owing.-
fact, subsequent events showed that he had fully explained his accountability. An important moiety in the instant case is that petitioner did not grant the cash
Thus, he satisfactorily explained the shortage. In other words, there was no advances or “vales” to the municipal officials. They took the cash advances from
direct evidence or proof that he put public funds to personal use. When absence the collections of the municipal collectors. However, they restored or liquidated”
of funds was not due to personal use, the presumption is completely destroyed. the amounts prior to the conduct of preliminary investigation before the office
of the Ombudsman. The liquidation was done, not by petitioner, but by the Final and executory decisions, more so with those already executed, may no
respective debtors. “Liquidation simply means the settling of indebtedness.” longer be amended except only to correct errors which are clerical in nature.
“Liquidation does not necessarily signify payment, and to liquidate an account, They become the law of the case and are immutable and unalterable regardless
can mean to ascertain the balance due, to whom it is due, and to whom it is of any claim of error or incorrectness. Amendments or alterations which
payable; hence, an account that has been liquidated can also mean that the substantially affect such judgments as well as the entire proceedings held for
item has been made certain as to what, and how much, is deemed to be owing.” that purpose are null and void for lack of jurisdiction. The reason lies in the fact
8. Criminal Law; Malversation; Presumption of Innocence; The prima facie that public policy dictates that litigations must be terminated at some definite
evidence that public funds have been put to the personal use of a municipal time and that the prevailing party should not be denied the fruits of his victory
treasurer is obliterated by the fact that he did not receive the money; The Court by some subterfuge devised by the losing party.
must not reject arbitrarily an explanation consistent with the presumption of 2. Negotiable Instruments; Checks; Obligations; While delivery of a check
innocence.- produces the effect of payment only when it is encashed, the rule is otherwise if
The prima facie evidence that public funds have been put to the personal use of the debtor was prejudiced by the creditor’s unreasonable delay in
petitioner has been obliterated by the fact that he did not receive the money as presentments—acceptance of a check implies an undertaking of due diligence in
municipal treasurer. In Zambrano v. Sandiganbayan, we said that if the accused presenting it for payment.-
did not receive the public funds, there was no malversation. In Diaz vs. Clearly then respondent Judge Laguio no longer had any jurisdiction whatsoever
Sandiganbayan, we held that when the absence of funds is not due to the to act on, much less grant, the motion for execution and supplement thereto
personal use thereof by the accused, the presumption is completely destroyed; filed by Moslares on 17 September 1993 or more than three (3) years later,
in fact, the presumption is deemed never to have existed at all. In malversation, claiming that he had already bought the lots. The fact that the check paid to him
it is necessary to prove that the accused received public funds, and that he could by Barretto Realty was never encashed should not be invoked against the latter.
not account for them and did not have them in his possession and that he could As already stated, Moslares never questioned the tender done three (3) years
not give a reasonable excuse for the disappearance of the same. In this case, the earlier. Besides, while delivery of a check produces the effect of payment only
prosecution failed to establish this important element of malversation. In fact, it when it is encashed, the rule is otherwise if the debtor was prejudiced by the
did not really exist. Petitioner gave a reasonable and satisfactory explanation of creditor’s unreasonable delay in presentment. Acceptance of a check implies an
his cash accountability of public funds that were duly liquidated. The Court must undertaking of due diligence in presenting it for payment. If no such
not reject arbitrarily an explanation consistent with the presumption of presentment was made, the drawer cannot be held liable irrespective of loss or
innocence. injury sustained by the payee. Payment will be deemed effected and the
9. Criminal Law; Presumption of Innocence; In our criminal justice system, the obligation for which the check was given as conditional payment will be
overriding consideration is not whether the court doubts the innocence of the discharged.
accused but whether it entertains a reasonable doubt as to his guilt.- 3. Judgments; Laches; Estoppel; The principle of laches does not attach when
In our criminal justice system, the overriding consideration is not whether the the judgment is null and void for want of jurisdiction; Estoppel, being an
court doubts the innocence of the accused but whether it entertains a equitable doctrine, cannot be invoked to perpetuate an injustice.-
reasonable doubt as to his guilt. This determinant, with the constitutional The principle of laches does not attach when the judgment is null and void for
presumption of innocence which can be overthrown only by the strength of the want of jurisdiction. The fact that petitioner invoked par. 3 of the Order of 11
prosecution’s own evidence proving guilt beyond reasonable doubt, irresistibly February 1994 praying that its P1,000,000.00 check still in Moslares’ possession
dictate an exoneration in this case. The evidence against petitioner is not be considered sufficient payment of the disputed lots, could not be cited against
enough to engender moral certainty of his guilt. This moral certainty is that it. For one thing, petitioner from the very start had always consistently
which convinces and satisfies the conscience of those who are to act upon it. questioned and assailed the jurisdiction of the trial court to entertain
Accordingly, the presumption of innocence which the Constitution guarantees respondent’s motion for execution filed three (3) years after the case had in fact
the petitioner has remained untarnished in this case for want of proof to the been executed. Secondly, estoppel being an equitable doctrine cannot be
contrary. It is safely entrenched in our jurisprudence that unless the prosecution invoked to perpetuate an injustice.
discharges its burden to prove the guilt of an accused beyond reasonable doubt,
the latter need not even offer evidence in his behalf. Division: SECOND DIVISION

Division: EN BANC Docket Number: G.R. No. 132362

Docket Number: G.R. No. 129064 Counsel: Encarnacion, Fernandez, Associates, Angeles & Associates

Counsel: Benito P. Fabie Ponente: BELLOSILLO

Ponente: PARDO Dispositive Portion:


WHEREFORE, the questioned Decision and Resolution of the Court of Appeals
Dispositive Portion: dated 30 June 1997 and 14 January 1998, respectively, are REVERSED and SET
WHEREFORE, the petition is GRANTED and the decision of respondent ASIDE. The Order of respondent Judge Perfecto A.S. Laguio, Jr. dated 11
SANDIGANBAYAN promulgated on March 19, 1996 and the resolution adopted February 1994 in Civil Case No. 84-27008, setting aside his earlier ruling of 7
on May 7, 1997 are REVERSED and SET ASIDE. Petitioner JUAN A. RUEDA, JR. is December 1993 which had declared petitioner Pio Barretto Realty Develop-
hereby ACQUITTED on reasonable doubt of the charge of malversation of public ment Corporation as the absolute owner of the real properties in question, and
funds, defined and penalized under Article 217 (4) of the Revised Penal Code. all subsequent proceedings culminating in the Order of 12 October 1994
His bail bond is ordered cancelled. authorizing the Clerk of Court, RTC-Manila, to execute a deed of conveyance
over subject properties in favor of respondent Honor P. Moslares, are declared
NULL and VOID for want of jurisdiction.Consequently, petitioner Pio Barretto
4. Case Title : PIO BARRETTO REALTY DEVELOPMENT CORPORATION, petitioner, Realty Development Corporation is declared the absolute owner of the disputed
vs. COURT OF APPEALS, JUDGE PERFECTO A.S. LAGUIO, JR., RTC-Branch 18, properties subject matter of the Compromise Agreement dated 2 May 1986 as
Manila, and HONOR P. MOSLARES, respondents.Case Nature : PETITION for fully implemented by the Deputy Sheriff, RTC-Br. 18, Manila, pursuant to the
review on certiorari of a decision of the Court of Appeals. final and executory Order dated 14 June 1990 of its Presiding Judge Perfecto
Syllabi Class : Judgments|Negotiable A.S. Laguio, Jr.
Instruments|Checks|Obligations|Laches|Estoppel
Syllabi:
1. Judgments; Final and executory decisions, more so with those already 5. Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. SPOUSES
executed, may no longer be amended except only to correct errors which are REYNALDO AND VICTORIA ROYECA, respondentsCase Nature : PETITION for
clerical in nature—amendments or alterations which substantially affect such review on certiorari of the decision and resolution of the Court of Appeals.
judgments as well as the entire proceedings held for that purpose are null and Syllabi Class : Banks and Banking ; Payment ;
void for lack of jurisdiction.- Syllabi:
1. Civil Procedure; Burden of Proof; In civil cases, the party having the burden of negotiable instrument is only a substitute for money and not money, the
proof must establish his case by a preponderance of evidence, or evidence which delivery of such an instrument does not, by itself, operate as payment. Mere
is more convincing to the court as worthy of belief than that which is offered in delivery of checks does not discharge the obligation under a judgment. The
opposition thereto.- obligation is not extinguished and remains suspended until the payment by
—In civil cases, the party having the burden of proof must establish his case by a commercial document is actually realized.
preponderance of evidence, or evidence which is more convincing to the court as 8. Payment; As a general rule, one who pleads payment has the burden of
worthy of belief than that which is offered in opposition thereto. Thus, the party, proving it.-
whether plaintiff or defendant, who asserts the affirmative of an issue has the —In Jimenez v. National Labor Relations Commission (NLRC), 256 SCRA 84
onus to prove his assertion in order to obtain a favorable judgment. For the (1996), cited by both the Regional Trial Court and the Court of Appeals, the
plaintiff, the burden to prove its positive assertions never parts. For the Court elucidated on who, between the plaintiff and defendant, has the burden to
defendant, an affirmative defense is one which is not a denial of an essential prove the affirmative defense of payment: As a general rule, one who pleads
ingredient in the plaintiff’s cause of action, but one which, if established, will be payment has the burden of proving it. Even where the plaintiff must allege non-
a good defense—i.e. an “avoidance” of the claim. payment, the general rule is that the burden rests on the defendant to prove
2. Banks and Banking; Payment; Reasonable banking practice and prudence payment, rather than on the plaintiff to prove non-payment. The debtor has the
dictates that, when a check given to a creditor bank in payment of an obligation burden of showing with legal certainty that the obligation has been discharged
is dishonored, the bank should immediately return it to the debtor and demand by payment. When the existence of a debt is fully established by the evidence
its replacement or payment lest itcauses any prejudice to the drawer.- contained in the record, the burden of proving that it has been extinguished by
—The Court cannot ignore what the respondents have consistently raised—that payment devolves upon the debtor who offers such a defense to the claim of the
they were not notified of the non-payment of the checks. Reasonable banking creditor. Where the debtor introduces some evidence of payment, the burden of
practice and prudence dictates that, when a check given to a creditor bank in going forward with the evidence—as distinct from the general burden of proof—
payment of an obligation is dishonored, the bank should immediately return it to shifts to the creditor, who is then under a duty of producing some evidence to
the debtor and demand its replacement or payment lest it causes any prejudice show non-payment.
to the drawer. In light of this and the fact that the obligation has been partially
paid, we deem it just and equitable to reduce the 3% per month penalty charge Division: THIRD DIVISION
as stipulated in the Promissory Note to 12% per annum. Although a court is not
at liberty to ignore the freedom of the parties to agree on such terms and Docket Number: G.R. No. 176664
conditions as they see fit, as long as they contravene no law, morals, good
customs, public order or public policy, a stipulated penalty, nevertheless, may be Counsel: Benedictine Law Center
equitably reduced by the courts if it is iniquitous or unconscionable, or if the
principal obligation has been partly or irregularly complied with. Ponente: NACHURA
3. Laches; Laches cannot, as a rule, abate a collection suit filed within the
prescriptive period mandated by the New Civil Code.- Dispositive Portion:
—The respondents posit that the petitioner’s claim is barred by laches since it WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The
has been three years since the checks were issued. We do not agree. Laches is a Court of Appeals Decision dated July 12, 2006, and Resolution dated February
recourse in equity. Equity, however, is applied only in the absence, never in 13, 2007, are REVERSED and SET ASIDE. The Decision of the Regional Trial Court,
contravention, of statutory law. Thus, laches cannot, as a rule, abate a collection dated August 11, 2005, is REINSTATED with the MODIFICATION that
suit filed within the prescriptive period mandated by the New Civil Code. The respondents are ordered to deliver the possession of the subject vehicle, or in
petitioner’s action was filed within the ten-year prescriptive period provided the alternative, pay the petitioner P48,084.00 plus late penalty charges/interest
under Article 1144 of the New Civil Code. Hence, there is no room for the thereon at the rate of 12% per annum from May 18, 1997 until fully paid.
application of laches.
4. Same; Promissory Notes; A promissory note in the hands of the creditor is a
proof of indebtedness rather than proof of payment.- Case Title : EUMELIA R. MITRA, petitioner, vs. PEOPLE OF THE PHILIPPINES and
—In all, we find that the evidence at hand preponderates in favor of the FELICISIMO S. TARCELO, respondents.Case Nature : PETITION for review on
petitioner. The petitioner’s possession of the documents pertaining to the certiorari of the decision and resolution of the Court of Appeals.
obligation strongly buttresses its claim that the obligation has not been Syllabi Class : Criminal Law|Bouncing Checks Law|Batas Pambansa Blg.
extinguished. The creditor’s possession of the evidence of debt is proof that the 22|Checks|Elements
debt has not been discharged by payment. A promissory note in the hands of the Syllabi:
creditor is a proof of indebtedness rather than proof of payment. In an action for 1. Criminal Law; Bouncing Checks Law; Batas Pambansa Blg.
replevin by a mortgagee, it is prima facie evidence that the promissory note has 22; Checks; Negotiable Instruments; A check is a negotiable instrument that
not been paid. Likewise, an uncanceled mortgage in the possession of the serves as a substitute for money and as a convenient form of payment in
mortgagee gives rise to the presumption that the mortgage debt is unpaid. financial transactions and obligations.-
5. Same; A notice of dishonor is required only to preserve the right of the payee —A check is a negotiable instrument that serves as a substitute for money and
to recover on the check.- as a convenient form of payment in financial transactions and obligations. The
—It should be noted that thepetitioner, as payee, did not have a legal obligation use of checks as payment allows commercial and banking transactions to
to inform the respondents of the dishonor of the checks. A notice of dishonor is proceed without the actual handling of money, thus, doing away with the need
required only to preserve the right of the payee to recover on the check. It to physically count bills and coins whenever payment is made. It permits
preserves the liability of the drawer and the indorsers on the check. Otherwise, if commercial and banking transactions to be carried out quickly and efficiently.
the payee fails to give notice to them, they are discharged from their liability But the convenience afforded by checks is damaged by unfunded checks that
thereon, and the payee is precluded from enforcing payment on the check. The adversely affect confidence in our commercial and banking activities, and
respondents, therefore, cannot fault the petitioner for not notifying them of the ultimately injure public interest.
non-payment of the checks because whatever rights were transgressed by such 2. Same; Same; Same; Same; Elements.-
omission belonged only to the petitioner. —To reiterate the elements of a violation of BP 22 as contained in the above-
6. Same; Because of this failure of the respondents to present sufficient proof of quoted provision, a violation exists where: 1. a person makes or draws and
payment, it was no longer necessary for the petitioner to prove non-payment, issues a check to apply on account or for value; 2. the person who makes or
particularly proof that the checks were dishonored.- draws and issues the check knows at the time of issue that he does not have
—Because of this failure of the respondents to present sufficient proof of sufficient funds in or credit with the drawee bank for the full payment of the
payment, it was no longer necessary for the petitioner to prove non-payment, check upon its presentment; and 3. the check is subsequently dishonored by the
particularly proof that the checks were dishonored. The burden of evidence is drawee bank for insufficiency of funds or credit, or would have been dishonored
shifted only if the party upon whom it is lodged was able to adduce for the same reason had not the drawer, without any valid reason, ordered the
preponderant evidence to prove its claim. bank to stop payment.
7. Same; Settled is the rule that payment must be made in legal tender.- 3. Same; Same; Same; Same; The purpose of Batas Pambansa Blg. 22 in
—Settled is the rule that payment must be made in legal tender. A check is not declaring the mere issuance of a bouncing check as malum prohibitum is to
legal tender and, therefore, cannot constitute a valid tender of payment. Since a punish the offender in order to deter him and others from committing the
offense, to isolate him from society, to reform and rehabilitate him, and to Thus, the courts always presume good faith, and for that reason accord prime
maintain social order.- importance to the separate personality of the corporation, disregarding the
—BP 22 or the Bouncing Checks Law was enacted for the specific purpose of corporate personality only after the wrongdoing is first clearly and convincingly
addressing the problem of the continued issuance and circulation of unfunded established. It thus behooves the courts to be careful in assessing the milieu
checks by irresponsible persons. To stem the harm caused by these bouncing where the piercing of the corporate veil shall be done.
checks to the community, BP 22 considers the mere act of issuing an unfunded
check as an offense not only against property but also against public order. The Division: THIRD DIVISION
purpose of BP 22 in declaring the mere issuance of a bouncing check as malum
prohibitum is to punish the offender in order to deter him and others from Docket Number: G.R. No. 157549
committing the offense, to isolate him from society, to reform and rehabilitate
him, and to maintain social order. The penalty is stiff. BP 22 imposes the penalty Counsel: Carlo Magno Verzo
of imprisonment for at least 30 days or a fine of up to double the amount of the
check or both imprisonment and fine. PonenteJ. : BERSAMIN,

Division: SECOND DIVISION Dispositive Portion:


ACCORDINGLY, we deny the petition for review on certiorari; and affirm with
Docket Number: G.R. No. 191404 modification the decision promulgated on August 14, 2002 by ordering the
petitioner to pay to Printwell, Inc. the sum of P262,500.00, plus interest of 12%
Counsel: M.C. Santos Law Office per annum to be computed from February 8, 1990 until full payment. The
petitioner shall pay cost of suit in this appeal.
Ponente: MENDOZA

Dispositive Portion: Case Title : PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROBERTO
WHEREFORE, the July 31, 2009 Decision and the February 11, 2010 Resolution TONGKO, accused-appellant.Case Nature : APPEAL from a decision of the
of the Court of Appeals in CA-G.R. CR No. 31740 are hereby AFFIRMED. Regional Trial Court of Pasig City, Br. 156.
Syllabi Class : Criminal Law|Estafa|Checks|Penalties|Constitutional Law|Cruel
and Unusual Punishments
Case Title : DONNINA C. HALLEY, petitioner, vs. PRINTWELL, INC., Syllabi:
respondent.Case Nature : PETITION for review on certiorari of a decision of the 1. Criminal Law; Estafa; Elements of Estafa under Article 315, paragraph 2(d) of
Court of Appeals. the Revised Penal Code.-
Syllabi Class : Corporation Law|Trust Fund Doctrine —Estafa, under Article 315, paragraph 2(d) of the Revised Penal Code, as
Syllabi: amended by Republic Act No. 4885, has the following elements: (1) postdating
1. Judges; A trial or appellate judge may occasionally view a party’s or issuance of a check in payment of an obligation contracted at the time the
memorandum or brief as worthy of due consideration either entirely or partly.- check was issued; (2) lack of sufficiency of funds to cover the check; and (3)
—It is to be observed in this connection that a trial or appellate judge may damage to the payee thereof.
occasionally view a party’s memorandum or brief as worthy of due 2. Same; Same; Same; Same; The legislature was not thoughtless in imposing
consideration either entirely or partly. When he does so, the judge may adopt severe penalties for violation of paragraph 2(d) of Article 315 of the Revised
and incorporate in his adjudication the memorandum or the parts of it he deems Penal Code. The history of the law will show that the severe penalties were
suitable, and yet not be guilty of the accusation of lifting or copying from the intended to stop the upsurge of swindling by issuance of bouncing checks.-
memorandum. This is because of the avowed objective of the memorandum to —The legislature was not thoughtless in imposing severe penalties for violation
contribute in the proper illumination and correct determination of the of par. 2(d) of Article 315 of the Revised Penal Code. The history of the law will
controversy. show that the severe penalties were intended to stop the upsurge of swindling
2. Same; The prevailing rule is that a stockholder is personally liable for the by issuance of bouncing checks. It was felt that unless aborted, this kind of
financial obligations of the corporation to the extent of his unpaid subscription.- estafa “. . . would erode the people’s confidence in the use of negotiable
—The prevailing rule is that a stockholder is personally liable for the financial instruments as a medium of commercial transaction and consequently result in
obligations of the corporation to the extent of his unpaid subscription. In view of the retardation of trade and commerce and the undermining of the banking
the petitioner’s unpaid subscription being worth P262,500.00, she was liable up system of the country.” The Court cannot impugn the wisdom of Congress in
to that amount. setting this policy.
3. Same; Trust Fund Doctrine; Under the trust fund doctrine, a corporation has 3. Same; Same; Same; Penalties; Constitutional Law; Cruel and Unusual
no legal capacity to release an original subscriber to its capital stock from the Punishments; The prohibition of cruel and unusual punishments is generally
obligation of paying for his shares, in whole or in part, without a valuable aimed at the form or character of the punishment rather than its severity in
consideration, or fraudulently, to the prejudice of creditors.- respect of duration or amount, and apply to punishments which never existed in
—Under the trust fund doctrine, a corporation has no legal capacity to release America or which public sentiment has regarded as cruel or obsolete.-
an original subscriber to its capital stock from the obligation of paying for his —Appellant contends that the penalty of twenty seven (27) years of reclusion
shares, in whole or in part, without a valuable consideration, or fraudulently, to perpetua is too harsh and out of proportion to the crime he committed. He
the prejudice of creditors. The creditor is allowed to maintain an action upon submits that his sentence violates Section 19(1), Article III of the Constitution
any unpaid subscriptions and thereby steps into the shoes of the corporation for which prohibits the infliction of cruel, degrading or inhuman punishment. We
the satisfaction of its debt. are not persuaded. In People v. de la Cruz, we held that “x x x the prohibition of
4. Corporation Law; Piercing the Veil of Corporate Fiction; The corporate cruel and unusual punishments is generally aimed at the form or character of
personality may be disregarded, and the individuals composing the the punishment rather than its severity in respect of duration or amount, and
corporation will be treated as individuals, if the corporate entity is being used apply to punishments which never existed in America or which public sentiment
as a cloak or cover for fraud or illegality; as a justification for a wrong;as an has regarded as cruel or obsolete x x x for instance those inflicted at the
alter ego, an adjunct, or a business conduit for the sole benefit of the whipping post, or in the pillory, burning at the stake, breaking on the wheel,
stockholders.- disemboweling, and the like. . .”
—Although a corporation has a personality separate and distinct from those of 4. Same; Same; Checks; The postdating of checks simply means that on the date
its stockholders, directors, or officers, such separate and distinct personality is indicated the checks would be properly funded, not that the checks should be
merely a fiction created by law for the sake of convenience and to promote the deemed as issued only then.-
ends of justice. The corporate personality may be disregarded, and the —There is likewise no merit to the submission of appellant that his postdated
individuals composing the corporation will be treated as individuals, if the checks were in payment of a pre-existing obligation. Again, we note appellant’s
corporate entity is being used as a cloak or cover for fraud or illegality; as a change of theory in foisting this argument. In the trial court, appellant testified
justification for a wrong; as an alter ego, an adjunct, or a business conduit for that he issued the postdated checks, thru Bo-ot, a day or two after he obtained
the sole benefit of the stockholders. As a general rule, a corporation is looked the P100,000.00 loan from Santos. The falsity of the uncorroborated claim,
upon as a legal entity, unless and until sufficient reason to the contrary appears. however, it too obvious and the trial court correctly rejected it. The claim cannot
succeed in light of Santos’ testimony that the issuance of said checks persuaded check, he could have inserted the date pursuant to Section 13 of the Negotiable
her to grant the loans. A look at the two promissory notes will show that they Instruments Law (NIL). Moreover, as stated in Section 14 thereof, complainant,
bear the date August 20, 1993 and they referred to the postdated checks issued as the person in possession of the check, has prima facie authority to complete it
by the appellant. There could be no reference to the postdated checks if they by filling up the blanks therein. Besides, pursuant to Section 12 of the same law,
were issued a day or two after the loans. In this appeal, however, appellant a negotiable instrument is not rendered invalid by reason only that it is
offers the new thesis that since the checks were postdated December 1993, antedated or postdated.
ergo, they were issued in payment of the P100,000.00 he got from Santos on 5. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
August 20, 1993. The postdating of the checks to December 1993 simply means Instruments; Where the complainant knows that the drawer does not have
that on said date the checks would be properly funded. It does not mean that sufficient funds in the bank at the time the check was issued to him, there is no
the checks should be deemed as issued only on December 1993. estafa through bouncing checks.-
The allegation of Mrs. Vicencio that the date to be placed by Virginia was
Division: SECOND DIVISION necessary so as to make the check evidence of indebtedness is nothing but a
ploy. Petitioners openly disclosed and never hid the fact that they no longer have
Docket Number: G.R. No. 123567 funds in the bank as their bank account was already closed. Knowledge by the
complainant that the drawer does not have sufficient funds in the bank at the
Counsel: The Solicitor General, M.B. Tomacruz Law Office time it was issued to him does not give rise to a case for estafa through
bouncing checks.
Ponente: PUNO 6. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable
Instruments; A check must be presented within a reasonable time from issue.-
Dispositive Portion: A check must be presented within a reasonable time from issue. By current
IN VIEW WHEREOF, the Decision dated January 16, 1996 of the RTC of Pasig banking practice, a check becomes stale after more than six (6) months. In fact a
City, Br. 156 in Criminal Case No. 106614 convicting appellant is affirmed. Costs check long overdue for more than two and one-half years is considered stale. In
against appellant. this case, the checks were issued more than three years prior to their
presentment. In his complaint, complainant alleged that petitioners bought
jewelry from him and that he would not have parted with his jewelry had not
Case Title : ERNESTO T. PACHECO and VIRGINIA O. PACHECO, petitioners, vs. petitioners issued the checks. The evidence on record, however, does not
HON. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.Case support the theory of the crime.
Nature : PETITION for review on certiorari of a decision of the Court of Appeals. 7. Criminal Law; Estafa (Swindling); Bouncing Checks; Awareness by the
Syllabi Class : Criminal Law|Estafa (Swindling)|Bouncing Checks|Negotiable complainant of the fictitious nature of the pretense cannot give rise to estafa by
Instruments|Words and Phrases|Evidence means of deceit.-
Syllabi: Following complainant’s theory that he would not have sold the jewelries had
1. Criminal Law; Estafa (Swindling); Bouncing Checks; Elements.- not petitioners issued “postdated” checks, still no estafa can be imputed to
The essential elements in order to sustain a conviction under the above petitioners. It is clear that the checks were not intended for encashment with the
paragraph are: 1. that the offender postdated or issued a check in payment of bank, but were delivered as mere security for the payment of the loan and under
an obligation contracted at the time the check was issued; 2. that such an agreement that the checks would be redeemed with cash as they fell due.
postdating or issuing a check was done when the offender had no funds in the Hence, the checks were not intended by the parties to be modes of payment but
bank, or his funds deposited therein were not sufficient to cover the amount of only as promissory notes. Since complainant and his wife were well aware of
the check; 3. deceit or damage to the payee thereof. that fact, they cannot now complain there was deception on the part of
2. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable petitioners. Awareness by the complainant of the fictitious nature of the
Instruments; Words and Phrases; A check has the character of negotiability and pretense cannot give rise to estafa by means of deceit. When the payee was
at the same time it constitutes an evidence of indebtedness; A drawer who informed by the drawer that the checks are not covered by adequate funds it
issues a check as security or evidence of investment is not liable for estafa.- does not give rise to bad faith or estafa.
The first and third elements are not present in this case. A check has the 8. Criminal Law; Estafa (Swindling); Bouncing Checks; Persons are presumed to
character of negotiability and at the same time it constitutes an evidence of have taken care of their business.-
indebtedness. By mutual agreement of the parties, the negotiable character of a Complainant’s allegations that the two subject checks were issued in 1992 as
check may be waived and the instrument may be treated simply as proof of an payment for the jewelry he allegedly sold to petitioners is belied by the evidence
obligation. There cannot be deceit on the part of the obligor, petitioners herein, on record. First, com-plainant is not engaged in the sale of jewelry. Neither are
because they agreed with the obligee at the time of the issuance and postdating petitioners. If the pieces of jewelry were important to complainant considering
of the checks that the same shall not be encashed or presented to the banks. As that they were with him for more than twenty-five years already, he would not
per assurance of the lender, the checks are nothing but evidence of the loan or have easily parted with them in consideration for unfunded personal checks in
security thereof in lieu of and for the same purpose as a promissory note. By favor of persons whose means of living or source of income were unknown to
their own covenant, therefore, the checks became mere evidence of him. Applicable here is the legal precept that persons are presumed to have
indebtedness. It has been ruled that a drawer who issues a check as security or taken care of their business.
evidence of investment is not liable for estafa. 9. Criminal Law; Estafa (Swindling); Bouncing Checks; Evidence; Factual
3. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable findings of the trial court bind the Supreme Court; Exceptions.-
Instruments; In the absence of the essential element of deceit, no estafa is The rule that factual findings of the trial court bind this court is not absolute but
committed.- admits of exceptions such as when the conclusion is a finding grounded on
Mrs. Vicencio could not have been deceived nor defrauded by petitioners in speculation, surmise, and conjecture and when the findings of the lower court is
order to obtain the loans because she was informed that they no longer have premised on the absence of evidence and is contradicted by the evidence on
funds in their RCBC accounts. In 1992, when the Vicencio family asked Virginia to record. Based on the foregoing discussions, this Court is constrained to depart
place a date on the check, the latter again informed Mrs. Vicencio that their from the general rule. Equally applicable is what Vice-Chancellor Van Fleet once
account with RCBC was already closed as early as August 1989. With the said: “Evidence to be believed must not only proceed from the mouth of a
assurance, however, that the check will only stand as a firm evidence of credible witness but must be credible in itself—such as the common experience
indebtedness, Virginia placed a date on the check. Under these circumstances, and observation of mankind can approve as probable under the circumstances.
Mrs. Vicencio cannot claim that she was deceived or defrauded by petitioners in We have no test of the truth of human testimony, except its conformity to our
obtaining the loan. In the absence of the essential element of deceit, no estafa knowledge, observation and experience. Whatever is repugnant to these
was committed by petitioners. belongs to the miraculous, and is outside of judicial cognizance.”
4. Criminal Law; Estafa (Swindling); Bouncing Checks; Negotiable 10. Criminal Law; Estafa (Swindling); Bouncing Checks; An accused acquitted of
Instruments; A person in possession of a check has prima facie authority to a criminal charge may nevertheless be held civilly liable in the same case where
complete it by filling up the blanks therein.- the facts established by the evidence so warrant.-
Both courts below relied so much on the fact that Mrs. Vicencio’s husband is a Petitioners, however, are not without liability. An accused acquitted of a
former Judge who knows the law. He should have known, then, that he need not criminal charge may nevertheless be held civilly liable in the same case where
even ask the petitioners to place a date on the check, because as holder of the the facts established by the evidence so warrant. Based on the records, they still
have an outstanding obligation of P15,000.00 in favor of Mrs. Vicencio. There the obligations through the coprax delivered to petitioner’s father; and (2) that
was mention that the loan shall earn interests. However, an agreement as to petitioner owed and subsequently paid respondent P214,000.
payment of interest must be in writing, otherwise it cannot be valid, although
there was actual payment of interests by virtue of the advance deductions from Division: THIRD DIVISION
the loan. Once the judgment becomes final and executory, the amount due is
deemed equivalent to a forbearance of credit during the interim period from the Docket Number: G.R. No. 159048
finality of judgment until full payment, in which case it shall earn legal interest
at the rate of twelve percent (12%) per annum pursuant to Central Bank (CB) Counsel: Leonardo D. Suario, Cariaga Law Offices
Circular No. 416.
Ponente: PANGANIBAN
Division: FIRST DIVISION
Dispositive Portion:
Docket Number: G.R. No. 126670 WHEREFORE, the Petition is hereby DENIED,and the assailed Decision and
Resolution AFFIRMED.
Counsel: Acerey C. Pacheco

Ponente: YNARES-SANTIAGO Case Title : SPOUSES ANTONIO and LOLITA TAN, petitioners, vs. CARMELITO
VILLAPAZ, respondent.Case Nature : PETITION for review on certiorari of a
Dispositive Portion: decision of the Court of Appeals.
WHEREFORE, the assailed Decision is REVERSED and SET ASIDE. Petitioners are Syllabi Class : Obligations and Contracts|Statute of Frauds|Negotiable
ACQUITTED of the charge of estafa but they are ORDERED to pay Mrs. Vicencio Instruments|Checks
the amount of P15,000.00 without interest. However, from the time this Syllabi:
judgment becomes final and executory, the amount due shall earn legal interest 1. Obligations and Contracts; Statute of Frauds; Negotiable
of twelve percent (12%) per annum until full payment. Instruments; Checks; A check, the entries of which are no doubt in writing, could
prove a loan transaction.-
As for petitioners’ reliance on Art. 1358 of the Civil Code, the same is misplaced
Case Title : BENNY GO, petitioner, vs. ELIODORO BACARON, respondent.Case for the requirement that contracts where the amount involved exceeds P500.00
Nature : PETITION for review on certiorari of the decision and resolution of the must appear in writing is only for convenience. At all events, a check, the entries
Court of Appeals. of which are no doubt in writing, could prove a loan transaction.
Syllabi Class : Civil Law|Evidence|Mortgages|Loans|Sales|Words and
Phrases|Checks Division: THIRD DIVISION
Syllabi:
1. Civil Law; Mortgages; Loans; Sales; Article 1602 of the Civil Code cites Docket Number: G.R. No. 160892
instances in which a contract of sale is presumed to be an equitable mortgage.-
The instances in which a contract of sale is presumed to be an equitable Counsel: Dominguez, Paderna & Tan Law Offices, Rodolfo Ta-asan
mortgage are enumerated in Article 1602 of the Civil Code as follows: “Art.
1602. The contract shall be presumed to be an equitable mortgage, in any of the Ponente: CARPIO-MORALES
following cases: (1) When the price of a sale with right to repurchase is
unusually inadequate; (2) When the vendor remains in possession as lessee or Dispositive Portion:
otherwise; (3) When upon or after the expiration of the right to repurchase WHEREFORE, the present petition is DENIED.
another instrument extending the period of redemption or granting a new
period is executed; (4) When the purchaser retains for himself a part of the
purchase price; (5) When the vendor binds himself to pay the taxes on the thing
sold; (6) In any other case where it may be fairly inferred that the real intention CONCEPCION CHUA GAW, petitioner, vs. SUY BEN CHUA and FELISA CHUA,
of the parties is that the transaction shall secure the payment of a debt or the respondents.
performance of any other obligation. In any of the foregoing cases, any money,
fruits, or other benefit to be received by the vendee as rent or otherwise shall be Remedial Law; Evidence; Adverse Witnesses; The rule is that the plaintiff must
considered as interest which shall be subject to the usury laws.” rely on the strength of his own evidence and not upon the weakness of the
2. Civil Law; Mortgages; Loans; Sales; That the parties intended to enter into an defendant’s evidence; Preponderance of evidence is determined by considering
equitable mortgage is bolstered by respondent’s continued payment of the real all the facts and circumstances of the case, culled from the evidence regardless
property taxes subsequent to the alleged sale.- of who actually presented it.—The delineation of a piece of evidence as part of
That the parties intended to enter into an equitable mortgage is bolstered by the evidence of one party or the other is only significant in determining whether
respondent’s continued payment of the real property taxes subsequent to the the party on whose shoulders lies the burden of proof was able to meet the
alleged sale. Payment of those taxes is a usual burden attached to ownership. quantum of evidence needed to discharge the burden. In civil cases, that
Coupled with continuous possession of the property, it constitutes evidence of burden devolves upon the plaintiff who must establish her case by
great weight that a person under whose name the realty taxes were declared preponderance of evidence. The rule is that the plaintiff must rely on the
has a valid and rightful claim over the land. strength of his own evidence and not upon the weakness of the defendant’s
3. Civil Law; Mortgages; Loans; Sales; Words and Phrases; An equitable evidence. Thus, it barely matters who with a piece of evidence is credited. In the
mortgage has been defined “as one which although lacking in some formality, or end, the court will have to consider the entirety of the evidence presented by
form or words, or other requisites demanded by a statute, nevertheless reveals both parties. Preponderance of evidence is then determined by considering all
the intention of the parties to charge real property as security for a debt, and the facts and circumstances of the case, culled from the evidence, regardless of
contains nothing impossible or contrary to law.”- who actually presented it.
An equitable mortgage has been defined “as one which although lacking in Same; Same; Same; Under a rule permitting the impeachment of an adverse
some formality, or form or words, or other requisites demanded by a statute, witness, although the calling party does not vouch for the witness’ veracity, he
nevertheless reveals the intention of the parties to charge real property as is nonetheless bound by his testimony if it is not contradicted or remains
security for a debt, and contains nothing impossible or contrary to law.” unrebutted.—That the witness is the adverse party does not necessarily mean
4. Evidence; Checks; Checks presented by petitioner may indeed evince that the calling party will not be bound by the former’s testimony. The fact
respondent’s indebtedness to him in the amounts stated on the faces of those remains that it was at his instance that his adversary was put on the witness
instruments.- stand. Unlike an ordinary witness, the calling party may impeach an adverse
Checks have the character of negotiability. At the same time, they may witness in all respects as if he had been called by the adverse party, except by
constitute evidence of indebtedness. Those presented by petitioner may indeed evidence of his bad character. Under a rule permitting the impeachment of an
evince respondent’s indebtedness to him in the amounts stated on the faces of adverse witness, although the calling party does not vouch for the witness’
those instruments. He, however, acknowledges (1) that respondent paid some of
veracity, he is nonetheless bound by his testimony if it is not contradicted or Counsel: Dario, Reyes, Hocson & Viado
remains unrebutted.
Same; Same; Same; A party who calls his adversary as a witness is not bound by Ponente: ABAD
the latter’s testimony only in the sense that he may contradict him by
introducing other evidence to prove a state of facts contrary to what the Dispositive Portion:
witness testifies on.—A party who calls his adversary as a witness is, therefore, WHEREFORE, the Court GRANTS the petition, SETS ASIDE the Court of Appeals
not bound by the latter’s testimony only in the sense that he may contradict decision in CA-G.R. CV 88782 dated May 30, 2008 and resolution dated October
him by introducing other evidence to prove a state of facts contrary to what the 10, 2008 and the Regional Trial Court order in Civil Case 93-64350 dated
witness testifies on. A rule that provides that the party calling an adverse October 30, 2006, REMANDS the case to the same Regional Trial Court of
witness shall not be bound by his testimony does not mean that such testimony Manila for the reception of such evidence as may be needed to determine the
may not be given its proper weight, but merely that the calling party shall not actual amount of indebtedness of respondents Monet’s Export and
be precluded from rebutting his testimony or from impeaching him. This, the Manufacturing Corp. and the spouses Vicente V. Tagle, Sr. and Ma. Consuelo G.
petitioner failed to do. Tagle and adjudicate petitioner Land Bank of the Philippines’ claims as such
Same; Same; Best Evidence Rule; A notarized document carries evidentiary evidence may warrant.
weight as to its due execution and documents acknowledged before a notary
public have in their favor the presumption of regularity.—It is also worthy to
note that both the Deed of Partition and the Deed of Sale were acknowledged Republic of the Philippines
before a Notary Public. The notarization of a private document converts it into a SUPREME COURT
public document, and makes it admissible in court without further proof of its Manila
authenticity. It is entitled to full faith and credit upon its face. A notarized THIRD DIVISION
document carries evidentiary weight as to its due execution, and documents G.R. No. 193479 October 19, 2011
acknowledged before a notary public have in their favor the presumption of PEOPLE OF THE PHILIPPINES, plaintiff-appellee vs. BERNARD G. MIRTO, accused-
regularity. Such a document must be given full force and effect absent a strong, appellant.
complete and conclusive proof of its falsity or nullity on account of some flaws DECISION
or defects recognized by law. A public document executed and attested through VELASCO, JR., J.:
the intervention of a notary public is, generally, evidence of the facts therein The Case
express in clear unequivocal manner. This is an appeal from the Decision1 dated August 24, 2009 of the Court of
Same; Same; Same; The “best evidence rule” as encapsulated in Rule 130, Appeals (CA) in CA-G.R. CR-H.C. No. 03444, which affirmed the March 24, 2008
Section 3 of the Revised Rules of Civil Procedure applies only when the content Decision2 in Criminal Case Nos. 9034, 9115, 9117 and 9130 of the Regional Trial
of such document is the subject of the inquiry.—The “best evidence rule” as Court (RTC), Branch 5 in Tuguegarao City, Cagayan. The RTC found accused
encapsulated in Rule 130, Section 3, of the Revised Rules of Civil Procedure Bernard G. Mirto guilty beyond reasonable doubt of the crime of Qualified
applies only when the content of such document is the subject of the inquiry. Theft.
Where the issue is only as to whether such document was actually executed, or The Facts
exists, or on the circumstances relevant to or surrounding its execution, the Seven Informations for Qualified Theft were filed against the accused, docketed
best evidence rule does not apply and testimonial evidence is admissible. Any as Criminal Case Nos. 9034, 9115, 9117, 9120, 9123, 9126, and 9130. The
other substitutionary evidence is likewise admissible without need to account Informations similarly show how the offenses were allegedly committed,
for the original. Moreover, production of the original may be dispensed with, in differing only as to the dates of the commission, the number of bags of cement
the trial court’s discretion, whenever the opponent does not bona fide dispute involved, the particulars of the checks paid by the cement purchasers, the
the contents of the document and no other useful purpose will be served by amounts involved, and the depositary accounts used by accused. The
requiring production. [Gaw vs. Chua, 551 SCRA 505(2008)] Information for Criminal Case No. 9034 indicted accused, thus:
The undersigned City Prosecutor of Tuguegarao City accuses BERNARD G.
MIRTO of the crime of QUALIFIED THEFT, defined and penalized under Article
Case Title : LAND BANK OF THE PHILIPPINES, petitioner, vs. MONET’S EXPORT 310, in relation to Articles 308 and 309 of the Revised Penal Code, committed as
AND MANUFACTURING CORP., VICENTE V. TAGLE, SR. and MA. CONSUELO G. follows:
TAGLE, respondents.Case Nature : PETITION for review on certiorari of the That on June 21, 2001, in the City of Tuguegarao, Province of Cagayan and
decision and resolution of the Court of Appeals. within the jurisdiction of this Honorable Court, said accused BERNARD G.
Syllabi Class : Evidence|Banks and Banking MIRTO, being the Branch Manager of UCC-Isabela (Tuguegarao Area), with
Syllabi: intent to gain but without violence against or intimidation of persons nor force
1. Evidence; Documentary Evidence; Entries in the course of business are upon things, did then and there willfully, unlawfully and feloniously, with grave
accorded unusual reliability because their regularity and continuity are abuse of confidence and without the consent and knowledge of complainant,
calculated to discipline record keepers in the habit of precision.- UNION CEMENT CORPORATION, a duly organized Corporation operating under
—Under Section 43, Rule 130 of the Rules of Court, entries prepared in the existing laws, represented by REYNALDO S. SANTOS, Assistant Vice President –
regular course of business are prima facie evidence of the truth of what they Marketing/North Luzon, whose business address is located at 5th Floor
state. The billing statement reconciles the transaction entries entered in the Kalayaan Building, 164 Salcedo Street, Makati, Metro Manila, take, steal and
bank records in the regular course of business and shows the net result of such deposit into his personal Security Bank & Trust Co. (Tuguegarao Branch)
transactions. Entries in the course of business are accorded unusual reliability Account No. 0301261982001, the proceeds of 4,600 bags of Portland cement,
because their regularity and continuity are calculated to discipline record owned by herein complainant-Corporation, paid to him by the Philippine
keepers in the habit of precision. If the entries are financial, the records are Lumber located at Bonifacio Street, this City, in the form of Checks, namely:
routinely balanced and audited. In actual experience, the whole of the business METROBANK CHECK NOS. 103214898 and 1032214896, for P67,000.00 &
world function in reliance of such kind of records. P241,200.00, respectively, in the total amount of P308,200.00, which accused is
2. Same; Banks and Banking; The bank does not have to present all the receipts obligated to convey to the complainant-Union Cement Corporation represented
of payment it issued to all its clients during the entire year.- by its Vice-President-Marketing, REYNALDO S. SANTOS, to its loss, damage and
—The bank does not have to present all the receipts of payment it issued to all prejudice, in the aforesaid amount of THREE HUNDRED EIGHT THOUSAND TWO
its clients during the entire year, thousands of them, merely to establish the fact HUNDRED PESOS, (P308,200.00) Philippine Currency.
that only five of them, rather than ten, pertains to the borrower. The original Contrary to law.3
documents need not be presented in evidence when it is numerous, cannot be To summarize, the seven Informations showed the following details:
examined in court without great loss of time, and the fact sought to be Criminal Case
established from them is only the general result. Date of offense
Cement bags
Division: SECOND DIVISION Purchaser/Buyers
Check payments
Docket Number: G.R. No. 184971 Amount (PhP)
Checks deposited In
Total Amount were sold directly to them instead of to dealers with credit lines and that, as
(PhP) payment, they issued “Pay to Cash” checks pursuant to the instruction of the
9034 accused.
June 21, 2001 4,600 Philippine Lumber MBTC 103214898 AVP Santos and Dr. Francis Felizardo, Senior Vice-President (SVP) and Head of
67,000.00 SBTC 0301-261982-001 the Marketing Group of UCC, met with the accused at the UCC Sales Office in
MBTC 1032214896 Poro Point, San Fernando City, La Union. In that meeting, the accused admitted
241,200.00 SBTC 0301-261982-001 misusing company money, but pleaded to them not to terminate him as he was
308,200.00 willing to pay back the amount from his salary on installment. He also asked
9115 them not to file charges against him.
May 25, 2001 4,750 out Philippine Lumber MBTC 1030214835 In a Report dated August 8, 2001, the Group Internal Audit confirmed the
116,000.00 SBTC 0301-261982-001 veracity of the June 29, 2001 handwritten admission letter of the accused and
of 5,850 MBTC 1030214833 his July 20, 2001 Certification enumerating the names of the specific bank
116,000.00 SBTC 0301-261982-001 accounts, specific bank holders, and the banks wherein he had deposited the
MBTC 1030214836 funds of UCC-Tuguegarao City Branch. It appeared that the total unremitted
116,000.00 SBTC 0301-261982-001 collections of the accused from May 25, 2001 to June 23, 2001 amounted to
MBTC 1030214834 PhP 6,572,750.
79,750.00 SBTC 0301-261982-001 UCC found that the accused gravely abused the trust and confidence reposed
MBTC 1030214849 on him as Branch Manager and violated company policies, rules, and
58,000.00 MBTC 124-5 [Magno Lim] regulations. Specifically, he used the credit line of accredited dealers in favor of
MBTC 1030214848 persons who either had no credit lines or had exhausted their credit lines. He
87,000.00 MBTC 124-5 [Magno Lim] diverted cement bags from the company’s Norzagaray Plant or La Union Plant
MBTC 1030214847 to truckers who would buy cement for profit. In these transactions, he
116,000.00 MBTC 124-5 [Magno Lim] instructed the customers that payments be made in the form of “Pay to Cash”
688,750.00 checks, for which he did not issue any receipts. He did not remit the checks but
9117 these were either encashed or deposited to his personal bank account at
May 22, 2001 9,950 Mapalo Trucking PNB 0015659 Security Bank & Trust Co. (SBTC)-Tuguegarao City Branch with Account No.
616,100.00 SBTC 0301-261982-001 0301-261982-001 or to the accounts of a certain Magno Lim at MetroBank and
PNB 0015661 Equitable PCIBank, both in Tuguegarao City. Conchito Dayrit, Customer Service
597,800.00 SBTC 0301-261982-001 Officer and Representative of SBTC-Tuguegarao City, confirmed the findings of
1,213,900.00 the UCC internal auditors through the accused’s Statement of Account showing
9120 the various checks deposited to his account, and which subsequently cleared.
June 6, 2001 900 out of 5,100 Alonzo Trucking MBTC Upon arraignment on August 6, 2002, the accused entered a plea of “not guilty”
1140171726 113,400.00 MBTC 124-5 [Magno Lim] to the seven separate charges of qualified theft.5 Trial on the merits ensued.
113,400.00 The Ruling of the RTC
9123 On March 24, 2008, the RTC rendered its Decision, acquitting the accused in
June 22, 2001 2,700 out of 7,100 Mapalo Trucking [no details] Criminal Case Nos. 9120, 9123, and 9126, but finding him guilty beyond
123,300.00 [no details] reasonable doubt of committing Qualified Theft in Criminal Case Nos. 9034,
[no details] 9115, 9117, and 9130. The dispositive portion reads:
246,600.00 [no details] WHEREFORE, premises considered, the Court renders judgment thus:
369,900.00 1.In Criminal Case No. 9034: finding the accused GUILTY BEYOND REASONABLE
9126 DOUBT of the crime of qualified theft;
June 19, 2001 1,800 out of 7,100 Alonzo Trucking MBTC 2.In Criminal Case No. 9115: finding the accused GUILTY BEYOND REASONABLE
114071731 244,800.00 EPCIB 71820-8 [Magno Lim] DOUBT of the crime of qualified theft;
244,800.00 3.In Criminal Case No. 9117: finding the accused GUILTY BEYOND REASONABLE
9130 DOUBT of the crime of qualified theft;
June 27, 2001 500 Rommeleens Enterprises DBP 4.In Criminal Case No. 9120: finding the accused NOT GUILTY, as there is no
0000155348 68,500.00 SBTC 0301-261982-001 showing how he profited from deposits he made to the account of Mr. Magno
68,500.00 Lim;
Per records,4 the accused was branch manager of Union Cement Corporation 5.In Criminal Case No. 9123: finding the accused NOT GUILTY by reason of
(UCC) for the Tuguegarao City area. At the UCC office in Isabela, he shared an insufficiency of evidence;
office room with Restituto P. Renolo, Branch Manager for the province. On 6.In Criminal Case No. 9126: finding the accused NOT GUILTY BEYOND
June 29, 2001, at about noon, the accused confided to Renolo that he had REASONABLE DOUBT of the crime of qualified theft;
misappropriated company funds. Renolo advised him to explain his misdeeds in 7.In Criminal Case No. 9130: finding the accused GUILTY BEYOND REASONABLE
writing to Assistant Vice-President and Head of UCC-North Luzon Reynaldo S. DOUBT of the crime of qualified theft.
Santos (AVP Santos). In view of the foregoing, in the imposition of the penalties upon the accused,
Later that day, at about 5:00 p.m., the accused told Renolo that he would be this Court is guided by the following doctrinal pronouncement of the Supreme
going to Tuguegarao City. Just before Renolo left the office, he saw on the Court in People v. [Mercado], G.R. No. 143676, February 12, 2003:
accused’s table a piece of partly-folded paper, which turned out to be a “Appellant asserts that the trial court erred in applying the proper penalty. As
handwritten letter of the accused to AVP Santos, in which he admitted taking reasoned by appellant, the penalty for Qualified Theft under Article 310 of the
company funds and enumerated the particular accounts and amounts involved. Revised Penal Code is prision mayor in its minimum and medium periods, raised
Renolo took the letter home, read it over the phone to AVP Santos at about by two degrees. Hence, the penalty high by two degrees should be reclusion
7:00 p.m., and faxed it to AVP Santos the following day. temporal in its medium and maximum periods and not reclusion perpetua as
AVP Santos, in turn, sent a copy of the letter to the top management of UCC, imposed by the trial court. Being a divisible penalty, the Indeterminate
which then instructed the Group Internal Audit of the Phinma Group of Sentence Law could then be applied.
Companies to conduct a special audit of the UCC-Tuguegarao City Branch. On the other hand, [appellee] cites the cases of People v. Reynaldo Bago and
Antonio M. Dumalian, AVP and Head of the Group Internal Audit, organized the People v. Cresencia C. Reyes to show that the trial court properly imposed the
audit team composed of Onisimo Prado, as head, with Emmanuel R. Reamico, penalty of reclusion perpetua.
Adeodato M. Logronio, and Glenn Agustin, as members. We agree with the appellee that the trial court imposed the proper penalty.”
The audit team conducted the special audit of the UCC-Tuguegarao City Branch In accordance with the doctrine laid down in People v. Mercado, the accused is
from July 3 to July 25, 2001. They interviewed several cement buyers/dealers, hereby sentenced to suffer the penalty of RECLUSION PERPETUA. Accused is
among them Wilma Invierno of Rommeleen’s Enterprises, Arthur Alonzo of ordered to restitute the private complainant the total amount of TWO MILLION
Alonzo Trucking, Robert Cokee of Philippine Lumber, and Russel Morales of TWO HUNDRED SEVENTY NINE THOUSAND THREE HUNDRED FIFTY PESOS (Php
Mapalo Trucking. All four executed affidavits attesting that UCC cement bags
2,279,350.00) covering the amount represented by the checks involved in these 1.Any person who, having found lost property, shall fail to deliver the same to
cases. the local authorities or to its owner;
Set the promulgation of this Decision on 15 April 2008, at 8:30 o’clock in the 2.Any person who, after having maliciously damaged the property of another,
morning. shall remove or make use of the fruits or objects of the damage caused by him;
SO ORDERED.6In convicting the accused, the RTC relied on his admission when and
he testified on February 15, 2007 and his Memorandum of the fact of his having 3.Any person who shall enter an enclosed estate or a field where trespass is
deposited the checks payments from UCC cement sales in his personal account forbidden or which belongs to another and without the consent of its owner,
with SBTC, Tuguegarao City Branch. Contrary to the accused’s argument, the shall hunt or fish upon the same or shall gather fruits, cereals, or other forest or
RTC found that he did not hold his collections in trust for UCC, since he was farm products.
never authorized by UCC to retain and deposit checks, as testified to by AVP Thus, the elements of the crime of Theft are: (1) there was a taking of personal
Santos. Moreover, the RTC found fatal to accused’s defense his handwritten property; (2) the property belongs to another; (3) the taking was without the
letter, dated June 29, 2001, addressed to AVP Santos, which reads in part, “Sir, I consent of the owner; (4) the taking was done with intent to gain; and (5) the
regret to say that a total amount of PhP 6,380,650.00 was misused by me for taking was accomplished without violence or intimidation against the person or
various reasons,”7 which the accused admitted to in open court during his force upon things.13
testimony on February 15, 2007. Theft is qualified under Art. 310 of the RPC, when it is, among others,
Aggrieved, accused appealed his conviction before the CA. committed with grave abuse of confidence, thus:
The Ruling of the CA ART. 310. Qualified Theft.—The crime of theft shall be punished by the
On August 24, 2009, the appellate court rendered the appealed decision, penalties next higher by two degrees than those respectively specified in the
affirming the findings of the RTC and the conviction of accused-appellant. The next preceding article, if committed by a domestic servant, or with grave abuse
fallo reads: of confidence, or if the property stolen is motor vehicle, mail matter or large
WHEREFORE, premises considered, the Decision of the Regional Trial Court of cattle or consists of coconuts taken from the premises of a plantation, fish
Tuguegarao City, Cagayan, Branch 5, in Criminal Case Nos. 9034, 9115, 9117 and taken from a fishpond or fishery or if property is taken on the occasion of fire,
9130, dated March 24, 2008 and promulgated on April 15, 2008, finding earthquake, typhoon, volcanic eruption, or any other calamity, vehicular
accused-appellant guilty beyond reasonable doubt of the crime of Qualified accident or civil disturbance. (Emphasis supplied.)
Theft is hereby AFFIRMED and UPHELD. The elements of Qualified Theft committed with grave abuse of confidence are
With costs against the accused-appellant. as follows:
SO ORDERED.8 1.Taking of personal property;
Accused-appellant argued that, first, the Informations indicting him for 2. That the said property belongs to another;
Qualified Theft did not adequately inform him of the nature of the offense 3.That the said taking be done with intent to gain;
charged against him; and second, he had juridical possession of the subject 4.That it be done without the owner’s consent;
checks, not merely material possession; hence, the qualifying circumstance of 5.That it be accomplished without the use of violence or intimidation against
“grave abuse of confidence” cannot be appreciated against him. persons, nor of force upon things;
The CA, however, found that accused-appellant only had material possession of 6. That it be done with grave abuse of confidence.14 (Emphasis supplied.)
the checks and not juridical possession9 as these checks payments were made All of the foregoing elements for Qualified Theft are present in this case.
to UCC by its customers and accused-appellant had no right or title to possess First. The presence of the first and second elements is abundantly clear. There
or retain them as against UCC. The fact that accused-appellant was obliged, as can be no quibble that the fund collections through checks payments—all
per company policy, to immediately turn over to UCC the payments he received issued payable to cash—are personal properties belonging to UCC. These funds
from UCC customers was attested to by the prosecution witness, UCC Branch through checks were paid by UCC clients for the deliveries of cement from UCC.
Manager Renolo. Thus, the CA concluded that there was neither a principal- One with the courts a quo, We will not belabor this point in the fifth argument
agent relationship between UCC and accused-appellant nor was accused- raised by accused-appellant.
appellant allowed to open a personal account where UCC funds would be
deposited and held in trust for UCC. Second. The third element is likewise abundantly clear. The collected amounts
Hence, We have this appeal. subject of the instant case belonged to UCC and not to accused-appellant.
The Office of the Solicitor General, representing the People of the Philippines, When accused-appellant received them in the form of “Pay to Cash” checks
submitted a Manifestation and Motion,10 opting not to file any supplemental from UCC customers, he was obliged to turn them over to UCC for he had no
brief, there being no new issues raised nor supervening events transpired. right to retain them. That he kept the checks and deposited them in his account
Accused-appellant manifested also not to file a supplemental brief.11 Thus, in and in the accounts of Magno Lim knowing all the while that these checks and
resolving the instant appeal, We consider the sole issue and arguments their proceeds were not his only proves the presence of unlawful taking.
accused-appellant earlier raised in his Brief for the Accused-Appellant before As the trial court aptly pointed out, accused-appellant’s theory that he only kept
the CA.Accused-appellant raises the same sole assignment of error already the funds in trust for UCC with the elaborate explanation that once the checks
passed upon and resolved by the CA, in that “THE TRIAL COURT ERRED IN cleared in his account then he remits them to UCC is completely incredulous.
CONCLUDING THAT, BASED ON THE EVIDENCE, THE ACCUSED IS GUILTY OF For one, accused-appellant has not adduced evidence that he indeed remitted
QUALIFIED THEFT.”12 the funds once the corresponding checks were cleared. For another, accused-
The Court’s Ruling appellant could not explain why he deposited some of the checks he collected
The appeal is bereft of merit. in the accounts of Magno Lim in MetroBank (MBTC Account No. 124-5) and
Accused-appellant argues that the prosecution failed: Equitable PCIBank (EPCIB Account No. 71820-8). Moreover, accused-appellant’s
(a)To establish that he had material possession of the funds in question; contention of such alleged management practice15 is unsupported by any
(b)To refute the authority given to him by UCC; evidence showing that prior to the events in mid-2001 there was indeed such a
(c)To establish the element of “taking” under Art. 308 of the Revised Penal Code practice of depositing check collections and remitting the proceeds once the
(RPC); checks cleared.
(d)To establish that the funds were taken without the consent and knowledge Third. The element of intent to gain is amply established through the
of UCC; affidavit16of Wilma Invierno of Rommeleen’s Enterprises, one of UCC’s
(e)To establish the element of “personal property” under Art. 308 of the RPC; customers, who confirmed that she had been sold cement bags instead of to
and dealers with credit lines and she was required by accused-appellant to issue
(f)To establish, in sum, the ultimate facts constitutive of the crime of Qualified “pay to cash” checks as payment. The affidavits of Arthur Alonzo17 of Alonzo
Theft under Art. 310, in relation to Art. 308, of the RPC. Trucking, Robert Cokee18 of Philippine Lumber, and Russel Morales19 of
For being closely related, We will discuss together the arguments thus raised. Mapalo Trucking similarly attested to the same type of sale and payment
Article 308 of the Revised Penal Code (RPC), which defines Theft, provides: arrangement. In so doing, accused-appellant facilitated the collection of “pay to
ART. 308. Who are liable for theft.—Theft is committed by any person who, cash” checks which he deposited in his bank account and in the bank accounts
with intent to gain but without violence, against, or intimidation of persons nor of Magno Lim. Thus, the fourth element of intent to gain is duly proved.
force upon things, shall take personal property of another without the latter’s Fourth. Equally clear and undisputed is the presence of the fifth element.
consent. Accused-appellant admitted having received these checks and depositing them
Theft is likewise committed by: in his personal account and in the accounts of Magno Lim. Thus, the element of
taking was accomplished without the use of violence or intimidation against line. He diverted cement bags from Norzagaray Plant or La Union Plant to
persons, nor of force upon things. truckers who would buy cement for profit. In these transactions, he instructed
Fifth. That UCC never consented to accused-appellant’s depositing the checks dealers that check be made in the form of “pay to cash”. He did not issue them
he collected in his or other accounts is demonstrated by the immediate action receipts. The checks were either encashed or deposited to accused-appellant’s
UCC took upon being apprised of the misappropriation and accused-appellant’s personal account No. 0301-261982-001 at Security Bank & Trust Co. (SBTC)
confession letter. UCC lost no time in forming a special audit group from the Tuguegarao Branch or deposited to the accounts of a certain Mr. Magno Lim
Group Internal Audit of Phinma Group of Companies. The special audit group maintained at MetroBank and EquitablePCIBank, both located at Tuguegarao
conducted an internal audit from July 3 to 25, 2001 and submitted a Special City.29 (Emphasis supplied.)
Audit Report20 dated August 8, 2001, showing that the total unremitted It is, thus, clear that accused-appellant committed Qualified Theft. And as duly
collections of accused-appellant from the period covering May 25, 2001 pointed out above, even considering the absence of the handwritten
through June 23, 2001 amounted to PhP 6,572,750.AVP Santos and UCC SVP extrajudicial admission of accused-appellant, there is more than sufficient
and Head of Marketing Group Dr. Felizardo met with accused-appellant who evidence adduced by the prosecution to uphold his conviction. As aptly pointed
admitted misappropriating company funds. AVP Santos testified21in open out by the trial court, the prosecution has established the following:
court on what transpired in that meeting and accused-appellant’s verbal 1.That checks of various customers of UCC were written out as bearer
admission/confession. And with the findings of the auditors that not only did instruments. Payments in cash were also made.
accused-appellant unlawfully take UCC funds but he also committed the offense 2.These were received by the accused Mirto who deposited them in his
of violating company policies, rules, and regulations, UCC was compelled to file personal account as well as in the account of Mr. Magno Lim.
seven criminal complaints against accused-appellant. This swift and prompt 3.The monies represented by the checks and the case payments were
action undertaken by UCC argues against the notion that it consented to consideration for bags of cement purchased from the UCC, the complainant-
accused-appellant’s act of depositing of check proceeds from company sales of corporation.
cement products in his account or in the accounts of Magno Lim. Sixth. That
accused-appellant committed the crime with grave abuse of confidence is clear. 4.The accused Mirto was never authorized nor was it part of his duties as
As gathered from the nature of his position, accused-appellant was a credit and branch manager to deposit these proceeds in his account or in the account of
collection officer of UCC in the Cagayan-Isabela area. His position entailed a Mr. Magno Lim.30
high degree of confidence, having access to funds collected from UCC clients. In
People v. Sison,22 involving a Branch Operation Officer of Philippine Defense of Agency Unavailing
Commercial International Bank (PCIB), the Court upheld the appellant’s As his main defense, accused-appellant cites the testimonies of prosecution
conviction of Qualified Theft, holding that “the management of the PCIB witnesses Restituto Renolo and Reynaldo Santos to impress upon the Court that
reposed its trust and confidence in the appellant as its Luneta Branch Operation he is an agent of UCC. And as an agent, so he claims, an implied trust is
Officer, and it was this trust and confidence which he exploited to enrich constituted by his juridical possession of UCC funds from the proceeds of
himself to the damage and prejudice of PCIB x x x.”23 In People v. Mercado,24 cement sales:
involving a manager of a jewelry store, the Court likewise affirmed the ATTY. CARMELO Z. LASAM: Mr. Renolo, can you tell us the specific duties and
appellant’s conviction of Qualified Theft through grave abuse of confidence. responsibilities of your area sales managers?
In the instant case, it is clear how accused-appellant, as Branch Manager of UCC RESTITUTO RENOLO: The duties and responsibilities of an area sales officer, we
who was authorized to receive payments from UCC customers, gravely abused are in charge of the distribution of our products, cement and likewise its
the trust and confidence reposed upon him by the management of UCC. collection of its sales.31
Precisely, by using that trust and confidence, accused-appellant was able to xxxx
perpetrate the theft of UCC funds to the grave prejudice of the latter. To ATTY. RAUL ORACION: Okay, now as Assistant Vice-President for Marketing and
repeat, the resulting report of UCC’s internal audit showed that accused- supervisor of all area sales offices and branch managers, could you tell the
appellant unlawfully took PhP 6,572,750 of UCC’s funds. duties and responsibilities of the accused Bernard Mirto at that time?
The courts a quo’s finding that accused-appellant admitted misappropriating REYNALDO SANTOS: x x x, also collect sales and for the cash for the collection
UCC’s funds through the appropriation of the subject checks is buttressed by of our sales.32
the testimonies of Renolo and Santos,25 who heard and understood accused- To accused-appellant, he had authority to collect and accept payments from
appellant’s extrajudicial confession. True enough, they were competent to customers, and was constituted an agent of UCC. As collection agent of UCC, he
testify as to the substance of what they heard from accused-appellant—his asserts he can hold the collections in trust and in favor of UCC; and that he is a
declaration expressly acknowledging his guilt to the offense—that may be given trustee of UCC and, therefore, has juridical possession over the collected funds.
in evidence against him.26That he deposited most of the subject checks in his Consequently, accused-appellant maintains there was no unlawful taking, for
account was proved by accused-appellant’s statement of account with SBTC such taking was with the knowledge and consent of UCC, thereby negating the
(Account No. 0301-261982-001) through the testimony of Conchito Dayrit, the elements of taking personal property and without the owner’s consent
Customer Service Officer and representative of SBTC-Tuguegarao City necessary in the crime of Qualified Theft.
Branch.27Moreover, accused-appellant issued a written certification28 dated This contention fails.
July 20, 2001, attesting to the fact of the ownership of the bank accounts where The duty to collect payments is imposed on accused-appellant because of his
he deposited the checks he collected from UCC clients, which reads: position as Branch Manager. Because of this employer-employee relationship,
07/20/01 he cannot be considered an agent of UCC and is not covered by the Civil Code
To whom it may concern: provisions on agency. Money received by an employee in behalf of his or her
This is to certify that to my knowledge, the owner of the following bank employer is considered to be only in the material possession of the
accounts are as follows: employee.33
Bank accountOwner The fact that accused-appellant had authority to accept payments from
SBC – TUG 0301261982001B. G. Mirto customers does not give him the license to take the payments and deposit them
MBTC – TUG 124-5Magno Lim to his own account since juridical possession is not transferred to him. On the
EPCI – TUG 71320-8Magno Lim contrary, the testimony he cites only bolsters the fact that accused-appellant is
This certification is issued for whatever purpose it may serve. an official of UCC and had the trust and the confidence of the latter and,
(Sgd.) Bernard G. Mirto7/20/01 therefore, could readily receive payments from customers for and in behalf of
Signature over printed name date said company.
Further, as can be amply gleaned from accused-appellant’s handwritten Proper Penalty
admission and duly borne out by the internal audit team’s findings, he The trial court, as affirmed by the appellate court, sentenced accused-appellant
deliberately used a scheme to perpetrate the theft. This was aptly pointed out to restitute UCC the aggregate amount of PhP 2,279,350, representing the
by the CA, which We reproduce for clarity: amount of the checks involved here. The trial court also imposed the single
UCC found that accused-appellant gravely abused the trust and confidence penalty of reclusion perpetua. Apparently, the RTC erred in imposing said single
reposed on him as Branch Manager and violated company policies, rules and penalty, and the CA erred in affirming it, considering that accused-appellant had
regulations. He did not remit collections from customers who paid “Pay to been convicted on four (4) counts of qualified theft under Criminal Case Nos.
Cash” checks. He used the credit line of accredited dealers in favor of persons 9034, 9115, 9117 and 9130. Consequently, accused-appellant should have been
who did not have credit lines or other dealers who had exhausted their credit accordingly sentenced to imprisonment on four counts of qualified theft with
the appropriate penalties for each count. Criminal Case No. 9034 is for PhP G.R. No. 109595, April 27, 2000, 331 SCRA 1, 13, cited in Matrido v. People, G.R.
308,200, Criminal Case No. 9115 is for PhP 688,750, Criminal Case No. 9117 is No. 179061, July 13, 2009, 592 SCRA 534, 544).
for PhP 1,213,900, and Criminal Case No. 9130 is for 68,500 for the aggregate 10 Rollo, pp. 25-27, dated January 6, 2011.
amount of PhP 2,279,350. 11 Id. at 39-40, Manifestation and Motion dated April 18, 2011.
Now to get the proper penalty for each count, We refer to People v. 12 Id. at 41.
Mercado,34 where We established that the appropriate penalty for Qualified 13 Cruz v. People, G.R. No. 176504, September 3, 2008, 564 SCRA 99, 110; citing
Theft is reclusion perpetua based on Art. 310 of the RPC, which provides that People v. Bago, G.R. No. 122290, April 6, 2000, 330 SCRA 115, 138-139.
“[t]he crime of [qualified] theft shall be punished by the penalties next higher 14 People v. Puig, G.R. Nos. 173654-765, August 28, 2008, 563 SCRA 564, 570;
by two degrees than those respectively specified in [Art. 309] x x x.” (Emphasis Roque v. People, G.R. No. 138954, November 25, 2004, 444 SCRA 98, 120.
supplied.) Applying the computation made in People v. Mercado to the 15 Rollo, p. 61.
present case to arrive at the correct penalties, We get the value of the property 16 Records, Folder of “Formal Offer of Prosecution’s Evidence,” p. 39, Exhibit
stolen as determined by the trial court, which are PhP 308,200, PhP 688,750, “N.”
PhP 1,213,900 and PhP 68,500. Based on Art. 30935 of the RPC, “since the 17 Id. at 35, Exhibit “K.”
value of the items exceeds P22,000.00, the basic penalty is prision mayor in its 18 Id. at 253-254, Exhibit “Z.”
minimum and medium periods to be imposed in the maximum period, which is 19 Id. at 264-265, Exhibit “II.”
8 years, 8 months and 1 day to 10 years of prision mayor.”36 20 Id. at 39-50, Exhibit “O.”
And in order to determine the additional years of imprisonment, following 21 TSN, November 17, 2004.
People v. Mercado, We deduct PhP 22,000 from each amount and each 22 G.R. No. 123183, January 19, 2000, 322 SCRA 345.
difference should then be divided by PhP 10,000, disregarding any amount less 23 Id. at 364-365.
than PhP 10,000. We now have 28 years, 66 years, 119 years and 4 years, 24 G.R. No. 143676, February 19, 2003, 397 SCRA 746.
respectively, that should be added to the basic penalty. But the imposable 25 Testimony of Restituto Renolo, TSN, September 23, 2003; testimony of
penalty for simple theft should not exceed a total of 20 years. Therefore, had Reynaldo Santos, TSN, November 17, 2004.
accused-appellant committed simple theft, the penalty for each of Criminal 26 People v. Mercado, supra note 24, at 752-753; citing People v. Maqueda,
Case Nos. 9034, 9115 and 9117 would be 20 years of reclusion temporal; while G.R. No. 112983, March 22, 1995, 242 SCRA 565, 590.
Criminal Case No. 9130 would be from 8 years, 8 months and 1 day of prision 27 TSN, July 27, 2006, pp. 28-29.
mayor, as minimum, to 14 years of reclusion temporal, as maximum, before the 28 Records, Folder of “Formal Offer of Prosecution’s Evidence,” p. 28, Exhibit
application of the Indeterminate Sentence Law. However, as the penalty for “B.”
Qualified Theft is two degrees higher, the correct imposable penalty is reclusion 29 Rollo, pp. 4-5.
perpetua for each count. 30 CA rollo, pp. 25-26.
In fine, considering that accused-appellant is convicted of four (4) counts of 31 TSN, September 23, 2003, p. 26.
Qualified Theft with corresponding four penalties of reclusion perpetua, Art. 70 32 TSN, November 17, 2004, p. 27.
of the RPC on successive service of sentences shall apply. Art. 70 pertinently 33 Matrido v. People, G.R. No. 179061, July 13, 2009, 592 SCRA 534, 543.
provides that “the maximum duration of the convict’s sentence shall not be 34 Supra note 24.
more than threefold the length of time corresponding to the most severe of the 35 Art. 309(1) of the RPC on simple theft provides:
penalties imposed upon him. No other penalty to which he may be liable shall 1. The penalty of prision mayor in its minimum and medium periods, if the value
be inflicted after the sum total of those imposed equals the said maximum of the thing stolen is more than 12,000 pesos but does not exceed 22,000
period. Such maximum period shall in no case exceed forty years.” Applying pesos; but if the value of the thing stolen exceeds the latter amount, the
said rule, despite the four penalties of reclusion perpetua for four counts of penalty shall be the maximum period of the one prescribed in this paragraph,
Qualified Theft, accused-appellant shall suffer imprisonment for a period not and one year for each additional ten thousand pesos, but the total of the
exceeding 40 years. penalty which may be imposed shall not exceed twenty years. In such cases,
WHEREFORE, the appeal is hereby DENIED. The appealed CA Decision dated and in connection with the accessory penalties which may be imposed and for
August 24, 2009 in CA-G.R. CR-H.C. No. 03444 is AFFIRMED with MODIFICATION the purpose of the other provisions of this Code, the penalty shall be termed
in that accused-appellant Bernard G. Mirto is convicted of four (4) counts of prision mayor or reclusion temporal, as the case may be.
Qualified Theft and accordingly sentenced to serve four (4) penalties of 36 People v. Mercado, supra note 24, at 758. [People vs. Mirto, G.R. No.
reclusion perpetua. But with the application of Art. 70 of the RPC, accused- 193479(2011)]
appellant shall suffer the penalty of imprisonment for a period not exceeding 40
years.
Costs against accused-appellant. Case Title : TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS
SO ORDERED. GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES,
VELASCO, JR., J., Chairperson, PERALTA, ABAD, MENDOZA, and PERLAS- respondents.Case Nature : PETITION for review on certiorari of a decision of the
BERNABE, JJ. Court of Appeals.
Syllabi Class : Loans|Corporation Law|Sales|Negotiable
Instruments|Certificates of Indebtedness|Bonds|Words and Phrases|Piercing
the Veil of Corporate Fiction
Syllabi:
_____________________ 1. Loans; Negotiable Instruments; Certificates of Indebtedness; Bonds; Words
1 Rollo, pp. 2-14. Penned by Associate Justice Martin S. Villarama, Jr. (now a and Phrases; A certificate of indebtedness which pertains to certificates for the
member of this Court) and concurred in by Associate Justices Magdangal M. de creation and maintenance of a permanent improvement revolving fund, is
Leon and Ricardo R. Rosario. similar to a “bond.”-
2 CA rollo, pp. 15-28. Penned by Presiding Judge Jezarene C. Aquino. Properly understood, a certificate of indebtedness pertains to certificates for the
3 Records, Vol. 1, p. 1. creation and maintenance of a permanent improvement revolving fund, and is
4 Rollo, pp. 3-5. similar to a “bond,” (82 Minn. 202). Being equivalent to a bond, it is properly
5 Records, Vol. 1, p. 38. understood as an acknowledgment of an obligation to pay a fixed sum of
6 CA rollo, pp. 26-28. money. It is usually used for the purpose of long term loans.
7 Records, Folder of “Formal Offer of Prosecution’s Evidence,” pp. 27-28, Exhibit 2. Loans; Negotiable Instruments; Certificates of Indebtedness; The language
“A.” of negotiability which characterizes a negotiable paper as a credit instrument is
8 Rollo, p. 14. its freedom to circulate as a substitute for money.-
9 [It is well-settled that when the money, goods, or any other personal property The language of negotiability which characterize a negotiable paper as a credit
is received by the offender from the offended party in trust or on commission instrument is its freedom to circulate as a substitute for money. Hence, freedom
or for administration, the offender acquires both material or physical of negotiability is the touchstone relating to the protection of holders in due
possession and juridical possession of the thing received.] Juridical possession course, and the freedom of negotiability is the foundation for the protection
means a possession which gives the transferee a right over the thing which the which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This
transferee may set up even against the owner (Chua-Burce v. Court of Appeals, freedom in negotiability is totally absent in a certificate of indebtedness as it
merely acknowledges to pay a sum of money to a specified person or entity for a respondents.Case Nature : PETITION for review on certiorari of a decision of the
period of time. Court of Appeals.
3. Corporation Law; Piercing the Veil of Corporate Fiction; Piercing the veil of Syllabi Class : Commercial Law|Banks and Banking
corporate entity requires the court to see through the protective shroud which Syllabi:
exempts its stockholders from liabilities that ordinarily, they could be subject to, 1. Commercial Law; Banks and Banking; A bank is under obligation to treat the
or distinguishes one corporation from a seemingly separate one, were it not for accounts of its depositors with meticulous care, whether such account consists
the existing corporate fiction.- only of a few hundred pesos or of millions of pesos.-
Petitioner cannot put up the excuse of piercing the veil of corporate entity, as A bank is under obligation to treat the accounts of its depositors with meticulous
this is merely an equitable remedy, and may be awarded only in cases when the care, whether such account consists only of a few hundred pesos or of millions of
corporate fiction is used to defeat public convenience, justify wrong, protect pesos. The fact that the other withdrawal slips were honored and paid by
fraud or defend crime or where a corporation is a mere alter ego or business respondent bank was no license for Citibank to presume that subsequent slips
conduit of a person. Piercing the veil of corporate entity requires the court to see would be honored and paid immediately. By doing so, it failed in its fiduciary
through the protective shroud which exempts its stockholders from liabilities duty to treat the accounts of its clients with the highest degree of care.
that ordinarily, they could be subject to, or distinguishes one corporation from a
seemingly separate one, were it not for the existing corporate fiction. But to do Docket Number: G.R No. 113236
this, the court must be sure that the corporate fiction was misused, to such an
extent that injustice, fraud, or crime was committed upon another, disregarding, Counsel: Sycip, Salazar, Hernandez & Gatmaitan, Cao Law Office
thus, his, her, or its rights. It is the protection of the interests of innocent third
persons dealing with the corporate entity which the law aims to protect by this Ponente: QUISUMBING
doctrine.
4. Corporation Law; Piercing the Veil of Corporate Fiction; Mere ownership by a Dispositive Portion:
single stockholder or by another corporation of all or nearly all of the capital WHEREFORE, the petition is DENIED and the decision of the Court of Appeals in
stock of a corporation is not of itself a sufficient reason for disregarding the CA-G.R. CV No. 29546 is AFFIRMED. Costs against petitioner.
fiction of separate corporate personalities.-
Though it is true that when valid reasons exist, the legal fiction that a
corporation is an entity with a juridical personality separate from its Case Title : ASTRO ELECTRONICS CORP. and PETER ROXAS, petitioners, vs.
stockholders and from other corporations may be disregarded, in the absence of PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION,
such grounds, the general rule must be upheld. The fact that Philfinance owns respondent.Case Nature : PETITION for review on certiorari of a decision of the
majority shares in Filriters is not by itself a ground to disregard the independent Court of Appeals.
corporate status of Filriters. In Liddel Co., Inc. vs. Collector of Internal Revenue, Syllabi Class : Negotiable Instruments Law|Civil Law|Promissory
the mere ownership by a single stockholder or by another corporation of all or Note|Parties|Maker|Obligations|Subrogation|Legal Subrogation
nearly all of the capital stock of a corporation is not of itself a sufficient reason Syllabi:
for disregarding the fiction of separate corporate personalities. 1. Negotiable Instruments Law; Promissory Note; Parties; Maker; Persons
5. Corporation Law; Piercing the Veil of Corporate Fiction; An entity which writing their names on face of promissory notes are makers.-
deals with corporate agents within circumstances showing that the agents are Under the Negotiable Instruments Law, persons who write their names on the
acting in excess of corporate authority may not hold the corporation liable.- face of promissory notes are makers, promising that they will pay to the order of
Petitioner, being a commercial bank, cannot feign ignorance of Central Bank the payee or any holder according to its tenor.
Circular 769, and its requirements. An entity which deals with corporate agents 2. Civil Law; Obligations; Subrogation; Legal Subrogation; Legal subrogation is
within circumstances showing that the agents are acting in excess of corporate that which takes place by operation of law.-
authority, may not hold the corporation liable. This is only fair, as everyone Subrogation is the transfer of all the rights of the creditor to a third person, who
must, in the exercise of his rights and in the performance of his duties, act with substitutes him in all his rights. It may either be legal or conventional. Legal
justice, give everyone his due, and observe honesty and good faith. subrogation is that which takes place without agreement but by operation of
6. Sales; Where the sale from one person to another was fictitious, as there was law because of certain acts. Instances of legal subrogation are those provided in
no consideration, and therefore void and inexistent, the latter has no title to Article 1302 of the Civil Code. Conventional subrogation, on the other hand, is
convey to third persons.- that which takes place by agreement of the parties.
The transfer made by Filriters to Philfinance did not conform to the said Central 3. Civil Law; Obligations; Subrogation; Legal Subrogation; Knowledge of debtor
Bank Circular, which for all intents, is considered part of the law. As found by the not necessary.-
courts a quo, Alfredo O. Banaria, who had signed the deed of assignment from Roxas’ acquiescence is not necessary for subrogation to take place because the
Filriters to Philfinance, purportedly for and in favor of Filriters, did not have the instant case is one of legal subrogation that occurs by operation of law, and
necessary written authorization from the Board of Directors of Filriters to act for without need of the debtor’s knowledge.
the latter. As it is, the sale from Filriters to Philfinance was fictitious, and
therefore void and inexistent, as there was no consideration for the same. This is Division: SECOND DIVISION
fatal to the petitioner’s cause, for then, Philfinance had no title over the subject
certificate to convey to Traders Royal Bank. Nemo potest nisi quod de jure Docket Number: G.R. No. 136729
potest—no man can do anything except what he can do lawfully.
Counsel: Manuel Q. Molina, Office of the Government Corporate Counsel,
Division: SECOND DIVISION Isabelo G. Gumaru

Docket Number: G.R. No. 93397 Ponente: AUSTRIA-MARTINEZ

Counsel: Gonzales, Sinense, Jimenez & Associates, Jaime M. Cabiles, Ruben L. Dispositive Portion:
Almadro WHEREFORE, finding no error with the decision of the Court of Appeals dated
December 10, 1998, the same is hereby AFFIRMED in toto.
Ponente: TORRES, JR.

Dispositive Portion: Case Title : ROMEO C. GARCIA, petitioner, vs. DIONISIO V. LLAMAS,
ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated respondent.Case Nature : PETITION for review on certiorari of the decision and
January 29, 1990 is hereby AFFIRMED. resolution of the Court of Appeals.
Syllabi Class : Civil Law|Commercial
Law|Actions|Obligations|Extinguishment|Novation|Kinds|Elements|Proof|Ne
Case Title : FIRESTONE TIRE & RUBBER COMPANY OF THE PHILIPPINES, gotiable Instruments Law|Promissory Notes|Accommodation Party|Pleadings
petitioner, vs. COURT OF APPEALS and LUZON DEVELOPMENT BANK, and Practice|Summary Judgment|Judgment on the Pleadings
Syllabi:
1. Civil Law; Obligations; Extinguishment; Novation; Definition.- depositions and admissions on file show that (1) except as to the amount of
Novation is a mode of extinguishing an obligation by changing its objects or damages, there is no genuine issue regarding any material fact; and (2) the
principal obligations, by substituting a new debtor in place of the old one, or by moving party is entitled to a judgment as a matter of law. A summary judgment
subrogating a third person to the rights of the creditor. Article 1293 of the Civil is a procedural device designed for the prompt disposition of actions in which
Code defines novation. the pleadings raise only a legal, not a genuine, issue regarding any material fact.
2. Civil Law; Obligations; Extinguishment; Novation; Kinds; In general, there Consequently, facts are asserted in the complaint regarding which there is yet
are two (2) modes of substituting the person of the debtor: (1) expromision and no admission, disavowal or qualification; or specific denials or affirmative
(2) delegacion.- defenses are set forth in the answer, but the issues are fictitious as shown by the
In general, there are two modes of substituting the person of the debtor: (1) pleadings, depositions or admissions. A summary judgment may be applied for
expromision and (2) delegacion. In expromision, the initiative for the change by either a claimant or a defending party.
does not come from—and may even be made without the knowledge of—the 10. Actions; Pleadings and Practice; Judgment on the Pleadings; A judgment on
debtor, since it consists of a third person’s assumption of the obligation. As such, the pleadings is proper when an answer fails to render an issue or otherwise
it logically requires the consent of the third person and the creditor. In admits the material allegations of the adverse party’s pleading.-
delegacion, the debtor offers, and the creditor accepts, a third person who On the other hand, under Section 1 of Rule 34 of the Rules of Court, a judgment
consents to the substitution and assumes the obligation; thus, the consent of on the pleadings is proper when an answer fails to render an issue or otherwise
these three persons are necessary. Both modes of substitution by the debtor admits the material allegations of the adverse party’s pleading. The essential
require the consent of the creditor. question is whether there are issues generated by the pleadings. A judgment on
3. Civil Law; Obligations; Extinguishment; Novation; Kinds; Novation may also the pleadings may be sought only by a claimant, who is the party seeking to
be extinctive and modificatory.- recover upon a claim, counterclaim or cross-claim; or to obtain a declaratory
Novation may also be extinctive or modificatory. It is extinctive when an old relief.
obligation is terminated by the creation of a new one that takes the place of the
former. It is merely modificatory when the old obligation subsists to the extent Division: FIRST DIVISION
that it remains compatible with the amendatory agreement. Whether extinctive
or modificatory, novation is made either by changing the object or the principal Docket Number: G.R. No. 154127
conditions, referred to as objective or real novation; or by substituting the
person of the debtor or subrogating a third person to the rights of the creditor, Counsel: Carlos G. Nery, Jr., Felipe N. Egargo, Jr.
an act known as subjective or personal novation.
4. Civil Law; Obligations; Extinguishment; Novation; Kinds; Elements; For Ponente: PANGANIBAN
novation to take place, the following requisites must concur.-
For novation to take place, the following requisites must concur: 1) There must Dispositive Portion:
be a previous valid obligation. 2) The parties concerned must agree to a new WHEREFORE, this Petition is hereby DENIED and the assailed Decision
contract. 3) The old contract must be extinguished. 4) There must be a valid new AFFIRMED. Costs against petitioner.
contract.
5. Civil Law; Obligations; Extinguishment; Novation; Kinds; Novation may also
be express or implied.- Case Title : TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO
Novation may also be express or implied. It is express when the new obligation CORPORATION, AUSTRALIA and NEW ZEALAND BANKING GROUP LIMITED and
declares in unequivocal terms that the old obligation is extinguished. It is SECURITY BANK CORPORATION, respondents.Case Nature : PETITION for review
implied when the new obligation is incompatible with the old one on every on certiorari of a decision of the Court of Appeals.
point. The test of incompatibility is whether the two obligations can stand Syllabi Class : Commercial Law|Actions|Banks and Banking|Letters of
together, each one with its own independent existence. Credit|Standby Credits|Words and Phrases|Uniform Customs and Practice
6. Civil Law; Obligations; Extinguishment; Novation; Proof; Well-settled is the (UCP) for Documentary Credits|“Independence
rule that nova-tion is never presumed.- Principle”|Guarantee|Contracts|Injunction|Requisites|Actions|Appeals|Pleadi
Well-settled is the rule that novation is never presumed. Consequently, that ngs and Practice|Obligations and Contracts|Forum Shopping
which arises from a purported change in the person of the debtor must be clear Syllabi:
and express. 1. Commercial Law; Banks and Banking; Letters of Credit; Standby
7. Commercial Law; Negotiable Instruments Law; Promissory Notes; As the Credits; Words and Phrases; In commercial transactions, a letter of credit is a
note was made payable to a specific person, it is covered by the general financial device developed by merchants as a convenient and relatively safe
provisions of the Civil Code, not the NIL.- mode of dealing with sales of goods to satisfy the seemingly irreconcilable
By its terms, the note was made payable to a specific person rather than to interests of a seller, who refuses to part with his goods before he is paid, and a
bearer or to order—a requisite for negotiability under Act 2031, the Negotiable buyer, who wants to have control of the goods before paying; Generally, credits
Instruments Law (NIL). Hence, petitioner cannot avail himself of the NIL’s in non-sale settings have come to be known as standby credits.-
provisions on the liabilities and defenses of an accommodation party. Besides, a The letter of credit evolved as a mercantile specialty, and the only way to
non-negotiable note is merely a simple contract in writing and is evidence of understand all its facets is to recognize that it is an entity unto itself. The
such intangible rights as may have been created by the assent of the parties. relationship between the beneficiary and the issuer of a letter of credit is not
The promissory note is thus covered by the general provisions of the Civil Code, strictly contractual, because both privity and a meeting of the minds are lacking,
not by the NIL. yet strict compliance with its terms is an enforceable right. Nor is it a third-party
8. Commercial Law; Negotiable Instruments Law; Promissory beneficiary contract, because the issuer must honor drafts drawn against a
Notes; Accommodation Party; Under Article 29 of Act 2031, an accommodation letter regardless of problems subsequently arising in the underlying contract.
party is liable for the instrument to a holder for value.- Since the bank’s customer cannot draw on the letter, it does not function as an
Under Article 29 of Act 2031, an accommodation party is liable for the assignment by the customer to the beneficiary. Nor, if properly used, is it a
instrument to a holder for value even if, at the time of its taking, the latter knew contract of suretyship or guarantee, because it entails a primary liability
the former to be only an accommodation party. The relation between an following a default. Finally, it is not in itself a negotiable instrument, because it
accommodation party and the party accommodated is, in effect, one of principal is not payable to order or bearer and is generally conditional, yet the draft
and surety—the accommodation party being the surety. It is a settled rule that a presented under it is often negotiable. In commercial transactions, a letter of
surety is bound equally and absolutely with the principal and is deemed an credit is a financial device developed by merchants as a convenient and
original promissor and debtor from the beginning. The liability is immediate and relatively safe mode of dealing with sales of goods to satisfy the seemingly
direct. irreconcilable interests of a seller, who refuses to part with his goods before he
9. Actions; Pleadings and Practice; Summary Judgment; A summary judgment is paid, and a buyer, who wants to have control of the goods before paying. The
is a procedural device designed for the prompt disposition of actions in which use of credits in commercial transactions serves to reduce the risk of
the pleadings raise only a legal, not a genuine, issue regarding any material nonpayment of the purchase price under the contract for the sale of goods.
fact.- However, credits are also used in non-sale settings where they serve to reduce
Under Section 3 of Rule 35 of the Rules of Court, a summary judgment may be the risk of nonperfor- mance. Generally, credits in the non-sale settings have
rendered after a summary hearing if the pleadings, supporting affidavits, come to be known as standby credits.
2. Commercial Law; Banks and Banking; Letters of Credit; Standby responsibility for the form, sufficiency, accuracy, genuineness, falsification or
Credits; Commercial Credits and Standby Credits, Distinguished.- legal effect of any documents, or for the general and/or particular conditions
There are three significant differences between commercial and standby credits. stipulated in the documents or superimposed thereon, nor do they assume any
First, commercial credits involve the payment of money under a contract of sale. liability or responsibility for the description, quantity, weight, quality, condition,
Such credits become payable upon the presentation by the seller-beneficiary of packing, delivery, value or existence of the goods represented by any
documents that show he has taken affirmative steps to comply with the sales documents, or for the good faith or acts and/or omissions, solvency,
agreement. In the standby type, the credit is payable upon certification of a performance or standing of the consignor, the carriers, or the insurers of the
party’s nonperformance of the agreement. The documents that accompany the goods, or any other person whomsoever.
beneficiary’s draft tend to show that the applicant has not performed. The 6. Commercial Law; Banks and Banking; Letters of Credit; “Independence
beneficiary of a commercial credit must demonstrate by documents that he has Principle”; The independent nature of the letter of credit may be: (a)
performed his contract. The beneficiary of the standby credit must certify that independence in toto where the credit is independent from the justification
his obligor has not performed the contract. aspect and is a separate obligation from the underlying agreement; or (b)
3. Commercial Law; Banks and Banking; Letters of Credit; A letter of credit independence may be only as to the justification aspect, though in both cases
changes its nature as different transactions occur and if carried through to the payment may be enjoined if in the light of the purpose of the credit the
completion ends up as a binding contract between the issuing and honoring payment of the credit would constitute fraudulent abuse of the credit.-
banks without any regard or relation to the underlying contract or disputes The independent nature of the letter of credit may be: (a) independence in toto
between the parties thereto.- where the credit is independent from the justification aspect and is a separate
By definition, a letter of credit is a written instrument whereby the writer obligation from the underlying agreement like for instance a typical standby; or
requests or authorizes the addressee to pay money or deliver goods to a third (b) independence may be only as to the justification aspect like in a commercial
person and assumes responsibility for payment of debt therefor to the letter of credit or repayment standby, which is identical with the same
addressee. A letter of credit, however, changes its nature as different obligations under the underlying agreement. In both cases the payment may be
transactions occur and if carried through to completion ends up as a binding enjoined if in the light of the purpose of the credit the payment of the credit
contract between the issuing and honoring banks without any regard or relation would constitute fraudulent abuse of the credit.
to the underlying contract or disputes between the parties thereto. 7. Commercial Law; Banks and Banking; Letters of Credit; “Independence
4. Commercial Law; Banks and Banking; Letters of Credit; Uniform Customs Principle”; The independence principle liberates the issuing bank from the duty
and Practice (UCP) for Documentary Credits; Since letters of credit have gained of ascertaining compliance by the parties in the main contract; As it is, the
general acceptability in international trade transactions, the International independence doctrine works to the benefit of both the issuing bank and the
Chamber of Commerce (ICC) has published from time to time updates on the beneficiary.-
Uniform Customs and Practice for Documentary Credits to standardize practices As discussed above, in a letter of credit transaction, such as in this case, where
in the letter of credit area; The observance of the UCP is justified by Article 2 of the credit is stipulated as irrevocable, there is a definite undertaking by the
the Code of Commerce which provides that in the absence of any particular issuing bank to pay the beneficiary provided that the stipulated documents are
provision in the Code of Commerce, commercial transactions shall be governed presented and the conditions of the credit are complied with. Precisely, the
by usages and customs generally observed.- independence principle liberates the issuing bank from the duty of ascertaining
Since letters of credit have gained general acceptability in international trade compliance by the parties in the main contract. As the principle’s nomenclature
transactions, the ICC has published from time to time updates on the Uniform clearly suggests, the obligation under the letter of credit is independent of the
Customs and Practice (UCP) for Documentary Credits to standardize practices in related and originating contract. In brief, the letter of credit is separate and
the letter of credit area. The vast majority of letters of credit incorporate the distinct from the underlying transaction. Given the nature of letters of credit,
UCP. First published in 1933, the UCP for Documentary Credits has undergone petitioner’s argument—that it is only the issuing bank that may invoke the
several revisions, the latest of which was in 1993. In Bank of the Philippine independence principle on letters of credit—does not impress this Court. To say
Islands v. De Reny Fabric Industries, Inc., this Court ruled that the observance of that the independence principle may only be invoked by the issuing banks would
the UCP is justified by Article 2 of the Code of Commerce which provides that in render nugatory the purpose for which the letters of credit are used in
the absence of any particular provision in the Code of Commerce, commercial commercial transactions. As it is, the independence doctrine works to the benefit
transactions shall be governed by usages and customs generally observed. More of both the issuing bank and the beneficiary.
recently, in Bank of America, NT SA v. Court of Appeals, this Court ruled that 8. Commercial Law; Banks and Banking; Letters of Credit; “Independence
there being no specific provisions which govern the legal complexities arising Principle”; Guarantee;Jurisprudence has laid down a clear distinction between a
from transactions involving letters of credit, not only between or among banks letter of credit and a guarantee in that the settlement of a dispute between the
themselves but also between banks and the seller or the buyer, as the case may parties is not a prerequisite for the release of funds under a letter of credit.-
be, the applicability of the UCP is undeniable. Petitioner’s argument that any dispute must first be resolved by the parties,
5. Commercial Law; Banks and Banking; Letters of Credit; “Independence whether through negotiations or arbitration, before the beneficiary is entitled to
Principle”; Under the “independence principle,” banks assume no liability or call on the letter of credit in essence would convert the letter of credit into a
responsibility for the form, sufficiency, accuracy, genuineness, falsification or mere guarantee. Jurisprudence has laid down a clear distinction between a
legal effect of any documents, or for the general and/or particular conditions letter of credit and a guarantee in that the settlement of a dispute between the
stipulated in the documents or superimposed thereon, nor do they assume any parties is not a pre-requisite for the release of funds under a letter of credit. In
liability or responsibility for the description, quantity, weight, quality, condition, other words, the argument is incompatible with the very nature of the letter of
packing, delivery, value or existence of the goods represented by any credit. If a letter of credit is drawable only after settlement of the dispute on the
documents, or for the good faith or acts and/or omissions, solvency, contract entered into by the applicant and the beneficiary, there would be no
performance or standing of the consignor, the carriers, or the insurers of the practical and beneficial use for letters of credit in commercial transactions.
goods, or any other person whomsoever.- 9. Commercial Law; Banks and Banking; Letters of Credit; “Independence
Article 3 of the UCP provides that credits, by their nature, are separate Principle”; Owing to the nature and purpose of standby letters of credit, banks
transactions from the sales or other contract(s) on which they may be based and are left with little or no alternative but to honor the credit or the call for
banks are in no way concerned with or bound by such contract(s), even if any payment.-
reference whatsoever to such contract(s) is included in the credit. Consequently, While it is the bank which is bound to honor the credit, it is the beneficiary who
the undertaking of a bank to pay, accept and pay draft(s) or negotiate and/or has the right to ask the bank to honor the credit by allowing him to draw
fulfill any other obligation under the credit is not subject to claims or defenses by thereon. The situation itself emasculates petitioner’s posture that LHC cannot
the applicant resulting from his relationships with the issuing bank or the invoke the independence principle and highlights its puerility, more so in this
beneficiary. A beneficiary can in no case avail himself of the contractual case where the banks concerned were impleaded as parties by petitioner itself.
relationships existing between the banks or between the applicant and the Respondent banks had squarely raised the independence principle to justify their
issuing bank. Thus, the engagement of the issuing bank is to pay the seller or releases of the amounts due under the Securities. Owing to the nature and
beneficiary of the credit once the draft and the required documents are purpose of the standby letters of credit, this Court rules that the respondent
presented to it. The so-called “independence principle” assures the seller or the banks were left with little or no alternative but to honor the credit and both of
beneficiary of prompt payment independent of any breach of the main contract them in fact submitted that it was “ministerial” for them to honor the call for
and precludes the issuing bank from determining whether the main contract is payment.
actually accomplished or not. Under this principle, banks assume no liability or
10. Commercial Law; Banks and Banking; Letters of Credit; “Independence sustain its claim for the issuance of an injunctive relief. Matters, theories or
Principle”; Contracts; A contract once perfected, binds the parties not only to arguments not brought out in the proceedings below will ordinarily not be
the fulfillment of what has been expressly stipulated but also to all the considered by a reviewing court as they cannot be raised for the first time on
consequences which according to their nature, may be in keeping with good appeal. The lower courts could thus not be faulted for not applying the fraud
faith, usage, and law.- exception rule not only because the existence of fraud was fundamentally
A contract once perfected, binds the parties not only to the fulfillment of what interwoven with the issue of default still pending before the arbitral tribunals,
has been expressly stipulated but also to all the consequences which according but more so, because petitioner never raised it as an issue in its pleadings filed in
to their nature, may be in keeping with good faith, usage, and law. A careful the courts below. At any rate, petitioner utterly failed to show that it had a clear
perusal of the Turnkey Contract reveals the intention of the parties to make the and unmistakable right to prevent LHC’s call upon the Securities.
Securities answerable for the liquidated damages occasioned by any delay on 15. Commercial Law; Banks and Banking; Letters of Credit; “Independence
the part of petitioner. The call upon the Securities, while not an exclusive remedy Principle”; Obligations and Contracts; Obligations arising from contracts have
on the part of LHC, is certainly an alternative recourse available to it upon the the force of law between the contracting parties and should be complied with in
happening of the contingency for which the Securities have been proffered. good faith.-
Thus, even without the use of the “independence principle,” the Turnkey Prudence should have impelled LHC to await resolution of the pending issues
Contract itself bestows upon LHC the right to call on the Securities in the event before the arbitral tribunals prior to taking action to enforce the Securities. But,
of default. as earlier stated, the Turnkey Contract did not require LHC to do so and,
11. Commercial Law; Banks and Banking; Letters of Credit; “Independence therefore, it was merely enforcing its rights in accordance with the tenor
Principle”; Injunction;Requisites; Most writers agree that fraud is an exception thereof. Obligations arising from contracts have the force of law between the
to the independence principle; The remedy for fraudulent abuse is an injunction.- contracting parties and should be complied with in good faith. More
Most writers agree that fraud is an exception to the independence principle. importantly, pursuant to the principle of autonomy of contracts embodied in
Professor Dolan opines that the untruthfulness of a certificate accompanying a Article 1306 of the Civil Code, petitioner could have incorporated in its Contract
demand for payment under a standby credit may qualify as fraud sufficient to with LHC, a proviso that only the final determination by the arbitral tribunals
support an injunction against payment. The remedy for fraudulent abuse is an that default had occurred would justify the enforcement of the Securities.
injunction. However, injunction should not be granted unless: (a) there is clear However, the fact is petitioner did not do so; hence, it would have to live with its
proof of fraud; (b) the fraud constitutes fraudulent abuse of the independent inaction.
purpose of the letter of credit and not only fraud under the main agreement; 16. Actions; Injunction; Settled is the rule that injunction would not lie where
and (c) irreparable injury might follow if injunction is not granted or the recovery the acts sought to be enjoined have already become fait accompli or an
of damages would be seriously damaged. accomplished or consummated act.-
12. Commercial Law; Banks and Banking; Letters of Credit; “Independence In a Manifestation, dated 30 March 2001, LHC informed this Court that the
Principle”; Injunction; The issuance of the writ of preliminary injunction as an subject letters of credit had been fully drawn. This fact alone would have been
ancillary or preventive remedy to secure the rights of a party in a pending case is sufficient reason to dismiss the instant petition. Settled is the rule that injunction
entirely within the discretion of the court taking cognizance of the case, the only would not lie where the acts sought to be enjoined have already become fait
limitation being that this discretion should be exercised based upon the grounds accompli or an accomplished or consummated act. In Ticzon v. Video Post
and in the manner provided by law.- Manila, Inc. this Court ruled that where the period within which the former
Generally, injunction is a preservative remedy for the protection of one’s employees were prohibited from engaging in or working for an enterprise that
substantive right or interest; it is not a cause of action in itself but merely a competed with their former employer—the very purpose of the preliminary
provisional remedy, an adjunct to a main suit. The issuance of the writ of injunction—has expired, any declaration upholding the propriety of the writ
preliminary injunction as an ancillary or preventive remedy to secure the rights would be entirely useless as there would be no actual case or controversy
of a party in a pending case is entirely within the discretion of the court taking between the parties insofar as the preliminary injunction is concerned. In the
cognizance of the case, the only limitation being that this discretion should be instant case, the consummation of the act sought to be restrained had rendered
exercised based upon the grounds and in the manner provided by law. Before a the instant petition moot—for any declaration by this Court as to propriety or
writ of preliminary injunction may be issued, there must be a clear showing by impropriety of the non-issuance of injunctive relief could have no practical effect
the complaint that there exists a right to be protected and that the acts against on the existing controversy. The other issues raised by petitioner particularly
which the writ is to be directed are violative of the said right. It must be shown with respect to its right to recover the amounts wrongfully drawn on the
that the invasion of the right sought to be protected is material and substantial, Securities, according to it, could properly be threshed out in a separate
that the right of complainant is clear and unmistakable and that there is an proceeding.
urgent and paramount necessity for the writ to prevent serious damage. 17. Actions; Pleadings and Practice; Forum Shopping; Considering the
Moreover, an injunctive remedy may only be resorted to when there is a seriousness of the charge of forum shopping and the severity of the sanctions for
pressing necessity to avoid injurious consequences which cannot be remedied its violation, the Court will refrain from making any definitive ruling on the issue
under any standard compensation. until the party alleged to have committed forum shopping has been given ample
13. Commercial Law; Banks and Banking; Letters of Credit; “Independence opportunity to respond to the charge.-
Principle”; It is premature and absurd to conclude that the draws on the Forum Shopping is a very serious charge. It exists when a party repetitively
Securities were outright fraudulent where the International Chamber of avails of several judicial remedies in different courts, simultaneously or
Commerce and the Construction Industry Authority Commission have not ruled successively, all substantially founded on the same transactions and the same
with finality on the existence of default.- essential facts and circumstances, and all raising substantially the same issues
The pendency of the arbitration proceedings would not per se make LHC’s draws either pending in, or already resolved adversely, by some other court. It may
on the Securities wrongful or fraudulent for there was nothing in the Contract also consist in the act of a party against whom an adverse judgment has been
which would indicate that the parties intended that all disputes regarding delay rendered in one forum, of seeking another and possibly favorable opinion in
should first be settled through arbitration before LHC would be allowed to call another forum other than by appeal or special civil action of certiorari, or the
upon the Securities. It is therefore premature and absurd to conclude that the institution of two or more actions or proceedings grounded on the same cause
draws on the Securities were outright fraudulent given the fact that the ICC and on the supposition that one or the other court might look with favor upon the
CIAC have not ruled with finality on the existence of default. other party. To determine whether a party violated the rule against forum
14. Commercial Law; Banks and Banking; Letters of Credit; “Independence shopping, the test applied is whether the elements of litis pendentia are present
Principle”; Actions;Appeals; Pleadings and Practice; Matters, theories or or whether a final judgment in one case will amount to res judicata in another.
arguments not brought out in the proceedings below will ordinarily not be Forum Shopping constitutes improper conduct and may be punished with
considered by a reviewing court as they cannot be raised for the first time on summary dismissal of the multiple petitions and direct contempt of court.
appeal.- Considering the seriousness of the charge of forum Shopping and the severity of
Nowhere in its complaint before the trial court or in its pleadings filed before the the sanctions for its violation, the Court will refrain from making any definitive
appellate court, did petitioner invoke the fraud exception rule as a ground to ruling on this issue until after petitioner has been given ample opportunity to
justify the issuance of an injunction. What petitioner did assert before the courts respond to the charge.
below was the fact that LHC’s draws on the Securities would be premature and
without basis in view of the pending disputes between them. Petitioner should Division: SECOND DIVISION
not be allowed in this instance to bring into play the fraud exception rule to
Docket Number: G.R. No. 146717 We held in Pacheco v. Court of Appeals that there is no estafa through bouncing
checks when it is shown that private complainant knew that the drawer did not
Counsel: Romulo, Mabanta, Buenaventura, Sayoc and Delos Angeles, M. B. have sufficient funds in the bank at the time the check was issued to him. Such
Tomacruz & Associates Law Offices, Castro, Yan Binas, Ortile, Samillano & knowledge negates the element of deceit and constitutes a defense in estafa
Mangrobang, Quasha, Ancheta, Peña & Nolasco, Sycip, Salazar, Hernandez & through bouncing checks.
Gatmaitan 6. Criminal Law; Estafa; Bouncing Checks; Presumption of Innocence; As a
matter of right, the constitutional presumption of innocence of the accused
Ponente: TINGA must be favored regardless of the inconsistencies in her testimony or the
weakness of her own testimony.-
Dispositive Portion: Despite the inconsistencies in the testimony of appellant, these were minor and
WHEREFORE, the instant petition is DENIED, with costs against petitioner. did not destroy her credibility nor shatter the theory of the defense. To be sure,
the prosecution failed to prove the guilt of appellant beyond reasonable doubt.
As a matter of right, the constitutional presumption of innocence of appellant
Case Title : PEOPLE OF THE PHILIPPINES, appellee, vs. ALOMA REYES and must be favored regardless of the inconsistencies in her testimony or the
TRICHIA MAE REYES (AT LARGE), accused. ALOMA REYES, appellant.Case weakness of her own defense.
Nature : APPEAL from a decision of the Regional Trial Court of Davao City, Br. 7. Criminal Law; Estafa; Bouncing Checks; An accused acquitted of estafa may
11. be held civilly liable in the same case where the facts established by the evidence
Syllabi Class : Criminal Law|Appeals|Estafa|Bouncing Checks Law|Banks and so warrant.-
Banking|Words and Phrases|Presumption of Innocence|Evidence|Remand of Appellant, however, is not without liability. An accused acquitted of estafa may
Cases be held civilly liable in the same case where the facts established by the evidence
Syllabi: so warrant. In the case at bar, the records lack sufficient evidence to determine
1. Criminal Law; Estafa; Bouncing Checks Law; Elements.- the amount of her remaining obligation.
Under Article 315, paragraph 2(d) of the Revised Penal Code, estafa is 8. Appeals; Evidence; Remand of Cases; Where the evidence is not sufficient to
committed by any person who shall defraud another by false pretenses or warrant a conclusion, the case should be remanded to the court a quo for
fraudulent acts executed prior to or simultaneously with the commission of the reception of further evidence.-
fraud. It is committed with the following essential elements which must be This Court is not a trier of facts and where the evidence on record is not
proved to sustain a conviction: 1. postdating or issuance of a check in payment sufficient to warrant a conclusion, the case should be remanded to the court a
of an obligation contracted at the time the check was issued; 2. lack of quo for reception of further evidence.
sufficiency of funds to cover the check; and 3.damage to the payee thereof.
2. Criminal Law; Estafa; Bouncing Checks Law; Banks and Banking; Words and Division: SECOND DIVISION
Phrases; Negotiable Order of Withdrawal (NOW) Accounts are defined as
interest-bearing deposit accounts that combine the payable on demand feature Docket Number: G.R. No. 154159
of checks and the investment feature of savings accounts; The fact that a NOW
check shall be payable only to a specific person, and not valid when payable to Counsel: The Solicitor General, Marissa Grace L. Corrales
“BEARER” or to “CASH” or when indorsed by the payee to another person, is
inconsequential; Negotiability is not the gravamen of the crime of estafa Ponente: PUNO
through bouncing checks—it is the fraud or deceit employed by the accused in
issuing a worthless check that is penalized.- Dispositive Portion:
Section X223 of the Manual of Regulations for Banks defines Negotiable Order IN VIEW WHEREOF, appellant Aloma Reyes is ACQUITTED of estafa under Article
of Withdrawal (NOW) Accounts as interest-bearing deposit accounts that 315, paragraph 2(d) of the Revised Penal Code, as amended. The assailed
combine the payable on demand feature of checks and the investment feature Sentence of the Regional Trial Court of Davao City, Branch 11, dated March 13,
of savings accounts. The fact that a NOW check shall be payable only to a 2002 is REVERSED and SET ASIDE. The case is REMANDED to the court a quo for
specific person, and not valid when made payable to “BEARER” or to “CASH” or the determination of appellant’s civil liability. The Director of the Bureau of
when indorsed by the payee to another person, is inconsequential. The same Corrections is DIRECTED to release her IMMEDIATELY unless she is being
restriction is produced when a check is crossed: only the payee named in the lawfully held for another offense.
check may deposit it in his bank account. If a third person accepts a cross check
and pays cash for its value despite the warning of the crossing, he cannot be
considered in good faith and thus not a holder in due course. The purpose of the Case Title : NOE S. ANDAYA, petitioner, vs. PEOPLE OF THE PHILIPPINES,
crossing is to ensure that the check will be encashed by the rightful payee only. respondent.Case Nature : PETITION for review on certiorari of the decision and
Yet, despite the restriction on the negotiability of cross checks, we held that they resolution of the Court of Appeals.
are negotiable instruments. To be sure, negotiability is not the gravamen of the Syllabi Class : Criminal Procedure|Criminal Law|Appeals|Falsification of Private
crime of estafa through bouncing checks. It is the fraud or deceit employed by Documents|Falsification of Commercial Documents|Criminal
the accused in issuing a worthless check that is penalized. Procedure|Pleadings and Practice|Disbursement Vouchers|Words and
3. Criminal Law; Estafa; Bouncing Checks Law; Deceit, to constitute estafa, Phrases|Presumption of Innocence|Right to be Informed
should be the efficient cause of defraudation—a check issued in payment of a Syllabi:
preexisting obligation does not constitute estafa even if there is no fund in the 1. Criminal Procedure; Appeals; An appeal in a criminal case opens the whole
bank to cover the amount of the check.- action for review on any question including those not raised by the parties.-
Deceit, to constitute estafa, should be the efficient cause of defraudation. It —Time honored is the principle that an appeal in a criminal case opens the
must have been committed either prior or simultaneous with the defraudation whole action for review on any question including those not raised by the
complained of. There must be concomitance: the issuance of a check should be parties. After a careful and thorough review of the records, we are convinced
the means to obtain money or property from the payee. Hence, a check issued in that petitioner should be acquitted based on reasonable doubt.
payment of a pre-existing obligation does not constitute estafa even if there is 2. Criminal Procedure; Pleadings and Practice; Public prosecutors must
no fund in the bank to cover the amount of the check. carefully study the evidence on record before filing the corresponding
4. Appeals; The rule that findings of facts of trial courts are accorded not only information in courts of law and must be vigilant in identifying and rectifying
respect, but at times, finality, admits of exceptions, as when there is a errors made.-
misapprehension of facts.- —It is an opportune time to remind public prosecutors of their important duty to
While findings of fact of trial courts are accorded not only respect, but at times, carefully study the evidence on record before filing the corresponding
finality, this rule admits of exceptions, as when there is a misappreciation of information in our courts of law and to be vigilant in identifying and rectifying
facts. errors made. Mistakes in filing the proper information and in the ensuing
5. Criminal Law; Estafa; Bouncing Checks; There is no estafa through bouncing prosecution of the case serve only to frustrate the State’s interest in enforcing its
checks when it is shown that private complainant knew that the drawer did not criminal laws and adversely affect the administration of justice.
have sufficient funds in the bank at the time the check was issued to him.- 3. Same; Same; Same; Falsification of Private Documents; Where the charge in
the information for falsification of private document was causing damage to a
financial entity because the accused caused it to appear in the disbursement of the information. However, as correctly ruled by the trial court, the subject
voucher that a person was entitled to a finder’s fee when in truth and in fact the voucher is a private document only; it is not a commercial document because it
entity owed no such amount to said person but the proof adduced during trial is not a document used by merchants or businessmen to promote or facilitate
showed that the acts of the accused were designed to lower the tax base of trade or credit transactions nor is it defined and regulated by the Code of
another person and aid the latter in evading payment of taxes on the finder’s Commerce or other commercial law. Rather, it is a private document, which has
fee, the accused cannot be convicted of falsifying the voucher with criminal been defined as a deed or instrument executed by a private person without the
intent to cause damage to the government.- intervention of a public notary or of other person legally authorized, by which
—As in the Burgos case, the information in the case at bar is valid, however, some disposition or agreement is proved, evidenced or set forth, because it
there is a variance between the allegation in the information and proof adduced acted as the authorization for the release of the P21,000.00 finder’s fee to
during trial with respect to the third essential element of falsification of private Guilas and as the receipt evidencing the payment of this finder’s fee.
document, i.e., the falsification caused damage or was committed with intent to 7. Same; Same; Falsification of Commercial Documents; Criminal
cause damage to a third party. To reiterate, petitioner was charged in the Procedure; Pleadings and Practice;Although the public prosecutor designated
information with causing damage to AFPSLAI in the amount of P21,000.00 the offense charged in the information as estafa through falsification of
because he caused it to appear in the disbursement voucher that Guilas was commercial document, the accused could be convicted of falsification of private
entitled to a P21,000.00 finder’s fee when in truth and in fact AFPSLAI owed no document, had it been proper, under the well-settled rule that it is the
such amount to Guilas. However, he was convicted by the trial court of falsifying allegations in the information that determines the nature of the offense and not
the voucher with criminal intent to cause damage to the government because the technical name given by the public prosecutor in the preamble of the
the trial court found that petitioner’s acts were designed to lower the tax base information.-
of Hernandez and aid the latter in evading payment of taxes on the finder’s fee. —Although the public prosecutor designated the offense charged in the
We find this variance material and prejudicial to petitioner which, perforce, is information as estafa through falsification of commercial document, petitioner
fatal to his conviction in the instant case. By the clear and unequivocal terms of could be convicted of falsification of private document, had it been proper,
the information, the prosecution endeavored to prove that the falsification of under the well-settled rule that it is the allegations in the information that
the voucher by petitioner caused damage to AFPSLAI in the amount of determines the nature of the offense and not the technical name given by the
P21,000.00 and not that the falsification of the voucher was done with intent to public prosecutor in the preamble of the information. We explained this principle
cause damage to the government. It is apparent that this variance not merely in the case of U.S. v. Lim San in this wise: From a legal point of view, and in a
goes to the identity of the third party but, more importantly, to the nature and very real sense, it is of no concern to the accused what is the technical name of
extent of the damage done to the third party. Needless to state, the defense the crime of which he stands charged. It in no way aids him in a defense on the
applicable for each is different. merits. x x x That to which his attention should be directed, and in which he,
4. Same; Same; Same; The main purpose of requiring the various elements of a above all things else, should be most interested, are the facts alleged. The real
crime to be set out in the information is to enable the accused to suitably question is not did he commit a crime given in the law some technical and
prepare his defense because he is presumed to have no independent specific name, but did he perform the acts alleged in the body of the information
knowledge of the facts that constitute the offense; To convict an accused of a in the manner therein set forth. x x x The real and important question to him is,
ground not alleged while he is concentrating his defense against the ground “Did you perform the acts alleged in the manner alleged?” not, “Did you commit
alleged would plainly be unfair and underhanded.- a crime named murder?” If he performed the acts alleged, in the manner stated,
—It is fundamental that every element constituting the offense must be alleged the law determines what the name of the crime is and fixes the penalty therefor.
in the information. The main purpose of requiring the various elements of a x x x If the accused performed the acts alleged in the manner alleged, then he
crime to be set out in the information is to enable the accused to suitably ought to be punished and punished adequately, whatever may be the name of
prepare his defense because he is presumed to have no independent knowledge the crime which those acts constitute.
of the facts that constitute the offense. The allegations of facts constituting the 8. Criminal Law; Falsification of Private Documents; Elements.-
offense charged are substantial matters and an accused’s right to question his —The elements of falsification of private document under Article 172,
conviction based on facts not alleged in the information cannot be waived. No paragraph 2 in relation to Article 171 of the Revised Penal Code are: (1) the
matter how conclusive and convincing the evidence of guilt may be, an accused offender committed any of the acts of falsification under Article 171 which, in
cannot be convicted of any offense unless it is charged in the information on the case at bar, falls under paragraph 2 of Article 171, i.e., causing it to appear
which he is tried or is necessarily included therein. To convict him of a ground that persons have participated in any act or proceeding when they did not in
not alleged while he is concentrating his defense against the ground alleged fact so participate; (2) the falsification was committed on a private document;
would plainly be unfair and underhanded. The rule is that a variance between and (3) the falsification caused damage or was committed with intent to cause
the allegation in the information and proof adduced during trial shall be fatal to damage to a third party.
the criminal case if it is material and prejudicial to the accused so much so that
it affects his substantial rights. Division: FIRST DIVISION
5. Same; Presumption of Innocence; Right to be Informed; The prosecution has
the duty to prove each and every element of the crime charged in the Docket Number: G.R. No. 168486
information to warrant a finding of guilt for the said crime or for any other crime
necessarily included therein.- Counsel: Luis S. Salas, The Solicitor General
—In all criminal prosecutions, the burden of proof is on the prosecution to
establish the guilt of the accused beyond reasonable doubt. It has the duty to Ponente: YNARES-SANTIAGO
prove each and every element of the crime charged in the information to
warrant a finding of guilt for the said crime or for any other crime necessarily Dispositive Portion:
included therein. However, in the case at bar, the prosecution failed to prove the WHEREFORE, the petition is GRANTED. The September 29, 2004 Decision and
third essential element of the crime charged in the information. Thus, petitioner April 26, 2005 Resolution of the Court Appeals in CA-G.R. CR No. 26556 are
should be acquitted due to insufficiency of evidence. REVERSED and SET ASIDE. Petitioner is ACQUITTED based on reasonable doubt.
6. Same; Same; Same; Same; Disbursement Vouchers; Words and Phrases; A The Bail Bond is CANCELLED.
disbursement voucher is a private document only-
—it is not a commercial document because it is not a document used by
merchants or businessmen to promote or facilitate trade or credit transactions Case Title : LEONILA BATULANON, petitioner, vs. PEOPLE OF THE PHILIPPINES,
nor it is defined and regulated by the Code of Commerce or other commercial respondent.Case Nature : PETITION for review on certiorari of the decision and
law; A private document is a deed or instrument executed by a private person resolution of the Court of Appeals.
without the intervention of a public notary or of other person legally authorized, Syllabi Class : Criminal Law|Falsification|Estafa|Pleadings and
by which some disposition or agreement is proved, evidenced or set forth.—The Practice|Handwriting|Compromise|Words and Phrases
second element of the offense charged in the information, i.e., the falsification Syllabi:
was committed in Disbursement Voucher No. 58380, a private document, is 1. Criminal Law; Falsification; Estafa; Pleadings and Practice; Although the
likewise present. It appears that the public prosecutor erroneously characterized offense charged in the information is estafa through falsification of commercial
the disbursement voucher as a commercial document so that he designated the document, the accused could be convicted of falsification of private document
offense as estafa through falsification of commercial document in the preamble under the well-settled rule that it is the allegations in the information that
determines the nature of the offense and not the technical name given in the without the intervention of a public notary or of other person legally authorized,
preamble of the information.- by which some disposition or agreement is proved, evidenced or set forth.-
—Although the offense charged in the information is estafa through falsification —The Court of Appeals correctly ruled that the subject vouchers are private
of commercial document, appellant could be convicted of falsification of private documents and not commercial documents because they are not documents
document under the well-settled rule that it is the allegations in the information used by merchants or businessmen to promote or facilitate trade or credit
that determines the nature of the offense and not the technical name given in transactions nor are they defined and regulated by the Code of Commerce or
the preamble of the information. In Andaya v. People, 493 SCRA 539 (2006), we other commercial law. Rather, they are private documents, which have been
held: From a legal point of view, and in a very real sense, it is of no concern to defined as deeds or instruments executed by a private person without the
the accused what is the technical name of the crime of which he stands charged. intervention of a public notary or of other person legally authorized, by which
It in no way aids him in a defense on the merits. x x x That to which his attention some disposition or agreement is proved, evidenced or set forth.
should be directed, and in which he, above all things else, should be most 6. Same; Same; Compromise; In criminal cases, except those involving quasi-
interested, are the facts alleged. The real question is not did he commit a crime offenses or criminal negligence or those allowed by law to be compromised, an
given in the law some technical and specific name, but did he perform the acts offer of compromise by the accused may be received in evidence as an implied
alleged in the body of the information in the manner therein set forth. x x x The admission of guilt.-
real and important question to him is, “Did you perform the acts alleged in the —The claim that Batulanon’s letter to the cooperative asking for a compromise
manner alleged?” not, “Did you commit a crime named murder?” If he was not an admission of guilt is untenable. Section 27, Rule 130 of the Rules of
performed the acts alleged, in the manner stated, the law determines what the Court provides that in criminal cases, except those involving quasi-offenses or
name of the crime is and fixes the penalty therefor. x x x If the accused criminal negligence or those allowed by law to be compromised, an offer of
performed the acts alleged in the manner alleged, then he ought to be punished compromise by the accused may be received in evidence as an implied
and punished adequately, whatever may be the name of the crime which those admission of guilt.
acts constitute. 7. Same; Same; Handwriting; The handwriting of a person may be proved by
2. Same; Same; Elements of Estafa Through Conversion or Misappropriation.- any witness who believes it to be the handwriting of such person because he has
—The elements of estafa through conversion or misappropriation under Art. 315 seen the person write, or has seen writing purporting to be his upon which the
(1) (b) of the Revised Penal Code are: (1) that money, goods or other personal witness has acted or been charged, and has thus acquired knowledge of the
property is received by the offender in trust, or on commission, or for handwriting of such person.-
administration, or under any other obligation involving the duty to make —Medallo categorically declared that she saw Batulanon forge the signatures of
delivery of, or to return, the same; (2) that there be misappropriation or Oracion and Arroyo in the vouchers and made it appear that the amounts stated
conversion of such money or property by the offender or denial on his part of therein were actually received by these persons. As to the signature of Arroyo,
such receipt; (3) that such misappropriation or conversion or denial is to the Medallo’s credible testimony and her familiarity with the handwriting of
prejudice of another; (4) that there is a demand made by the offended party on Batulanon proved that it was indeed the latter who signed the name of Arroyo.
the offender. (Note: The 4th element is not necessary when there is evidence of Contrary to Batulanon’s contention, the prosecution is not duty-bound to
misappropriation of the goods by the defendant) present the persons whose signatures were forged as Medallo’s eyewitness
3. Same; Same; The essence of falsification is the act of making untruthful or account of the incident was sufficient. Moreover, under Section 22, Rule 132 of
false statements.- the Rules of Court, the handwriting of a person may be proved by any witness
—In Criminal Case No. 3627, the trial court convicted petitioner Batulanon for who believes it to be the handwriting of such person because he has seen the
falsifying Dennis Batulanon’s signature in the cash voucher based on the person write, or has seen writing purporting to be his upon which the witness
Information charging her of signing the name of her 3 year old son, Dennis. The has acted or been charged, and has thus acquired knowledge of the handwriting
records, however, reveal that in Cash Voucher No. 374A, petitioner Batulanon of such person.
did not falsify the signature of Dennis. What she did was to sign: “by: 8. Same; Same; Elements of Falsification of Private Documents.-
lbatulanon” to indicate that she received the proceeds of the loan in behalf of —The elements of falsification of private document under Article 172,
Dennis. Said act does not fall under any of the modes of falsification under paragraph 2 of the Revised Penal Code are: (1) that the offender committed any
Article 171 because there in nothing untruthful about the fact that she used the of the acts of falsification, except those in paragraph 7, Article 171; (2) that the
name of Dennis and that as representative of the latter, obtained the proceeds falsification was committed in any private document; and (3) that the
of the loan from PCCI. The essence of falsification is the act of making untruthful falsification caused damage to a third party or at least the falsification was
or false statements, which is not attendant in this case. As to whether, such committed with intent to cause such damage.
representation involves fraud which caused damage to PCCI is a different matter
which will make her liable for estafa, but not for falsification. Hence, it was an Division: FIRST DIVISION
error for the courts below to hold that petitioner Batulanon is also guilty of
falsification of private document with respect to Criminal Case No. 3627 Docket Number: G.R. No. 139857
involving the cash voucher of Dennis.
4. Same; Same; Estafa; There is no complex crime of estafa through Counsel: Acharon, Alconera & Associates, The Solicitor General
falsification of private document;If the falsification of a private document is
committed as a means to commit estafa, the proper crime to be charged is Ponente: YNARES-SANTIAGO
falsification; If the estafa can be committed without the necessity of falsifying a
document, the proper crime to be charged is estafa.- Dispositive Portion:
—As there is no complex crime of estafa through falsification of private WHEREFORE, the Decision appealed from is AFFIRMED with the following
document, it is important to ascertain whether the offender is to be charged MODIFICATIONS:
with falsification of a private document or with estafa. If the falsification of a
private document is committed as a means to commit estafa, the proper crime
to be charged is falsification. If the estafa can be committed without the Republic of the Philippines
necessity of falsifying a document, the proper crime to be charged is estafa. Supreme Court
Thus, in People v. Reyes, 56 Phil. 286 (1931), the accused made it appear in the Manila
time book of the Calamba Sugar Estate that a laborer, Ciriaco Sario, worked 21
days during the month of July, 1929, when in reality he had worked only 11 SECOND DIVISION
days, and then charged the offended party, the Calamba Sugar Estate, the
wages of the laborer for 21 days. The accused misappropriated the wages PENTACAPITAL INVESTMENT CORPORATION, G.R. No. 1
during which the laborer did not work for which he was convicted of falsification Petitioner,
of private document.
5. Same; Same; Words and Phrases; Vouchers are private documents and not - versus -
commercial documents because they are not documents used by merchants or
businessmen to promote or facilitate trade or credit transactions, nor are they MAKILITO B. MAHINAY,
defined and regulated by the Code of Commerce or other commercial Respondent.
law; Private documents are deeds or instruments executed by a private person x--------------------------------------------------x
PENTACAPITAL INVESTMENT CORPORATION,
Petitioner, G.R. No. 181482

Present:

CARPIO, J.,
- versus - Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.
MAKILITO B. MAHINAY,
Respondent. Promulgated:

July 5, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before us are two consolidated petitions for review on certiorari under


Rule 45 of the Rules of Court filed by petitioner Pentacapital Investment
Corporation. In G.R. No. 171736, petitioner assails the Court of Appeals (CA)
Decision[1] dated December 20, 2005 and Resolution[2] dated March 1, 2006 in
CA-G.R. SP No. 74851; while in G.R. No. 181482, it assails the CA
Decision[3]dated October 4, 2007 and Resolution[4] dated January 21, 2008 in CA-
G.R. CV No. 86939.

The Facts

Petitioner filed a complaint for a sum of money against respondent


Makilito Mahinay based on two separate loans obtained by the latter,
amounting to P1,520,000.00 and P416,800.00, or a total amount
of P1,936,800.00. These loans were evidenced by two promissory
notes[5] dated February 23, 1996. Despite repeated demands, respondent failed
to pay the loans, hence, the complaint.[6]

In his Answer with Compulsory Counterclaim,[7] respondent claimed that


petitioner had no cause of action because the promissory notes on which its
complaint was based were subject to a condition that did not occur.[8] While
admitting that he indeed signed the promissory notes, he insisted that he never
took out a loan and that the notes were not intended to be evidences of
indebtedness.[9] By way of counterclaim, respondent prayed for the payment of
moral and exemplary damages plus attorney’s fees.[10]
Respondent explained that he was the counsel of Ciudad Real
Development Inc. (CRDI). In 1994, Pentacapital Realty Corporation (Pentacapital
Realty) offered to buy parcels of land known as the Molino Properties, owned
by CRDI, located in Molino, Bacoor, Cavite. The Molino Properties, with a total
area of 127,708 square meters, were sold at P400.00 per sq m. As the Molino
Properties were the subject of a pending case, Pentacapital Realty paid only the
down payment amounting toP12,000,000.00. CRDI allegedly instructed
Pentacapital Realty to pay the former’s creditors, including respondent who
thus received a check worth P1,715,156.90.[11] It was further agreed that the
balance would be payable upon the submission of an Entry of Judgment
showing that the case involving the Molino Properties had been decided in
favor of CRDI.[12]

Respondent, Pentacapital Realty and CRDI allegedly agreed that


respondent had a charging lien equivalent to 20% of the total consideration of
the sale in the amount of P10,277,040.00. Pending the submission of the Entry
of Judgment and as a sign of good faith, respondent purportedly returned
the P1,715,156.90 check to Pentacapital Realty. However, the Molino
Properties continued to be haunted by the seemingly interminable court actions
initiated by different parties which thus prevented respondent from collecting
his commission.

On motion[13] of respondent, the Regional Trial Court (RTC) allowed


him to file a Third Party Complaint[14] against CRDI, subject to the payment of
docket fees.[15]
Admittedly, respondent earlier instituted an action for Specific
Performance against Pentacapital Realty before the RTC of Cebu City, Branch
57, praying for the payment of his commission on the sale of the Molino
Properties.[16] In an Amended Complaint,[17] respondent referred to the action
he instituted as one of Preliminary Mandatory Injunction instead of Specific
Performance. Acting on Pentacapital Realty’s Motion to Dismiss, the RTC
dismissed the case for lack of cause of action.[18] The dismissal became final and
executory.

With the dismissal of the aforesaid case, respondent filed a Motion


to Permit Supplemental Compulsory Counterclaim.[19] In addition to the
damages that respondent prayed for in his compulsory counterclaim, he sought
the payment of his commission amounting to P10,316,640.00, plus interest at
the rate of 16% per annum, as well as attorney’s fees equivalent to 12% of his
principal claim.[20] Respondent claimed that Pentacapital Realty is a 100%
subsidiary of petitioner. Thus, although petitioner did not directly participate in
the transaction between Pentacapital Realty, CRDI and respondent, the latter’s
claim against petitioner was based on the doctrine of piercing the veil of
corporate fiction. Simply stated, respondent alleged that petitioner and
Pentacapital Realty are one and the same entity belonging to the Pentacapital
Group of Companies.[21]

Over the opposition of petitioner, the RTC, in an Order[22] dated


August 22, 2002, allowed the filing of the supplemental counterclaim.
Aggrieved, petitioner sought recourse in the CA through a special
civil action for certiorari, seeking to reverse and set aside the RTC Order. The
case was docketed as CA-G.R. SP No. 74851. On December 20, 2005, the CA F.
rendered the assailed Decision dismissing the petition.[23] The appellate court
sustained the allowance of the supplemental compulsory counterclaim based WHETHER PETITIONER PENTACAPITAL
on the allegations in respondent’s pleading. The CA further concluded that INVESTMENT COMMITTED FORUM SHOPPING WHEN IT
there was a logical relationship between the claims of petitioner in its complaint FILED THE PRESENT PETITION DURING THE PENDENCY OF
and those of respondent in his supplemental compulsory counterclaim. The CA THE MOTION FOR RECONSIDERATION IT FILED BEFORE
declared that it was inconsequential that respondent did not clearly allege the THE COURT A QUO AND, SUBSEQUENTLY, OF THE APPEAL
facts required to pierce the corporate separateness of petitioner and its BEFORE THE COURT OF APPEALS TO QUESTION THE
subsidiary, the Pentacapital Realty.[24] JUDGMENT OF THE COURT A QUO.[25]

Petitioner now comes before us in G.R. No. 171736, raising the


following issues: There being no writ of injunction or Temporary Restraining Order
(TRO), the proceedings before the RTC continued and respondent was allowed
A. to present his evidence on his supplemental compulsory counterclaim. After
trial on the merits, the RTC rendered a decision[26] dated March 20, 2006, the
WHETHER RESPONDENT MAHINAY IS BARRED dispositive portion of which reads:
FROM ASSERTING THE CLAIM CONTAINED IN HIS
“SUPPLEMENTAL COMPULSORY COUNTERCLAIM” ON THE WHEREFORE, PREMISES CONSIDERED,
GROUNDS OF (1) RES JUDICATA, (2) WILLFUL AND plaintiff’s complaint is hereby ordered dismissed for lack
DELIBERATE FORUM SHOPPING, AND (3) FAILURE TO of merit. This court, instead, finds that defendant was
INTERPOSE SUCH CLAIM ON TIME PURSUANT TO SECTION able to prove by a clear preponderance of evidence his
2 OF RULE 9 OF THE RULES OF COURT; cause of action against plaintiff as to defendant’s
compulsory and supplemental counterclaims. That,
B. therefore, this court hereby orders the plaintiff to pay
unto defendant the following sums, to wit:
WHETHER RESPONDENT MAHINAY’S
SUPPLEMENTAL COMPULSORY COUNTERCLAIM IS 1. P1,715,156.90 representing the amount
ACTUALLY A THIRD-PARTY COMPLAINT AGAINST plaintiff is obligated to pay defendant as
PENTACAPITAL REALTY, THE INTRODUCTION OF WHICH provided for in the deed of sale and
REQUIRES THE PAYMENT OF THE NECESSARY DOCKET the supplemental agreement, plus interest at
FEES; the rate of 16% per annum, to be
computed from September 23, 1998 until the
C. said amount shall have been fully paid;

ASSUMING FOR THE SAKE OF PURE ARGUMENT 2. Php 10,316,640.00 representing defendant’s
THAT IT IS PROPER TO PIERCE THE CORPORATE VEIL AND share of the proceeds of the sale of the
TO ALLOW RESPONDENT MAHINAY TO LODGE A Molino property (defendant’s charging lien)
“SUPPLEMENTAL COMPULSORY COUNTERCLAIM” plus interest at the rate of 16% per annum, to
AGAINST HEREIN PETITIONER PENTACAPITAL be computed from September 23, 1998 until
INVESTMENT FOR AN ALLEGED OBLIGATION OF ITS the said amount shall have been fully paid;
SUBSIDIARY, PENTACAPITAL REALTY, ON THE THEORY
THAT THEY ARE “ONE AND THE SAME COMPANY,” 3. Php 50,000.00 as attorney’s fees based on
WHETHER PENTACAPITAL REALTY SHOULD HAVE AT quantum meruit;
LEAST BEEN MADE A PARTY TO THE CASE AS RULED BY
THIS HONORABLE COURT IN FILMERCO COMMERCIAL 4. Php 50,000.00 litigation expenses, plus
CO., INC. VS. INTERMEDIATE APPELLATE COURT; costs of suit.

D. This court finds it unnecessary to rule on the


third party complaint, the relief prayed for therein being
WHETHER RESPONDENT MAHINAY SHOULD BE dependent on the possible award by this court of the
ALLOWED TO PRESENT EVIDENCE ON HIS SO-CALLED relief of plaintiff’s complaint.[27]
“SUPPLEMENTAL COMPULSORY COUNTERCLAIM”
INASMUCH AS (1) RESPONDENT MAHINAY’S PLEADINGS On appeal, the CA, in CA-G.R. CV No. 86939, affirmed in toto the
ARE BEREFT OF ANY ALLEGATIONS TO BUTTRESS THE above decision. The CA found no basis for petitioner to collect the amount
MERGING OF PENTACAPITAL REALTY AND PENTACAPITAL demanded, there being no perfected contract of loan for lack of
INVESTMENT INTO ONE ENTITY AND THE CONSEQUENT consideration.[28] As to respondent’s supplemental compulsory counterclaim,
IMPUTATION ON THE LATTER OF THE FORMER’S quoting the findings of the RTC, the appellate court held that respondent was
SUPPOSED LIABILITY ON RESPONDENT MAHINAY’S able to prove by preponderance of evidence that it was the intent of
SUPPLEMENTAL COMPULSORY COUNTERCLAIM, AND (2) Pentacapital Group of Companies and CRDI to give him P10,316,640.00
THE INCIDENTS ALLEGEDLY PERTAINING TO, AND WHICH andP1,715,156.90.[29] The CA likewise affirmed the award of interest at the rate
WOULD THEREBY SUPPORT, THE PIERCING OF of 16% per annum, plus damages.[30]
CORPORATE VEIL ARE NOT EVIDENTIARY MATTERS
MATERIAL TO THE PROCEEDINGS BEFORE THE COURT A Unsatisfied, petitioner moved for reconsideration of the aforesaid
QUO CONSIDERING THAT THE SAME ARE BEYOND THE Decision, but it was denied in a Resolution[31] dated January 21, 2008. Hence,
SCOPE OF THE PLEADINGS; the present petition in G.R. No. 181482, anchored on the following arguments:

E. A.
Considering that the inferences made in the
WHETHER THE DOCTRINE OF PIERCING THE present case are manifestly absurd, mistaken or
CORPORATE VEIL MAY BE INVOKED AND APPLIED IN impossible, and are even contrary to the admissions of
ORDER TO EVADE AN OBLIGATION AND FACILITATE respondent Mahinay, and inasmuch as the judgment is
PROCEDURAL WRONGDOING; AND premised on a misapprehension of facts, this Honorable
Court may validly take cognizance of the errors relative to The cause of action of
the findings of fact of both the Honorable Court of respondent Mahinay, as contained
Appeals and the court a quo. in his “supplemental compulsory
counterclaim,” is already barred by
B. a prior judgment (res judicata).
Respondent Mahinay is liable to petitioner
PentaCapital Investment for the PhP1,936,800.00 loaned 2.
to him as well as for damages and attorney’s fees. Considering that the
dismissal on the merits by the RTC
1. Cebu of respondent Mahinay’s
The Honorable Court of complaint against PentaCapital
Appeals erred in concluding that Realty for attorney’s fees has
respondent Mahinay failed to attained finality, respondent
receive the money he borrowed Mahinay committed a willful act of
when there is not even any dispute forum shopping when he
as to the fact that respondent interposed the exact same claim in
Mahinay did indeed receive the the proceedings a quo as a
PhP1,936,800.00 from petitioner supposed supplemental
PentaCapital Investment. compulsory counterclaim against
what he claims to be “one and the
2. same” company.
The Promissory Notes
executed by respondent Mahinay 3.
are valid instruments and are Respondent Mahinay’s
binding upon him. supplemental compulsory
counterclaim is actually a third
C. party complaint against
Petitioner PentaCapital Investment cannot be held PentaCapital Realty; the filing
liable on the supposed “supplemental compulsory thereof therefore requires the
counterclaim” of respondent Mahinay. payment of the necessary docket
fees.
1.
The findings of fact as well as E.
the conclusions arrived at by the The doctrine of piercing the corporate veil is an
Court of Appeals in its decision equitable remedy which cannot and should not be
were based on mistaken invoked, much less applied, in order to evade an
assumptions and on erroneous obligation and facilitate procedural wrongdoing.[32]
appreciation of the evidence on
record.
Simply put, the issues for resolution are: 1) whether the admission of
2. respondent’s supplemental compulsory counterclaim is proper; 2) whether
There is no evidence on respondent’s counterclaim is barred by res judicata; and (3) whether petitioner
record to support the merging of is guilty of forum-shopping.
PentaCapital Realty and petitioner
PentaCapital Investment into one The Court’s Ruling
entity and the consequent
imputation on the latter of the Admission of Respondent’s
former’s supposed liability on Supplemental Compulsory Counterclaim
respondent Mahinay’s
supplemental compulsory
counterclaim. The pertinent provision of the Rules of Court is Section 6 of Rule 10,
which reads:
3.
Inasmuch as the claim of Sec. 6. Supplemental pleadings. – Upon motion
respondent Mahinay is supposedly of a party, the court may, upon reasonable notice and
against PentaCapital Realty, and upon such terms as are just, permit him to serve a
considering that petitioner supplemental pleading setting forth transactions,
PentaCapital Investment is a occurrences or events which have happened since the
separate, distinct entity from date of the pleading sought to be supplemented. The
PentaCapital Realty, the latter adverse party may plead thereto within ten (10) days
should have been impleaded as it is from notice of the order admitting the supplemental
an indispensable party. pleading.

D. As a general rule, leave will be granted to a party who desires to file


Assuming for the sake of pure argument that it is a supplemental pleading that alleges any material fact which happened or came
proper to disregard the corporate fiction and to consider within the party’s knowledge after the original pleading was filed, such being
herein petitioner PentaCapital Investment and its the office of a supplemental pleading. The application of the rule would ensure
subsidiary, PentaCapital Realty, as one and the same that the entire controversy might be settled in one action, avoid unnecessary
entity, respondent Mahinay’s “supplemental compulsory repetition of effort and unwarranted expense of litigants, broaden the scope of
counterclaim” must still necessarily fail. the issues in an action owing to the light thrown on it by facts, events and
occurrences which have accrued after the filing of the original pleading, and
1. bring into record the facts enlarging or charging the kind of relief to which
plaintiff is entitled. It is the policy of the law to grant relief as far as possible for
wrongs complained of, growing out of the same transaction and thus put an prevail. The burden of proof remains where it is, but by the presumption, the
end to litigation.[33] one who has that burden is relieved for the time being from introducing
evidence in support of the averment, because the presumption stands in the
In his Motion to Permit Supplemental Compulsory Counterclaim, place of evidence unless rebutted.[40]
respondent admitted that, in his Answer with Compulsory Counterclaim, he
claimed that, as one of the corporations composing the Pentacapital Group of
Companies, petitioner is liable to him for P10,316,640.00, representing 20%
attorney’s fees and share in the proceeds of the sale transaction between
Pentacapital Realty and CRDI. In the same pleading, he further admitted that he
did not include this amount in his compulsory counterclaim because he had
earlier commenced another action for the collection of the same amount
against Pentacapital Realty before the RTC of Cebu. With the dismissal of the
RTC-Cebu case, there was no more legal impediment for respondent to file the
supplemental counterclaim.

Moreover, in his Answer with Compulsory Counterclaim, respondent


already alleged that he demanded from Pentacapital Group of Companies to
which petitioner supposedly belongs, the payment of his 20% commission. This,
in fact, was what prompted respondent to file a complaint before the RTC-Cebu
for preliminary mandatory injunction for the release of the said amount.

Given these premises, it is obvious that the alleged obligation of


petitioner already existed and was known to respondent at the time of the filing
of his Answer with Counterclaim. He should have demanded payment of his
commission and share in the proceeds of the sale in that Answer with
Compulsory Counterclaim, but he did not. He is, therefore, proscribed from
incorporating the same and making such demand via a supplemental pleading.
The supplemental pleading must be based on matters arising subsequent to the
filing of the original pleading related to the claim or defense presented therein,
and founded on the same cause of action.[34]Supplemental pleadings must state
transactions, occurrences or events which took place since the time the
pleading sought to be supplemented was filed.[35]

Even on the merits of the case, for reasons that will be discussed
below, respondent’s counterclaim is doomed to fail.

Petitioner’s Complaint

In its complaint for sum of money, petitioner prayed that respondent


be ordered to pay his obligation amounting toP1,936,800.00 plus interest and
penalty charges, and attorney’s fees. This obligation was evidenced by two
promissory notes executed by respondent. Respondent, however, denied
liability on the ground that his obligation was subject to a condition that did not
occur. He explained that the promissory notes were dependent upon the
happening of a remote event that the parties tried to anticipate at the time
they transacted with each other, and the event did not happen.[36] He further
insisted that he did not receive the proceeds of the loan.

To ascertain whether or not respondent is bound by the promissory


notes, it must be established that all the elements of a contract of loan are
present. Like any other contract, a contract of loan is subject to the rules
governing the requisites and validity of contracts in general. It is elementary in
this jurisdiction that what determines the validity of a contract, in general, is the
presence of the following elements: (1) consent of the contracting parties; (2)
object certain which is the subject matter of the contract; and (3) cause of the
obligation which is established.[37]

In this case, respondent denied liability on the ground that the


promissory notes lacked consideration as he did not receive the proceeds of the
loan.

We cannot sustain his contention.

Under Article 1354 of the Civil Code, it is presumed that consideration


exists and is lawful unless the debtor proves the contrary.[38] Moreover, under
Section 3, Rule 131 of the Rules of Court, the following are disputable
presumptions: (1) private transactions have been fair and regular; (2) the
ordinary course of business has been followed; and (3) there was sufficient
consideration for a contract.[39] A presumption may operate against an
adversary who has not introduced proof to rebut it. The effect of a legal
presumption upon a burden of proof is to create the necessity of presenting
evidence to meet the legal presumption or the prima facie case created
thereby, and which, if no proof to the contrary is presented and offered, will
In the present case, as proof of his claim of lack of consideration,
respondent denied under oath that he owed petitioner a single centavo. He Lastly, respondent promised to pay 25% of his outstanding obligations as
added that he did not apply for a loan and that when he signed the promissory attorney’s fees in case of non-payment thereof. Attorney’s fees here are in the
notes, they were all blank forms and all the blank spaces were to be filled up nature of liquidated damages. As long as said stipulation does not contravene
only if the sale transaction over the subject properties would not push through law, morals, or public order, it is strictly binding upon respondent. Nonetheless,
because of a possible adverse decision in the civil cases involving them (the courts are empowered to reduce such rate if the same is iniquitous or
properties). He thus posits that since the sale pushed through, the promissory unconscionable pursuant to the above-quoted provision.[49] This sentiment is
notes did not become effective. echoed in Article 2227 of the Civil Code, to wit:

Contrary to the conclusions of the RTC and the CA, we find such proof Art. 2227. Liquidated damages, whether intended
insufficient to overcome the presumption of consideration. The presumption as an indemnity or a penalty, shall be equitably reduced if
that a contract has sufficient consideration cannot be overthrown by the bare, they are iniquitous or unconscionable.
uncorroborated and self-serving assertion of respondent that it has no
consideration.[41] The alleged lack of consideration must be shown by
preponderance of evidence.[42] Hence, we reduce the stipulated attorney’s fees from 25% to 10%.[50]

As it now appears, the promissory notes clearly stated that respondent


promised to pay petitioner P1,520,000.00 andP416,800.00, plus interests and
penalty charges, a year after their execution. Nowhere in the notes was it
stated that they were subject to a condition. As correctly observed by
petitioner, respondent is not only a lawyer but a law professor as well. He is,
therefore, legally presumed not only to exercise vigilance over his concerns but,
more importantly, to know the legal and binding effects of promissory notes
and the intricacies involving the execution of negotiable instruments including
the need to execute an agreement to document extraneous collateral
conditions and/or agreements, if truly there were such.[43] This militates
against respondent’s claim that there was indeed such an agreement. Thus, the
promissory notes should be accepted as they appear on their face.

Respondent’s liability is not negated by the fact that he has uncollected


commissions from the sale of the Molino properties. As the records of the case
show, at the time of the execution of the promissory notes, the Molino
properties were subject of various court actions commenced by different
parties. Thus, the sale of the properties and, consequently, the payment of
respondent’s commissions were put on hold. The non-payment of his
commissions could very well be the reason why he obtained a loan from
petitioner.

In Sierra v. Court of Appeals,[44] we held that:

A promissory note is a solemn


acknowledgment of a debt and a formal commitment to
repay it on the date and under the conditions agreed
upon by the borrower and the lender. A person who signs
such an instrument is bound to honor it as a legitimate
obligation duly assumed by him through the signature he
affixes thereto as a token of his good faith. If he reneges
on his promise without cause, he forfeits the sympathy
and assistance of this Court and deserves instead its
sharp repudiation.

Aside from the payment of the principal obligation of P1,936,800.00, the


parties agreed that respondent pay interest at the rate of 25% from February
17, 1997 until fully paid. Such rate, however, is excessive and thus, void. Since
the stipulation on the interest rate is void, it is as if there was no express
contract thereon. To be sure, courts may reduce the interest rate as reason and
equity demand.[45] In this case, 12% interest is reasonable.

The promissory notes likewise required the payment of a penalty


charge of 3% per month or 36% per annum. We find such rates unconscionable.
This Court has recognized a penalty clause as an accessory obligation which the
parties attach to a principal obligation for the purpose of ensuring the
performance thereof by imposing on the debtor a special prestation (generally
consisting of the payment of a sum of money) in case the obligation is not
fulfilled or is irregularly or inadequately fulfilled.[46] However, a penalty charge
of 3% per month is unconscionable;[47] hence, we reduce it to 1% per month or
12% per annum, pursuant to Article 1229 of the Civil Code which states:

Art. 1229. The judge shall equitably reduce the


penalty when the principal obligation has been partly or
irregularly complied with by the debtor. Even if there has
been no performance, the penalty may also be reduced by
the courts if it is iniquitous or unconscionable.[48]
Respondent’s Counterclaim and Supplemental conclusion that Pentacapital Realty is not a privy to the contract between
Counterclaim respondent and CRDI. It also categorically stated that it was CRDI which agreed
to pay respondent’s commission equivalent to 20% of the proceeds of the sale.
The RTC, affirmed by the CA, granted respondent’s counterclaims as it With these findings, and considering that petitioner’s alleged liability stems
applied the doctrine of piercing the veil of corporate fiction. It is undisputed from its supposed relation with Pentacapital Realty, logic dictates that the
that the parties to the contract of sale of the subject properties are Pentacapital findings of the RTC-Cebu, which had become final and executory, should bind
Realty as the buyer, CRDI as the seller, and respondent as the agent of CRDI. petitioner.
Respondent insisted, and the RTC and the CA agreed, that petitioner, as the
parent company of Pentacapital Realty, was aware of the sale transaction, and It is well-settled that when material facts or questions in issue in a
that it was the former who paid the consideration of the sale. Hence, they former action were conclusively settled by a judgment rendered therein, such
concluded that the two corporations should be treated as one entity. facts or questions constitute res judicata and may not again be litigated in a
subsequent action between the same parties or their privies regardless of the
Petitioner assails the CA Decision sustaining the grant of form of the latter.[54] Absolute identity of parties is not required, and where a
respondent’s counterclaim and supplemental counterclaim on the following shared identity of interest is shown by the identity of the relief sought by one
grounds: first, respondent’s claims are barred by res judicata, the same having person in a prior case and the second person in a subsequent case, such was
been adjudicated with finality by the RTC-Cebu in Civil Case No. CEB- deemed sufficient.[55] There is identity of parties not only when the parties in
25032; second, piercing the veil of corporate fiction is without basis; third, the the cases are the same, but also between those in privity with them.
case is dismissible for failure to implead Pentacapital Realty as indispensable
party; and last, respondent’s supplemental counterclaim is actually a third party No other procedural law principle is indeed more settled than that
complaint against Pentacapital Realty, the filing thereof requires the payment once a judgment becomes final, it is no longer subject to change, revision,
of the necessary docket fees. amendment, or reversal, except only for correction of clerical errors, or the
making of nunc pro tunc entries which cause no prejudice to any party, or
Petitioner’s contentions are meritorious. where the judgment itself is void. The underlying reason for the rule is two-
fold: (1) to avoid delay in the administration of justice and thus make orderly
Res judicata means “a matter adjudged; a thing judicially acted upon or the discharge of judicial business; and (2) to put judicial controversies to an end,
decided; a thing or matter settled by judgment.” It lays the rule that an existing at the risk of occasional errors, inasmuch as controversies cannot be allowed to
final judgment or decree rendered on the merits, without fraud or collusion, by drag on indefinitely and the rights and obligations of every litigant must not
a court of competent jurisdiction, upon any matter within its jurisdiction, is hang in suspense for an indefinite period of time.[56]
conclusive of the rights of the parties or their privies, in all other actions or suits
in the same or any other judicial tribunal of concurrent jurisdiction on the In view of the foregoing disquisitions, we find no necessity to discuss the
points and matters in issue in the first suit.[51] other issues raised by petitioner.

The requisites of res judicata are: Forum Shopping

(1) The former judgment or order must be For his part, respondent adopts the conclusions made by the RTC
final; and the CA in granting his counterclaims. He adds that the petition should be
dismissed on the ground of forum-shopping. He argues that petitioner is guilty
(2) It must be a judgment on the merits; of forum-shopping by filing the petition for review (G.R. No. 181482), assailing
the CA Decision dated October 4, 2007, despite the pendency of G.R. No.
(3) It must have been rendered by a court 171736 assailing the CA Decision dated December 20, 2005.
having jurisdiction over the subject matter and
the parties; and We do not agree with respondent.

(4) There must be between the first and Forum-shopping is the act of a litigant who repetitively availed of
second actions, identity of parties, subject several judicial remedies in different courts, simultaneously or successively, all
matter, and cause of action.[52] substantially founded on the same transactions and the same essential facts
and circumstances, and all raising substantially the same issues, either pending
These requisites are present in the instant case. It is undisputed that in or already resolved adversely by some other court, to increase his chances of
respondent instituted an action for Preliminary Mandatory Injunction against obtaining a favorable decision if not in one court, then in another.[57]
Pentacapital Realty, before the RTC of Cebu City, docketed as Civil Case No.
CEB-25032. On motion of Pentacapital Realty, in an Order dated August 15, What is important in determining whether forum-shopping exists is the
2001, the court dismissed the complaint on two grounds: 1) non-payment of vexation caused the courts and parties-litigants by a party who asks different
the correct filing fee considering that the complaint was actually a collection of courts and/or administrative agencies to rule on the same or related causes
sum of money although denominated as Preliminary Mandatory Injunction; and and/or grant the same or substantially the same reliefs, in the process creating
2) lack of cause of action. The court treated the complaint as a collection suit the possibility of conflicting decisions being rendered by the different fora upon
because respondent was seeking the payment of his unpaid commission or the same issues.[58]
share in the proceeds of the sale of the Molino Properties. Additionally, the RTC
found that respondent had no cause of action against Pentacapital Realty, there Forum-shopping can be committed in three ways: (1) by filing
being no privity of contract between them. Lastly, the court held that it was multiple cases based on the same cause of action and with the same prayer, the
CRDI which agreed that 20% of the total consideration of the sale be paid and previous case not having been resolved yet (where the ground for dismissal
delivered to respondent.[53]Instead of assailing the said Order, respondent filed is litis pendentia); (2) by filing multiple cases based on the same cause of action
his supplemental compulsory counterclaim, demanding again the payment of and with the same prayer, the previous case having been finally resolved
his commission, this time, against petitioner in the instant case. The Order, (where the ground for dismissal is res judicata); and (3) by filing multiple cases
therefore, became final and executory. based on the same cause of action but with different prayers (splitting of causes
of action, where the ground for dismissal is also either litis pendentia or res
Respondent’s supplemental counterclaim against petitioner is judicata).[59]
anchored on the doctrine of piercing the veil of corporate fiction. Obviously,
after the dismissal of his complaint before the RTC-Cebu, he now proceeds More particularly, the elements of forum-shopping are: (a) identity of
against petitioner, through a counterclaim, on the basis of the same cause of parties or at least such parties that represent the same interests in both actions;
action. Thus, if we follow respondent’s contention that petitioner and (b) identity of rights asserted and reliefs prayed for, the relief being founded on
Pentacapital Realty are one and the same entity, the latter being a subsidiary of the same facts; (c) identity of the two preceding particulars, such that any
the former, respondent is barred from instituting the present case based on the judgment rendered in the other action will, regardless of which party is
principle of bar by prior judgment. The RTC-Cebu already made a definitive successful, amount to res judicata in the action under consideration.[60]
amnesty return under P.D. 1740 and 1840 does not ipso facto shield him from
These elements are not present in this case. In G.R. No. 171736, petitioner immunity against prosecution. Tax amnesty is a general pardon to taxpayers
assails the propriety of the admission of respondent’s supplemental compulsory who want to start a clean tax slate. It also gives the government a chance to
counterclaim; while in G.R. No. 181482, petitioner assails the grant of collect uncollected tax from tax evaders without having to go through the
respondent’s supplemental compulsory counterclaim. In other words, the first tedious process of a tax case. To avail of a tax amnesty granted by the
case originated from an interlocutory order of the RTC, while the second case is government, and to be immune from suit on its delinquencies, the taxpayer
an appeal from the decision of the court on the merits of the case. There is, must have voluntarily disclosed his previously untaxed income and must have
therefore, no forum-shopping for the simple reason that the petition and the paid the corresponding tax on such previously untaxed income.
appeal involve two different and distinct issues. 4. Taxation; Tax Amnesty; Statutory Construction; A tax amnesty, much like a
tax exemption, is never favored nor presumed in law and if granted by statute,
WHEREFORE, premises considered, the petitions are hereby GRANTED. the terms of the amnesty like that of a tax exemption must be construed strictly
The Decisions and Resolutions of the Court of Appeals dated December 20, against the taxpayer and liberally in favor of the taxing authority.-
2005 and March 1, 2006, in CA-G.R. SP No. 74851, and October 4, 2007 and It also bears noting that a tax amnesty much like a tax exemption, is never
January 21, 2008, in CA-G.R. CV No. 86939, are REVERSED and SET ASIDE. favored nor presumed in law and if granted by statute, the terms of the amnesty
like that of a tax exemption must be construed strictly against the taxpayer and
Respondent Makilito B. Mahinay is ordered to pay petitioner Pentacapital liberally in favor of the taxing authority. Hence, on this matter, it is our view that
Investment Corporation P1,936,800.00 plus 12% interest per annum, petitioner’s claim of immunity from prosecution under the shield of availing tax
and 12% per annum penalty charge, starting February 17, 1997. He amnesty is untenable.
5. Taxation; Sales; Installment Method; Words and Phrases; Initial payment
is likewise ordered to pay 10% of his outstanding obligation as attorney’s under Section 43 of the 1977 National Internal Revenue Code and Section 175 of
fees. No pronouncement as to costs. Revenue Regulation No. 2 means the payment received in cash or property
excluding evidences of indebtedness due and payable in subsequent years, like
SO ORDERED. promissory notes or mortgages, given of the purchaser during the taxable year
of sale—it does not include amounts received by the vendor in the year of sale
Case Title : BIBIANO V. BAÑAS, JR., petitioner, vs. COURT OF APPEALS, from the disposition to a third person of notes given by the vendee as part of the
AQUILINO T. LARIN, RODOLFO TUAZON AND PROCOPIO TALON, purchase price which are due and payable in subsequent years.-
respondents.Case Nature : PETITION for review on certiorari of a decision of the Section 43 and Sec. 175 says that among the entities who may use the above-
Court of Appeals. mentioned installment method is a seller of real property who disposes his
Syllabi Class : Appeals|Negotiable Instruments property on installment, provided that the initial payment does not exceed 25%
Law|Taxation|Actions|Evidence|Promissory Notes|Words and Phrases|Tax of the selling price. They also state what may be regarded as installment
Amnesty|Statutory Construction|Sales|Installment Method|Although the payment and what constitutes initial payment. Initial payment means the
proceed of a discounted promissory note is not considered part of the initial payment received in cash or property excluding evidences of indebtedness due
payment|it is still taxable income for the year it was converted into and payable in subsequent years, like promissory notes or mortgages, given of
cash|Libel|Damages|Public Officers|Taxation the purchaser during the taxable year of sale. Initial payment does not include
Syllabi: amounts received by the vendor in the year of sale from the disposition to a
1. Appeals; Evidence; Findings of fact by the Court of Appeals especially if they third person of notes given by the vendee as part of the purchase price which
affirm factual findings of the trial court will not be disturbed by the Supreme are due and payable in subsequent years. Such disposition or discounting of
Court, unless these findings are not supported by evidence.- receivable is material only as to the computation of the initial payment. If the
As repeatedly held, findings of fact by the Court of Appeals especially if they initial payment is within 25% of total contract price, exclusive of the proceeds of
affirm factual findings of the trial court will not be disturbed by this Court, unless discounted notes, the sale qualifies as an installment sale, otherwise it is a
these findings are not supported by evidence. Similarly, neither should we deferred sale.
disturb a finding of the trial court and appellate court that an allegation is not 6. Taxation; Sales; Installment Method; Although the proceed of a discounted
supported by evidence on record. Thus, we agree with the conclusion of promissory note is not considered part of the initial payment, it is still taxable
respondent court that herein private respondents, on the basis of evidence, income for the year it was converted into cash;If the seller disposes the entire
could not be held liable for extortion. installment obligation by discounting the bill or the promissory note, he
2. Negotiable Instruments Law; Promissory Notes; Words and necessarily must report the balance of the income from the discounting not only
Phrases; Ordinarily, when a bill is discounted, the lender (e.g. banks, financial income from the initial install-ment payment-
institution) charges or deducts a certain percentage from the principal value as Although the proceed of a discounted promissory note is not considered part of
its compensation.- the initial payment, it is still taxable income for the year it was converted into
It will be recalled that petitioner entered into a deed of sale purportedly on cash. The subsequent payments or liquidation of certificates of indebtedness is
installment. On the same day, he discounted the promissory note covering the reported using the installment method in computing the proportionate income
future installments. The discounting seems questionable because ordinarily, to be returned, during the respective year it was realized. Non-dealer sales of
when a bill is discounted, the lender (e.g. banks, financial institution) charges or real or personal property may be reported as income under the installment
deducts a certain percentage from the principal value as its compensation. Here, method provided that the obligation is still outstanding at the close of that year.
the discounting was done by the buyer. If the seller disposes the entire installment obligation by discounting the bill or
3. Taxation; Tax Amnesty; The mere filing of tax amnesty return under the promissory note, he necessarily must report the balance of the income from
Presidential Decrees 1740 and 1840 does not ipso facto shield the taxpayer from the discounting not only income from the initial installment payment.
immunity against prosecution—to avail of a tax amnesty granted by the 7. Taxation; Sales; Installment Method; Where the seller has the promissory
government, and to be immune from suit on its delinquencies, the taxpayer notes covering the succeeding installment payments of the land issued by the
must have voluntarily disclosed his previously untaxed income and must have buyer, discounted by said buyer itself, on the same day of the sale, he loses
paid the corresponding tax on such previously untaxed income.- entitlement to report the sale as a sale on installment since a taxable disposition
On July 2, 1981, two weeks after the filing of the tax evasion complaint against results and the seller is required by law to report in his returns the income
him by respondent Larin on June 17, 1981, petitioner availed of the tax amnesty derived from the discounting.-
under P.D. No. 1740. His amended tax return for the years 1974-1979 was filed Where an installment obligation is discounted at a bank or finance company, a
with the BIR office of Valenzuela, Bulacan, instead of Manila where the taxable disposition results, even if the seller guarantees its payment, continues
petitioner’s principal office was located. He again availed of the tax amnesty to collect on the installment obligation, or handles repossession of merchandise
under P.D. No. 1840. His disclosure, however, did not include the income from in case of default. This rule prevails in the United States. Since our income tax
his sale of land to AYALA on cash basis. Instead he insisted that such sale was on laws are of American origin, interpretations by American courts on our parallel
installment. He did not amend his income tax return. He did not pay the tax tax laws have persuasive effect on the interpretation of these laws. Thus, by
which was considerably increased by the income derived from the discounting. analogy, all the more would a taxable disposition result when the discounting of
He did not meet the twin requirements of P.D. 1740 and 1840, declaration of his the promissory note is done by the seller himself. Clearly, the indebtedness of
untaxed income and full payment of tax due thereon. Clearly, the petitioner is the buyer is discharged, while the seller acquires money for the settlement of his
not entitled to the benefits of P.D. Nos. 1740 and 1840. The mere filing of tax receivables. Logically then, the income should be reported at the time of the
actual gain. For income tax purposes, income is an actual gain or an actual connection with their functions. Moreover, we must be careful lest the amounts
increase of wealth. Although the proceeds of a discounted promissory note is awarded make citizens hesitate to expose corruption in the government, for fear
not considered initial payment, still it must be included as taxable income on the of lawsuits from vindictive government officials. Thus, conformably with our
year it was converted to cash. When petitioner had the promissory notes declaration that moral damages are not intended to enrich anyone, we hereby
covering the succeeding installment payments of the land issued by AYALA, reduce the moral damages award in this case from two hundred thousand
discounted by AYALA itself, on the same day of the sale, he lost entitlement to (P200,000.00) pesos to seventy five thousand (P75,000.00) pesos, while the
report the sale as a sale on installment since, a taxable disposition resulted and exemplary damage is set at P25,000.00 only.
petitioner was required by law to report in his returns the income derived from 12. Actions; Libel; Damages; The law allows the award of attorney’s fees when
the discounting. What petitioner did is tantamount to an attempt to circumvent exemplary damages are awarded, and when the party to a suit was compelled
the rule on payment of income taxes gained from the sale of the land to AYALA to incur expenses to protect his interest.-
for the year 1976. The law allows the award of attorney’s fees when exemplary damages are
8. Actions; Libel; Damages; Actual damages cannot be allowed unless awarded, and when the party to a suit was compelled to incur expenses to
supported by evidence on the record—the court cannot rely on speculation, protect his interest. Though government officers are usually represented by the
conjectures or guesswork as to the fact and amount of damages.- Solicitor General in cases connected with the performance of official functions,
The records of the case contain no statement whatsoever of the amount of the considering the nature of the charges, herein respondent Larin was compelled to
actual damages sustained by the respondents. Actual damages cannot be hire a private lawyer for the conduct of his defense as well as the successful
allowed unless supported by evidence on the record. The court cannot rely on pursuit of his counterclaims. In our view, given the circumstances of this case,
speculation, conjectures or guesswork as to the fact and amount of damages. To there is ample ground to award in his favor P50,000.00 as reasonable attorney’s
justify a grant of actual or compensatory damages, it is necessary to prove with fees.
a reasonable degree of certainty, the actual amount of loss. Since we have no
basis with which to assess, with certainty, the actual or compensatory damages Division: SECOND DIVISION
counter-claimed by respondent Larin, the award of such damages should be
deleted. Docket Number: G.R. No. 102967
9. Actions; Libel; Damages; Public Officers; As a rule, a public official may not
recover damages for charges of falsehood related to his official conduct unless Counsel: Cuevas, De la Cuesta & De las Alas, Francisco Malate, Ramon U. Ampil
he proves that the statement was made with actual malice.-
Moral damages may be recovered in cases involving acts referred to in Article 21 Ponente: QUISUMBING
of the Civil Code. As a rule, a public official may not recover damages for charges
of falsehood related to his official conduct unless he proves that the statement Dispositive Portion:
was made with actual malice. In Babst, et al. vs. National Intelligence Board, et WHEREFORE, the assailed decision of the Court of Appeals dated November 29,
al., 132 SCRA 316, 330 (1984), we reiterated the test for actual malice as set 1991, is hereby AFFIRMED with MODIFICATION so that the award of actual
forth in the landmark American case of New York Times vs. Sullivan, which we damages are deleted; and that petitioner is hereby ORDERED to pay to
have long adopted, in defamation and libel cases, viz.: “. . . with knowledge that respondent Larin moral damages in the amount of P75,000.00, exemplary
it was false or with reckless disregard of whether it was false or not.” damages in the amount of P25,000.00, and attorney’s fees in the amount of
10. Actions; Libel; Damages; Public Officers; Taxation; There is sufficient basis P50,000.00 only.
for the award of moral and exemplary damages in favor of a Bureau of Internal
Revenue official where he suffered anxiety and humiliation because of a
baseless prosecution by a taxpayer.- [G.R. No. 117319. July 19, 2006]
We appreciate petitioner’s claim that he filed his 1976 return in good faith and
that he had honestly believed that the law allowed him to declare the sale of the BPI FAMILY BANK versus COURT OF APPEALS, COURT OF TAX APPEALS AND
land, in installment. We can further grant that the pertinent tax laws needed COMMISSIONER OF INTERNAL REVENUE
construction, as we have earlier done. That petitioner was offended by the Third Division
headlines alluding to him as tax evader is also fully understandable. All these,
however, do not justify what amounted to a baseless prosecution of respondent Sirs/Mesdames:
Larin. Petitioner presented no evidence to prove Larin extorted money from him.
He even admitted that he never met nor talked to respondent Larin. When the Quoted hereunder, for your information, is a resolution of this Court dated JULY
tax investigation against the petitioner started, Larin was not yet the Regional 19, 2006.
Director of BIR Region IV-A, Manila. On respondent Larin’s instruction, G.R. No. 117319 (BPI Family Bank versus Court of Appeals, Court of Tax
petitioner’s tax assessment was considered one involving a sale of capital asset, Appeals and Commissioner of Internal Revenue)
the income from which was subjected to only fifty percent (50%) assessment,
thus reducing the original tax assessment by half. These circumstances may be x --------------------------------------------------------------------------------------------------------
taken to show that Larin’s involvement in extortion was not indubitable. Yet, ----------------- x
petitioner went on to file the extortion cases against Larin in different fora. This
is where actual malice could attach on petitioner’s part. Significantly, the trial RESOLUTION
court did not err in dismissing petitioner’s complaints, a ruling affirmed by the
Court of Appeals. Keeping all these in mind, we are constrained to agree that From April 28, 1986 to December 19, 1986, petitioner affixed and paid
there is sufficient basis for the award of moral and exemplary damages in favor the documentary stamps on its confirmations of sale of T-bills and Central Bank
of respondent Larin. The appellate court believed respondent Larin when he said bills. On April 6, 1987, the Bureau of Internal Revenue (BIR) issued Revenue
he suffered anxiety and humiliation because of the unfounded charges against Memorandum Circular No. 13-87[1] stating among others that no documentary
him. Petitioner’s actions against Larin were found “unwarranted and baseless,” stamp tax shall be imposed on documents of conveyance of instruments
and the criminal charges filed against him in the Tanodbayan and City Fiscal’s enumerated in Section 229,[2] presently Section 180 of the National Internal
Office were all dismissed. Hence, there is adequate support for respondent Revenue Code (NIRC). Pursuant thereto, petitioner filed with the BIR a claim for
court’s conclusion that moral damages have been proved. refund, amounting to P1,116,612, alleging among others that T-bills and Central
11. Actions; Libel; Damages; Public Officers; Considering that in the instant case Bank bills fall within the purview of the instruments enumerated in Section 229
the award is in favor of a government official in connection with his official (now Section 180) of the National Internal Revenue Code.
function, it is with caution that the Supreme Court affirms granting moral On April 15, 1988, petitioner filed a petition for review with the
damages, for it might open the floodgates for government officials counter- respondent Court of Tax Appeals. The Court of Tax Appeals denied the claim for
claiming damages in suits filed against them in connection with their functions.- refund, and later on, the motion for reconsideration. On appeal, the Court of
It will be noted that in above cases, the parties who were awarded moral Appeals ruled that, procedurally, the petitioner failed to attach in its petition
damages were not public officials. Considering that here, the award is in favor of the proof of service and the duplicate original of the Court of Tax Appeals'
a government official in connection with his official function, it is with caution decision; and on the substantial merits of the appeal, the sale and transfer of T-
that we affirm granting moral damages, for it might open the floodgates for bills and Central Bank bills are subject to documentary stamp tax under Section
government officials counter-claiming damages in suits filed against them in
225[3] (now Section 176) of the NIRC. The dispositive portion of the Court of A perusal of Section 225[11] shows that on all sales, or agreements to sell,
Appeals' decision reads as follows: or memoranda of sales, or deliveries, or transfer of certificates of obligation, in
any association, company, or corporation; or transfer of such securities by
delivery, or by any paper, or agreement, or memorandum or other evidences of
WHEREFORE, the instant petition is hereby DISMISSED and the decision under
transfer or sale whether entitling the holder in any manner to the benefit of
review AFFIRMED.
such certificates of obligation, there shall be collected a documentary stamp
tax. In this case, we have to inquire whether the T-bills and Central Bank bills
Costs against petitioner. are covered by the said provision.
Under Section 1[12] of Republic Act No. 245, as amended by P.D. No. 142,
SO ORDERED.[4] Treasury bills are evidence of indebtedness, issued by the National Government
on a discount basis and offered for sale either at auction on competitive or non-
Hence, this petition, raising the following issues: competitive basis, payable at any date not later than one year from the date of
issue. Central Bank bills are also evidence of indebtedness issued by the Central
Bank conformably with Section 98[13] of R.A. No. 265, which authorizes the
From the foregoing it is clear that there is a procedural as well as substantive
Central Bank to issue and negotiate Central Bank obligations, and to place, buy,
issue that presents itself in this case. The procedural issue is whether the
and sell freely its negotiable evidence of indebtedness.
petition is dismissible for failure to comply with the requirements of Supreme
Court Circular No. 1-88. The substantive issue is whether the Court of Appeals Contrary to petitioner's argument, a certificate of indebtedness is
committed reversible error in not ruling that Treasury Bills and Central [Bank] different from ordinary debt instruments such as promissory notes and deposit
Bills are promissory notes or are included in the definition of deposit substitutes substitutes. A certificate of indebtedness includes only instruments having the
under sec. 180 of the NIRC.[5] (Stress supplied.) general character of investment securities as distinguished from instruments
evidencing debts arising in ordinary transactions between individuals.[14] As
Simply, the issue on the substantive aspect is, Are T-bills and Central distinguished from a promissory note which is an unconditional promise in
Bank bills subject to documentary stamp tax under Section 225 of the NIRC? On writing made by one person to another, signed by the maker, engaging to pay
the procedural aspect, the issue is: Did the Court of Appeals err in dismissing on demand, or at a fixed or determinable future time, a sum certain in money,
the petition for failure to attach the proof of service and the duplicate original to order or bearer,[15] T-bills and Central Bank bills are investment securities of a
of the Court of Tax Appeals' decision? public character, issued by the Philippine Government, thru the Central Bank of
the Philippines.
Before us, petitioner now submits that said government securities do not
fall under Section 225. Also, petitioner claims that those cited government On the other hand, the chief feature of a deposit substitute is
securities are deemed as promissory notes and/or deposit substitutes borrowing.[16] In this case, petitioner sells government securities to private
enumerated under Section 229 (now Section 180), hence, by virtue of Revenue individuals/entities, in which its confirmations of sale are being subjected to
Memorandum Circular No. 13-87, they are not subject to documentary stamp documentary stamp tax. There is no borrowing or debt instrument involved in
tax. Petitioner also contends that: this case. Here, the petitioner, as the seller, simply conveys through sale,
specific government securities to the buyer, who thereby acquires title thereto,
(1) in BIR Ruling No. 036 dated February 10, 1988, the then including the plenary right of disposal. As there is no borrowing, there is no
Commissioner has issued an opinion addressed to the Chief debt with respect to which the seller can be primarily bound. Nor is the seller
of the Banks, Financing & Insurance Division of the BIR that, subsidiarily bound to respond in case the issuer of the said securities defaults,
since treasury bills are considered as deposit substitutes, they hypothetically assuming that the Philippine Government, as issuer of the
are subject to documentary stamp tax under Section 229 of securities sold, could default. Precisely, the sale of said government securities is
the NIRC;[6] always "without recourse."

(2) Revenue Regulations No. 17-84, Section 2(h)(b) provided that, Both the respondent courts correctly held that whether T-bills and
the following borrowings shall be considered as deposit Central Bank bills are denominated as certificates of obligations, certificates of
substitutes, ". . .(b) All borrowings of the national and local indebtedness or evidence of indebtedness, they bear the same
government and its instrumentalities including the Central meaning. Section 225 is clear. On all sales, or agreements to sell, or
Bank of the Philippines, evidenced by debt instruments memoranda of sales, or deliveries, or transfer of certificates of obligation in any
denoted as treasury bonds, bills, notes, certificates of association, company, or corporation; or transfer of such securities by delivery,
indebtedness and similar instruments;"[7] or by any paper, or agreement, or memorandum or other evidences of transfer
or sale whether entitling the holder in any manner to the benefit of such
(3) Revenue Memorandum Circular No. 13-87, stated that, since certificates of obligation, there shall be collected a documentary stamp tax. The
Section 225 of the NIRC applies only to documents of nomenclatures, i.e., evidence of indebtedness, certificate of obligation and
conveyances covering instruments stated in Sections 223 and certificate of indebtedness, bear the same meaning and although their various
224 (now Secs. 174 and 175) of the NIRC, it follows that appellations are used interchangeably by law, they all refer to the subject
documents of conveyance covering instruments stated in securities, i.e., T-bills and Central Bank bills.
Section 229 are not subject to DST.[8]
Rules and regulations issued by the administrative officials to implement
Therefore, according to petitioner, the subject government a law cannot go beyond the terms and provisions of the latter.[17] While the
securities are exempt from documentary stamp taxes. interpretation placed upon a law by the executive officers is entitled to great
respect by the courts, nevertheless, it is not conclusive and will be ignored if
The tax court and the appellate court, however, held that T-bills and judicially found to be erroneous. Administrative rulings have been aptly
Central Bank bills, under its governing laws, Republic Act No. 245, as amended described as follows: "They are the best guess of the moment and incidentally
by Presidential Decree No. 142,[9] and R.A. No. 265,[10] are denominated as often contain such well considered and sound law; but the courts have held that
evidence of indebtedness, hence, are deemed the same as certificates of they do not prevent an entire change of front at any time and are merely
obligations or certificates of indebtedness. They added that the issuance of said advisory - sort of an information service to the taxpayer." Moreover,
government securities falls within the purview of Sections 222 (now Section administrative rulings of previous Commissioners are not conclusive and
173) and 223 (now Section 174), while its sale, transfer or conveyance is under binding upon their successors[18] if the latter become convinced that a law
Section 225 (now Section 176) of the NIRC. warrants a different construction. Therefore, courts will not countenance
administrative rulings that are not consistent and in harmony with the law they
We agree with the ruling of both the tax and appellate courts.
seek to apply and implement. Therefore, the confirmations of sale of
It bears stressing that the main issue raised before us is: Are government securities made by the petitioner to private individuals/entities are
confirmations of sale of the subject government securities, between herein subject to documentary stamp tax pursuant to Section 225 of the NIRC.
petitioner and private individuals/entities, subject to documentary stamp tax?
We see no need to rule on the procedural issues, since the Court of [15] ACT No. 2031, Sec. 184. Promissory note defined. - A negotiable promissory
Appeals, despite pronouncement of the alleged procedural defects, note within the meaning of this Act is an unconditional promise in writing made
nevertheless, ruled on the merits of the case. by one person to another, signed by the maker, engaging to pay on demand, or
at a fixed or determinable future time, a sum certain in money to order or to
WHEREFORE, the instant petition is DENIED. The Court of Appeals' bearer. Where a note is drawn to the maker's own order, it is not complete
decision dated September 19, 1994 in CA-G.R. SP No. 29853 isAFFIRMED. until indorsed by him.
[16]
No pronouncement as to costs. Revenue Memorandum Circular No. 62-2003 provides,
[T]he chief feature of a deposit substitute is "borrowing." Without borrowing,
SO ORDERED. there is no deposit substitute. The sale of a debt instrument is deemed
"borrowing" if the seller assumes liability to pay what in essence is a loan, by
Very truly yours,
whatever name it is called and whatever be its form. The liability may be either
(Sgd.) LUCITA ABJELINA-SORIANO primary or subsidiary. Primary liability refers to the obligation to pay back the
purchase price (loan). There is a subsidiary liability if there is recourse against
Clerk of Court the seller in case the person primarily liable under the underlying instrument
fails to pay. For this reason, "deposit substitutes" include certificates of
[1]
assignment or participation "with recourse." Of course, if the seller is, by
Supplementary Revenue Memorandum Circular to Revenue Memorandum
stipulation, already primarily liable - as where he has the firm obligation to buy
Circular No. 33-86, Publishing Questions and Answers to Documentary Stamp
back the very same debt paper he has sold - it is superfluous to talk of transfer
Tax.
[2] SEC. 229. Stamp Tax on negotiable promissory notes, bills of exchange,
"with or without recourse." Where, however, there is indeed no liability to pay,
either primary or subsidiary, there is no borrowing or debt that can give rise to
drafts, certificates of deposit bearing interest and others not payable on sight or
a deposit substitute . . .
demand. - On all bills of exchange (between points within the Philippines), [17] People v. Lim, 108 Phil. 1091, 1094 (1960).
drafts or certificates of deposit drawing interest, or orders for the payment of [18] Hilado v. Coll. Of Internal Rev. and Ct. of Tax Appeals, 100 Phil. 288, 294
any sum of money otherwise than at sight or on demand, on all negotiable
(1956).
promissory notes, except bank notes issued for circulation, and on each renewal
of any such note, there shall be collected a documentary stamp tax . . .
[3] SEC. 225. Stamp tax on sales, agreements to sell, memoranda of sales, Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COMMISSIONER
deliveries or transfer of bonds, due bills, certificate of obligation, or shares or OF INTERNAL REVENUE, respondent.
certificates of stock. - On all sales, or agreements to sell, or memoranda of sales, Case Nature : PETITION for review on certiorari of a decision of the Court of
or deliveries, or transfer of bonds, dues-bills, certificates of obligation, or shares Appeals.
or certificates of stock, in any association, company, or corporation, or transfer Syllabi Class : Documentary Stamp Tax|Bills of Exchange|Letters of
of such securities by assignment in blank, or by delivery, or by any paper, or Credit|Taxation|Excise Tax|Negotiable Instruments Law (Act No. 2031|Word
agreement, or memorandum or other evidences of transfer or sale whether and Phrases|Documentary Stamp Tax|“Draft” and “Bank Draft|”
entitling the holder in any manner to the benefit of such certificate of obligation Explained|Words and Phrases;|Interests
. . . or for the future transfer of any . . . certificate of obligation . . . there shall be Syllabi:
collected a documentary stamp tax . . . 1. Documentary Stamp Tax; Section 195 (now Section 182) of the National
[4]
Rollo, p. 100. Internal Revenue Code (NIRC) imposes a documentary stamp tax on (1) foreign
[5] Id. at 189. bills of exchange, (2) letters of credit, and (3) orders, by telegraph or otherwise,
[6] Id. at 22-23. for the payment of money issued by express or steamship companies or by any
[7]
Id. at 23. person or persons.-
[8] Id. at 21. —The first issue raised by the petitioner is whether BPI is liable for documentary
[9] AMENDING REPUBLIC ACT NO. 245 ENTITLED "AN ACT AUTHORIZING THE stamp taxes in connection with its sale of foreign exchange to the Central Bank
SECRETARY OF FINANCE TO BORROW TO MEET PUBLIC EXPENDITURES in 1986 under Section 195 (now Section 182) of the NIRC, quoted hereunder: Sec.
AUTHORIZED BY LAW AND FOR OTHER PURPOSES. 182. Stamp tax on foreign bills of exchange and letters of credit. On all foreign
[10]
AN ACT ESTABLISHING THE CENTRAL BANK OF THE PHILIPPINES, DEFINING bills of exchange and letters of credit (including orders, by telegraph or
ITS POWERS IN THE ADMINISTRATION OF THE MONETARY AND BANKING otherwise, for the payment of money issued by express or steamship companies
SYSTEM, AMENDING THE PERTINENT PROVISIONS OF THE ADMINISTRATIVE or by any person or persons) drawn in but payable out of the Philippines in a set
CODE WITH RESPECT TO THE CURRENCY AND THE BUREAU OF BANKING, AND of three or more according to the custom of merchants and bankers, there shall
FOR OTHER PURPOSES. be collected a documentary stamp tax of thirty centavos on each two hundred
[11] Supra, note 3. pesos, or fractional part thereof, of the face value of such bill of exchange or
[12] Section 1. In order to meet public expenditures authorized by law or to letter of credit, or the Philippine equivalent of such face value, if expressed in
provide for the purchase, redemption, or refunding of any obligations, either foreign country. To determine what is being taxed under this section, a
direct or guaranteed, of the Philippine Government, the Secretary of Finance, discussion on the nature of the acts covered by Section 195 (now Section 182) of
with the approval of the President of the Philippines, after consultation with the the NIRC is indispensable. This section imposes a documentary stamp tax on (1)
Monetary Board, is authorized to borrow from time to time on the credit of the foreign bills of exchange, (2) letters of credit, and (3) orders, by telegraph or
Republic of the Philippines such sum or sums as in his judgment may be otherwise, for the payment of money issued by express or steamship companies
necessary, and to issue therefore evidences of indebtedness of the Philippine or by any person or persons. This enumeration is further limited by the
Government. qualification that they should be drawn in the Philippines and payable outside of
Such evidences of indebtedness may be of the following types: the Philippines.
a. Treasury bills issued on a discount basis or at par and payable at maturity 2. Same; Collecting charges incident to tax delinquency is mandatory.-
without interest. Treasury bills may be offered for sale either on a competitive —Based on established doctrine, these charges incident to delinquency are
basis or at a fixed rate of discount or at par and may be made payable at any compensatory in nature and are imposed for the taxpayers’ use of the funds at
date not later than one year from the date of issue; x x x x the time when the State should have control of said funds. Collecting such
[13] SEC. 98. Issue and negotiation of Central Bank obligations. - In order to charges is mandatory. Therefore, the Decision of the Court of Appeals imposing
provide the Central Bank with effective instruments for open market a 20% delinquency interest over the assessment reduced by the CTA was
operations, the Bank may, subject to such rules and regulations as the justified and in accordance with Section 249(c)(3) of the NIRC.
Monetary Board may prescribe and in accordance with the principles stated in 3. Taxation; Interests; Even if an assessment is later reduced by the courts, a
Section 96 of this Act, issue, place, buy and sell freely negotiable evidences of delinquency interest should still be imposed from the time demand was made
indebtedness of the Bank. Said evidences of indebtedness may be issued by the Commissioner of Internal Revenue;The intention of the law is precisely to
directly against the international reserve of the Bank or against the securities discourage delay in the payment of taxes due to the State and, in this sense, the
which it has acquired under the provisions of Section 97 of this Act, or may be surcharge and interest charged are not penal but compensatory in nature-
issued without relation to specific types of assets of the Bank. x x x x —they are compensation to the State for the delay in payment, or for the
[14]
The Revised Documentary Stamp Tax Regulation, promulgated by the concomitant use of the funds by the taxpayer beyond the date he is supposed to
Department of Finance on September 16, 1924. XXII O.G. 112, p. 2335. have paid them to the State.—In the case of Philippine Refining Company v.
Court of Appeals, 256 SCRA 667 (1996), this Court categorically ruled that even if 7. Same; What is being taxed is the facility that allows a party to draw the draft
an assessment was later reduced by the courts, a delinquency interest should or make the order to pay within the Philippines and have the payment made in
still be imposed from the time demand was made by the CIR. As correctly another country.-
pointed out by the Solicitor General, the deficiency tax assessment in this case, —BPI alleges that the assailed decision must be reversed since the sale between
which was the subject of the demand letter of respondent Commissioner dated BPI and the Central Bank of foreign exchange, as distinguished from foreign bills
April 11, 1989, should have been paid within thirty (30) days from receipt of exchange, is not subject to the documentary stamp taxes prescribed in
thereof. By reason of petitioner’s default thereon, the delinquency penalties of Section 195 (now Section 182) of the NIRC. This argument leaves much to be
25% surcharge and interest of 20% accrued from April 11, 1989. The fact that desired. In this case, it is not the sale of foreign exchange per se that is being
petitioner appealed taxed under Section 195 of the NIRC. This section refers to a documentary stamp
4. Excise Tax; The power to levy an excise upon the performance of an act or tax, which is an excise upon the facilities used in the transaction of the business
the engaging in an occupation does not depend upon the domicile of the separate and apart from the business itself. It is not a tax upon the business
person subject to the excise, nor upon the physical location of the property itself which is so transacted, but it is a duty upon the facilities made use of and
and in connection with the act or occupation taxed, but depends upon the actually employed in the transaction of the business, and separate and apart
place in which the act is performed or occupation engaged in; Section 195 from the business itself. Section 195 (now Section 182) of the NIRC covers
(now Section 182) of the NIRC would be rendered invalid if the fact that the foreign bills of exchange, letters of credit, and orders of payment for money,
payment was made outside of the country can be used as a basis for drawn in Philippines, but payable outside the Philippines. From this
nonpayment of the tax.- enumeration, two common elements need to be present: (1) drawing the
—BPI argues that the foreign exchange sold was deposited and instrument or ordering a drawee, within the Philippines; and (2) ordering that
5. Bills of Exchange; “Draft” and “Bank Draft,” Explained; Words and drawee to pay another person a specified amount of money outside the
Phrases; In the case of a bill of exchange, the funds may belong to the drawer Philippines. What is being taxed is the facility that allows a party to draw the
and need not be advanced by the drawee, as in the case of a check or a draft or make the order to pay within the Philippines and have the payment
draft; A draft is a form of a bill of exchange used mainly in transactions between made in another country.
persons physically remote from each other, an order made by one person, say 8. Taxation; Documentary Stamp Tax; The phrase “orders, by telegraph or
the buyer of goods, addressed to a person having in his possession funds of such otherwise, for the payment of money” used in reference to documentary stamp
buyer ordering the addressee to pay the purchase price to the seller of the taxes may be found in an earlier documentary tax provision, Section 1449(i) of
goods, and where the order is made by one bank to another, it is referred to as a the Administrative Code of 1917, which was substantially reproduced in Section
bank draft.- 195 (now Section 182) of the NIRC.-
—The fact that the funds belong to BPI and were not advanced by the —The phrase “orders, by telegraph or otherwise, for the payment of money”
correspondent bank will not remove the transaction from the coverage of used in reference to documentary stamp taxes may be found in an earlier
Section 195 (now Section 182) of the NIRC. There are transactions covered by documentary tax provision, Section 1449(i) of the Administrative Code of 1917,
this section wherein funds belonging to the drawer are used for payment. A bill which was substantially reproduced in Section 195 (now Section 182) of the
of exchange, when drawn in the Philippines but payable in another country, NIRC. Regulations No. 26, which provided the rules and guidelines for the
would surely be covered by this section. And in the case of a bill of exchange, the documentary stamp tax imposed under the Administrative Code of 1917,
funds may belong to the drawer and need not be advanced by the drawee, as in contains an explanation for the phrase “orders, by telegraph or otherwise, for
the case of a check or a draft. In the description of a draft provided hereunder, the payment of money”: What may be regarded as telegraphic transfer.—A
the drawee is in possession of funds belonging to the drawer of the bill: A draft local bank cables to a certain bank in a foreign country with which bank said
is a form of a bill of exchange used mainly in transactions between persons local bank has a credit, and directs that foreign bank to pay to another bank or
physically remote from each other. It is an order made by one person, say the person in the same locality a certain sum of money, the document for and in
buyer of goods, addressed to a person having in his possession funds of such respect such transaction will be regarded as a telegraphic transfer, taxable
buyer ordering the addressee to pay the purchase price to the seller of the under the provisions of Section 1449(i) of the Administrative Code.
goods. Where the order is made by one bank to another, it is referred to as a 9. Letters of Credit; Word and Phrases; A letter of credit is one whereby one
bank draft. person requests some other person to advance money or give credit to a third
6. Same; Same; “Credit” and “Deposit,” Defined; Words and Phrases; By the person, and promises that he will repay the same to the person making the
definition of “credit” being equated with the term “deposits,” BPI’s deposit advancement, or accept the bill drawn upon himself for the like amount.-
account with its correspondent bank is much the same as the “credit” referred —The Code of Commerce loosely defines a “letter of credit” and provides for its
to in Section 51 of Regulations No. 26- essential conditions, thus: Art. 567. Letters of credit are those issued by one
—the fact that the funds transferred to the Central Bank’s account with the merchant to another or for the purpose of attending to a commercial
Federal Reserve Bank are from BPI’s deposit account with the correspondent transaction. Art. 568. The essential conditions of letters of credit shall be: 1. To
bank can only underline that the present case is the same situation described be issued in favor of a definite person and not to order. 2. To be limited to a
under Section 51 of Regulations No. 26.—BPI further alleges that since the funds fixed and specified amount, or to one or more undetermined amounts, but
transferred to the Federal Reserve Bank were taken from BPI’s account with the within a maximum the limits of which has to be stated exactly. A more explicit
correspondent bank, this is not the transaction contemplated under Section 51 definition of a letter of credit can be found in the commentaries: A letter of
of Regulations No. 26. BPI argues that Section 51 of Regulations No. 26, in using credit is one whereby one person requests some other person to advance money
the phrase “with which local bank has credit,” involves transactions wherein the or give credit to a third person, and promises that he will repay the same to the
drawee bank pays with its own funds and excludes from the coverage of the law person making the advancement, or accept the bills drawn upon himself for the
situations wherein the funds paid out by the correspondent bank are owned by like amount. A bill of exchange and a letter of credit may differ as to their
the drawer. In the case of Republic of the Philippines v. Philippine National Bank, negotiability, and as to who owns the funds used for the payment at the time
3 SCRA 851 (1961), the Court equated “credit” with the term “deposits,” and payment is made. However, in both bills of exchange and letters of credit, a
identified the depositor as the creditor and the bank as the debtor. And as person orders another to pay money to a third person.
correctly stated by the trial court, the term “credit” in its usual meaning is a sum 10. Same; A “foreign bill of exchange” may be drawn outside the Philippines,
credited on the books of a company to a person who appears to be entitled to it. payable outside the Philippines, or both drawn and payable outside of the
It presupposes a creditordebtor relationship, and may be said to imply ability, by Philippines.-
reason of property or estates, to make a promised payment. It is the correlative —Section 129 of the same law classifies bills of exchange as inland and foreign,
to debt or indebtedness, and that which is due to any person, as distinguished the distinction is laid down by where the bills are drawn and paid. Thus, a
from that which he owes. The same is true with the term “deposits” in banks “foreign bill of exchange” may be drawn outside the Philippines, payable outside
where the relationship created between the depositor and the bank is that of the Philippines, or both drawn and payable outside of the Philippines. Sec. 129.
creditor and debtor. By this definition of “credit,” BPI’s deposit account with its Inland and foreign bills of exchange.—An inland bill of exchange is a bill which
correspondent bank is much the same as the “credit” referred to in Section 51 of is, or on its face purports to be, both drawn and payable within the Philippines.
Regulations No. 26. Thus, the fact that the funds transferred to the Central Any other bill is a foreign bill. x x x
Bank’s account with the Federal Reserve Bank are from BPI’s deposit account 11. Bills of Exchange; Negotiable Instruments Law (Act No. 2031); Words and
with the correspondent bank can only underline that the present case is the Phrases; “Bills of Exchange,” Defined.-
same situation described under Section 51 of Regulations No. 26. —A definition of a “bill of exchange” is provided by Section 39 of Regulations
No. 26, the rules governing documentary taxes promulgated by the Bureau of
Internal Revenue (BIR) in 1924: Sec. 39. Definition of “bill of exchange.” The term 1988 by delegating his power to compromise said DST assessment on securities.
bill of exchange denotes checks, drafts, and all This ultra vires act of those revenue officials cannot have any valid and binding
legal effect upon the BIR, so as to proscribe the latter from issuing the assailed
Division: FIRST DIVISION reassessment of unpaid DST on the sales of securities under repurchase
agreements for the year 1983.
Docket Number: G.R. No. 137002 3. Same; Same; Compromise Agreements; Words and Phrases; The issue of DST
assessment on sales of securities with repurchase agreement, which was the
Counsel: Padilla Law Office, The Solicitor General subject of the reassessment being questioned in this case, is definitely not within
the scope of the compromise agreement, being limited as it is to DST on
Ponente: CHICO-NAZARIO promissory notes-
—the Court simply cannot agree with the petitioner that securities and
Dispositive Portion: promissory notes for purposes of the subject Compromise Agreement are one
WHEREFORE, premises considered, this Court DENIES this petition and AFFIRMS and the same thing; The term “promissory note” has a definite meaning under
the Decision of the Court of Appeals in CA-G.R. SP No. 57362 dated 14 August the negotiable instruments law, which does not include “securities.”—The issue
1998, ordering that petitioner Bank of the Philippine Islands to pay Respondent of DST assessment on sales of securities with repurchase agreement, which was
Commissioner of Internal Revenue the deficiency documentary stamp tax in the the subject of the reassessment being questioned in this case, is definitely not
amount of P690,030.00 inclusive of surcharge and compromise penalty, plus within the scope of the compromise agreement, being limited as it is to DST on
20% annual interest from 7 June 1990 until fully paid. Costs against the promissory notes issued prior to October 15, 1984. The DST assessed on the
petitioner. former arises from the act of “selling” securities (presently taxed under Section
176), while the DST assessed in the latter is on the act of “issuing” promissory
notes (taxed under Section 180). It is evident from the separate provisions
Case Title : SECURITY BANK CORPORATION (formerly SECURITY BANK AND governing the two that the law treats these two instruments differently. This
TRUST COMPANY), petitioner, vs. THE COMMISSIONER OF INTERNAL REVENUE, Court simply cannot agree with SBC that securities and promissory notes for
respondent.Case Nature : PETITION for review on certiorari of a decision of the purposes of the subject Compromise Agreement are one and the same thing.
Court of Appeals. Besides, even assuming, in gratia argumenti, that promissory notes may be
Syllabi Class : Taxation|Documentary Stamp Tax (DST)|Administrative included under the generic term “securities,” securities cannot be included under
Law|Court of Tax Appeals|Compromise Agreements|Words and Phrases|The the specific term “promissory notes” so as to be deemed within the scope of the
issue of DST assessment on sales of securities with repurchase same compromise agreement. To be sure, the term “promissory note” has a
agreement|which was the subject of the reassessment being questioned in this definite meaning under the negotiable instruments law, which does not include
case|is definitely not within the scope of the compromise agreement|being “securities,” and this definite meaning is what is deemed incorporated in the
limited as it is to DST on promissory notes—the Court simply cannot agree with compromise agreement entered into by and between SBC and the BIR, unless a
the petitioner that securities and promissory notes for purposes of the subject different definition is therein expressly agreed upon, which is not the case.
Compromise Agreement are one and the thing|The BIR Commissioner has the 4. Same; Same; Court of Tax Appeals; As a matter of principle, the Supreme
sole power and authority to compromise taxes Court will not set aside the conclusion reached by the Court of Tax Appeals
Syllabi: which is, by the very nature of its function, dedicated exclusively to the study
1. Taxation; Documentary Stamp Tax (DST); It is clear from the plain language and consideration of tax problems and has necessarily developed an expertise
of the law that all sales of securities, without making any distinction as to the on the subject unless there has been an abuse or improvident exercise of
nature or type of the sale, i.e., whether it be with a repurchase agreement or authority.-
not, are taxable.- —The Court has no basis to rule in the present petition for review on certiorari,
—The NIRC levies DST upon documents, instruments and papers as follows: SEC. which by its very nature is limited to questions of law and not of facts, whether
173. Stamp taxes upon documents, instruments, and papers—Upon documents, the securities subject of the tax assessment in this case in fact fall within the
instruments, and papers, and upon acceptances, assignments, sales, and ambit of said revenue memorandum circulars. This Court is bound by the factual
transfers of the obligation, right, or property incident thereto, there shall be findings by the CTA, which did not rule that the subject securities, because of
levied, collected and paid for, and in respect of the transaction so had or what type these were, fall under Section 229 (now Section 180) instead of 225
accomplished, the corresponding documentary stamp taxes prescribed in the (now Section 176) of the NIRC. In Commissioner of Internal Revenue v. Court of
following sections of this Title, by the person making, signing, issuing, accepting, Appeals, the Court ruled: x x x the Court of Tax Appeals is a highly specialized
or transferring the same, and at the same time such act is done or transaction body specifically created for the purpose of reviewing tax cases. Through its
had: Provided,That whenever one party to the taxable document enjoys expertise, it is undeniably competent to determine the issue of whether. x x x
exemption from the tax herein imposed, the other party to thereto who is not Consequently, as a matter of principle, this Court will not set aside the
exempt shall be the one directly liable for the tax. (Emphasis supplied.) conclusion reached by the Court of Tax Appeals which is, by the very nature of its
Particularly covering sales of securities, which SBC has been assessed by the BIR function, dedicated exclusively to the study and consideration of tax problems
in this case, and the corresponding DST rates due thereon at the time the said and has necessarily developed an expertise on the subject unless there has been
tax accrued, the former Section 225 (now Section 176) of the NIRC provides: It is an abuse or improvident exercise of authority. This point becomes more evident
clear from the plain language of the law that all sales of securities, without in the case before us where the unanimous findings and conclusions of both the
making any distinction as to the nature or type of the sale, i.e., whether it be Court of Tax Appeals and the Court of Appeals appear untainted by any abuse of
with a repurchase agreement or not, are taxable. On the other hand, all authority, much less grave abuse of discretion.
securities consisting of bonds, due-bills, certificates of obligation, or shares or 5. Same; Same; Administrative Law; BIR circulars and rulings cannot prevail
certificates of stock in any association, company or corporation, of whatever over the clear and plain language of the Tax Code.-
type or nature are within the scope of this section. —SBC contends, however, that the sales of securities being levied upon are not
2. Same; Same; Same; The BIR Commissioner has the sole power and authority covered by Section 225 (now Section 176), but instead fall under Section 229
to compromise taxes;Ultra vires acts of revenue officials cannot have any valid (now Section 180) of the Tax Code. In this respect, SBC invokes Revenue
and binding legal effect upon the BIR so as to proscribe the latter from issuing Memorandum Circulars No. 13-87 and No. 33-86 and BIR Ruling No. 119-91. We
reassessment of unpaid DST on the sales of securities.- are not persuaded for the simple reason that the BIR circulars and ruling relied
—As regards SBC’s contention that the BIR, through its various officials, upon were all issued after 1983, the tax period involved in this case. Those
accepted its offer to settle its entire DST deficiency assessment for 1983 which circulars and ruling cannot prevail over the clear and plain language of the Tax
included the DST assessment for securities with repurchase agreement in the tax Code.
base for purposes of the computation of the DST due and collectible, suffice it to
say that such acceptance and approval were not made by the BIR Commissioner Division: SECOND DIVISION
himself, who, under Section 204 of the NIRC, has the sole power and authority to
compromise taxes. Neither was there any showing that the BIR Commissioner Docket Number: G.R. No. 130838
specifically authorized those revenue officials, who purportedly accepted and
approved SBC’s offer of payment, to compromise the DST on sale of securities, Counsel: Castro, Biñas, Ortile, Samillano & Mangrobang, The Solicitor General
which, to stress, were not included in the Compromise Agreement of August 15,
Ponente: GARCIA some other person or his order. In any event, the negotiable character of any
and all documents under Section 180 is immaterial for purposes of imposing
Dispositive Portion: DST.
WHEREFORE, the petition is DENIED and the assailed CA Decision dated August
29, 1997 is AFFIRMED in toto. Division: SECOND DIVISION

Docket Number: G.R. No. 171266


Case Title : INTERNATIONAL EXCHANGE BANK, petitioner, vs. COMMISSIONER
OF INTERNAL REVENUE, respondent.Case Nature : PETITION for review on Counsel: Enrico G. Valdez, Rhodora J. Corcuera-Menzon
certiorari of a decision of the Court of Tax Appeals.
Syllabi Class : Taxation|Documentary Stamp Tax (DST)|Banks and Ponente: CARPIO-MORALES
Banking|Words and Phrases|Tax Avoidance
Syllabi: Dispositive Portion:
1. Taxation; Documentary Stamp Tax (DST); Banks and Banking; A passbook WHEREFORE, the petition is DENIED.
representing an interest earning deposit account issued by a bank qualifies as a
certificate of deposit drawing interest.-
—As correctly found by the CTA En Banc, a passbook representing an interest Case Title : NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) and
earning deposit account issued by a bank qualifies as a certificate of deposit Spouses EDUARDO R. DEE and ARCELITA M. DEE, petitioners, vs. PHILIPPINE
drawing interest. A document to be deemed a certificate of deposit requires no NATIONAL BANK, respondent.Case Nature : PETITION for review on certiorari of
specific form as long as there is some written memorandum that the bank a decision of the Court of Appeals.
accepted a deposit of a sum of money from a depositor. What is important and Syllabi Class : Actions|Obligations and
controlling is the nature or meaning conveyed by the passbook and not the Contracts|Mortgages|Appeals|Loans|Promissory Notes|Interest
particular label or nomenclature attached to it, inasmuch as substance, not Rates|Escalation Clauses|Principle of Mutuality of Contracts|Usury Law|Banks
form, is paramount. and Banking|Words and Phrases|Credit Lines|Contract Clause|Disclosure
2. Same; Same; Same; Tax Avoidance; While tax avoidance schemes and Statements|Truth in Lending Act|Damages|Novation|Attorney’s Fees|Notarial
arrangements are not prohibited, tax laws cannot be circumvented in order to Law|Legal Ethics|Act 496 has repealed the Spanish Notarial
evade payment of just taxes.- Law|Evidence|Entries in Ledgers|Presumptions|Foreclosure of Mortgage
—While tax avoidance schemes and arrangements are not prohibited, tax laws Syllabi:
cannot be circumvented in order to evade payment of just taxes.To claim that 1. Actions; Appeals; As a rule, questions of fact cannot be the subject of a
time deposits evidenced by passbooks should not be subject to DST is a clear petition for review on certiorari, but as an exception, factual findings of the
evasion of the rule on equality and uniformity in taxation that requires the Court of Appeals may be reviewed on appeal when, inter alia, the factual
imposition of DST on documents evidencing transactions of the same kind, in inferences are manifestly mistaken, the judgment is based on a
this particular case, on all certificates of deposits drawing interest. misapprehension of facts, or the Court of Appeals manifestly overlooked certain
3. Same; Same; Same; Words and Phrases; The Documentary Stamp Tax (DST) relevant and undisputed facts that, if properly considered, would justify a
is levied on the exercise by persons of certain privileges conferred by law for the different legal conclusion.-
creation, revision, or termination of specific legal relationships through the It must be stressed that only questions of law may be raised in a petition for
execution of specific instruments.- review on certiorari under Rule 45 of the Rules of Court. As a rule, questions of
—It bears emphasis that DST is levied on the exercise by persons of certain fact cannot be the subject of this mode of appeal, for “[t]he Supreme Court is
privileges conferred by law for the creation, revision, or termination of specific not a trier of facts.” As exceptions to this rule, however, factual findings of the
legal relationships through the execution of specific instruments. It is an excise CA may be reviewed on appealwhen, inter alia, the factual inferences are
upon the privilege, opportunity or facility offered at exchanges for the manifestly mistaken;the judgment is based on a misapprehension of facts; or
transaction of the business. the CA manifestly overlooked certain relevant and undisputed facts that, if
4. Same; Same; Same; A Fixed Savings Deposit (FSD), like a time deposit, properly considered, would justify a different legal conclusion. In the present
provides for a higher interest rate when the deposit is not withdrawn within case, these exceptions exist in various instances, thus prompting us to take
the required fixed period, otherwise, it earns interest pertaining to a regular cognizance of factual issues and to decide upon them in the interest of justice
savings deposit; Having a fixed term and the reduction of interest rate in case of and in the exercise of our sound discretion. Indeed, Petitioner NSBCI’s loan
pre-termination are essential features of a time deposit.- accounts with respondent appear to be bloated with some iniquitous imposition
—As for petitioner’s argument that its FSD is similar to a regular savings deposit of interests, penalties, other charges and attorney’s fees. To demonstrate this
because it is evidenced by a passbook, and that based on the legislative point, the Court shall take up one by one the promissory notes, the credit
deliberations on the bill which was to become R.A. 9243 which amended Section agreements and the disclosure statements.
180 of the NIRC (which is to a large extent the same as Section 180 of the Tax 2. Obligations and Contracts; Loans; Promissory Notes; Interest
Code, as amended by R.A. 7660), Congress admitted that deposits evidenced by Rates; Escalation Clauses; Principle of Mutuality of Contracts; A borrower’s
passbooks which have features akin to time deposits are not subject to DST, the accessory duty to pay interest does not give the lender unrestrained freedom to
same does not lie. The FSD, like a time deposit, provides for a higher interest charge any rate other than that which was agreed upon—it would be the zenith
rate when the deposit is not withdrawn within the required fixed period; of farcicality to specify and agree upon rates that could be subsequently
otherwise, it earns interest pertaining to a regular savings deposit. Having a upgraded at whim by only one party to the agreement; The “unilateral
fixed term and the reduction of interest rates in case of pre-termination are determination and imposition” of increased rate is violative of the principle of
essential features of a time deposit. mutuality of contracts ordained in Article 1308 of the Civil Code.-
5. Same; Same; Same; A regular savings account with a passbook which is In each drawdown, the Promissory Notes specified the interest rate to be
withdrawable at any time is not subject to Documentary Stamp Tax (DST), unlike charged: 19.5 percent in the first, and 21.5 percent in the second and again in
a time deposit which is payable on a fixed maturity date.- the third. However, a uniform clause therein permitted respondent to increase
—Orders for the payment of sum of money payable at sight or on demand are of the rate “within the limits allowed by law at any time depending on whatever
course explicitly exempted from the payment of DST. Thus, a regular savings policy it may adopt in the future x x x,” without even giving prior notice to
account with a passbook which is withdrawable at any time is not subject to petitioners. The Court holds that petitioners’ accessory duty to pay interest did
DST, unlike a time deposit which is payable on a fixed maturity date. not give respondent unrestrained freedom to charge any rate other than that
6. Same; Same; Same; A certificate of deposit may or may not be negotiable- which was agreed upon. No interest shall be due, unless expressly stipulated in
—a certificate of deposit may be payable to the depositor, to the order of the writing. It would be the zenith of farcicality to specify and agree upon rates that
depositor, or to some other person or his order; The negotiable character of any could be subsequently upgraded at whim by only one party to the agreement.
and all documents under Section 180 of the National Internal Revenue Code The “unilateral determination and imposition”of increased rates is “violative of
(NIRC).—Contrary to petitioner’s claim, not all certificates of deposit are the principle of mutuality of contracts ordained in Article 1308 of the Civil Code.”
negotiable. A certificate of deposit may or may not be negotiable as gathered One-sided impositions do not have the force of law between the parties,
from the use of the conjunction or, instead of and, in its definition. A certificate because such impositions are not based on the parties’ essential equality.
of deposit may be payable to the depositor, to the order of the depositor, or to
3. Obligations and Contracts; Loans; Promissory Notes; Interest maturity of the commitment, borrowings then owing can be converted into a
Rates; Escalation Clauses; Principle of Mutuality of Contracts; Although “term loan.” Van Horne, Financial Management and Policy (5th ed., 1980), pp.
escalation clauses are valid in maintaining fiscal stability and retaining the value 520-521. Thus, when a borrower needs money, it makes a drawdown or
of money on long-term contracts, giving the lender an unbridled right to adjust availment on the credit line in the form of a note or “promise to pay” a certain
the interest independently and upwardly would completely take away from the principal amount. The balance of all unpaid principals, otherwise known as
borrower the “right to assent to an important modification in their agreement” outstanding drawdowns or availments, at any given time, should not exceed the
and would also negate the element of mutuality in their contracts.- ceiling or limit. After due payment of any drawdown or availment, the borrower
Although escalation clauses are valid in maintaining fiscal stability and retaining can make succeeding drawdowns or availments within the maximum amount
the value of money on long-term contracts, giving respondent an unbridled right committed, provided the line has not yet expired.
to adjust the interest independently and upwardly would completely take away 8. Obligations and Contracts; Loans; Promissory Notes; Banks and
from petitioners the “right to assent to an important modification in their Banking; Words and Phrases; “Gross or Intermediation Spread,” Explained.-
agreement” and would also negate the element of mutuality in their contracts. The difference between the interest and other service fees charged by a bank to
The clause cited earlier made the fulfillment of the contracts “dependent its borrowers and clients and the interest it pays to its depositors and other
exclusively upon the uncontrolled will” of respondent and was therefore void. suppliers of funds is the “gross or intermediation spread.” IBON Databank Phils.,
Besides, the pro forma promissory notes have the character of a contract Inc., The Philippine Financial System—A Primer (1983), p. 36.
d’adhésion, “where the parties do not bargain on equal footing, the weaker 9. Obligations and Contracts; Loans; Promissory Notes; Banks and
party’s [the debtor’s] participation being reduced to the alternative ‘to take it or Banking; Where the disclosure statements, as well as the credit agreements, do
leave it.’ ” not provide for any increase in the specified interest rates, none would be
4. Obligations and Contracts; Loans; Promissory Notes; Interest permitted.-
Rates; Escalation Clauses; Usury Law;While the Usury Law ceiling on interest In sum, the three disclosure statements, as well as the two credit agreements
rates was lifted by Central Bank Circular No. 905, nothing in the said Circular considered by this Court, did not provide for any increase in the specified interest
grants lenders carte blanche authority to raise interest rates to levels which will rates. Thus, none would now be permitted. When cross-examined, Julia Ang-
either enslave their borrowers or lead to a hemorrhaging of their assets.- Lopez, Finance Account Analyst II of PNB, Dagupan Branch, even testified that
“While the Usury Law ceiling on interest rates was lifted by [Central Bank] the bases for computing such rates were those sent by the head office from time
Circular No. 905, nothing in the said Circular grants lenders carte blanche to time, and not those indicated in the notes or disclosure statements.
authority to raise interest rates to levels which will either enslave their 10. Obligations and Contracts; Loans; Promissory Notes; Banks and
borrowers or lead to a hemorrhaging of their assets.” In fact, we have declared Banking; Contract Clause; The sole purpose of the impairment clause of the
nearly ten years ago that neither this Circular nor PD 1684, which further Constitution is to safeguard the integrity of valid contractual agreements
amended the Usury Law, “authorized either party to unilaterally raise the against unwarranted interference by the State in the form of laws—private
interest rate without the other’s consent.” individuals’ intrusions on interest rates is governed by statutory enactments like
5. Obligations and Contracts; Loans; Promissory Notes; Interest the Civil Code.-
Rates; Escalation Clauses; Usury Law;Rates found to be iniquitous or In addition to the preceding discussion, it is then useless to belabor the point
unconscionable are void, as if there were no express contract thereon.- that the increase in rates violates the impairment clause of the Constitution,
A similar case eight years ago pointed out to the same respondent (PNB) that because the sole purpose of this provision is to safeguard the integrity of valid
borrowing signified a capital transfusion from lending institutions to businesses contractual agreements against unwarranted interference by the State in the
and industries and was done for the purpose of stimulating their growth; yet form of laws. Private individuals’ intrusions on interest rates is governed by
respondent’s continued “unilateral and lopsided policy” of increasing interest statutory enactments like the Civil Code.
rates “without the prior assent” of the borrower not only defeats this purpose, 11. Obligations and Contracts; Loans; Promissory Notes; Banks and
but also deviates from this pronouncement. Although such increases are not Banking; Disclosure Statements;Truth in Lending Act; The effect, when the
usurious, since the “Usury Law is now legally inexistent”—the interest ranging borrower is not clearly informed of the Disclosure Statements—prior to the
from 26 percent to 35 percent in the statements of account—“must be equitably consummation of the availment or drawdown—is that the lender will have no
reduced for being iniquitous, unconscionable and exorbitant.” Rates found to be right to collect upon such charge or increases thereof, even if stipulated in the
iniquitous or unconscionable are void, as if it there were no express contract Notes; The time is now ripe to give teeth to the often ignored forty-one-year old
thereon. Above all, it is undoubtedly against public policy to charge excessively “Truth in Lending Act” and thus transform it from a snivelling paper tiger to a
for the use of money. growling financial watchdog of hapless borrowers.-
6. Obligations and Contracts; Loans; Promissory Notes; Interest No penalty charges or increases thereof appear either in the Disclosure
Rates; Escalation Clauses; A borrower’s request for restructuring does not Statements or in any of the clauses in the second and the third Credit
indicate any agreement to an interest increase—there can be no implied waiver Agreements earlier discussed. While a standard penalty charge of 6 percent per
of a right when there is no clear, unequivocal and decisive act showing such annum has been imposed on the amounts stated in all three Promissory Notes
purpose; No one receiving a proposal to modify a loan contract, especially still remaining unpaid or unrenewed when they fell due, there is no stipulation
interest—a vital component—is obliged to answer the proposal.- therein that would justify any increase in that charges. The effect, therefore,
It cannot be argued that assent to the increases can be implied either from the when the borrower is not clearly informed of the Disclosure Statements—prior
June 18, 1991 request of petitioners for loan restructuring or from their lack of to the consummation of the availment or drawdown—is that the lender will
response to the statements of account sent by respondent. Such request does have no right to collect upon such charge or increases thereof, even if stipulated
not indicate any agreement to an interest increase; there can be no implied in the Notes. The time is now ripe to give teeth to the often ignored forty-one-
waiver of a right when there is no clear, unequivocal and decisive act showing year old “Truth in Lending Act” and thus transform it from a snivelling paper
such purpose. Besides, the statements were not letters of information sent to tiger to a growling financial watchdog of hapless borrowers.
secure their conformity; and even if we were to presume these as an offer, there 12. Obligations and Contracts; Loans; Promissory Notes; Banks and
was no acceptance. No one receiving a proposal to modify a loan contract, Banking; Disclosure Statements;Damages; Liquidated damages intended as
especially interest—a vital component—is “obliged to answer the proposal.” penalty shall be equitably reduced to zilch where iniquitous or unconscionable.-
7. Obligations and Contracts; Loans; Promissory Notes; Banks and We have earlier said that the Notes are contracts of adhesion; although not
Banking; Words and Phrases; Credit Lines; “Revolving Credit Line,” Explained.- invalid per se, any apparent ambiguity in the loan contracts—taken as a
Banks give credit lines to businessmen in order to assist them in the operation of whole—shall be strictly construed against respondent who caused it. Worse, in
their business. A fixed limit or ceiling may be placed on the account, provided its the statements of account, the penalty rate has again been unilaterally
balance does not exceed such stipulated limit or ceiling. The balance may increased by respondent to 36 percent without petitioners’ consent. As a result
perhaps never be cleared, since the credit revolves round and round; hence, the of its move, such liquidated damages intended as a penalty shall be equitably
title “revolving credit.” Miranda, Essentials of Money, Credit and Banking (5th reduced by the Court to zilch for being iniquitous or unconscionable.
rev. ed., 1981), pp. 96-99. Moreover, a “revolving credit line” is a formal 13. Obligations and Contracts; Loans; Promissory Notes; Banks and
commitment by a bank to lend a borrower up to a specified amount of money Banking; Disclosure Statements;Novation; Novation can never be presumed,
over a given period of time. The actual notes evidencing the debt are short-term; and the animus novandi must appear by express agreement of the parties, or by
but the borrower may renew them up to a specified maximum throughout the their acts that are too clear and unequivocal to be mistaken.-
duration of such commitment. The bank, in turn, is legally bound under the loan Although the first Disclosure Statement was furnished Petitioner NSBCI prior to
agreement to have funds available whenever money is borrowed. At the the execution of the transaction, it is not a contract that can be modified by the
related Promissory Note, but a mere statement in writing that reflects the true Counsel: Cesar M. Cariño, Dinah B. Tabada
and effective cost of loans from respondent. Novation can never be presumed,
and the animus novandi “must appear by express agreement of the parties, or Ponente: PANGANIBAN
by their acts that are too clear and unequivocal to be mistaken.” To allow
novation will surely flout the “policy of the State to protect its citizens from a Dispositive Portion:
lack of awareness of the true cost of credit.” WHEREFORE, this Petition is hereby PARTLY GRANTED. The Decision of the
14. Obligations and Contracts; Loans; Promissory Notes; Attorney’s Court of Appeals is AFFIRMED, with the MODIFICATION that PNB is ORDERED to
Fees; Attorney’s fees are not an integral part of the cost of borrowing, but arise refund the sum of P3,686,101.52 representing the overcollection computed
only when collecting upon the Notes becomes necessary.- above, plus interest thereon at the legal rate of six percent (6%) per annum
We affirm the equitable reduction in attorney’s fees. These are not an integral from the filing of the Complaint until the finality of this Decision. After this
part of the cost of borrowing, but arise only when collecting upon the Notes Decision becomes final and executory, the applicable rate shall be twelve
becomes necessary. The purpose of these fees is not to give respondent a larger percent (12%) per annum until its satisfaction. No costs.
compensation for the loan than the law already allows, but to protect it against
any future loss or damage by being compelled to retain counsel—in-house or
not—to institute judicial proceedings for the collection of its credit. Courts have Case Title : BANK OF THE PHILIPPINE ISLANDS, INC., petitioner, vs. SPS.
has the power to determine their reasonableness based on quantum meruit and NORMAN AND ANGELINA YU and TUANSON BUILDERS CORPORATION
to reduce the amount thereof if excessive. represented by PRES. NORMAN YU, respondents.Case Nature : PETITION for
15. Obligations and Contracts; Loans; Promissory Notes; Attorney’s review on certiorari of a decision of the Court of Appeals.
Fees; Notarial Law; Legal Ethics;Act 496 has repealed the Spanish Notarial Syllabi Class : Loans|Penalty Charges
Law; A party’s engagement of his counsel in another capacity concurrent with Syllabi:
the practice of law is not prohibited, so long as the roles being assumed by such 1. Remedial Law; Civil Procedure; Summary Judgments; A summary judgment
counsel is made clear to the client.- is apt when the essential facts of the case are uncontested or the parties do not
The disqualification argument in the Affidavit of Publication raised by petitioners raise any genuine issue of fact.-
no longer holds water, inasmuch as Act 496 has repealed the Spanish Notarial —A summary judgment is apt when the essential facts of the case are
Law.In the same vein, their engagement of their counsel in another capacity uncontested or the parties do not raise any genuine issue of fact. Here, to
concurrent with the practice of law is not prohibited, so long as the roles being resolve the issue of the excessive charges allegedly incorporated into the auction
assumed by such counsel is made clear to the client. The only reason for this bid price, the RTC simply had to look at a) the pleadingsof the parties; b) the
clarification requirement is that certain ethical considerations operative in one loan agreements, the promissory note, and the real estate mortgages between
profession may not be so in the other. them; c) the foreclosure and bidding documents; and d) the admissions and
16. Obligations and Contracts; Loans; Evidence; Entries in other disclosures between the parties during pre-trial. Since the parties admitted
Ledgers; Presumptions; Without a doubt, the subsidiary ledgers in a manual not only the existence, authenticity, and genuine execution of these documents
accounting system are mere private documents that support and are controlled but also what they stated, the trial court did not need to hold a trial for the
by the general ledger; We go by the presumption that the recording of private reception of the evidence of the parties.
transactions has been fair and regular, and that the ordinary course of business 2. Same; Penalty Charges; Courts have authority to reduce penalty charges
has been followed.- when these are unreasonable and iniquitous.-
Contrary to petitioners’ assertions, the subsidiary ledgers of respondent properly —Nonetheless, the courts have authority to reduce penalty charges when these
reflected all entries pertaining to Petitioner NSBCI’s loan accounts. In are unreasonable and iniquitous. Considering that BPI had already received over
accordance with the Generally Accepted Accounting Principles (GAAP) for the P2.7 million in interest and that it seeks to impose the penalty charge of 3% per
Banking Industry, all interests accrued or earned on such loans, except those month or 36% per annum on the total amount due—principal plus interest, with
that were restructured and non-accruing, have been periodically taken into interest not paid when due added to and becoming part of the principal and also
income. Without a doubt, the subsidiary ledgers in a manual accounting system bearing interest at the same rate—the Court finds the ruling of the RTC in its
are mere private documents that support and are controlled by the general original decision reasonable and fair. Thus, the penalty charge of 12% per
ledger. Such ledgers are neither foolproof nor standard in format, but are annum or 1% per month is imposed.
periodically subject to audit. Besides, we go by the presumption that the 3. Same; Same; Penalty charges stipulated in the promissory notes declared
recording of private transactions has been fair and regular, and that the valid.-
ordinary course of business has been followed. —The ruling that is more in point is that laid down in The Consolidated Bank and
17. Obligations and Contracts; Loans; Evidence; Words and Phrases; “General Trust Corporation v. Court of Appeals, 246 SCRA 193 (1995) a case cited in New
Ledgers,” and “Subsidiary Ledgers,” Explained.- Sampaguita. The Consolidated Bank ruling declared valid the penalty charges
A “general ledger,” on the one hand, is a summary or repository of accounts to that were stipulated in the promissory notes. What the Court disallowed in that
which debits and credits resulting from financial transactions are posted from case was the collection of a handling charge that the promissory notes did not
journals or books of original entry; a “subsidiary ledger,” on the other, is a contain.
special type of ledger confined chiefly to a particular account. 4. Same; Promissory Notes; A promissory note is an acknowledgment of a debt
18. Mortgages; Foreclosure of Mortgage; No personal notice is required in an and commitment to repay it on the date and under the conditions that the
extrajudicial foreclosure since such action is in rem, requiring only notice by parties agreed on; It is a valid contract absent proof of acts which might have
publication and posting, in order to bind parties interested in the foreclosed vitiated consent.-
property.- —In this case, although BPI failed to state the penalty charges in the disclosure
In the accessory contract of real mortgage, in which immovable property or real statement, the promissory note that the Yus signed, on the same date as the
rights thereto are used as security for the fulfillment of the principal loan disclosure statement, contained a penalty clause that said: “I/We jointly and
obligation,the bid price may be lower than the property’s fair market value. In severally, promise to further pay a late payment charge on any overdue amount
fact, the loan value itself is only 70 percent of the appraised value. As correctly herein at the rate of 3% per month.” The promissory note is an acknowledgment
emphasized by the appellate court, a low bid price will make it easier for the of a debt and commitment to repay it on the date and under the conditions that
owner to effect redemption by subsequently reacquiring the property or by the parties agreed on. It is a valid contract absent proof of acts which might
selling the right to redeem and thus recover alleged losses. Besides, the public have vitiated consent.
auction sale has been regularly and fairly conducted, there has been ample 5. Loans; Words and Phrases; “Finance Charge”; A finance charge represents
authority to effect the sale,and the Certificates of Title can be relied upon. No the amount to be paid by the debtor incident to the extension of credit.-
personal notice is even required, because an extrajudicial foreclosure is an —Penalty charge, which is liquidated damages resulting from a breach, falls
action in rem, requiring only notice by publication and posting, in order to bind under item (6) or finance charge. A finance charge “represents the amount to be
parties interested in the foreclosed property. paid by the debtor incident to the extension of credit.” The lender may provide
for a penalty clause so long as the amount or rate of the charge and the
Division: THIRD DIVISION conditions under which it is to be paid are disclosed to the borrower before he
enters into the credit agreement.
Docket Number: G.R. No. 148753
Division: SECOND DIVISION
87/98/100 75,000.00 02/12/98
Docket Number: G.R. No. 184122
87/98/197 195,000.00 03/19/98

87/97/761 60,000.00 09/26/97

Republic of the Philippines


87/97/768 30,000.00 09/29/97
Supreme Court
Manila
87/97/767 180,000.00 09/29/97

FIRST DIVISION 87/97/970 110,000.00 12/29/97

87/97/747 50,000.00 09/22/97


UNION BANK OF THE PHILIPPINES, G.R. Nos. 173090-91
Petitioner, 87/96/944 605,000.00 12/19/97
Present:
87/98/191 470,000.00 03/16/98
CORONA, C.J.,
Chairperson,
87/98/198 505,000.00 03/19/98
- versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and 87/98/090 449,000.00 02/09/98
VILLARAMA, JR., JJ.
US$3,632,000.00[4]
SPOUSES RODOLFO T. TIU AND
VICTORIA N. TIU, Promulgated:
Respondents.
September 7, 2011 On June 23, 1998, Union Bank advised the spouses Tiu through a
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x letter[5] that, in view of the existing currency risks, the loans shall be
redenominated to their equivalent Philippine peso amount on July 15,
1998. On July 3, 1998, the spouses Tiu wrote to Union Bank authorizing the
DECISION latter to redenominate the loans at the rate of US$1=P41.40[6] with interest of
19% for one year.[7]

LEONARDO-DE CASTRO, J.: On December 21, 1999, Union Bank and the spouses Tiu entered into
a Restructuring Agreement.[8] The Restructuring Agreement contains a clause
wherein the spouses Tiu confirmed their debt and waived any action on account
This is a Petition for Review on Certiorari seeking to reverse the Joint thereof. To quote said clause:
Decision[1] of the Court of Appeals dated February 21, 2006 in CA-G.R. CV No.
00190 and CA-G.R. SP No. 00253, as well as the Resolution[2] dated June 1, 1. Confirmation of Debt – The BORROWER
2006 denying the Motion for Reconsideration. hereby confirms and accepts that as of
December 8, 1999, its outstanding principal
The factual and procedural antecedents of this case are as follows: indebtedness to the BANK under the
Agreement and the Notes amount to ONE
On November 21, 1995, petitioner Union Bank of the Philippines HUNDRED FIFTY[-]FIVE MILLION THREE
(Union Bank) and respondent spouses Rodolfo T. Tiu and Victoria N. Tiu (the HUNDRED SIXTY[-]FOUR THOUSAND EIGHT
spouses Tiu) entered into a Credit Line Agreement (CLA) whereby Union Bank HUNDRED PESOS (PHP 155,364,800.00)
agreed to make available to the spouses Tiu credit facilities in such amounts as exclusive of interests, service and penalty
may be approved.[3] From September 22, 1997 to March 26, 1998, the spouses charges (the “Indebtedness”) and further
Tiu took out various loans pursuant to this CLA in the total amount of three confirms the correctness, legality, collectability
million six hundred thirty-two thousand dollars (US$3,632,000.00), as evidenced and enforceability of the Indebtedness. The
by promissory notes: BORROWER unconditionally waives any action,
demand or claim that they may otherwise
PN No. Amount in US$ Date Granted have to dispute the amount of the
Indebtedness as of the date specified in this
87/98/111 72,000.00 02/16/98 Section, or the collectability and enforceability
thereof. It is the understanding of the parties
87/98/108 84,000.00 02/13/98 that the BORROWER’s acknowledgment,
affirmation, and waiver herein are material
considerations for the BANK’s agreeing to
87/98/152 320,000.00 03/02/98
restructure the Indebtedness which would
have already become due and payable as of
87/98/075 150,000.00 01/30/98 the above date under the terms of the
Agreement and the Notes.[9]
87/98/211 32,000.00 03/26/98

87/98/071 110,000.00 01/29/98 The restructured amount (P155,364,800.00) is the sum of the
following figures: (1) P150,364,800.00, which is the value of the
87/98/107 135,000.00 02/13//98 US$3,632,000.00 loan as redenominated under the above-mentioned exchange
rate of US$1=P41.40; and (2) P5,000,000.00, an additional loan given to the
spouses Tiu to update their interest payments.[10]
Under the same Restructuring Agreement, the parties declared that because the real owners thereof are their co-petitioners, Juanita T. Tiu,
the loan obligation to be restructured (after deducting thedacion price of Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu.[19]
properties ceded by the Tiu spouses and adding: [1] the taxes, registration fees
and other expenses advanced by Union Bank in registering the Deeds of Dation The spouses Tiu further claim that prior to the signing of the
in Payment; and [2] other fees and charges incurred by the Indebtedness) is one Restructuring Agreement, they entered into a Memorandum of Agreement with
hundred four million six hundred sixty-eight thousand seven hundred forty-one Union Bank whereby the former deposited with the latter several certificates of
pesos (P104,668,741.00) (total restructured amount).[11] The Deeds of Dation in shares of stock of various companies and four certificates of title of various
Payment referred to are the following: parcels of land located in Cebu. The spouses Tiu claim that these properties
have not been subjected to any lien in favor of Union Bank, yet the latter
1. Dation of the Labangon properties – Deed executed by Juanita continues to hold on to these properties and has not returned the same to the
Tiu, the mother of respondent Rodolfo Tiu, involving ten former.[20]
parcels of land with improvements located in Labangon, Cebu
City and with a total land area of 3,344 square meters, for the On the other hand, Union Bank claims that the Restructuring
amount of P25,130,000.00. The Deed states that these Agreement was voluntarily and validly entered into by both parties. Presenting
properties shall be leased to the Tiu spouses at a monthly rate as evidence the Warranties embodied in the Real Estate Mortgage, Union Bank
ofP98,000.00 for a period of two years.[12] contends that the foreclosure of the mortgage on the residential property of
the spouses Tiu was valid and that the improvements thereon were absolutely
2. Dation of the Mandaue property – Deed executed by the owned by them. Union Bank denies receiving certificates of shares of stock of
spouses Tiu involving one parcel of land with improvements various companies or the four certificates of title of various parcels of land from
located in A.S. Fortuna St., Mandaue City, covered by TCT No. the spouses Tiu. However, Union Bank also alleges that even if said certificates
T-31604 and with a land area of 2,960 square meters, for the were in its possession it is authorized under the Restructuring Agreement to
amount of P36,080,000.00. The Deed states that said property retain any and all properties of the debtor as security for the loan.[21]
shall be leased to the Tiu spouses at a monthly rate
ofP150,000.00 for a period of two years.[13] The RTC issued a Temporary Restraining Order[22] and, eventually, a
Writ of Preliminary Injunction[23] preventing the sale of the residential property
As likewise provided in the Restructuring Agreement, the spouses of the spouses Tiu. [24]
Tiu executed a Real Estate Mortgage in favor of Union Bank over their
“residential property inclusive of lot and improvements” located at P. Burgos On December 16, 2004, the RTC rendered its Decision[25] in Civil Case
St., Mandaue City, covered by TCT No. T-11951 with an area of 3,096 square No. MAN-4363 in favor of Union Bank. The dispositive portion of the Decision
meters.[14] read:

The spouses Tiu undertook to pay the total restructured amount WHEREFORE, premises considered, judgment
(P104,668,741.00) via three loan facilities (payment schemes). is hereby rendered dismissing the Complaint and lifting
and setting aside the Writ of Preliminary Injunction. No
The spouses Tiu claim to have made the following payments: pronouncement as to damages, attorney’s fees and costs
(1) P15,000,000.00 on August 3, 1999; and (2) anotherP13,197,546.79 as of May of suit.[26]
8, 2001. Adding the amounts paid under the Deeds of Dation in Payment, the
spouses Tiu postulate that their payments added up to P89,407,546.79.[15]
In upholding the validity of the Restructuring Agreement, the RTC
Asserting that the spouses Tiu failed to comply with the payment held that the spouses Tiu failed to present any evidence to prove either fraud or
schemes set up in the Restructuring Agreement, Union Bank initiated intimidation or any other act vitiating their consent to the same. The exact
extrajudicial foreclosure proceedings on the residential property of the spouses obligation of the spouses Tiu to Union Bank is therefore P104,668,741.00, as
Tiu, covered by TCT No. T-11951. The property was to be sold at public auction agreed upon by the parties in the Restructuring Agreement. As regards the
on July 18, 2002. contention of the spouses Tiu that they have fully paid their indebtedness, the
RTC noted that they could not present any detailed accounting as to the total
The spouses Tiu, together with Juanita T. Tiu, Rosalinda T. King, amount they have paid after the execution of the Restructuring Agreement.[27]
Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu, filed with the Regional Trial
Court (RTC) of Mandaue City a Complaint seeking to have the Extrajudicial On January 4, 2005, Union Bank filed a Motion for Partial
Foreclosure declared null and void. The case was docketed as Civil Case No. Reconsideration,[28] protesting the finding in the body of the December 16, 2004
MAN-4363.[16] Named as defendants were Union Bank and Sheriff IV Veronico Decision that the residential house on Lot No. 639 is not owned by the spouses
C. Ouano (Sheriff Oano) of Branch 55, RTC, Mandaue City. Complainants Tiu and therefore should be excluded from the real properties covered by the
therein prayed for the following: (1) that the spouses Tiu be declared to have real estate mortgage. On January 6, 2005, the spouses Tiu filed their own
fully paid their obligation to Union Bank; (2) that defendants be permanently Motion for Partial Reconsideration and/or New Trial.[29] They alleged that the
enjoined from proceeding with the auction sale; (3) that Union Bank be ordered trial court failed to rule on their fourth cause of action wherein they mentioned
to return to the spouses Tiu their properties as listed in the Complaint; (4) that that they turned over the following titles to Union Bank: TCT Nos. 30271,
Union Bank be ordered to pay the plaintiffs the sum of P10,000,000.00 as moral 116287 and 116288 and OCT No. 0-3538. They also prayed for a partial new
damages, P2,000,000.00 as exemplary damages,P3,000,000.00 as attorney’s trial and for a declaration that they have fully paid their obligation to Union
fees and P500,000.00 as expenses of litigation; and (5) a writ of preliminary Bank.[30]
injunction or temporary restraining order be issued enjoining the public auction
sale to be held on July 18, 2002.[17] On January 11, 2005, the spouses Tiu received from Sheriff Oano a
Second Notice of Extra-judicial Foreclosure Sale of Lot No. 639 to be held
The spouses Tiu claim that from the beginning the loans were in on February 3, 2005. To prevent the same, the Tiu spouses filed with the Court
pesos, not in dollars. Their office clerk, Lilia Gutierrez, testified that the spouses of Appeals a Petition for Prohibition and Injunction with Application for
Tiu merely received the peso equivalent of their US$3,632,000.00 loan at the TRO/Writ of Preliminary Injunction.[31] The petition was docketed as CA-G.R. SP
rate of US$1=P26.00. The spouses Tiu further claim that they were merely No. 00253. The Court of Appeals issued a Temporary Restraining Order on
forced to sign the Restructuring Agreement and take up an additional loan January 27, 2005.[32]
ofP5,000,000.00, the proceeds of which they never saw because this amount
was immediately applied by Union Bank to interest payments.[18] On January 19, 2005, the RTC issued an Order denying Union Bank’s
Motion for Partial Reconsideration and the Tiu spouses’ Motion for Partial
The spouses Tiu allege that the foreclosure sale of the mortgaged Reconsideration and/or New Trial.[33]
properties was invalid, as the loans have already been fully paid. They also
allege that they are not the owners of the improvements constructed on the lot Both the spouses Tiu and Union Bank appealed the case to the Court
of Appeals.[34] The two appeals were given a single docket number, CA-G.R.
CEB-CV No. 00190. Acting on a motion filed by the spouses Tiu, the Court of
Appeals consolidatedCA-G.R. SP No. 00253 with CA-G.R. CEB-CV No. 00190.[35] Finally, the Court of Appeals took judicial notice that before or during
the financial crisis, banks actively convinced debtors to make dollar loans in the
On April 19, 2005, the Court of Appeals issued a Resolution finding guise of benevolence, saddling borrowers with loans that ballooned twice or
that there was no need for the issuance of a Writ of Preliminary Injunction as thrice their original loans. The Court of Appeals, noting “the cavalier way with
the judgment of the lower court has been stayed by the perfection of the which banks exploited and manipulated the situation,”[47] held Union Bank liable
appeal therefrom.[36] to the spouses Tiu for P100,000.00 in moral damages, P100,000.00 in exemplary
damages, and P50,000.00 in attorney’s fees.[48]
On May 9, 2005, Sheriff Oano proceeded to conduct the extrajudicial
sale. Union Bank submitted the lone bid ofP18,576,000.00.[37] On June 14, The Court of Appeals disposed of the case as follows:
2005, Union Bank filed a motion with the Court of Appeals praying that Sheriff
Oano be ordered to issue a definite and regular Certificate of Sale.[38] On July WHEREFORE, in view of the foregoing
21, 2005, the Court of Appeals issued a Resolution denying the Motion and premises, judgment is hereby rendered by us
suspending the auction sale at whatever stage, pending resolution of the appeal permanently enjoining Union Bank from foreclosing the
and conditioned upon the filing of a bond in the amount of P18,000,000.00 by mortgage of the residential property of the Tiu spouses
the Tiu spouses.[39] The Tiu spouses failed to file said bond.[40] which is covered by Transfer Certificate of Title No. 11951
and from pursuing other foreclosure of mortgages over
On February 21, 2006, the Court of Appeals rendered the assailed any other properties of the Tiu spouses for the above-
Joint Decision in CA-G.R. CV No. 00190 and CA-G.R. SP No. 00253. The Court of litigated debt that has already been fully paid. If a
Appeals dismissed the Petition for Prohibition, CA-G.R. SP No. 00253, on the foreclosure sale has already been made over such
ground that the proper venue for the same is with the RTC.[41] properties, this Court orders the cancellation of such
foreclosure sale and the Certificate of Sale thereof if any
On the other hand, the Court of Appeals ruled in favor of the spouses has been issued. This Court orders Union Bank to
Tiu in CA-G.R. CV No. 00190. The Court of Appeals held that the loan return to the Tiu spouses the amount of NINE
transactions were in pesos, since there was supposedly no stipulation the loans HUNDRED TWENTY[-]SEVEN THOUSAND FIVE HUNDRED
will be paid in dollars and since no dollars ever exchanged hands. Considering FORTY[-]SIX PESOS AND SEVENTY[-]NINE CENTAVOS
that the loans were in pesos from the beginning, the Court of Appeals reasoned (P927,546.79) representing illegally collected
that there is no need to convert the same. By making it appear that the loans rentals. This Court also orders Union Bank to return to
were originally in dollars, Union Bank overstepped its rights as creditor, and the Tiu spouses all the certificates of shares of stocks and
made unwarranted interpretations of the original loan agreement. According to titles to real properties of the Tiu spouses that were
the Court of Appeals, the Restructuring Agreement, which purportedly attempts deposited to it or, in lieu thereof, to pay the cost for the
to create a novation of the original loan, was not clearly authorized by the replacement and issuance of new certificates and new
debtors and was not supported by any cause or consideration. Since the titles over the said properties. This Court finally orders
Restructuring Agreement is void, the original loan of P94,432,000.00 Union Bank to pay the Tiu spouses ONE HUNDRED
(representing the amount received by the spouses Tiu of US$3,632,000.00 using THOUSAND PESOS (P100,000.00) in moral damages, ONE
the US$1=P26.00 exchange rate) should subsist. The Court of Appeals likewise HUNDRED THOUSAND PESOS (P100,000.00) in exemplary
invalidated (1) the P5,000,000.00 charge for interest in the Restructuring damages, FIFTY THOUSAND PESOS (P50,000.00) in
Agreement, for having been unilaterally imposed by Union Bank; and (2) the attorney’s fees and cost, both in the lower court and in
lease of the properties conveyed in dacion en pago, for being against public this Court.[49]
policy.[42]

In sum, the Court of Appeals found Union Bank liable to the spouses On June 1, 2006, the Court of Appeals rendered the assailed
Tiu in the amount of P927,546.79. For convenient reference, we quote relevant Resolution denying Union Bank’s Motion for Reconsideration.
portion of the Court of Appeal’s Decision here:
Hence, this Petition for Review on Certiorari, wherein Union Bank
To summarize the obligation of the Tiu submits the following issues for the consideration of this Court:
spouses, they owe Union Bank P94,432,000.00. The Tiu
spouses had already paid Union Bank the amount 1. WHETHER OR NOT THE COURT OF APPEALS
of P89,407,546.79. On the other hand, Union Bank must COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
return to the Tiu spouses the illegally collected rentals in IT CONCLUDED THAT THERE WERE NO DOLLAR
the amount ofP5,952,000.00. Given these findings, the LOANS OBTAINED BY [THE] TIU SPOUSES FROM
obligation of the Tiu spouses has already been fully UNION BANK DESPITE [THE] CLEAR ADMISSION OF
paid. In fact, it is the Union Bank that must return to the INDEBTEDNESS BY THE BORROWER-MORTGAGOR
Tiu spouses the amount of NINE HUNDRED TWENTY[- TIU SPOUSES.
]SEVEN THOUSAND FIVE HUNDRED FORTY[-]SIX PESOS
AND SEVENTY[-]NINE CENTAVOS (P927,546.79).[43] 2. WHETHER OR NOT THE COURT OF APPEALS
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT NULLIFIED THE RESTRUCTURING AGREEMENT
With regard to the ownership of the improvements on the subject BETWEEN TIU SPOUSES AND UNION BANK FOR LACK
mortgaged property, the Court of Appeals ruled that it belonged to respondent OF CAUSE OR CONSIDERATION DESPITE THE
Rodolfo Tiu’s father, Jose Tiu, since 1981. According to the Court of Appeals, ADMISSION OF THE BORROWER-MORTGAGOR TIU
Union Bank should not have relied on warranties made by debtors that they are SPOUSES OF THE DUE AND VOLUNTARY EXECUTION
the owners of the property. The appellate court went on to permanently enjoin OF SAID RESTRUCTURING AGREEMENT.
Union Bank from foreclosing the mortgage not only of the property covered by
TCT No. T-11951, but also any other mortgage over any other property of the 3. WHETHER OR NOT THE COURT OF APPEALS
spouses Tiu.[44] COMMITTED GRAVE AND REVERSIBLE ERROR WHEN
IT PERMANENTLY ENJOINED UNION BANK FROM
The Court of Appeals likewise found Union Bank liable to return the FORECLOSING THE MORTGAGE ON THE
certificates of stocks and titles to real properties of the spouses Tiu in its RESIDENTIAL PROPERTY OF THE TIU SPOUSES
possession. The appellate court held that Union Bank made judicial admissions DESPITE THE ADMISSION OF NON-PAYMENT OF
of such possession in its Reply to Plaintiff’s Request for Admission.[45] In the THEIR OUTSTANDING LOAN TO THE BANK BY THE
event that Union Bank can no longer return these certificates and titles, it was BORROWER-MORTGAGOR TIU SPOUSES;
mandated to shoulder the cost for their replacement.[46]
4. WHETHER OR NOT THE COURT OF APPEALS likely defer to the latter’s esteemed opinion,
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN representations and interpretations. It has been often
IT FIXED THE AMOUNT OF THE OBLIGATION OF stated in our jurisprudence that banks have a fiduciary
RESPONDENT SPOUSES CONTRARY TO THE duty to their depositors. According to the case of Bank of
PROVISIONS OF THE PROMISSORY NOTES, the Philippine Islands vs. IAC (G.R. No. 69162, February 21,
RESTRUCTURING AGREEMENT AND [THE] 1992), “as a business affected with public interest and
VOLUNTARY ADMISSIONS BY BORROWER- because of the nature of its functions, the bank is under
MORTGAGOR TIU SPOUSES; obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary
5. WHETHER OR NOT THE COURT OF APPEALS nature of their relationship.” Such fiduciary relationship
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN should also extend to the bank’s borrowers who, more
IT RULED ON THE ALLEGED RENTALS PAID BY often than not, are also depositors of the bank. Banks are
RESPONDENT SPOUSES WITHOUT ANY FACTUAL in the business of lending while most borrowers hardly
BASIS; know the basics of such business. When transacting with
a bank, most borrowers concede to the expertise of the
6. WHETHER OR NOT THE COURT OF APPEALS bank and consider their procedures, pronouncements
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN and representations as unassailable, whether such be
IT HELD WITHOUT ANY FACTUAL BASIS THAT THE true or not. Therefore, when there is a doubtful banking
LOAN OBLIGATION OF TIU SPOUSES HAS BEEN transaction, this Court will tip the scales in favor of the
FULLY PAID; borrower.

7. WHETHER OR NOT THE COURT OF APPEALS Given the above ruling, the Restructuring
COMMITTED GRAVE AND REVERSIBLE ERROR WHEN Agreement, therefore, between the Tiu spouses and
IT HELD WITHOUT ANY FACTUAL BASIS THAT THE Union Bank does not operate to supersede all previous
HOUSE INCLUDED IN THE REAL ESTATE MORTGAGE loan documents, as claimed by Union Bank. But the said
DID NOT BELONG TO THE TIU SPOUSES. Restructuring Agreement, as it was crafted by Union
Bank, does not merely confirm the original loan of the Tiu
8. WHETHER OR NOT THE COURT OF APPEALS spouses but attempts to create a novation of the said
COMMITTED GRAVE AND REVERSIBLE ERROR IN original loan that is not clearly authorized by the debtors
ORDERING UNION BANK TO RETURN THE and that is not supported by any cause or
CERTIFICATES OF SHARES OF STOCK AND TITLES TO consideration. According to Article 1292 of the New Civil
REAL PROPERTIES OF TIU SPOUSES ALLEGEDLY IN Code, in order that an obligation may by extinguished by
THE POSSESSION OF UNION BANK. another which substitutes the same, it is imperative that
it be so declared in unequivocal terms, or that the old and
9. WHETHER OR NOT THE COURT OF APPEALS the new obligations be on every point incompatible with
VIOLATED THE DOCTRINES AND PRINCIPLES ON each other. Such is not the case in this instance. No valid
APPELLATE JURISDICTION. novation of the original obligation took place. Even
granting arguendo that there was a novation, the sudden
10. WHETHER OR NOT THE COURT OF APPEALS change in the original amount of the loan to the new
COMMITTED GRAVE AND REVERSIBLE ERROR IN amount declared in the Restructuring Agreement is not
AWARDING DAMAGES AGAINST UNION BANK.[50] supported by any cause or consideration. Under Article
1352 of the Civil Code, contracts without cause, or with
unlawful cause, produce no effect whatever. A contract
Validity of the Restructuring Agreement whose cause did not exist at the time of the transaction is
void. Accordingly, Article 1297 of the New Civil Code
As previously discussed, the Court of Appeals declared that the mandates that, if the new obligation is void, the original
Restructuring Agreement is void on account of its being a failed novation of the one shall subsist, unless the parties intended that the
original loan agreements. The Court of Appeals explained that since there was former relation should be extinguished at any
no stipulation that the loans will be paid in dollars, and since no dollars ever event. Since the Restructuring Agreement is void and
exchanged hands, the original loan transactions were in pesos.[51] Proceeding since there was no intention to extinguish the original
from this premise, the Court of Appeals held that the Restructuring Agreement, loan, the original loan shall subsist.[52]
which was meant to convert the loans into pesos, was unwarranted. Thus, the
Court of Appeals reasoned that: Union Bank does not dispute that the spouses Tiu received the
loaned amount of US$3,632,000.00 in Philippine pesos, not dollars, at the
Be that as it may, however, since the loans of prevailing exchange rate of US$1=P26.[53] However, Union Bank claims that this
the Tiu spouses from Union Bank were peso loans from does not change the true nature of the loan as a foreign currency loan, [54] and
the very beginning, there is no need for conversion proceeded to illustrate in its Memorandum that the spouses Tiu obtained
thereof. A Restructuring Agreement should merely favorable interest rates by opting to borrow in dollars (but receiving the
confirm the loans, not add thereto. By making it appear equivalent peso amount) as opposed to borrowing in pesos.[55]
in the Restructuring Agreement that the loans were
originally dollar loans, Union Bank overstepped its rights We agree with Union Bank on this point. Although indeed, the
as a creditor and made unwarranted interpretations of spouses Tiu received peso equivalents of the borrowed amounts, the loan
the original loan agreement. This Court is not bound by documents presented as evidence, i.e., the promissory notes,[56] expressed the
such interpretations made by Union Bank. When one amount of the loans in US dollars and not in any other currency. This clearly
party makes an interpretation of a contract, he makes it indicates that the spouses Tiu were bound to pay Union Bank in dollars, the
at his own risk, subject to a subsequent challenge by the amount stipulated in said loan documents. Thus, before the Restructuring
other party and a modification by the courts. In this case, Agreement, the spouses Tiu were bound to pay Union Bank the amount of
that party making the interpretation is not just any party, US$3,632,000.00 plus the interest stipulated in the promissory notes, without
but a well entrenched and highly respected bank. The converting the same to pesos. The spouses Tiu, who are in the construction
matter that was being interpreted was also a financial business and appear to be dealing primarily in Philippine currency, should
matter that is within the profound expertise of the therefore purchase the necessary amount of dollars to pay Union Bank, who
bank. A normal person who does not possess the same could have justly refused payment in any currency other than that which was
financial proficiency or acumen as that of a bank will most stipulated in the promissory notes.
cost of purchasing the required currency was likewise swiftly increasing. If the
We disagree with the finding of the Court of Appeals that the parties did not enter into the Restructuring Agreement in December 1999 and
testimony of Lila Gutierrez, which merely attests to the fact that the spouses Tiu the peso continued to deteriorate, the ability of the spouses Tiu to pay and the
received the peso equivalent of their dollar loan, proves the intention of the ability of Union Bank to collect would both have immensely suffered. As shown
parties that such loans should be paid in pesos. If such had been the intention by the evidence presented by Union Bank, the peso indeed continued to
of the parties, the promissory notes could have easily indicated the same. deteriorate, climbing to US$1=P50.01 on December 2000.[69] Hence, in order to
ensure the stability of the loan agreement, Union Bank and the spouses Tiu
Such stipulation of payment in dollars is not prohibited by any agreed in the Restructuring Agreement to peg the principal loan
prevailing law or jurisprudence at the time the loans were taken. In this regard, at P150,364,800.00 and the unpaid interest at P5,000,000.00.
Article 1249 of the Civil Code provides:
Before this Court, the spouses Tiu belatedly argue that their consent
Art. 1249. The payment of debts in money to the Restructuring Agreement was vitiated by fraud and mistake, alleging that
shall be made in the currency stipulated, and if it is not (1) the Restructuring Agreement did not take into consideration their substantial
possible to deliver such currency, then in the currency payment in the amount ofP40,447,185.60 before its execution; and (2) the dollar
which is legal tender in the Philippines. loans had already been redenominated in 1997 at the rate of US$1=P26.34.[70]

We have painstakingly perused over the records of this case, but


Although the Civil Code took effect on August 30, 1950, jurisprudence had failed to find any documentary evidence of the alleged payment
upheld[57] the continued effectivity of Republic Act No. 529, which took effect of P40,447,185.60 before the execution of the Restructuring Agreement. In
earlier on June 16, 1950. Pursuant to Section 1[58] of Republic Act No. 529, any paragraph 16 of their Amended Complaint, the spouses Tiu alleged payment
agreement to pay an obligation in a currency other than the Philippine currency of P40,447,185.60 for interests before the conversion of the dollar loan.[71] This
is void; the most that could be demanded is to pay said obligation in Philippine was specifically denied by Union Bank in paragraph 5 of its Answer with
currency to be measured in the prevailing rate of exchange at the time the Counterclaim.[72] Respondent Rodolfo Tiu testified that they made “50 million
obligation was incurred.[59] On June 19, 1964, Republic Act No. 4100 took effect, plus” in cash payment plus “other monthly interest payments,”[73] and identified
modifying Republic Act No. 529 by providing for several exceptions to the nullity a computation of payments dated July 17, 2002 signed by himself.[74] Such
of agreements to pay in foreign currency.[60] computation, however, was never formally offered in evidence and was in any
event, wholly self-serving.
On April 13, 1993, Central Bank Circular No. 1389[61] was issued,
lifting foreign exchange restrictions and liberalizing trade in foreign currency. In As regards the alleged redenomination of the same dollar loans in
cases of foreign borrowings and foreign currency loans, however, prior Bangko 1997 at the rate of US$1=P26.34, the spouses Tiu merely relied on the following
Sentral approval was required. On July 5, 1996, Republic Act No. 8183 took direct testimony of Herbert Hojas, one of the witnesses of Union Bank:
effect,[62] expressly repealing Republic Act No. 529 in Section 2[63]thereof. The
same statute also explicitly provided that parties may agree that the obligation Q: Could you please describe what kind of loan was
or transaction shall be settled in a currency other than Philippine currency at the the loan of the spouses Rodolfo Tiu, the
time of payment.[64] plaintiffs in this case?

Although the Credit Line Agreement between the spouses Tiu and A: It was originally an FCDU, meaning a dollar loan.
Union Bank was entered into on November 21, 1995,[65]when the agreement to
pay in foreign currency was still considered void under Republic Act No. 529, the Q: What happened to this FCDU loan or dollar loan?
actual loans,[66] as shown in the promissory notes, were taken out
from September 22, 1997 to March 26, 1998, during which time Republic Act A: The dollar loan was re-denominated in view of the
No. 8183 was already in effect. In United Coconut Planters Bank v. Beluso,[67] we very unstable exchange of the dollar and the
held that: peso at that time,

[O]pening a credit line does not create a credit Q: Could you still remember what year this account
transaction of loan or mutuum, since the former is merely was re-denominated from dollar to peso?
a preparatory contract to the contract of loan
or mutuum. Under such credit line, the bank is merely A: I think it was on the year 1997.
obliged, for the considerations specified therefor, to lend
to the other party amounts not exceeding the limit Q: Could [you] still remember what was then the
provided. The credit transaction thus occurred not when prevailing exchange rate between the dollar
the credit line was opened, but rather when the credit and the peso at that year 1997?
line was availed of. x x x.[68]
A: Yes. I have here the list of the dollar exchange rate
from January 1987 (sic). It was P26.34 per
Having established that Union Bank and the spouses Tiu validly dollar.[75]
entered into dollar loans, the conclusion of the Court of Appeals that there were
no dollar loans to novate into peso loans must necessarily fail.
Neither party presented any documentary evidence of the alleged
Similarly, the Court of Appeals’ pronouncement that the novation redenomination in 1997. Respondent Rodolfo Tiu did not even mention it in his
was not supported by any cause or consideration is likewise incorrect. This testimony. Furthermore, Hojas was obviously uncertain in his statement that
conclusion suggests that when the parties signed the Restructuring Agreement, said redenomination was made in 1997.
Union Bank got something out of nothing or that the spouses Tiu received no
benefit from the restructuring of their existing loan and was merely taken As pointed out by the trial court, the Restructuring Agreement, being
advantage of by the bank. It is important to note at this point that in the notarized, is a public document enjoying a prima faciepresumption of
determination of the nullity of a contract based on the lack of consideration, the authenticity and due execution. Clear and convincing evidence must be
debtor has the burden to prove the same. Article 1354 of the Civil Code presented to overcome such legal presumption.[76] The spouses Tiu, who
provides that “[a]though the cause is not stated in the contract, it is presumed attested before the notary public that the Restructuring Agreement “is their
that it exists and is lawful, unless the debtor proves the contrary.” own free and voluntary act and deed,”[77] failed to present sufficient evidence to
prove otherwise. It is difficult to believe that the spouses Tiu, veteran
In the case at bar, the Restructuring Agreement was signed at the businessmen who operate a multi-million peso company, would sign a very
height of the financial crisis when the Philippine peso was rapidly important document without fully understanding its contents and
depreciating. Since the spouses Tiu were bound to pay their debt in dollars, the consequences.
20. The total amount of the two dacions in
This Court therefore rules that the Restructuring Agreement is valid payment made by the plaintiffs was P61,210,000.00;
and, as such, a valid and binding novation of loans of the spouses Tiu entered
into from September 22, 1997 to March 26, 1998 which had a total amount of 21. Plaintiffs spouses Tiu also made other
US$3,632,000.00. payment of the amount of P13,197,546.79 as of May 8,
2001;[82]
Validity of the Foreclosure of Mortgage

The spouses Tiu challenge the validity of the foreclosure of the In paragraphs 4 and 5 of their Answer with Counterclaim,[83] Union
mortgage on two grounds, claiming that: (1) the debt had already been fully Bank specifically denied the allegation in paragraph 9 of the Complaint, but
paid; and (2) they are not the owners of the improvements on the mortgaged admitted the allegations in paragraphs 17, 18, 19, 20 and 21
property. thereof. Paragraphs 18, 19 and 20 allege the two deeds of dacion. However,
these instruments were already incorporated in the computation of the
(1) Allegation of full payment of the mortgage debt outstanding debt (i.e., subtracted from the confirmed debt of P155,364,800.00),
as can be gleaned from the following provisions in the Restructuring Agreement:
In the preceding discussion, we have ruled that the Restructuring
Agreement is a valid and binding novation of loans of the spouses Tiu entered a.) The loan obligation to the BANK to be
into from September 22, 1997 to March 26, 1998 in the total amount of restructured herein after deducting from the
US$3,632,000.00. Thus, in order that the spouses Tiu can be held to have fully Indebtedness of the BORROWER the dacion
paid their loan obligation, they should present evidence showing their payment price of the properties subject of the Deeds of
of the total restructured amount under the Restructuring Agreement which Dacion and adding to the Indebtedness all the
was P104,668,741.00. As we have discussed above, however, while respondent taxes, registration fees and other expenses
Rodolfo Tiu appeared to have identified during his testimony a computation advanced by the bank in registering the Deeds
dated July 17, 2002 of the alleged payments made to Union Bank,[78] the same of Dacion, and also adding to the Indebtedness
was not formally offered in evidence. Applying Section 34, Rule 132[79] of the the interest, and other fees and charges
Rules of Court, such computation cannot be considered by this Court. We have incurred by the Indebtedness, amounts to ONE
held that a formal offer is necessary because judges are mandated to rest their HUNDRED FOUR MILLION SIX HUNDRED SIXTY-
findings of facts and their judgment only and strictly upon the evidence offered EIGHT THOUSAND SEVEN HUNDRED FORTY-
by the parties at the trial. It has several functions: (1) to enable the trial judge to ONE PESOS (PHP104,668,741.00) (the “TOTAL
know the purpose or purposes for which the proponent is presenting the RESTRUCTURED AMOUNT”).[84]
evidence; (2) to allow opposing parties to examine the evidence and object to its
admissibility; and (3) to facilitate review by the appellate court, which will not be As regards the allegations of cash payments in paragraphs 17 and 21
required to review documents not previously scrutinized by the trial of the Amended Complaint, the date of the alleged payment is critical as to
court.[80] Moreover, even if such computation were admitted in evidence, the whether they were included in the Restructuring Agreement. The payment
same is self-serving and cannot be given probative weight. In the case at bar, of P15,000,000.00 alleged in paragraph 17 of the Amended Complaint was
the records do not contain even a single receipt evidencing payment to Union supposedly made on August 3 and 12, 1999. This payment was before the date
Bank. of execution of the Restructuring Agreement on December 21, 1999, and is
therefore already factored into the restructured obligation of the
The Court of Appeals, however, held that several payments made by spouses.[85] On the other hand, the payment of P13,197,546.79 alleged in
the spouses Tiu had been admitted by Union Bank. Indeed, Section 11, Rule 8 paragraph 21 of the Amended Complaint was dated May, 8, 2001. Said
of the Rules of Court provides that an allegation not specifically denied is payment cannot be deemed included in the computation of the spouses Tiu’s
deemed admitted. In such a case, no further evidence would be required to debt in the Restructuring Agreement, which was assented to more than a year
prove the antecedent facts. We should therefore examine which of the earlier. This amount (P13,197,546.79) is even absent[86] in the computation of
payments specified by the spouses Tiu in their Amended Complaint[81] were not Union Bank of the outstanding debt, in contrast with the P15,000,000.00
specifically denied by Union Bank. payment which is included[87] therein. Union Bank did not explain this
discrepancy and merely relied on the spouses Tiu’s failure to formally offer
The allegations of payment are made in paragraphs 16 to 21 of the supporting evidence. Since this payment ofP13,197,546.79 on May 8, 2001 was
Amended Complaint: admitted by Union Bank in their Answer with Counterclaim, there was no need
on the part of the spouses Tiu to present evidence on the same. Nonetheless, if
16. Before conversion of the dollar loan into a we subtract this figure from the total restructured amount (P104,668,741.00) in
peso loan[,] the spouses Tiu had already paid the the Restructuring Agreement, the result is that the spouses Tiu still owe Union
defendant bank the amount of P40,447,185.60 for Bank P91,471,194.21.
interests;
(2) Allegation of third party ownership of the improvements on the
17. On August 3, 1999 and August 12, 1999, mortgaged lot
plaintiffs made payments in the amount
of P15,000,000.00; The Court of Appeals, taking into consideration its earlier ruling that
the loan was already fully paid, permanently enjoined Union Bank from
18. In order to lessen the obligation of foreclosing the mortgage on the property covered by Transfer Certificate of Title
plaintiffs, the mother of plaintiff Rodolfo T. Tiu, plaintiff No. 11951 (Lot No. 639) and from pursuing other foreclosure of mortgages over
Juanita T. Tiu, executed a deed of dacion in payment in any other properties of the spouses Tiu. The Court of Appeals ruled:
favor of defendant involving her 10 parcels of land
located in Labangon, Cebu City for the amount The prayer, therefore, of the Tiu spouses to
of P25,130,000.00. Copy of the deed was attached to the enjoin the foreclosure of the real estate mortgage over
original complaint as Annex “C”; their residential property has merit. The loan has already
been fully paid. It should also be noted that the house
19. For the same purpose, plaintiffs spouses constructed on the residential property of the Tiu spouses
Tiu also executed a deed of dacion in payment of their is not registered in the name of the Tiu spouses, but in
property located at A.S. Fortuna St., Mandaue City for the the name of Jose Tiu (Records, pp. 127-132), the father of
amount of P36,080,000.00. Copy of the deed was appellant and petitioner Rodolfo Tiu, since 1981. It had
attached to the original complaint as Annex “D”; been alleged by the Tiu spouses that Jose Tiu died
on December 18, 1983, and, that consequently upon his
death, Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu,
Rosalie T. Young and Rosenda T. Tiu became owners of For the Labangon property, the Tiu spouses
the house (Records, p. 116). This allegation has not been paid rentals in the amount of P98,000.00 per month for
substantially denied by Union Bank. All that the Union two years, or a total amount ofP2,352,000.00. For the
Bank presented to refute this allegation are a Transfer A.S. Fortuna property, the Tiu spouses paid rentals in the
Certificate of Title and a couple of Tax Declarations which amount of P150,000.00 per month for two years, or a
do not indicate that a residential house is titled in the total amount of P3,600,000.00. The total amount in
name of the Tiu spouses. In fact, in one of the Tax rentals paid by the Tiu spouses to Union Bank is FIVE
Declarations, the market value of the improvements is MILLION NINE HUNDRED FIFTY- TWO THOUSAND PESOS
worth only P3,630.00. Certainly, Union Bank should have (P5,952,000.00). This Court finds that the return of this
been aware that this Tax Declaration did not cover the amount to the Tiu spouses is called for since it will better
residential house. Union Bank should also not rely on serve public policy. These properties that were given by
warranties made by debtors that they are the owners of the Tiu spouses to Union Bank as payment should not be
the property. They should investigate such used by the latter to extract more money from the
representations. The courts have made consistent rulings former. This situation is analogous to having a debtor pay
that a bank, being in the business of lending, is obligated interest for a debt already paid. Instead of leasing the
to verify the true ownership of the properties mortgaged properties, Union Bank should have instructed the Tiu
to them. Consequently, this Court permanently enjoins spouses to vacate the said properties so that it could
Union Bank from foreclosing the mortgage of the dispose of them.[94]
residential property of the Tiu spouses which is covered
by Transfer Certificate of Title No. 11951 and from
pursuing other foreclosure of mortgages over any other The Court of Appeals committed a serious error in this regard. As
properties of the Tiu spouses. If a foreclosure sale has pointed out by petitioner Union Bank, the spouses Tiu did not present any proof
already been made over such properties, this Court of the alleged rental payments. Not a single receipt was formally offered in
orders the cancellation of such foreclosure sale and the evidence. The mere stipulation in a contract of the monthly rent to be paid by
Certificate of Sale thereof if any has been issued, and the the lessee is certainly not evidence that the same has been paid. Since the
return of the title to the Tiu spouses.[88] spouses Tiu failed to prove their payment to Union Bank of the amount
of P5,952,000.00, we are constrained to reverse the ruling of the Court of
Appeals ordering its return.
We disagree. Contrary to the ruling of the Court of Appeals, the
burden to prove the spouses Tiu’s allegation – that they do not own the Even assuming arguendo that the spouses Tiu had duly proven that it
improvements on Lot No. 639, despite having such improvements included in had paid rent to Union Bank, we nevertheless disagree with the finding of the
the mortgage – is on the spouses Tiu themselves. The fundamental rule is that Court of Appeals that it is against public policy for banks to enter into two-year
he who alleges must prove.[89] The allegations of the spouses Tiu on this matter, contracts of lease of properties ceded to them through dacion en pago. The
which are found in paragraphs 35 to 39[90] of their Amended Complaint, were provisions of law cited by the Court of Appeals, namely Sections 51 and 52 of the
specifically denied in paragraph 9 of Union Bank’s Answer with Counterclaim.[91] General Banking Law of 2000, merely provide:

Upon careful examination of the evidence, we find that the spouses SECTION 51. Ceiling on Investments in Certain
Tiu failed to prove that the improvements on Lot No. 639 were owned by third Assets. — Any bank may acquire real estate as shall be
persons. In fact, the evidence presented by the spouses Tiu merely attempt to necessary for its own use in the conduct of its
prove that the improvements on Lot No. 639 were declared for taxes in the business: Provided, however, That the total investment in
name of respondent Rodolfo Tiu’s father, Jose Tiu, who allegedly died on such real estate and improvements thereof, including
December 18, 1983. There was no effort to show how their co-plaintiffs in the bank equipment, shall not exceed fifty percent (50%) of
original complaint, namely Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie combined capital accounts: Provided, further, That the
T. Young and Rosenda T. Tiu, became co-owners of the house. The spouses Tiu equity investment of a bank in another corporation
did not present evidence as to (1) who the heirs of Jose Tiu are; (2) if Juanita T. engaged primarily in real estate shall be considered as
Tiu, Rosalinda T. King, Rufino T. Tiu, Rosalie T. Young and Rosenda T. Tiu are part of the bank's total investment in real estate, unless
indeed included as heirs; and (3) why petitioner Rodolfo Tiu is not included as an otherwise provided by the Monetary Board.
heir despite being the son of Jose Tiu. No birth certificate of the alleged heirs,
will of the deceased, or any other piece of evidence showing judicial or SECTION 52. Acquisition of Real Estate by Way
extrajudicial settlement of the estate of Jose Tiu was presented. of Satisfaction of Claims. — Notwithstanding the
limitations of the preceding Section, a bank may acquire,
In light of the foregoing, this Court therefore sets aside the ruling of hold or convey real property under the following
the Court of Appeals permanently enjoining Union Bank from foreclosing the circumstances:
mortgage on Lot No. 639, including the improvements thereon.
52.1. Such as shall be mortgaged to it in good
Validity of Alleged faith by way of security for debts;
Rental Payments on
the Properties 52.2. Such as shall be conveyed to it in
Conveyed to the Bank satisfaction of debts previously contracted in the course
via Dacion en Pago of its dealings; or

The Court of Appeals found the lease contracts over the properties 52.3. Such as it shall purchase at sales under
conveyed to Union Bank via dacion en pago to be void for being against public judgments, decrees, mortgages, or trust deeds held by it
policy. The appellate court held that since the General Banking Law of and such as it shall purchase to secure debts due it.
2000[92] mandates banks to immediately dispose of real estate properties that
are not necessary for its own use in the conduct of its business, banks should not Any real property acquired or held under the
enter into two-year contracts of lease over properties paid to them circumstances enumerated in the above paragraph shall
through dacion.[93] The Court of Appeals thus ordered Union Bank to return the be disposed of by the bank within a period of five (5)
rentals it collected. To determine the amount of rentals paid by the spouses Tiu years or as may be prescribed by the Monetary
to Union Bank, the Court of Appeals simply multiplied the monthly rental Board: Provided, however, That the bank may, after said
stipulated in the Restructuring Agreement by the stipulated period of the lease period, continue to hold the property for its own use,
agreement: subject to the limitations of the preceding Section.
replacement and issuance of new certificates and new
Section 52.2 contemplates a dacion en pago. Thus, Section 52 titles over the said properties.[99]
undeniably gives banks five years to dispose of properties conveyed to them in
satisfaction of debts previously contracted in the course of its dealings, unless As regards Union Bank’s argument that it has the right to retain said
another period is prescribed by the Monetary Board. Furthermore, there documents pursuant to the Restructuring Agreement, it is referring to paragraph
appears to be no legal impediment for a bank to lease the real properties it has 11(b), which provides that:
received in satisfaction of debts, within the five-year period that such bank is
allowed to hold the acquired realty. 11. Effects of Default – When the BORROWER is in
default, such default shall have the following
We do not dispute the interpretation of the Court of Appeals that the effects, alternative, concurrent and cumulative with
purpose of the law is to prevent the concentration of land holdings in a few each other:
hands, and that banks should not be allowed to hold on to the properties
contemplated in Section 52 beyond the five-year period unless such bank has xxxx
exerted its best efforts to dispose of the property in good faith but
failed. However, inquiries as to whether the banks exerted best efforts to (b) The BANK shall be entitled to all
dispose of the property can only be done if said banks fail to dispose of the same the remedies provided for and further shall have the
within the period provided. Such inquiry is furthermore irrelevant to the issues right to effect or apply against the partial or full
in the case at bar. payment of any and all obligations of the
BORROWER under this Restructuring Agreement
Order to Return any and all moneys or other properties of the
Certificates Allegedly BORROWER which, for any reason, are or may
in Union Bank’s hereafter come into the possession of the Bank or
Possession the Bank’s agent. All such moneys or properties
shall be deemed in the BANK’s possession as soon
In the Amended Complaint, the spouses Tiu alleged[95] that they as put in transit to the BANK by mail or carrier.[100]
delivered several certificates and titles to Union Bank pursuant to a
Memorandum of Agreement. These certificates and titles were not subjected
to any lien in favor of Union Bank, but the latter allegedly continued to hold on In the first place, notwithstanding the foregoing provision, there is no
to said properties. clear intention on the part of the spouses Tiu to deliver the certificates over
certain shares of stock and real properties as security for their debt. From the
The RTC failed to rule on this issue. The Court of Appeals, tackling terms of the Memorandum of Agreement, these certificates were surrendered
this issue for the first time, ruled in favor of the Tiu spouses and ordered the to Union Bank in order that the said properties described therein be given their
return of these certificates and titles. The appellate court added that if Union corresponding loan values required for the restructuring of the spouses Tiu’s
Bank can no longer return these certificates or titles, it should shoulder the cost outstanding obligations. However, in the event the parties fail to agree on the
for their replacement.[96] valuation of the subject properties, Union Bank agrees to release the
same.[101] As Union Bank itself vehemently alleges, the Memorandum of
Union Bank, asserting that the Memorandum of Agreement did not, Agreement was not consummated. Moreover, despite the fact that the Bank
in fact, push through, denies having received the subject certificates and was aware, or in possession, of these certificates,[102] at the time of execution of
titles. Union Bank added that even assuming arguendo that it is in possession of the Restructuring Agreement, only the mortgage over the real property covered
said documents, the Restructuring Agreement itself allows such possession.[97] by TCT No. T-11951 was expressly mentioned as a security in the Restructuring
Agreement. In fact, in its Reply to Request for Admission,[103] Union Bank
The evidence on hand lends credibility to the allegation of Union admitted that (1) the titles to the real properties were submitted to it for
Bank that the Memorandum of Agreement did not push through. The copy of appraisal but were subsequently rejected, and (2) no real estate mortgages were
the Memorandum of Agreement attached by the spouses Tiu themselves to executed over the said properties. There being no agreement that these
their original complaint did not bear the signature of any representative from properties shall secure respondents’ obligation, Union Bank has no right to
Union Bank and was not notarized.[98] retain said certificates.

We, however, agree with the finding of the Court of Appeals that Assuming arguendo that paragraph 11(b) of the Restructuring
despite the failure of the Memorandum of Agreement to push through, the Agreement indeed allows the retention of the certificates (submitted to the
certificates and titles mentioned therein do appear to be in the possession of Bank ostensibly for safekeeping and appraisal) as security for spouses Tiu’s debt,
Union Bank. As held by the Court of Appeals: Union Bank’s position still cannot be upheld. Insofar as said provision permits
Union Bank to apply properties of the spouses Tiu in its possession to the full or
Lastly, this Court will order, as it hereby partial payment of the latter’s obligations, the same appears to impliedly allow
orders, Union Bank to return to the Tiu spouses all the Union Bank to appropriate these properties for such purpose. However, said
certificates of shares of stocks and titles to real properties provision cannot be validly applied to the subject certificates and titles without
of the Tiu spouses in its possession. Union Bank cannot violating the prohibition against pactum commissorium contained in Article 2088
deny possession of these items since it had made judicial of the Civil Code, to the effect that “[t]he creditor cannot appropriate the things
admissions of such possession in their document entitled given by way of pledge or mortgage, or dispose of them[;] [a]ny stipulation to
“Reply to Plaintiffs’ request for Admission” (records, pp. the contrary is null and void.” Applicable by analogy to the present case is our
216-217). While in that document, Union Bank only ruling in Nakpil v. Intermediate Appellate Court,[104] wherein property held in
admitted to the possession of four real estate titles, this trust was ceded to the trustee upon failure of the beneficiary to answer for the
Court is convinced that all the certificates and titles amounts owed to the former, to wit:
mentioned in the unconsummated Memorandum of
Agreement (Records, pp. 211-213) were given by the Tiu For, there was to be automatic appropriation of the
spouses to Union Bank for appraisal. This finding is property by Valdes in the event of failure of petitioner to
further bolstered by the admission of the Union Bank that pay the value of the advances. Thus, contrary to
it kept the titles for safekeeping after it rejected the respondent's manifestations, all the elements of
Memorandum of Agreement. Since Union Bank rejected a pactum commissorium were present: there was a
these certificates and titles of property, it should return creditor-debtor relationshipbetween the parties;
the said items to the Tiu spouses. If Union Bank can no the property was used as security for the loan; and, there
longer return these certificates and titles or if it has was automatic appropriation by respondent of Pulong
misplaced them, it shall shoulder the cost for the Maulap in case of default of petitioner.[105] (Emphases
supplied.)
WHEREFORE, the Petition is PARTIALLY GRANTED. The Joint
Decision of the Court of Appeals in CA-G.R. CV No. 00190 and CA-G.R. SP No.
This Court therefore affirms the order of the Court of Appeals for 00253 dated February 21, 2006 is hereby AFFIRMED insofar as it ordered
Union Bank to return to the spouses Tiu all the certificates of shares of stock and petitioner Union Bank of the Philippines to return to the respondent spouses
titles to real properties that were submitted to it or, in lieu thereof, to pay the Rodolfo T. Tiu and Victoria N. Tiu all the certificates of shares of stock and titles
cost for the replacement and issuance of new certificates and new titles over the to real properties that were submitted to it or, in lieu thereof, to pay the cost for
said properties. the replacement and issuance of new certificates and new titles over the said
properties. The foregoing Joint Decision is hereby SET ASIDE: (1) insofar as it
Validity of the Award of Damages permanently enjoined Union Bank of the Philippines from foreclosing the
mortgage of the residential property of respondent spouses Rodolfo T. Tiu and
The Court of Appeals awarded damages in favor of the spouses Tiu Victoria N. Tiu which is covered by Transfer Certificate of Title No. 11951;
based on its taking judicial notice of the alleged exploitation by many banks of (2) insofar as it ordered Union Bank of the Philippines to return to the
the Asian financial crisis, as well as the foreclosure of the mortgage of the home respondent spouses Rodolfo T. Tiu and Victoria N. Tiu the amount
of the spouses Tiu despite the alleged full payment by the latter. As regards the of P927,546.79 representing illegally collected rentals; and (3) insofar as it
alleged manipulation of the financial crisis, the Court of Appeals held: ordered Union Bank of the Philippines to pay the respondent spouses Rodolfo T.
Tiu and Victoria N. TiuP100,000.00 in moral damages, P100,000.00 in exemplary
As a final note, this Court observes the damages, P50,000.00 in attorney’s fees and cost, both in the lower court and in
irregularity in the circumstances [surrounding] dollar this Court.
loans granted by banks right before or during the Asian
financial crisis. It is of common knowledge that many No further pronouncement as to costs.
banks, around that time, actively pursued and convinced
debtors to make dollar loans or to convert their peso
loans to dollar loans allegedly because of the lower SO ORDERED.
interest rate of dollar loans. This is a highly suspect [1]
behavior on the part of the banks because it is irrational Rollo, pp. 74-96; penned by Associate Justice Isaias P. Dicdican with
for the banks to voluntarily and actively proffer a Associate Justices Ramon M. Bato, Jr. and Apolinario D. Bruselas, Jr.,
conversion that would give them substantially less concurring.
[2]
income. In the guise of benevolence, many banks were Id. at 97-100.
[3] Records, pp. 12-13.
able to convince borrowers to make dollar loans or to [4]
convert their peso loans to dollar loans. Soon thereafter, Id. at 14.
[5] Id.
the Asian financial crisis hit, and many borrowers were
[6] Written in the document as “@ 41.40%”.
saddled with loans that ballooned to twice or thrice the [7]
amount of their original loans. This court takes judicial Records, p. 333.
[8] Id. at 334-344.
notice of these events or matters which are of public [9]
knowledge. It is inconceivable that the banks were Id. at 335.
[10] Id. at 115.
unaware of the looming Asian financial crisis. Being in the
[11]
forefront of the financial world and having access to Id. at 335.
[12] Id. at 354-357.
financial data that were not available to the average
[13] Id. at 350-353.
borrower, the banks were in such a position that they had
[14]
a higher vantage point with respect to the financial Id. at 339.
[15] Id. at 114.
landscape over their average clients. The cavalier way
[16] Id. at 2-11.
with which banks exploited and manipulated the situation [17]
is almost too palpable that they openly and unabashedly Id. at 10.
[18]
struck heavy blows on the Philippine economy, industries Rollo, pp. 163-164.
[19] Id. at 169.
and businesses. The banks have a fiduciary duty to their [20]
clients and to the Filipino people to be transparent in Id. at 168.
[21]
their dealings and to make sure that the latter’s interest Id. at 42-61.
[22] Records, pp. 97-98.
are not prejudiced by the former’s interest. Article 1339 [23]
of the New Civil Code provides that the failure to disclose Id. at 420-423.
[24] Rollo, pp. 75-78.
facts, when there is a duty to reveal them, as when the [25]
parties are bound by confidential relations, constitutes Id. at 101-120.
[26] Id. at 120.
fraud. Undoubtedly, the banks and their clients are
[27] Id. at 117-118.
bound by confidential relations. The almost perfect [28]
timing of the banks in convincing their clients to shift to Records, pp. 787-794.
[29] Id. at 799-815.
dollar loans just when the Asian financial crisis struck [30]
indicates that the banks not only failed to disclose facts to Id. at 814-815.
[31] CA rollo (CA-G.R. SP No. 00253), pp. 2-8.
their clients of the looming crisis, but also suggests of the
[32]
insidious design to take advantage of these undisclosed Id. at 90-91.
[33] Records, p. 828.
facts.[106]
[34] Id. at 830-831, 836-837.
[35] CA rollo (CA-G.R. SP No. 00253), pp. 140-141.
[36]
We have already held that the foreclosure of the mortgage was CA rollo (CA-G.R. SP No. 00190), pp. 92-95.
[37]
warranted under the circumstances. As regards the alleged exploitation by Id. at 253.
[38] Id. at 250-256.
many banks of the Asian financial crisis, this Court rules that the generalization [39]
made by the appellate court is unfounded and cannot be the subject of judicial Id. at 305-307.
[40] Rollo, p. 78.
notice. “It is axiomatic that good faith is always presumed unless convincing [41]
evidence to the contrary is adduced. It is incumbent upon the party alleging bad Id. at 79.
[42] Id. at 83-91.
faith to sufficiently prove such allegation. Absent enough proof thereof, the
[43] Id. at 92.
presumption of good faith prevails.”[107] The alleged insidious design of many [44]
banks to betray their clients during the Asian financial crisis is certainly not of Id. at 92-93.
[45]
public knowledge. The deletion of the award of moral and exemplary damages Id. at 91.
[46] Id. at 91-92.
in favor of the spouses Tiu is therefore in order. [47] Id. at 93.
[48] Id. at 93-95.
[49] Id. at 95-96. declared by the Government of the Philippines shall be legal tender
[50] Id. at 282-283. for all debts, public and private.
[51] Id. at 83. [61] Otherwise known as the Consolidated Foreign Exchange Rules and
[52]
Id. at 85-87. Regulations.
[53] Id. at 292. [62] Republic Act No. 8183 provides that it shall take effect fifteen (15)
[54] Id. at 293. days after its publication in the Official Gazette or in two (2) national
[55]
Id. at 293-295. newspapers of general circulation. It was published in Malaya and
[56] Records, pp. 252-278. the Manila Times on June 20, 1996.
[57] Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., 102 Phil. 1, 9 [63] SECTION 2. Republic Act Numbered Five Hundred Twenty-Nine
(1957); Arrieta v. National Rice and Corn Corporation, 119 Phil. 339, (R.A. No. 529), as amended entitled "An Act to Assure Uniform Value
349-350 (1964). of Philippine Coin and Currency," is hereby repealed.
[58] SECTION 1. Every provision contained in, or made with respect [64] SECTION 1. All monetary obligations shall be settled in the
to, any obligation which provision purports to give the obligee the Philippine currency which is legal tender in the Philippines. However,
right to require payment in gold or in a particular kind of coin or the parties may agree that the obligation or transaction shall be
currency other than Philippine currency or in an amount of money of settled in any other currency at the time of payment.
the Philippines measured thereby, be as it is hereby declared
against public policy, and null, void and of no effect, and no such TCT number Registry of Deeds Location
provision shall be contained in, or made with respect to, any 116288 Cebu City Panganiban St., Cebu City
obligation hereafter incurred. Every obligation heretofore or Panganiban St., Cebu City
116287 Cebu City
hereafter incurred, whether or not any such provision as to
OCT No. 0-3538 Cebu City Panganiban St., Cebu City
payment is contained therein or made with respect thereto,
shall be discharged upon payment in any coin or currency which
at the time of payment is legal tender for public and private
30271 Cebu City Minglanilla, Cebu Province
debts: Provided, That, if the obligation was incurred prior to the
[65] Records, pp. 12-13.
enactment of this Act and required payment in a particular kind of
[66] Id. at 252-278.
coin or currency other than Philippine currency, it shall be
[67] G.R. No. 159912, August 17, 2007, 530 SCRA 567.
discharged in Philippine currency measured at the prevailing rates of
[68] Id. at 599.
exchange at the time the obligation was incurred, except in case of a
[69]
loan made in a foreign currency stipulated to be payable in the same TSN, October 8, 2004, pp. 8-9.
[70] Rollo, pp. 247-248.
currency in which case the rate of exchange prevailing at the time of
[71]
the stipulated date of payment shall prevail. All coin and currency, Records, p. 114.
[72] Id. at 232.
including Central Bank notes, heretofore or hereafter issued and
[73]
declared by the Government of thePhilippines shall be legal tender TSN, October 1, 2002, pp. 38-39.
[74] Id. at 18-19.
for all debts, public and private.
[75]
[59] Eastboard Navigation, Ltd. v. Juan Ysmael and Co., Inc., supra note 57. TSN, October 8, 2004, pp. 4-5.
[76] Domingo v. Robles, 493 Phil. 916, 921 (2005).
[60]
SEC. 1. Every provision contained in, or made with respect to, any
[77] Records, p. 344; Restructuring Agreement, p. 11.
domestic obligation to wit, any obligation contracted in the
[78] TSN, October 1, 2002, pp. 18-19.
Philippines which provisions purports to give the obligee the right to
[79] SEC. 34. Offer of Evidence. — The court shall consider no evidence
require payment in gold or in a particular kind of coin or currency
other than Philippine currency or in an amount of money of the which has not been formally offered. The purpose for which the
Philippines measured thereby, be as it is hereby declared against evidence is offered must be specified.
[80] Heirs of Pedro Pasag v. Parocha, G.R. No. 155483, April 27, 2007, 522
public policy, and null, void, and of no effect, and no such provision
shall be contained in, or made with respect to, any obligation SCRA 410, 416.
[81] Records, pp. 110-119.
hereafter incurred. The above prohibition shall not apply to (a)
[82]
transactions where the funds involved are the proceeds of loans or Id. at 114.
[83] Id. at 232.
investments made directly or indirectly, through bona fide
[84] Id. at 335.
intermediaries or agents, by foreign governments, their agencies and
[85] See records, pp. 134-135.
instrumentalities, and international financial and banking institutions
[86] Id.
so long as the funds are identifiable, as having emanated from the
[87] Id. at 134.
sources enumerated above; (b) transactions affecting high-priority
[88] Rollo, pp. 92-93.
economic projects for agricultural, industrial and power
[89] Spouses Bejoc v. Cabreros, 502 Phil. 336, 343 (2005).
development as may be determined by the National Economic
[90]
Council which are financed by or through foreign funds; (c) forward 35. That in 1983, the Spouses Jose Tiu and Juanita
exchange transactions entered into between banks or between Tiu, and during the existence of their marriage,
banks and individuals or juridical persons; (d) import-export and constructed their house on Lot No. 639 and declared the
other international banking, financial investment and industrial same for taxation purposes in the name of Jose Tiu;
transactions. With the exception of the cases enumerated in items 36. That Jose Tiu died on December 18, 1983;
(a), (b), (c) and (d) in the foregoing provision, in which bases the 37. That consequently upon his death, the
terms of the parties' agreement shall apply, every other domestic plaintiffs Juanita T. Tiu, Rosalinda T. King, Rufino T. Tiu,
obligation heretofore or hereafter incurred, whether or not any such Rosalie T. Young and Rosenda T. Tiu became owners of
provision as to payment is contained therein or made with respect the aforesaid house;
thereto, shall be discharged upon payment in any coin or currency 38. That the herein plaintiffs have not
which at the time of payment is legal tender for public and private executed any real estate mortgage on their house
debts: Provided, That if the obligation was incurred prior to the constructed on plaintiffs spouses Tiu’s lot in favor of
enactment of this Act and required payment in a particular kind of defendant bank;
coin or currency other than Philippine currency, it shall be 39. Consequently, the extra-judicial
discharged in Philippine currency measured at the prevailing rates of foreclosure sale of said house is null and void as the real
exchange at the time the obligation was incurred, except in case of a owners of the same have not mortgaged the said house
loan made in a foreign currency stipulated to be payable in the same to defendant bank; (Records, p. 116.)
[91] Records, pp. 232-233.
currency in which case the rate of exchange prevailing at the time of
[92] Republic Act No. 8791.
the stipulated date of payment shall prevail. All coin and currency,
[93] Rollo, pp. 90-91.
including Central Bank notes, heretofore and hereafter issued and
[94] Id. at 91.
[95] 40. Before the execution of the restructuring entering into the compromise agreement was in order that Dr. Gueco would pay
agreement, the plaintiffs and the defendant bank entered his outstanding account and in return petitioner would return the car and drop
into a memorandum of agreement, whereby the plaintiffs the case for money and replevin before the Metropolitan Trial Court. The joint
turned over to defendant bank in the meanwhile the motion to dismiss was but a natural consequence of the compromise agreement
following real and personal properties: and simply stated that Dr. Gueco had fully settled his obligation, hence, the
a) Shares of stock of the Borrower/Mortgagor dismissal of the case. Petitioner’s act of requiring Dr. Gueco to sign the joint
in Grand Convention Center, Cebu Country Club, Subic motion to dismiss cannot be said to be a deliberate attempt on the part of
Bay Yacht Club, Alta Vista Golf and Country Club and Cebu petitioner to renege on the compromise agreement of the parties. It should,
Grand Salinas Development Corporation, likewise, be noted that in cases of breach of contract, moral damages may only
b) Real Estate properties: be awarded when the breach was attended by fraud or bad faith. The law
Copy of the memorandum of agreement was presumes good faith.
attached to the original complaint as Annex 3. Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A
“I”; stale check is one which has not been presented for payment within a
41. As can be seen from the Restructuring reasonable time after its issue.-
Agreement, only the lot subject of the sheriff’s notice of A stale check is one which has not been presented for payment within a
extrajudicial foreclosure sale was mortgaged to guarantee reasonable time after its issue. It is valueless and, therefore, should not be paid.
plaintiff’s obligation; Under the negotiable instruments law, an instrument not payable on demand
42. None of the properties mentioned in must be presented for payment on the day it falls due. When the instrument is
paragraph 40 hereof have been subjected to any lien in payable on demand, presentment must be made within a reasonable time after
favor of defendant bank but the defendant bank its issue. In the case of a bill of exchange, presentment is sufficient if made
continues to hold on to said properties and has not within a reasonable time after the last negotiation thereof.
returned the same to the plaintiffs spouses Tiu (Records, 4. Banks and Banking; Checks; Negotiable Instruments; A check must be
p. 117). presented for payment within a reasonable time after its issue, and in
[96]
Rollo, pp. 91-92. determining what is a “reasonable time,” regard is to be had to the nature of
[97] Id. at 317. the instrument, the usage of trade or business with respect to such instruments,
[98] Records, pp. 41-42. and the facts of the particular case.-
[99] Rollo, pp. 91-92. A check must be presented for payment within a reasonable time after its issue,
[100] Records, p. 341. and in determining what is a “reasonable time,” regard is to be had to the
[101] Id. at 41. nature of the instrument, the usage of trade or business with respect to such
[102] Id. at 209; see Acknowledgement Receipt dated November 24, 1999. instruments, and the facts of the particular case. The test is whether the payee
[103] Id. at 216-217. employed such diligence as a prudent man exercises in his own affairs. This is
[104]
G.R. No. 74449, August 20, 1993, 225 SCRA 456. because the nature and theory behind the use of a check points to its immediate
[105] Id. at 467-468. use and payability. In a case, a check payable on demand which was long
[106] Rollo, pp. 93-94. overdue by about two and a half (2-1/2) years was considered a stale check.
[107] Pacific Basin Securities Co., Inc. v. Oriental Petroleum And Minerals Failure of a payee to encash a check for more than ten (10) years undoubtedly
Corp., G.R. Nos. 143972, 144056 and 144056, August 31, 2007, 531 resulted in the check becoming stale. Thus, even a delay of one (1) week or two
SCRA 667, 689. (2) days, under the specific circumstances of the cited cases constituted
unreasonable time as a matter of law.
Case Title : THE INTERNATIONAL CORPORATE BANK (now UNION BANK OF THE 5. Banks and Banking; Checks; Negotiable Instruments; Words and Phrases; A
PHILIPPINES), petitioner, vs. SPS. FRANCIS S. GUECO and MA. LUZ E. GUECO, manager’s check is one drawn by the bank’s manager upon the bank itself, and
respondents.Case Nature : PETITION for review on certiorari of a decision of the it is similar to a cashier’s check both as to effect and use. A cashier’s check is a
Court of Appeals. check of the bank’s cashier on his own or another check—it is a bill of exchange
Syllabi Class : Appeals|Obligations and Contracts|Banks and drawn by the cashier of a bank upon the bank itself, and accepted in advance by
Banking|Evidence|Fraud|Words and Phrases|Checks|Negotiable Instruments the act of its issuance.-
Syllabi: In the case at bar, however, the check involved is not an ordinary bill of
1. Appeals; Evidence; It is well settled that the findings of fact of the lower exchange but a manager’s check. A manager’s check is one drawn by the bank’s
court, especially when affirmed by the Court of Appeals, are binding upon the manager upon the bank itself. It is similar to a cashier’s check both as to effect
Supreme Court.- and use. A cashier’s check is a check of the bank’s cashier on his own or another
As to the first issue, we find for the respondents. The issue as to what constitutes check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the
the terms of the oral compromise or any subsequent novation is a question of bank itself, and accepted in advance by the act of its issuance. It is really the
fact that was resolved by the Regional Trial Court and the Court of Appeals in bank’s own check and may be treated as a promissory note with the bank as a
favor of respondents. It is well settled that the findings of fact of the lower court, maker. The check becomes the primary obligation of the bank which issues it
especially when affirmed by the Court of Appeals, are binding upon this Court. and constitutes its written promise to pay upon demand. The mere issuance of it
While there are exceptions to this rule, the present case does not fall under any is considered an acceptance thereof. If treated as promissory note, the drawer
one of them, the petitioner’s claim to the contrary, notwithstanding. would be the maker and in which case the holder need not prove presentment
2. Obligations and Contracts; Fraud; Words and Phrases; Fraud is the for payment or present the bill to the drawee for acceptance.
deliberate intention to cause damage or prejudice, the voluntary execution of a 6. Banks and Banking; Checks; Negotiable Instruments; Even assuming that
wrongful act, or a willful omission, knowing and intending the effects which presentment is needed, failure to present a manager’s check for payment within
naturally and necessarily arise from such act or omission; The fraud referred to a reasonable time will result to the discharge of the drawer only to the extent of
in Article 1170 of the Civil Code is the deliberate and intentional evasion of the the loss caused by the delay.-
normal fulfillment of an obligation.- Even assuming that presentment is needed, failure to present for payment
Fraud has been defined as the deliberate intention to cause damage or within a reasonable time will result to the discharge of the drawer only to the
prejudice. It is the voluntary execution of a wrongful act, or a willful omission, extent of the loss caused by the delay. Failure to present on time, thus, does not
knowing and intending the effects which naturally and necessarily arise from totally wipe out all liability. In fact, the legal situation amounts to an
such act or omission; the fraud referred to in Article 1170 of the Civil Code is the acknowledgment of liability in the sum stated in the check. In this case, the
deliberate and intentional evasion of the normal fulfillment of obligation. We Gueco spouses have not alleged, much less shown that they or the bank which
fail to see how the act of the petitioner bank in requiring the respondent to sign issued the manager’s check has suffered damage or loss caused by the delay or
the joint motion to dismiss could constitute as fraud. True, petitioner may have non-presentment. Definitely, the original obligation to pay certainly has not
been remiss in informing Dr. Gueco that the signing of a joint motion to dismiss been erased.
is a standard operating procedure of petitioner bank. However, this cannot in
anyway have prejudiced Dr. Gueco. The motion to dismiss was in fact also for Division: FIRST DIVISION
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 Docket Number: G.R. No. 141968
adequate to support a conclusion, even if other equally reasonable minds might
Counsel: Tomas R. Leonidas, Estrella, Estrella & Associates conceivably opine otherwise.

Ponente: KAPUNAN Division: SECOND DIVISION

Dispositive Portion: Docket Number: G.R. No. 153166


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 Counsel: Glenn G. Hao, Horacio R. Makalintal, Jr.
Court is SET ASIDE. Respondents are further ordered to pay the original
obligation amounting to P150,000.00 to the petitioner upon surrender or Ponente: PUNO
cancellation of the manager’s check in the latter’s possession, afterwhich,
petitioner is to return the subject motor vehicle in good working condition. Dispositive Portion:
IN VIEW WHEREOF, the petition is DENIED. The Court of Appeals Decision dated
February 12, 2002 and Resolution dated April 16, 2002 in CA-G.R. SP No. 58766
Case Title : TERESITA L. VERTUDES, petitioner, vs. JULIE BUENAFLOR and are AFFIRMED.
BUREAU OF IMMIGRATION, respondents.Case Nature : PETITION for review on
certiorari of the decision and resolution of the Court of Appeals.
Syllabi Class : Constitutional Law|Remedial Law|Due Process|Right to Cross- G.R. No. 170325. September 26, 2008.*
examination|Certiorari PHILIPPINE NATIONAL BANK, petitioner, vs. ERLANDO T. RODRIGUEZ and
Syllabi: NORMA RODRIGUEZ, respondents.
1. Constitutional Law; Due Process; Right to Cross-examination; Where a party Courts; Judgments; Amendment of decisions is more acceptable than an
has had the opportunity to cross-examine a witness but failed to avail himself of erroneous judgment attaining finality to the prejudice of innocent parties; The
it, he necessarily forfeits the right to cross-examine and the testimony given on Court does not sanction careless disposition of cases by courts of justice—the
direct examination of the witness will be received or allowed to remain in the highest degree of diligence must go into the study of every controversy
record.- submitted for decision by litigants.—Prefatorily, amendment of decisions is
We have explained the meaning of the right to cross-examination as a vital more acceptable than an erroneous judgment attaining finality to the prejudice
element of due process as follows: The right of a party to confront and cross- of innocent parties. A court discovering an erroneous judgment before it
examine opposing witnesses in a judicial litigation, be it criminal or civil in becomes final may, motu proprio or upon motion of the parties, correct its
nature, or in proceedings before administrative tribunals with quasi-judicial judgment with the singular objective of achieving justice for the litigants.
powers, is a fundamental right which is part of due process. However, the right However, a word of caution to lower courts, the CA in Cebu in this particular
is a personal one which may be waived expressly or impliedly by conduct case, is in order. The Court does not sanction careless disposition of cases by
amounting to a renunciation of the right of cross-examination. Thus, where a courts of justice. The highest degree of diligence must go into the study of every
party has had the opportunity to cross-examine a witness but failed to avail controversy submitted for decision by litigants. Every issue and factual detail
himself of it, he necessarily forfeits the right to cross-examine and the testimony must be closely scrutinized and analyzed, and all the applicable laws judiciously
given on direct examination of the witness will be received or allowed to remain studied, before the promulgation of every judgment by the court. Only in this
in the record. manner will errors in judgments be avoided.
2. Constitutional Law; Due Process; It is well-settled that the essence of due Negotiable Instruments Law; Checks; Fictitious Payee Rule; As a rule, when the
process in administrative proceedings is an opportunity to explain one’s side or payee is fictitious or not intended to be the true recipient of the proceeds, the
an opportunity to seek reconsideration of the action or ruling complained of.- check is considered as a bearer instrument.—As a rule, when the payee is
It is well-settled that the essence of due process in administrative proceedings is fictitious or not intended to be the true recipient of the proceeds, the check is
an opportunity to explain one’s side or an opportunity to seek reconsideration of considered as a bearer instrument. A check is “a bill of exchange drawn on a
the action or ruling complained of. This was clearly satisfied in the case at bar. bank payable on demand.” It is either an order or a bearer instrument.
Records show that petitioner not only gave her sworn written explanation of the Same; Same; Same; “Bearer” and “Order” Instruments; Words and Phrases; An
charges against her during the initial stage of the investigation, she also order instrument requires an indorsement from the payee or holder before it
submitted: a) a sworn counter-affidavit refuting the charges against her, with all may be validly negotiated while a bearer instrument is negotiable by mere
the attached annexes as evidence; b) a Motion to Re-open the case with the BI; delivery.—The distinction between bearer and order instruments lies in their
c) a Motion for Reconsideration and/or New Trial with the BI; d) an Appeal to manner of negotiation. Under Section 30 of the NIL, an order instrument
the CSC; e) a Motion for Reconsideration with the CSC; f) an Appeal to the CA; g) requires an indorsement from the payee or holder before it may be validly
a Motion for Reconsideration with the CA; and h) the instant petition for review. negotiated. A bearer instrument, on the other hand, does not require an
3. Constitutional Law; Due Process; What due process demands is for the chief indorsement to be validly negotiated. It is negotiable by mere delivery. The
of the bureau to personally weigh and assess the evidence which the provision reads: SEC. 30. What constitutes negotiation.—An instrument is
subordinate has gathered and not merely to rely on the recommendation of said negotiated when it is transferred from one person to another in such manner as
investigating officer.- to constitute the transferee the holder thereof. If payable to bearer, it is
There is nothing essentially wrong in the head of a bureau adopting the negotiated by delivery; if payable to order, it is negotiated by the indorsement
recommendation of a subordinate. Section 47, Book V of the Administrative of the holder completed by delivery.
Code of 1987 gives the chief of bureau or office or department the power to Same; Same; Same; Same; Under Section 9(c) of the Negotiable Instruments
delegate the task of investigating a case to a subordinate. What due process Law (NIL), a check payable to a specified payee may nevertheless be considered
demands is for the chief of the bureau to personally weigh and assess the as a bearer instrument if it is payable to the order of a fictitious or non-existing
evidence which the subordinate has gathered and not merely to rely on the person, and such fact is known to the person making it so payable.—A check
recommendation of said investigating officer. that is payable to a specified payee is an order instrument. However, under
4. Remedial Law; Certiorari; It is settled that only questions of law are Section 9(c) of the NIL, a check payable to a specified payee may nevertheless
entertained in petitions for review on certiorari under Rule 45 of the Rules of be considered as a bearer instrument if it is payable to the order of a fictitious
Court; Findings of fact of quasi-judicial agencies, like the Bureau of Immigration or non-existing person, and such fact is known to the person making it so
(BI) and the Civil Service Commission (CSC), are accorded not only respect but payable. Thus, checks issued to “Prinsipe Abante” or “Si Malakas at si
even finality if such findings are supported by substantial evidence.- Maganda,” who are well-known characters in Philippine mythology, are bearer
It is settled that only questions of law are entertained in petitions for review on instruments because the named payees are fictitious and non-existent.
certiorari under Rule 45 of the Rules of Court. It is not the function of this Court, Same; Same; Same; Same; Words and Phrases; Legal Research; In discussing the
in a petition under Rule 45, to scrutinize, weigh and analyze evidence all over broader meaning of the term “fictitious” as used in the Negotiable Instruments
again. Well-settled is the rule that the findings of fact of quasi-judicial agencies, Law (NIL), court rulings in the United States are a logical starting point since our
like the BI and the CSC, are accorded not only respect but even finality if such law on negotiable instruments was directly lifted from the Uniform Negotiable
findings are supported by substantial evidence. Substantial evidence is such Instruments Law of the United States; A review of US jurisprudence yields that
amount of relevant evidence which a reasonable mind might accept as an actual, existing, and living payee may also be “fictitious” if the maker of the
check did not intend for the payee to in fact receive the proceeds of the
check—if the payee is not the intended recipient of the proceeds of the check, Same; Same; Same; Banks and Banking; A bank that regularly processes checks
the payee is considered a “fictitious” payee and the check is a bearer that are neither payable to the customer nor duly indorsed by the payee is
instrument; In a fictitious-payee situation, the drawee bank is absolved from apparently grossly negligent in its operations.—PNB was remiss in its duty as
liability and the drawer bears the loss, the underlying theory being that one the drawee bank. It does not dispute the fact that its teller or tellers accepted
cannot expect a fictitious payee to negotiate the check by placing his the 69 checks for deposit to the PEMSLA account even without any indorsement
indorsement thereon.—We have yet to discuss a broader meaning of the term from the named payees. It bears stressing that order instruments can only be
“fictitious” as used in the NIL. It is for this reason that We look elsewhere for negotiated with a valid indorsement. A bank that regularly processes checks
guidance. Court rulings in the United States are a logical starting point since our that are neither payable to the customer nor duly indorsed by the payee is
law on negotiable instruments was directly lifted from the Uniform Negotiable apparently grossly negligent in its operations. This Court has recognized the
Instruments Law of the United States. A review of US jurisprudence yields that unique public interest possessed by the banking industry and the need for the
an actual, existing, and living payee may also be “fictitious” if the maker of the people to have full trust and confidence in their banks. For this reason, banks
check did not intend for the payee to in fact receive the proceeds of the check. are minded to treat their customer’s accounts with utmost care, confidence,
This usually occurs when the maker places a name of an existing payee on the and honesty.
check for convenience or to cover up an illegal activity. Thus, a check made Same; Same; Same; Same; In a checking transaction, the drawee bank has the
expressly payable to a non-fictitious and existing person is not necessarily an duty to verify the genuineness of the signature of the drawer and to pay the
order instrument. If the payee is not the intended recipient of the proceeds of check strictly in accordance with the drawer’s instructions, i.e., to the named
the check, the payee is considered a “fictitious” payee and the check is a bearer payee in the check.—In a checking transaction, the drawee bank has the duty to
instrument. In a fictitious-payee situation, the drawee bank is absolved from verify the genuineness of the signature of the drawer and to pay the check
liability and the drawer bears the loss. When faced with a check payable to a strictly in accordance with the drawer’s instructions, i.e., to the named payee in
fictitious payee, it is treated as a bearer instrument that can be negotiated by the check. It should charge to the drawer’s accounts only the payables
delivery. The underlying theory is that one cannot expect a fictitious payee to authorized by the latter. Otherwise, the drawee will be violating the instructions
negotiate the check by placing his indorsement thereon. And since the maker of the drawer and it shall be liable for the amount charged to the drawer’s
knew this limitation, he must have intended for the instrument to be negotiated account.
by mere delivery. Thus, in case of controversy, the drawer of the check will bear Banks and Banking; The trustworthiness of bank employees is indispensable to
the loss. This rule is justified for otherwise, it will be most convenient for the maintain the stability of the banking industry—banks are enjoined to be extra
maker who desires to escape payment of the check to always deny the validity vigilant in the management and supervision of their employees.—PNB was
of the indorsement. This despite the fact that the fictitious payee was purposely negligent in the selection and supervision of its employees. The trustworthiness
named without any intention that the payee should receive the proceeds of the of bank employees is indispensable to maintain the stability of the banking
check. industry. Thus, banks are enjoined to be extra vigilant in the management and
Same; Same; Same; Under the commercial bad faith exception to the fictitious- supervision of their employees. In Bank of the Philippine Islands v. Court of
payee rule, a showing of commercial bad faith on the part of the drawee bank, Appeals, 216 SCRA 51 (1992), this Court cautioned thus: Banks handle daily
or any transferee of the check for that matter, will work to strip it of this transactions involving millions of pesos. By the very nature of their work the
defense.—There is a commercial bad faith exception to the fictitious-payee degree of responsibility, care and trustworthiness expected of their employees
rule. A showing of commercial bad faith on the part of the drawee bank, or any and officials is far greater than those of ordinary clerks and employees. For
transferee of the check for that matter, will work to strip it of this defense. The obvious reasons, the banks are expected to exercise the highest degree of
exception will cause it to bear the loss. Commercial bad faith is present if the diligence in the selection and supervision of their employees.
transferee of the check acts dishonestly, and is a party to the fraudulent Actions; Default; Failure to file an answer is a ground for a declaration that
scheme. Said the US Supreme Court in Getty: Consequently, a transferee’s lapse defendant is in default.—We note that the RTC failed to thresh out the merits of
of wary vigilance, disregard of suspicious circumstances which might have well PNB’s cross-claim against its co-defendants PEMSLA and MPC. The records are
induced a prudent banker to investigate and other permutations of negligence bereft of any pleading filed by these two defendants in answer to the complaint
are not relevant considerations under Section 3-405 x x x. Rather, there is a of respondents-spouses and cross-claim of PNB. The Rules expressly provide
“commercial bad faith” exception to UCC 3-405, applicable when the transferee that failure to file an answer is a ground for a declaration that defendant is in
“acts dishonestly—where it has actual knowledge of facts and circumstances default. Yet, the RTC failed to sanction the failure of both PEMSLA and MPC to
that amount to bad faith, thus itself becoming a participant in a fraudulent file responsive pleadings. Verily, the RTC dismissal of PNB’s cross-claim has no
scheme. x x x Such a test finds support in the text of the Code, which omits a basis. Thus, this judgment shall be without prejudice to whatever action the
standard of care requirement from UCC 3-405 but imposes on all parties an bank might take against its co-defendants in the trial court. [Philippine National
obligation to act with “honesty in fact.” x x x Bank vs. Rodriguez, 566 SCRA 513(2008)]
Same; Same; Same; For the fictitious-payee rule to be available as a defense,
the bank must show that the maker did not intend for the named payees to be
part of the transaction involving the checks—mere lack of knowledge on the Case Title : SAN MIGUEL CORPORATION, petitioner, vs. BARTOLOME PUZON,
part of the payees of the existence of the checks is not tantamount to a lack of JR., respondent.Case Nature : PETITION for review on certiorari of the decision
intention on the part of maker that the payees would not receive the checks’ and resolution of the Court of Appeals.
proceeds; It is a requisite condition of a fictitious-payee situation that the maker Syllabi Class : Criminal Law|Theft|Negotiable Instruments Law|Checks|Words
of the check intended for the payee to have no interest in the transaction.—For and Phrases
the fictitious-payee rule to be available as a defense, PNB must show that the Syllabi:
makers did not intend for the named payees to be part of the transaction 1. Criminal Procedure; Preliminary Investigation; Probable Cause; The
involving the checks. At most, the bank’s thesis shows that the payees did not determination of the existence or absence of probable cause lies within the
have knowledge of the existence of the checks. This lack of knowledge on the discretion of the prosecuting officers after conducting a preliminary
part of the payees, however, was not tantamount to a lack of intention on the investigation upon complaint of an offended party.-
part of respondents-spouses that the payees would not receive the checks’ —“Probable cause is defined as such facts and circumstances that will engender
proceeds. Considering that respondents-spouses were transacting with PEMSLA a well-founded belief that a crime has been committed and that the respondent
and not the individual payees, it is understandable that they relied on the is probably guilty thereof and should be held for trial.” On the fine points of the
information given by the officers of PEMSLA that the payees would be receiving determination of probable cause, Reyes v. Pearlbank Securities, Inc. (560 SCRA
the checks. Verily, the subject checks are presumed order instruments. This is 518 [2008]) comprehensively elaborated that: The determination of [the
because, as found by both lower courts, PNB failed to present sufficient existence or absence of probable cause] lies within the discretion of the
evidence to defeat the claim of respondents-spouses that the named payees prosecuting officers after conducting a preliminary investigation upon complaint
were the intended recipients of the checks’ proceeds. The bank failed to satisfy of an offended party. Thus, the decision whether to dismiss a complaint or not is
a requisite condition of a fictitious-payee situation—that the maker of the check dependent upon the sound discretion of the prosecuting fiscal. He may dismiss
intended for the payee to have no interest in the transaction. Because of a the complaint forthwith, if he finds the charge insufficient in form or substance
failure to show that the payees were “fictitious” in its broader sense, the or without any ground. Or he may proceed with the investigation if the
fictitious-payee rule does not apply. Thus, the checks are to be deemed payable complaint in his view is sufficient and in proper form. To emphasize, the
to order. Consequently, the drawee bank bears the loss. determination of probable cause for the filing of information in court is an
executive function, one that properly pertains at the first instance to the public
prosecutor and, ultimately, to the Secretary of Justice, who may direct the filing Law where the blanks may be filled up by the holder, the signing in blank being
of the corresponding information or move for the dismissal of the case. with the assumed authority to do so.-
Ultimately, whether or not a complaint will be dismissed is dependent on the That the Deed of Assignment is dated January 16, 1974 while the questioned
sound discretion of the Secretary of Justice. And unless made with grave abuse signature was found to be circa 1954-1957, and not that of 1974, is of no
of discretion, findings of the Secretary of Justice are not subject to review. For moment. It does not necessarily mean, that the deed is a forgery. Pertinent
this reason, the Court considers it sound judicial policy to refrain from interfering records reveal that the subject Deed of Assignment is embodied in a blank form
in the conduct of preliminary investigations and to leave the Department of for the assignment of shares with authority to transfer such shares in the books
Justice ample latitude of discretion in the determination of what constitutes of the corporation. It was clearly intended to be signed in blank to facilitate the
sufficient evidence to establish probable cause for the prosecution of supposed assignment of shares from one person to another at any future time. This is
offenders. Consistent with this policy, courts do not reverse the Secretary of similar to Section 14 of the Negotiable Instruments Law where the blanks may
Justice’s findings and conclusions on the matter of probable cause except in be filled up by the holder, the signing in blank being with the assumed authority
clear cases of grave abuse of discretion. to do so. Indeed, as the shares were registered in the name of Federico O.
2. Same; Same; Negotiable Instruments Law; Checks; Words and Borromeo just to give him personality and standing in the business community,
Phrases; Delivery as the term is used in Section 12 of the Negotiable Instruments private respondent had to have a counter evidence of ownership of the shares
Law means that the party delivering did so for the purpose of giving effect involved. Thus, the execution of the deed of assignment in blank, to be filled up
thereto.- whenever needed. The same explains the discrepancy between the date of the
—Considering that the second element is that the thing taken belongs to deed of assignment and the date when the signature was affixed thereto.
another, it is relevant to determine whether ownership of the subject check was 3. Evidence; Handwritings; Expert Witnesses; Courts may place whatever
transferred to petitioner. On this point the Negotiable Instruments Law provides: weight is due on the testimony of an expert witness.-
Sec. 12. Antedated and postdated.—The instrument is not invalid for the reason Petitioners, however, question the “Report” of the document examiner on the
only that it is antedated or postdated, provided this is not done for an illegal or ground that they were not given an opportunity to cross-examine the Philippine
fraudulent purpose. The person to whom an instrument so dated is delivered Constabulary document examiner; arguing that they never waived their right to
acquires the title thereto as of the date of delivery. (Underscoring supplied.) question the competency of the examiner concerned. While the Court finds merit
Note however that delivery as the term is used in the aforementioned provision in the contention of petitioners, that they did not actually waive their right to
means that the party delivering did so for the purpose of giving effect thereto. cross-examine on any aspect of subject Report of the Philippine Constabulary
Otherwise, it cannot be said that there has been delivery of the negotiable Crime Laboratory, the Court discerns no proper basis for deviating from the
instrument. Once there is delivery, the person to whom the instrument is findings of the Court of Appeals on the matter. It is worthy to stress that courts
delivered gets the title to the instrument completely and irrevocably. If the may place whatever weight is due on the testimony of an expert witness.
subject check was given by Puzon to SMC in payment of the obligation, the Conformably, in giving credence and probative value to the said “Report” of the
purpose of giving effect to the instrument is evident thus title to or ownership of Philippine Constabulary Crime Laboratory, corroborating the findings of the trial
the check was transferred upon delivery. However, if the check was not given as Court, the Court of Appeals merely exercised its discretion. There being no grave
payment, there being no intent to give effect to the instrument, then ownership abuse in the exercise of such judicial discretion, the findings by the Court of
of the check was not transferred to SMC. Appeals should not be disturbed on appeal.
3. Criminal Law; Theft; Elements.-
—“[T]he essential elements of the crime of theft are the following: (1) that there Division: THIRD DIVISION
be a taking of personal property; (2) that said property belongs to another; (3)
that the taking be done with intent to gain; (4) that the taking be done without Docket Number: G.R. No. 75908
the consent of the owner; and (5) that the taking be accomplished without the
use of violence or intimidation against persons or force upon things.” Counsel: Angara, Abello, Concepcion, Regala & Cruz, Villamor, Laxa & Associates

Division: FIRST DIVISION Ponente: PURISIMA

Docket Number: G.R. No. 167567 Dispositive Portion:


WHEREFORE, the Petition is DISMISSED for lack of merit and the assailed
Counsel: Castell & Bermejo Resolution, dated March 13, 1986, AFFIRMED. No pronouncement as to costs.

Ponente: DEL CASTILLO


Case Title : QUIRINO GONZALES LOGGING CONCESSIONAIRE, QUIRINO
Dispositive Portion: GONZALES and EUFEMIA GONZALES, petitioners, vs. THE COURT OF APPEALS
WHEREFORE, the petition is DENIED. The December 21, 2004 Decision and (CA) and REPUBLIC PLANTERS BANK, respondents.Case Nature : PETITION for
March 28, 2005 Resolution of the Court of Appeals in CA-G.R. SP. No. 83905 are review on certiorari of a decision of the Court of Appeals.
AFFIRMED. Syllabi Class : Remedial Law|Actions|Prescription
Syllabi:
1. Remedial Law; Actions; Prescription; Prescription of actions is interrupted
Case Title : FEDERICO O. BORROMEO, LOURDES O. BORROMEO and FEDERICO when they are filed before the court, when there is a written extrajudicial
O. BORROMEO, INC, petitioners, vs. AMANCIO SUN and the COURT OF APPEALS, demand by the creditors, and when, there is any written acknowledgment of the
respondents.Case Nature : PETITION for review on certiorari of a resolution of debt by the debtor.-
the then Intermediate Appellate Court. The Civil Code provides that an action upon a written contract, an obligation
Syllabi Class : created by law, and a judgment must be brought within ten years from the time
Courts|Evidence|Evidence|Handwritings|Assignments|Negotiable Instruments the right of action accrues. x x x Prescription of actions is interrupted when they
Law|Expert Witnesses are filed before the court, when there is a written extrajudicial demand by the
Syllabi: creditors, and when, there is any written acknowledgment of the debt by the
1. Courts; Evidence; Appeals.- debtor.
Well-settled is the rule that “factual findings of the Court of Appeals are 2. Remedial Law; Actions; Prescription; A mortgage action prescribes after ten
conclusive on the parties and not reviewable by the Supreme Court—and they years from the time the right of action accrued.-
carry even more weight when the Court of Appeals affirms the factual findings With respect to the first to the fifth causes of action, as gleaned from the
of the trial court.” complaint, the Bank seeks the recovery of the deficient amount of the obligation
2. Evidence; Handwritings; Assignments; Negotiable Instruments Law; The fact after the foreclosure of the mortgage. Such suit is in the nature of a mortgage
that a Deed of Assignment is dated January 16, 1974 while the questioned action because its purpose is precisely to enforce the mortgage contract. A
signature was found to be circa 1954-1957, and not that of 1974, does not mortgage action prescribes after ten years from the time the right of action
necessarily mean that the deed is a forgery, as where it was clearly intended to accrued.
be signed in blank to facilitate the assignment of shares from one person to
another at any future time, similar to Section 14 of the Negotiable Instruments Division: THIRD DIVISION
1. The amount of Four Hundred Eighty Seven Thousand One Hundred
Docket Number: G.R. No. 126568 Thirteen and 87/100 (P487,113.87) pesos with 12% interest from filing of the
case until fully paid.
Counsel: Mariano R. Riva, The Chief Legal Counsel 2. 25% of the principal obligation as and by way of attorney's fees.
3. Cost of suit.
Ponente: CARPIO-MORALES SO ORDERED.[7]
Aggrieved, the spouses brought their case to the Court of Appeals where
Dispositive Portion: the Regional Trial Court's judgment was affirmed, to wit:
WHEREFORE, the CA Decision is hereby AFFIRMED with WHEREFORE, with the sole modification that the award for attorney's fee[s] is
MODIFICATION.Republic Bank’s Complaint with respect to its first to sixth hereby eliminated, the Judgment appealed from is in all other
causes of action is hereby DISMISSED. Its complaint with respect to its seventh respectsAFFIRMED, with the costs of this instance to be taxed against the
to ninth causes of action is REMANDED to the court of origin, the Manila defendants-appellants.
Regional Trial Court, Branch 36, for it to determine the amounts due the Bank SO ORDERED.[8]
thereunder. Before us now are the following issues: (1) Are the spouses liable for
issuing Security Bank and Trust Company Check No. 027836? (2) Did the Court
of Appeals err in upholding the propriety of the civil case that was instituted
[G.R. No. 142047. July 10, 2006] separately from the BP 22 case?
SPS. SERGIO AND MILAGROS OJEDA versus ANDRELINA ORBETA To justify their prayer for a reversal of the Court of Appeals' decision, the
Third Division spouses insist that there are special and important reasons present in the case
Sirs/Mesdames: which constitute a question of law and there was a misapprehension of facts
Quoted hereunder, for your information, is a resolution of this Court dated JULY committed by the Court of Appeals which must be rectified.
10, 2006. Petitioners maintain that any obligation arising from Security Bank and
G.R. No. 142047 (Sps. Sergio and Milagros Ojeda versus Andrelina Trust Company Check No. 027836 is invalid and illegal since the same was
Orbeta) issued in blank except for the signature of Milagros Ojeda. They further claim
Petitioner spouses Sergio Ojeda and Milagros Ojeda seek a reversal of that they already paid P55,000 to satisfy their obligation to Orbeta of P30,000
the February 24, 2000 Decision[1] rendered by the Court of Appeals in CA-G.R. only. The couple also aver that the motion of Orbeta to file a separate civil
CV No. 59985 entitled Andrelina Orbeta v. Sps. Sergio Ojeda and Milagros action was merely noted by the Regional Trial Court in the BP 22 case and there
Ojeda. The questioned decision affirmed the February 23, 1995 Decision[2] of was no order granting the institution of a separate civil action.
the Regional Trial Court, Branch 106 of Quezon City in Civil Case No. Q-91-7794. Respondent Orbeta, on the other hand, counters that the errors raised
The facts of this case are not complicated. by the spouses deal with questions of fact which have already been passed
From 1986 to 1989, the spouses Ojeda obtained various loans they would upon and decided by the Regional Trial Court and the Court of Appeals and
use as additional capital from Andrelina Orbeta, a general merchandiser and cannot now be raised in this petition for review. Orbeta also contends that, the
former market stall holder. Over time, Orbeta extended a total of 18 loans to couple cannot assert for the first time that the motion to file a separate civil
the spouses.[3] Although the couple failed to pay their obligations on time, action was merely noted and no order was issued by the Regional Trial Court
Orbeta continued to accommodate them, and lent them more money on the granting the same since a full blown trial had been conducted without the said
assurance that they would soon pay all their debts. Every time Orbeta would issue having been raised by the spouses, hence, they are barred from doing so,
verbally demand payment, she was told that payment was forthcoming and since they are considered to have waived any objection they may have had on
there was nothing to worry about since the spouses' business was doing well the subject. Finally, Orbeta points out that the judgment in the BP 22 case did
and the couple had a daughter based in Japan who always sent them not contain an award for civil liability which is tantamount to the Regional Trial
money. To their sincerity, they aver, they even delivered a copy of the Court's approval of the motion.[9]
registration papers of one of their vehicles to Orbeta. To resolve the first issue, we must here emphasize that the jurisdiction of
Notwithstanding all their promises, however, the spouses' obligations this Court in a petition such as this is limited to reviewing errors of law that
remained unpaid. Orbeta made numerous demands but all attempts to collect might have been committed by the lower court. The allegation of the spouses
from the couple proved futile. Frustrated by their failure to pay, Orbeta that Security Bank and Trust Company Check No. 027836 was delivered to
through her lawyer sent a demand letter to the spouses on March Orbeta in blank except for the signature of Milagros Ojeda and the amount of
1989.[4] Eventually, on July 1989, after an accounting of all outstanding loans P10,000 annotated at the back of the check, and their contention that they
due, Milagros Ojeda issued Security Bank and Trust Company Check No. 027836 cannot be held liable for the face value of the check since Milagros Ojeda was
dated September 1, 1989 for P487,133.87, representing full settlement of all not the one who filled up the date, name of the payee and the amount
obligations due in favor of Orbeta. When presented for payment, however, the appearing on the check, are questions of fact that require us to re-examine the
check was dishonored for having been drawn against an account already closed. evidence presented by the contending parties during trial. This cannot be done
Consequently, Orbeta filed Criminal Case No. Q-90-10226 for violation in a petition for review. Under Rule 45, only questions of law may be raised in a
of Batas Pambansa Bilang 22 against Milagros Ojeda with the Regional Trial petition for review, except in very few specified instances, e.g. where there is
Court of Quezon City.[5] After a plea of guilty, judgment was rendered against variance in the factual findings of the trial and appellate courts. Since both the
the accused in a decision[6] dated October 11, 1990. The dispositive portion of Regional Trial Court and the Court of Appeals agree on the cited facts, we are
the decision read: bound by their factual findings.
WHEREFORE, considering the plea of Guilty entered by accused Milagros Ojeda In any event, the spouses do not deny that the check was delivered to
this morning, the Court hereby renders judgment: Orbeta and that the signature appearing on the check belongs to Milagros
1. Finding said accused GUILTY beyond reasonable doubt of the offense Ojeda. Even if the check was delivered to Orbeta in blank, we must stress that
charged; the presumption is that the latter had prima facieauthority to complete the
2. Sentencing her to suffer the penalty of ONE (1) YEAR imprisonment; and check by filling up the same. Here, the provision of Section 14 of the Negotiable
3. To pay costs. Instruments Law is pertinent:
The decision was promulgated in open Court this morning in the presence of SEC. 14. Blanks; when may be filled. - Where the instrument is wanting in any
the accused herself, Assistant City Prosecutor Perpetuo LB Alonzo and Atty. material particular, the person in possession thereof has a prima
Renerio S. Payumo. facieauthority to complete it by filling up the blanks therein. And a signature
SO ORDERED. on a blank paper delivered by the person making the signature in order that the
Consistent with the reservation made by Ojeda in the BP 22 case, Civil paper may be converted into a negotiable instrument operates as a prima
Case No. Q-91-7794 was subsequently filed against the spouses to collect on the facie authority to fill it up as such for any amount. In order, however, that any
civil aspect of the BP 22 case. In the civil case, the Regional Trial Court ruled as such instrument, when completed may be enforced against any person who
follows: became a party thereto prior to its completion, it must be filled up strictly in
WHEREFORE, finding no cogent reason to deny the relief being prayed for, the accordance with the authority given and within a reasonable time. But if any
cause of action of plaintiff having been fully established and proven by such instrument, after completion, is negotiated to a holder in due course, it is
preponderant evidence, judgment is hereby rendered ordering defendants to valid and effectual for all purposes in his hands, and he may enforce it as if it
pay plaintiff:
had been filled up strictly in accordance with the authority given and within a circumstances affording the offended party a reasonable opportunity to make
reasonable time. (Emphasis supplied.) such reservation.
The law merely requires that the instrument be in the possession of a In no case may the offended party recover damages twice for the same
person other than the drawer or maker, and from such possession, together act or omission of the accused.
with the fact that the instrument is wanting in a material particular, the law When the offended party seeks to enforce civil liability against the
presumes agency to fill up the blanks.[10] Because of the presumption of accused by way of moral, nominal, temperate or exemplary damages, the filing
authority, the burden of proving that there was no authority or that the fees for such civil action as provided in these Rules shall constitute a first lien on
authority granted was exceeded is placed on the person questioning such the judgment except in an award for actual damages.
authority.[11] There is nothing on record to show that the prima In cases wherein the amount of damages, other than actual, is alleged in
facie presumption created by the afore-quoted section was successfully refuted the complaint or information, the corresponding filing fees shall be paid by the
by the spouses. Therefore, the couple's stance that they cannot be held liable offended party upon the filing thereof in court for trial.
for the check because they were not the ones who wrote the date, the name of [14] Yakult Philippines v. Court of Appeals, G.R. No. 91856, October 5, 1990, 190

the payee and the amount, is untenable. SCRA 357, 361.


[15]
On the second issue, it appears that an urgent motion to file a separate Under the present Section 1(b), Rule 111 of the Revised Rules of Criminal
civil action was filed by Orbeta on October 11, 1990, which motion was Procedure:
correspondingly noted by the Regional Trial Court in its decision.[12] Since the (b) The criminal action for violation of Batas Pambansa Blg. 22 shall be
civil liability involved in this case is one that arises from a crime, the rule is that deemed to include the corresponding civil action. No reservation to file such
the same is impliedly instituted with the criminal action unless the offended civil action separately shall be allowed.
party expressly waives the civil action; reserves his right to institute it
separately; or institutes the civil action prior to the filing of the criminal Case Title : SAMSON CHING, petitioner, vs. CLARITA NICDAO and HON. COURT
case.[13] The purpose of the rule requiring reservation is to prevent the OF APPEALS, respondents.Case Nature : PETITION for review on certiorari of a
offended party from recovering damages twice for the same act or omission.[14] decision of the Court of Appeals.
Orbeta's intention to reserve her right to recover the civil liability arising Syllabi Class : Actions|Burden of Proof|Interests|Criminal Procedure|Civil
from the BP 22 case is clear from the time she filed the urgent motion.[15] The Liability|Appeals|Estoppel
fact that the Regional Trial Court did not provide for an award of damages in its Syllabi:
decision is also a clear recognition of Orbeta's reservation. 1. Actions; Criminal Procedure; Civil Liability; The civil liability is not
Contrary to the spouses' argument, an order by the Regional Trial Court extinguished by acquittal: (a) where the acquittal is based on reasonable
granting the urgent motion to file a separate civil action is not necessary since doubt; (b) where the court expressly declares that the liability of the accused is
the rules only require that the offended party make the reservation before the not criminal but only civil in nature; and (c) where the civil liability is not
prosecution starts to present its evidence and under circumstances affording derived from or based on the criminal act of which the accused is acquitted.-
the offended party a reasonable opportunity to make such reservation. —In Sapiera v. Court of Appeals, 314 SCRA 370 (1999), the Court enunciated
Lastly, we agree with respondent that it is now too late for the spouses that the civil liability is not extinguished by acquittal: (a) where the acquittal is
to question the institution of the civil case separately from the BP 22 case. A based on reasonable doubt; (b) where the court expressly declares that the
full blown trial was conducted in the civil case with the participation of the liability of the accused is not criminal but only civil in nature; and (c) where the
spouses, but they never raised any objection thereto, and they cannot be civil liability is not derived from or based on the criminal act of which the
allowed here and now to raise this issue for the first time. accused is acquitted. Thus, under Article 29 of the Civil Code—ART. 29. When the
WHEREFORE, the instant petition is DENIED. The February 24, 2000 accused in a criminal prosecution is acquitted on the ground that his guilt has
Decision of the Court of Appeals sustaining the February 23, 1995 Decision of not been proved beyond reasonable doubt, a civil action for damages for the
the Regional Trial Court is AFFIRMED. same act or omission may be instituted. Such action requires only a
Costs against petitioners. preponderance of evidence. Upon motion of the defendant, the court may
SO ORDERED. require the plaintiff to file a bond to answer for damages in case the complaint
should be found to be malicious. If in a criminal case the judgment of acquittal is
[1] Rollo, pp. 12-24. Penned by Associate Justice Renato C. Dacudao, with based upon reasonable doubt, the court shall so declare. In the absence of any
Associate Justices Quirino D. Abad Santos, Jr., and B.A. Adefuin-De la Cruz declaration to that effect, it may be inferred from the text of the decision
concurring. whether or not the acquittal is due to that ground.
[2]
Id. at 25-31. 2. Same; Estoppel; Estoppel cannot give validity to an act that is prohibited by
[3] Id. at 19. law or one that is against public policy-
[4] Id. at 18. —clearly, the collection of interests without any stipulation therefor in writing is
[5] Id. at 16. prohibited by law.—Neither could respondent Nicdao be considered to be
[6] Id. at 51-52. estopped from denying the validity of these interests. Estoppel cannot give
[7]
Id. at 31. validity to an act that is prohibited by law or one that is against public policy.
[8] Id. at 23. Clearly, the collection of interests without any stipulation therefor in writing is
[9] Id. at 45-46. prohibited by law. Consequently, the daily payments made by respondent
[10]
A-F. Agbayani, COMMENTARIES AND JURISPRUDENCE ON THE Nicdao amounting to P5,780,000.00 were properly considered by the CA as
COMMERCIAL LAWS OF THE PHILIPPINES, Vol. I, 168 (1987 ed.). applying to the principal amount of her loan obligations.
[11]
J.C. Campos, Jr. & M.C. Lopez-Campos, NOTES AND SELECTED CASES ON 3. Interests; Under Article 1956 of the Civil Code, “no interest shall be due unless
NEGOTIABLE INSTRUMENTS Law, 351 (3rd ed., 1971) (citations omitted). it has been expressly stipulated in writing.”-
[12]
Rollo, p. 52. —The Court agrees with the CA that the daily payments made by respondent
[13] The Rules of Criminal Procedure prevailing then provides: Nicdao amounting to P5,780,000.00 cannot be considered as interest payments
SECTION 1. Institution of criminal and civil actions. - When a criminal only. Even respondent Nicdao testified that the daily payments that she made to
action is instituted, the civil action for the recovery of civil liability is impliedly Nuguid were for the interests due. However, as correctly ruled by the CA, no
instituted with the criminal action, unless the offended party waives the civil interests could be properly collected in the loan transactions between petitioner
action, reserves his right to institute it separately, or institutes the civil action Ching and respondent Nicdao because there was no stipulation therefor in
prior to the criminal action. writing. To reiterate, under Article 1956 of the Civil Code, “no interest shall be
Such civil action includes recovery of indemnity under the Revised Penal due unless it has been expressly stipulated in writing.”
Code, and damages under Articles 32, 33, 34 and 2176 of the Civil Code of 4. Burden of Proof; It is a basic rule in evidence that the burden of proof lies on
the Philippinesarising from the same act or omission of the accused. the party who makes the allegations-
A waiver of any of the civil actions extinguishes the others. The institution —et incumbit probatio, qui dicit, non qui negat; cum per rerum naturam factum
of, or the reservation of the right to file, any of said civil actions separately negantis probatio nulla sit (The proof lies upon him who affirms, not upon him
waives the others. who denies; since, by the nature of things, he who denies a fact cannot produce
The reservation of the right to institute the separate civil actions shall be any proof).—It is a basic rule in evidence that the burden of proof lies on the
made before the prosecution starts to present its evidence and under party who makes the allegations—Et incumbit probatio, qui dicit, non qui negat;
cum per rerum naturam factum negantis probatio nulla sit (The proof lies upon
him who affirms, not upon him who denies; since, by the nature of things, he —Since 1998, this Court has held that it would best serve the ends of criminal
who denies a fact cannot produce any proof). In civil cases, the party having the justice if, in fixing the penalty to be imposed for violation of B.P. 22, the same
burden of proof must establish his case by a preponderance of evidence. philosophy underlying the Indeterminate Sentence Law be observed, i.e., that of
Preponderance of evidence is the weight, credit, and value of the aggregate redeeming valuable human material and preventing unnecessary deprivation of
evidence on either side and is usually considered to be synonymous with the personal liberty and economic usefulness with due regard to the protection of
term “greater weight of evidence” or “greater weight of the credible evidence.” the social order. This policy was embodied in Supreme Court Administrative
Preponderance of evidence is a phrase which, in the last analysis, means Circular No. 12-2000, authorizing the non-imposition of the penalty of
probability of the truth. It is evidence which is more convincing to the court as imprisonment in B.P. 22 cases. We also clarified in Administrative Circular No.
worthy of belief than that which is offered in opposition thereto. Section 1, Rule 13-2001, as explained in Tan v. Mendez, 383 SCRA 202 (2002), that we are not
133 of the Revised Rules of Court offers the guidelines in determining decriminalizing B.P. 22 violations, nor have we removed imprisonment as an
preponderance of evidence: SEC. 1. Preponderance of evidence, how alternative penalty. Needless to say, the determination of whether the
determined.—In civil cases, the party having the burden of proof must establish circumstances warrant the imposition of a fine alone rests solely upon the judge.
his case by a preponderance of evidence. In determining where the Should the judge decide that imprisonment is the more appropriate penalty,
preponderance or superior weight of evidence on the issues involved lies, the Administrative Circular No. 12-2000 ought not to be deemed a hindrance.
court may consider all the facts and circumstances of the case, the witnesses’ 3. Same; Same; Checks; The lack of criminal intent on the part of the accused is
manner of testifying, their intelligence, their means and opportunity of knowing irrelevant; The law has made the mere act of issuing a worthless check a
the facts to which they are testifying, the nature of the facts to which they malum prohibitum; The gravamen of the offense under this law is the act of
testify, the probability or improbability of their testimony, their interest or want issuing a worthless check or a check that is dishonored upon its presentment for
of interest, and also their personal credibility so far as the same may payment, not the nonpayment of the obligation.-
legitimately appear upon the trial. The court may also consider the number of —It bears repeating that the lack of criminal intent on the part of the accused is
witnesses, though the preponderance is not necessarily with the greater irrelevant. The law has made the mere act of issuing a worthless check a malum
number. prohibitum, an act proscribed by legislature for being deemed pernicious and
5. Same; Same; Same; Appeals; The appeal period accorded to the accused inimical to public welfare. In fact, even in cases where there had been payment,
should also be available to the offended party who seeks redress of the civil through compensation or some other means, there could still be prosecution for
aspect of the decision- violation of B.P. 22. The gravamen of the offense under this law is the act of
—the period to appeal granted to the offended party is the same as that issuing a worthless check or a check that is dishonored upon its presentment for
granted to the accused.—Following the long recognized rule that “the appeal payment, not the nonpayment of the obligation.
period accorded to the accused should also be available to the offended party 4. Criminal Law; Bouncing Checks Law; Elements of the Crime.-
who seeks redress of the civil aspect of the decision,” the period to appeal — We have gone over the records and find no error in the decision ofthe
granted to petitioner Ching is the same as that granted to the accused. With appellate court holding that the elements of the crime have been established by
petitioner Ching’s timely filing of the instant petition for review of the civil the prosecution, i.e., (1) the making, drawing, and issuance of any check to
aspect of the CA’s decision, the Court thus has the jurisdiction and authority to apply for account or for value; (2) the knowledge of the maker, drawer, or issuer
determine the civil liability of respondent Nicdao notwithstanding her acquittal. that at the time of issue he does not have sufficient funds in or credit with the
In order for the petition to prosper, however, it must establish that the judgment drawee bank for the payment of the check in full upon its presentment; and (3)
of the CA acquitting respondent Nicdao falls under any of the three categories the subsequent dishonor of the check by the drawee bank for insufficiency of
enumerated in Salazar and Sapiera, to wit: (a) where the acquittal is based on funds or credit or dishonor for the same reason had not the drawer, without any
reasonable doubt as only preponderance of evidence is required; (b) where the valid cause, ordered the bank to stop payment.
court declared that the liability of the accused is only civil; and (c) where the civil
liability of the accused does not arise from or is not based upon the crime of Division: FIRST DIVISION
which the accused is acquitted.
Docket Number: G.R. No. 160127
Division: THIRD DIVISION
Counsel: Benjamin C. Santos & Ray Montri C. Santos Law Offices
Docket Number: G.R. No. 141181
PonenteC.J. : PUNO,
Counsel: Abaño, Pamfilo, Paras, Pineda and Agustin Law Offices, Villaraza and
Angangco Dispositive Portion:
IN VIEW WHEREOF, the petition is DENIED and the Decision of the Court of
Ponente: CALLEJO, SR. Appeals in CA-G.R. CR No. 20343 is AFFIRMED with MODIFICATION. Petitioner is
ordered to indemnify Nemesio Artaiz in the amount of P844,000.00 and the
Dispositive Portion: cost of suit, with legal interest from date of judicial demand. The sentence of
WHEREFORE, premises considered, the Petition is DENIED for lack of merit. imprisonment of one (1) year is SET ASIDE and, in lieu thereof, a FINE in the
amount of P200,000.00 is imposed upon petitioner, with subsidiary
imprisonment not to exceed six months in case of insolvency or nonpayment.
Case Title : RAFAEL P. LUNARIA, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondentCase Nature : PETITION for review on certiorari of the decision and
resolution of the Court of Appeals. Case Title : JOHN DY, petitioner, vs. PEOPLE OF THE PHILIPPINES and The
Syllabi Class : Criminal Law ; Bouncing Checks Law ; Checks ; Penalties ; HONORABLE COURT OF APPEALS, respondents.Case Nature : PETITION for
Syllabi: review on certiorari of the decision and resolution of the Court of Appeals.
1. Remedial Law; Appeals; Certiorari; The jurisdiction of the Supreme Court is Syllabi Class : Criminal Law ; Estafa (Art. 315, 2[d]) ; Penalties ;
confined to reviews of errors of law ascribed to the Court of Appeals (CA).- Syllabi:
—At the outset, the first and second grounds raised by petitioner are essentially 1. Estafa; Bouncing Checks Law; Negotiable Instruments Law; Words and
factual in nature, impugning the finding of guilt by both the CA and the RTC. Phrases; Elements of Estafa under Art. 315, par. 2(d) of the Rev. Penal
Petitioner would have this court re-evaluate and re-assess the facts, when it is Code; Section 191 of the Negotiable Instruments Law defines “issue” as the
beyond cavil that in an appeal by certiorari, the jurisdiction of this Court is first delivery of an instrument, complete in form, to a person who takes it as a
confined to reviews of errors of law ascribed to the CA. This Court is not a trier of holder; Delivery denotes physical transfer of the instrument by the maker or
facts, and the findings of fact by the CA are conclusive, more so when it concurs drawer coupled with an intention to convey title to the payee and recognize him
with the factual findings of the RTC. Absent any showing that such findings are as a holder.-
devoid of any substantiation on record, the finding of guilt is conclusive on us. —Before an accused can be held liable for estafa under Article 315, paragraph
2. Same; Same; Same; Penalties; Supreme Court Administrative Circular No. 2(d) of the Revised Penal Code, as amended by Republic Act No. 4885, the
12-2000, authorizing the non-imposition of the penalty of imprisonment in following elements must concur: (1) postdating or issuance of a check in
B.P. 22 cases; Court has not decriminalized B.P. 22 violations, nor have removed payment of an obligation contracted at the time the check was issued; (2)
imprisonment as an alternative penalty.- insufficiency of funds to cover the check; and (3) damage to the payee thereof.
These elements are present in the instant case. Section 191 of the Negotiable same reason had not the drawer, without any valid cause, ordered the bank to
Instruments Law defines “issue” as the first delivery of an instrument, complete stop payment. The case at bar satisfies all these elements.
in form, to a person who takes it as a holder. Significantly, delivery is the final 7. Same; Same; Same; Uncollected deposits are not the same as insufficient
act essential to the negotiability of an instrument. Delivery denotes physical funds-
transfer of the instrument by the maker or drawer coupled with an intention to —the prima facie presumption of deceit arises only when a check has been
convey title to the payee and recognize him as a holder. It means more than dishonored for lack or insufficiency of funds; Clearly, the estafa punished under
handing over to another; it imports such transfer of the instrument to another Article 315, paragraph 2(d) of the Revised Penal Code is committed when a
as to enable the latter to hold it for himself. check is dishonored for being drawn against insufficient funds or closed account,
2. Criminal Law; Estafa (Art. 315, 2[d]); Penalties; If the amount of the fraud and not against uncollected deposit.—The same, however, does not hold true
exceeds 22,000, the penalty of reclusión temporal is imposed in its maximum with respect to FEBTC Check No. 553602 for P106,579.60. This check was
period, adding one year for each additional P10,000 but the total penalty shall dishonored for the reason that it was drawn against uncollected deposit.
not exceed thirty (30) years, which shall be termed reclusión perpetua, merely to Petitioner had P160,659.39 in his savings deposit account ledger as of July 22,
describe the penalty actually imposed on account of the amount of the fraud 1992. We disagree with the conclusion of the RTC that since the balance
involved.- included a regional clearing check worth P55,000 deposited on July 20, 1992,
—Under Section 1 of P.D. No. 818, if the amount of the fraud exceeds P22,000, which cleared only five (5) days later, then petitioner had inadequate funds in
the penalty of reclusión temporal is imposed in its maximum period, adding one this instance. Since petitioner technically and retroactively had sufficient funds
year for each additional P10,000 but the total penalty shall not exceed thirty at the time Check No. 553602 was presented for payment then the second
(30) years, which shall be termed reclusión perpetua. Reclusión perpetua is not element (insufficiency of funds to cover the check) of the crime is absent. Also
the prescribed penalty for the offense, but merely describes the penalty actually there is no prima facie evidence of deceit in this instance because the check was
imposed on account of the amount of the fraud involved. not dishonored for lack or insufficiency of funds. Uncollected deposits are not
3. Same; Same; Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also the same as insufficient funds. The prima facie presumption of deceit arises only
speaks only of insufficiency of funds and does not treat of uncollected deposits.- when a check has been dishonored for lack or insufficiency of funds. Notably, the
—Like Article 315 of the Revised Penal Code, B.P. Blg. 22 also speaks only of law speaks of insufficiency of funds but not of uncollected deposits.
insufficiency of funds and does not treat of uncollected deposits. To repeat, we Jurisprudence teaches that criminal laws are strictly construed against the
cannot interpret the law in such a way as to expand its provision to encompass Government and liberally in favor of the accused. Hence, in the instant case, the
the situation of uncollected deposits because it would make the law more law cannot be interpreted or applied in such a way as to expand its provision to
onerous on the part of the accused. Again, criminal statutes are strictly encompass the situation of uncollected deposits because it would make the law
construed against the Government and liberally in favor of the accused. more onerous on the part of the accused. Clearly, the estafa punished under
4. Same; Same; To be liable under Section 1 of B.P. Blg. 22, the check must be Article 315, paragraph 2(d) of the Revised Penal Code is committed when a
dishonored by the drawee bank for insufficiency of funds or credit or dishonored check is dishonored for being drawn against insufficient funds or closed account,
for the same reason had not the drawer, without any valid cause, ordered the and not against uncollected deposit. Corollarily, the issuer of the check is not
bank to stop payment.- liable for estafa if the remaining balance and the uncollected deposit, which was
—In Tan v. People, 349 SCRA 777 (2001), this Court acquitted the petitioner duly collected, could satisfy the amount of the check when presented for
therein who was indicted under B.P. Blg. 22, upon a check which was dishonored payment.
for the reason DAUD, among others. We observed that: In the second place, 8. Same; Same; Same; Words and Phrases; Deceit as an element of estafa is a
even without relying on the credit line, petitioner’s bank account covered the specie of fraud-
check she issued because even though there were some deposits that were still —it is actual fraud which consists in any misrepresentation or contrivance where
uncollected the deposits became “good” and the bank certified that the check a person deludes another, to his hurt.—We are not swayed by petitioner’s
was “funded.” To be liable under Section 1 of B.P. Blg. 22, the check must be arguments that the single incident of dishonor and his absence when the checks
dishonored by the drawee bank for insufficiency of funds or credit or dishonored were delivered belie fraud. Indeed damage and deceit are essential elements of
for the same reason had not the drawer, without any valid cause, ordered the the offense and must be established with satisfactory proof to warrant
bank to stop payment. conviction. Deceit as an element of estafa is a specie of fraud. It is actual fraud
5. Same; Same; Estafa; What the law punishes is simply the issuance of a which consists in any misrepresentation or contrivance where a person deludes
bouncing check and not the purpose for which it was issued nor the terms and another, to his hurt. There is deceit when one is misled—by guile, trickery or by
conditions relating thereto- other means—to believe as true what is really false.
—the only valid query, then, is whether the law has been breached, i.e., by the 9. Same; Same; Same; Even if the checks were given to the payee in blank, this
mere act of issuing a bad check, without so much regard as to the criminal alone did not make their issuance invalid.-
intent of the issuer.—During the joint pre-trial conference of this case, Dy —In this case, even if the checks were given to W.L. Foods in blank, this alone
admitted that he issued the checks, and that the signatures appearing on them did not make its issuance invalid. When the checks were delivered to Lim,
were his. The facts reveal that the checks were issued in blank because of the through his employee, he became a holder with prima facie authority to fill the
uncertainty of the volume of products to be retrieved, the discount that can be blanks. This was, in fact, accomplished by Lim’s accountant. The pertinent
availed of, and the deduction for bad orders. Nevertheless, we must stress that provisions of Section 14 of the Negotiable Instruments Law are instructive: SEC.
what the law punishes is simply the issuance of a bouncing check and not the 14. Blanks; when may be filled.—Where the instrument is wanting in any
purpose for which it was issued nor the terms and conditions relating thereto. If material particular, the person in possession thereof has a prima facie authority
inquiry into the reason for which the checks are issued, or the terms and to complete it by filling up the blanks therein. And a signature on a blank paper
conditions of their issuance is required, the public’s faith in the stability and delivered by the person making the signature in order that the paper may be
commercial value of checks as currency substitutes will certainly erode. converted into a negotiable instrument operates as a prima facie authority to fill
Moreover, the gravamen of the offense under B.P. Blg. 22 is the act of making or it up as such for any amount. …. (Emphasis supplied.) Hence, the law merely
issuing a worthless check or a check that is dishonored upon presentment for requires that the instrument be in the possession of a person other than the
payment. The act effectively declares the offense to be one of malum drawer or maker. From such possession, together with the fact that the
prohibitum. The only valid query, then, is whether the law has been breached, instrument is wanting in a material particular, the law presumes agency to fill
i.e., by the mere act of issuing a bad check, without so much regard as to the up the blanks. Because of this, the burden of proving want of authority or that
criminal intent of the issuer. Indeed, non-fulfillment of the obligation is the authority granted was exceeded, is placed on the person questioning such
immaterial. Thus, petitioner’s defense of failure of consideration must likewise authority. Petitioner failed to fulfill this requirement.
fall. This is especially so since as stated above, Dy has acknowledged receipt of
the goods. Division: SECOND DIVISION
6. Batas Pambansa Blg. 22; Bouncing Checks Law; Elements.-
—The elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the Docket Number: G.R. No. 158312
making, drawing and issuance of any check to apply to account or for value; (2)
the knowledge of the maker, drawer or issuer that at the time of issue he does Counsel: M.A. Obias & Associates
not have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment; and (3) subsequent dishonor of the Ponente Actg. C.J. : QUISUMBING,
check by the drawee bank for insufficiency of funds or credit or dishonor for the
Dispositive Portion: busy the bank is on a particular day, we are even more convinced that
Notes.—B.P. Blg. 22 does not appear to concern itself with what might actually petitioner’s safeguards to protect clients from check fraud are arbitrary and
be envisioned by the parties, its primordial intention being to instead ensure subjective. Every client should be treated equally by a banking institution
the stability and commercial value of checks as being vital substitutes for regardless of the amount of his deposits and each client has the right to expect
currency. (Meriz vs. People, 368 SCRA 524 [2001]) Conviction for violation of that every centavo he entrusts to a bank would be handled with the same
B.P. Blg. 22 “imports deceit” and “certainly relates to and affects the good degree of care as the accounts of other clients. Perforce, we find that petitioner
moral character of a person”—a drawer who issues an unfunded check plainly failed to adhere to the high standard of diligence expected of it as a
deliberately reneges on his private duties he owes his fellow men or society in a banking institution.
manner contrary to accepted and customary rule of right and duty, justice, 6. Same; It is well-settled that banks are engaged in a business impressed with
honesty or good morals. (Villaber vs. Commission on Elections, 369 SCRA 126 public interest, and it is their duty to protect in return their many clients and
[2001]) depositors who transact business with them.-
—It is well-settled that banks are engaged in a business impressed with public
interest, and it is their duty to protect in return their many clients and depositors
Case Title : BANK OF AMERICA NT & SA, petitioner, vs. PHILIPPINE RACING who transact business with them. They have the obligation to treat their client’s
CLUB, respondent.Case Nature : PETITION for review on certiorari of the account meticulously and with the highest degree of care, considering the
decision and resolution of the Court of Appeals. fiduciary nature of their relationship. The diligence required of banks, therefore,
Syllabi Class : Attorney’s Fees is more than that of a good father of a family.
Syllabi: 7. Same; Same; A material alteration is defined in Section 125 of the Negotiable
1. Banks and Banking; Negotiable Instruments Law; If the signatures are Instruments Law (NIL) to be one which changes the date, the sum payable, the
genuine, the bank has the unavoidable legal and contractual duty to pay.- time or place of payment, the number or relations of the parties, the currency in
—Petitioner insists that it merely fulfilled its obligation under law and contract which payment is to be made or one which adds a place of payment where no
when it encashed the aforesaid checks. Invoking Sections 126 and 185 of the place of payment is specified, or any change or addition which alters the effect
Negotiable Instruments Law (NIL), petitioner claims that its duty as a drawee of the instrument in any respect.-
bank to a drawer-client maintaining a checking account with it is to pay orders —Petitioner maintains that there exists a duty on the drawee bank to inquire
for checks bearing the drawer-client’s genuine signatures. The genuine from the drawer before encashing a check only when the check bears a material
signatures of the client’s duly authorized signatories affixed on the checks signify alteration. A material alteration is defined in Section 125 of the NIL to be one
the order for payment. Thus, pursuant to the said obligation, the drawee bank which changes the date, the sum payable, the time or place of payment, the
has the duty to determine whether the signatures appearing on the check are number or relations of the parties, the currency in which payment is to be made
the drawer-client’s or its duly authorized signatories. If the signatures are or one which adds a place of payment where no place of payment is specified, or
genuine, the bank has the unavoidable legal and contractual duty to pay. If the any other change or addition which alters the effect of the instrument in any
signatures are forged and falsified, the drawee bank has the corollary, but respect. With respect to the checks at issue, petitioner points out that they do
equally unavoidable legal and contractual, duty not to pay. not contain any material alteration. This is a fact which was affirmed by the trial
2. Attorney’s Fees; An adverse decision does not ipso facto justify an award of court itself.
attorney’s fees to the winning party.-
—We find that the awards of attorney’s fees and litigation expenses in favor of Division: FIRST DIVISION
respondent are not justified under the circumstances and, thus, must be deleted.
The power of the court to award attorney’s fees and litigation expenses under Docket Number: G.R. No. 150228
Article 2208 of the NCC demands factual, legal, and equitable justification. An
adverse decision does not ipso facto justify an award of attorney’s fees to the Counsel: Sycip, Salazar, Hernandez & Gatmaitan
winning party. Even when a claimant is compelled to litigate with third persons
or to incur expenses to protect his rights, still attorney’s fees may not be Ponente: LEONARDO-DE CASTRO
awarded where no sufficient showing of bad faith could be reflected in a party’s
persistence in a case other than an erroneous conviction of the righteousness of Dispositive Portion:
his cause. WHEREFORE, the Decision of the Court of Appeals dated July 16, 2001 and its
3. Damages; Following established jurisprudential precedents, we believe the Resolution dated September 28, 2001 are AFFIRMED with the following
allocation of sixty percent (60%) of the actual damages, involved in this case MODIFICATIONS: (a) petitioner Bank of America NT & SA shall pay to
(represented by the amount of the checks with legal interest) to petitioner is respondent Philippine Racing Club sixty percent (60%) of the sum of Two
proper under the premises.- Hundred Twenty Thousand Pesos (P220,000.00) with legal interest as awarded
—Following established jurisprudential precedents, we believe the allocation of by the trial court and (b) the awards of attorney’s fees and litigation expenses in
sixty percent (60%) of the actual damages involved in this case (represented by favor of respondent are deleted. Proportionate costs.
the amount of the checks with legal interest) to petitioner is proper under the
premises. Respondent should, in light of its contributory negligence, bear forty
percent (40%) of its own loss. Case Title : PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. MARTIN L.
4. Same; Doctrine of Last Clear Chance; In instances where both parties are at ROMERO and ERNESTO C. RODRIGUEZ, accused-appellants.Case Nature :
fault, this Court has consistently applied the doctrine of last clear chance in APPEAL from a decision of the Regional Trial Court of Butuan City, Br. 2.
order to assign liability.- Syllabi Class : Criminal Law|Estafa
—Even if we assume that both parties were guilty of negligent acts that led to Syllabi:
the loss, petitioner will still emerge as the party foremost liable in this case. In 1. Criminal Law; Estafa; Elements of Estafa.-
instances where both parties are at fault, this Court has consistently applied the Under paragraph 2 (d) of Article 315, as amended by R.A. 4885, the elements of
doctrine of last clear chance in order to assign liability. In Westmont Bank v. estafa are: (1) a check was postdated or issued in payment of an obligation
Ong, 375 SCRA 212 (2002), we ruled: …[I]t is petitioner [bank] which had the last contracted at the time it was issued; (2) lack or insufficiency of funds to cover
clear chance to stop the fraudulent encashment of the subject checks had it the check; (3) damage to the payee thereof. The prosecution has satisfactorily
exercised due diligence and followed the proper and regular banking procedures established all these elements.
in clearing checks. As we had earlier ruled, the one who had a last clear 2. Criminal Law; Estafa; What fraud deem to comprise.-
opportunity to avoid the impending harm but failed to do so is chargeable with Fraud, in its general sense, is deemed to comprise anything calculated to
the consequences thereof. deceive, including all acts, omissions, and concealment involving a breach of
5. Same; Every client should be treated equally by a banking institution legal or equitable duty, trust, or confidences justly reposed, resulting in damage
regardless of the amount of his deposits and each client has the right to expect to another, or by which an undue and unconscientious advantage is taken of
that every centavo he entrusts to a bank would be handled with the same another. It is a generic term embracing all multifarious means which human
degree of care as the accounts of other clients.- ingenuity can device, and which are resorted to by one individual to secure an
—Taking this with the testimony of petitioner’s operations manager that in case advantage over another by false suggestions or by suppression of truth and
of an irregularity on the face of the check (such as when blanks were not includes all surprise, trick, cunning, dissembling and any unfair way by which
properly filled out) the bank may or may not call the client depending on how another is cheated.
3. Criminal Law; Estafa; There is deceit when one is misled, either by guide or declaration from the court that the fact from which the civil action might arise
trickery or by other means, to believe to be true what is really false.- did not exist. An accused acquitted of estafa may nevertheless be held civilly
Deceit is a specie of fraud. It is actual fraud, and consists in any false liable where the facts established by the evidence so warrant. The accused
representation or contrivance whereby one person overreaches and misleads should be adjudged liable for the unpaid value of the checks signed by her in
another, to his hurt. Deceit excludes the idea of mistake. There is deceit when favor of the complainant.
one is misled, either by guide or trickery or by other means, to believe to be true 4. Criminal Law; Damages; Rationale behind the award of civil indemnity
what is really false. In this case, there was deception when accused fraudulently despite a judgment of acquittal when evidence is sufficient to sustain the
represented to complainant that his investment with the corporation would award.-
have an 800% return in 15 or 21 days. The rationale behind the award of civil indemnity despite a judgment of
4. Criminal Law; Estafa; Failure to cover the amount of the check within three acquittal when evidence is sufficient to sustain the award was explained by the
days after notice creates a rebuttable presumption of fraud.- Code Commission in connection with Art. 29 of the Civil Code, to wit: The old rule
Even assuming for the sake of argument that the check was dishonored without that the acquittal of the accused in a criminal case also releases him from civil
any fraudulent pretense or fraudulent act of the drawer, the latter’s failure to liability is one of the most serious flaws in the Philippine legal system. It has
cover the amount within three days after notice creates a rebuttable given rise to numberless instances of miscarriage of justice, where the acquittal
presumption of fraud. was due to a reasonable doubt in the mind of the court as to the guilt of the
accused. The reasoning fol- lowed is that inasmuch as the civil responsibility is
Division: FIRST DIVISION derived from the criminal offense, when the latter is not proved, civil liability
cannot be demanded. This is one of those cases where confused thinking leads
Docket Number: G.R. No. 112985 to unfortunate and deplorable consequences. Such reasoning fails to draw a
clear line of demarcation between criminal liability and civil responsibility, and
Counsel: The Solicitor General, Public Attorney’s Office to determine the logical result of the distinction. The two liabilities are separate
and distinct from each other. One affects the social order and the other private
Ponente: PARDO rights. One is for punishment or correction of the offender while the other is for
reparation of damages suffered by the aggrieved party x x x x It is just and
Dispositive Portion: proper that for the purposes of imprisonment of or fine upon the accused, the
WHEREFORE, the Court hereby AFFIRMS WITH MODIFICATION the appealed offense should be proved beyond reasonable doubt. But for the purpose of
judgment. The Court hereby sentences accused-appellant Martin Romero to indemnifying the complaining party, why should the offense also be proved
suffer an indeterminate penalty of ten (10) years and one (1) day of prision beyond reasonable doubt? Is not the invasion or violation of every private right
mayor, as minimum, to sixteen (16) years and one (1) day of reclusion temporal, to be proved only by preponderance of evidence? Is the right of the aggrieved
as maximum, to indemnify Ernesto A. Ruiz in the amount of one hundred fifty person any less private because the wrongful act is also punishable by the
thousand pesos (P150,000.00) with interest thereon at six (6%) per centum per criminal law?
annum from September 14, 1989, until fully paid, to pay twenty thousand pesos
(P20,000.00) as moral damages and fifteen thousand pesos (P15,000.00), as Division: SECOND DIVISION
exemplary damages, and the costs.
Docket Number: G.R. No. 128927

Case Title : REMEDIOS NOTA SAPIERA, petitioner, vs. COURT OF APPEALS and Counsel: Tanopo & Serafica, Hermogenes S. Decano
RAMON SUA, respondents.Case Nature : PETITION for review on certiorari of a
decision of the Court of Appeals. Ponente: BELLOSILLO
Syllabi Class : Actions|Negotiable Instruments Law|Criminal
Law|Damages|Criminal Procedure|Criminal Law|Estafa Dispositive Portion:
Syllabi: WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
1. Actions; Damages; Criminal Procedure; The civil liability is not extinguished 22 January 1996 as amended by its Resolution dated 19 March 1997 ordering
by acquittal where: (a) the acquittal is based on reasonable doubt; (b) where the petitioner Remedios Nota Sapiera to pay private respondent Ramon Sua the
court expressly declares that the liability of the accused is not criminal but only remaining amount of P210,150.00 as civil liability, is AFFIRMED. Costs against
civil in nature; and, (c) where the civil liability is not derived from or based on the petitioners.
criminal act of which the accused is acquitted.-
The judgment of acquittal extinguishes the liability of the accused for damages
only when it includes a declaration that the fact from which the civil liability Case Title : SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA C. EVANGELISTA,
might arise did not exist. Thus, the civil liability is not extinguished by acquittal petitioners, vs. MERCATOR FINANCE CORP., LYDIA P. SALAZAR, LAMEC’S REALTY
where: (a) the acquittal is based on reasonable doubt; (b) where the court AND DEVELOPMENT CORP. and the REGISTER OF DEEDS OF BULACAN,
expressly declares that the liability of the accused is not criminal but only civil in respondents.Case Nature : PETITION for review on certiorari of a decision of the
nature; and, (c) where the civil liability is not derived from or based on the Court of Appeals.
criminal act of which the accused is acquitted. Syllabi Class : Civil Procedure|Civil Law|Motions|Summary Judgment|“Genuine
2. Negotiable Instruments Law; Where a signature is so placed upon the Issue”|Contracts|Suretyship|Liability
instrument that it is not clear in what capacity the person making the same Syllabi:
intended to sign, he is deemed an indorser.- 1. Civil Procedure; Motions; Summary Judgment; The crucial question in a
We affirm the findings of the Court of Appeals that despite the conflicting motion for summary judgment is where the issues raised in the pleadings are
versions of the parties, it is undisputed that the four (4) checks issued by de genuine or fictitious.-
Guzman were signed by petitioner at the back without any indication as to how Summary judgment “is a procedural technique aimed at weeding out sham
she should be bound thereby and, therefore, she is deemed to be an indorser claims or defenses at an early stage of the litigation.” The crucial question in a
thereof. The Negotiable Instruments Law clearly provides—Sec. 17. Construction motion for summary judgment is whether the issues raised in the pleadings are
where instrument is ambiguous.—Where the language of the instrument is genuine or fictitious, as shown by affidavits, depositions or admissions
ambiguous, or there are admissions therein, the following rules of construction accompanying the motion.
apply: x x x x (f) Where a signature is so placed upon the instrument that it is not 2. Civil Procedure; Motions; Summary Judgment; “Genuine Issue”; The proper
clear in what capacity the person making the same intended to sign, he is inquiry would therefore be whether the affirmative defenses offered by
deemed an indorser. x x x x petitioners constitute genuine issue of fact requiring a full-blown trial.-
3. Negotiable Instruments Law; Damages; Criminal Law; Estafa; An accused A genuine issue means “an issue of fact which calls for the presentation of
acquitted of estafa may nevertheless be held civilly liable where the facts evidence, as distinguished from an issue which is fictitious or contrived so as not
established by the evidence so warrant—she may be adjudged liable for the to constitute a genuine issue for trial.” To forestall summary judgment, it is
unpaid value of the checks signed by her in favor of the complainant.- essential for the non-moving party to confirm the existence of genuine issues
The dismissal of the criminal cases against petitioner did not erase her civil where he has substantial, plausible and fairly arguable defense, i.e., issues of
liability since the dismissal was due to insufficiency of evidence and not from a fact calling for the presentation of evidence upon which a reasonable finding of
fact could return a verdict for the non-moving party. The proper inquiry would modification as to the interest rate which shall be six percent (6%) per annum, to
therefore be whether the affirmative defenses offered by petitioners constitute be computed from the date of the filing of the complaint since the amount of
genuine issue of fact requiring a full-blown trial. damages was alleged in the complaint;however, the rate of interest shall be
3. Civil Law; Contracts; Suretyship; Liability; A surety is bound by the same twelve percent (12%) per annum from the time the judgment in this case
consideration that makes the contract effective between the parties thereto.- becomes final and executory until its satisfaction and the basis for the
A surety is one who is solidarily liable with the principal. Petitioners cannot claim computation of this twelve percent (12%) rate of interest shall be the amount of
that they did not personally receive any consideration for the contract for well- P370,475.00.
entrenched is the rule that the consideration necessary to support a surety 4. Civil Law; Damages; Court sustains the award of exemplary damages in the
obligation need not pass directly to the surety, a consideration moving to the amount of P50,000.00.-
principal alone being sufficient. A surety is bound by the same consideration that We also sustain the award of exemplary damages in the amount of P50,000.00.
makes the contract effective between the principal parties thereto. Under Article 2229 of the Civil Code, exemplary damages are imposed by way of
example or correction for the public good, in addition to the moral, temperate,
Division: THIRD DIVISION liquidated or compensatory damages. Considering petitioner’s fraudulent act,
we hold that an award of P50,000.00 would be adequate, fair and reasonable.
Docket Number: G.R. No. 148864 The grant of exemplary damages justifies the award of attorney’s fees in the
amount of P50,000.00, and the award of P5,000.00 for litigation expenses.
Counsel: Wilfredo O. Arceo, Cases, Corpus and Associates Law Offices, Evelyn B. 5. Civil Law; Damages; Appellate court’s award of P50,000.00 in moral damages
Esparrago Piollo is warranted.-
The appellate court’s award of P50,000.00 in moral damages is warranted.
Ponente: PUNO Under Article 2217 of the Civil Code, moral damages may be granted upon proof
of physical suffering, mental anguish, fright, serious anxiety, besmirched
Dispositive Portion: reputation, wounded feelings, moral shock, social humiliation and similar injury.
IN VIEW WHEREOF, the petition is dismissed. Treble costs against the Ong testitified that he suffered sleepless nights, embarrassment, humiliation
petitioners. and anxiety upon discovering that the checks due his company were forged by
petitioner and that petitioner had filed baseless criminal complaints against him
before the fiscal’s office of Quezon City which disrupted HCCC’s business
Case Title: Adalia Francisco vs. CA operations.
Case Nature : PETITION for review on certiorari of a decision of the Court of
Appeals. Division: THIRD DIVISION
Syllabi Class : Remedial Law|Negotiable Instruments Law|Civil
Law|Evidence|Indorsement|Damages Docket Number: G.R. No. 116320
Syllabi:
1. Remedial Law; Evidence; Well-entrenched is the rule that findings of trial Counsel: Enrique Agana & Associates, Nelson A. Loyola, Eliseo P. Vencer II
courts which are factual in nature, especially when affirmed by the Court of
Appeals, deserve to be respected and affirmed by the Supreme Court, provided it Ponente: GONZAGA-REYES
is supported by substantial evidence on record.-
As regards the forgery, we concur with the lower courts’ finding that Francisco Dispositive Portion:
forged the signature of Ong on the checks to make it appear as if Ong had WHEREFORE, we AFFIRM the respondent court’s decision promulgated on June
indorsed said checks and that, after indorsing the checks for a second time by 29, 1992, upholding the February 16, 1988 decision of the trial court in favor of
signing her name at the back of the checks, Francisco deposited said checks in private respondents, with the modification that the interest upon the actual
her savings account with IBAA. The forgery was satisfactorily established in the damages awarded shall be at six percent (6%) per annum, which interest rate
trial court upon the strength of the findings of the NBI handwriting expert. Other shall be computed from the time of the filing of the complaint on November 19,
than petitioner’s self-serving denials, there is nothing in the records to rebut the 1979. However, the interest rate shall be twelve percent (12%) per annum from
NBI’s findings. Well-entrenched is the rule that findings of trial courts which are the time the judgment in this case becomes final and executory and until such
factual in nature, especially when affirmed by the Court of Appeals, deserve to amount is fully paid. The basis for computation of the six percent and twelve
be respected and affirmed by the Supreme Court, provided it is supported by percent rates of interest shall be the amount of P370,475.00. No
substantial evidence on record, as it is in the case at bench. pronouncement as to costs.
2. Negotiable Instruments Law; Indorsement; The Negotiable Instruments Law
provides that where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as to negative personal Case Title : SOLIDBANK CORPORATION, petitioner, vs. MINDANAO FERROALLOY
liability.- CORPORATION, Spouses JONG-WON HONG and SOO-OK KIM HONG, TERESITA
Petitioner claims that she was, in any event, authorized to sign Ong’s name on CU, and RICARDO P. GUEVARA and Spouse, respondents.Case Nature :
the checks by virtue of the Certification executed by Ong in her favor giving her PETITION for review on certiorari of the decision and resolution of the Court of
the authority to collect all the receivables of HCCC from the GSIS, including the Appeals.
questioned checks. Petitioner’s alternative defense must similarly fail. The Syllabi Class : Corporation Law|Civil Law|Piercing the Veil of Corporate
Negotiable Instruments Law provides that where any person is under obligation Fiction|Obligations and Contracts|Damages|Fraud|Malicious
to indorse in a representative capacity, he may indorse in such terms as to Prosecution|Attorney’s Fees
negative personal liability. An agent, when so signing, should indicate that he is Syllabi:
merely signing in behalf of the principal and must disclose the name of his 1. Corporation Law; Corporate officers cannot be held personally liable for the
principal; otherwise he shall be held personally liable. Even assuming that consequences of their acts, for as long as these are for and on behalf of the
Francisco was authorized by HCCC to sign Ong’s name, still, Fran- cisco did not corporation, within the scope of their authority and in good faith.-
indorse the instrument in accordance with law. Instead of signing Ong’s name, Basic is the principle that a corporation is vested by law with a personality
Francisco should have signed her own name and expressly indicated that she separate and distinct from that of each person composing or representing it.
was signing as an agent of HCCC. Thus, the Certification cannot be used by Equally fundamental is the general rule that corporate officers cannot be held
Francisco to validate her act of forgery. personally liable for the consequences of their acts, for as long as these are for
3. Civil Law; Damages; Every person who, contrary to law, wilfully or negligently and on behalf of the corporation, within the scope of their authority and in good
causes damage to another, shall indemnify the latter for the same.- faith. The separate corporate personality is a shield against the personal liability
Every person who, contrary to law, wilfully or negligently causes damage to of corporate officers, whose acts are properly attributed to the corporation.
another, shall indemnify the latter for the same.Due to her forgery of Ong’s 2. Corporation Law; Piercing the Veil of Corporate Fiction; To disregard the
signature which enabled her to deposit the checks in her own account, Francisco separate juridical personality of a corporation, the wrongdoing must be clearly
deprived HCCC of the money due it from the GSIS pursuant to the Land and convincingly established; it cannot be presumed.-
Development and Construction Contract. Thus, we affirm respondent court’s Under certain circumstances, courts may treat a corporation as a mere
award of compensatory damages in the amount of P370,475.00, but with a aggroupment of persons, to whom liability will directly attach. The distinct and
separate corporate personality may be disregarded, inter alia, when the Counsel: De los Reyes, Banaga, Briones & Associates, Quasha, Ancheta, Pena &
corporate identity is used to defeat public convenience, justify a wrong, protect Nolasco, Pacis & Reyes
a fraud, or defend a crime. Likewise, the corporate veil may be pierced when the
corporation acts as a mere alter ego or business conduit of a person, or when it Ponente: PANGANIBAN
is so organized and controlled and its affairs so conducted as to make it merely
an instrumentality, agency, conduit or adjunct of another corporation. But to Dispositive Portion:
disregard the separate juridical personality of a corporation, the wrongdoing WHEREFORE, this Petition is PARTIALLY GRANTED. The assailed Decision is
must be clearly and convincingly established; it cannot be presumed. AFFIRMED, but the award of moral and exemplary damages as well as
3. Civil Law; Obligations and Contracts; It is axiomatic that solidary liability attorney’s fees is DELETED. No costs.
cannot be lightly inferred.-
It is axiomatic that solidary liability cannot be lightly inferred. Under Article 1207
of the Civil Code, “there is a solidary liability only when the obligation expressly Case Title : ATRIUM MANAGEMENT CORPORATION, petitioner, vs. COURT OF
so states, or when the law or the nature of the obligation requires solidarity.” APPEALS, E.T. HENRY AND CO., LOURDES VICTORIA M. DE LEON, RAFAEL DE
Since solidary liability is not clearly expressed in the Promissory Note and is not LEON, JR., AND HI-CEMENT CORPORATION, respondents., LOURDES M. DE
required by law or the nature of the obligation in this case, no conclusion of LEON, petitioner, vs. COURT OF APPEALS, ATRIUM MANAGEMENT
solidary liability can be made. CORPORATION, AND HI-CEMENT CORPORATION, respondents.Case Nature :
4. Civil Law; Damages; Fraud; Fraud must be established by clear and PETITION for review on certiorari of a decision of the Court of Appeals.
convincing evidence, mere preponderance of evidence is not adequate.- Syllabi Class : Corporation Law|Negotiable Instrument Law|Ultra Vires
Fraud must be established by clear and convincing evidence; mere Acts|Checks|Words and Phrases
preponderance of evidence is not adequate. Bad faith, on the other hand, Syllabi:
imports a dishonest purpose or some moral obliquity and conscious doing of a 1. Corporation Law; Ultra Vires Acts; Checks; The act of issuing checks for the
wrong, not simply bad judgment or negligence. It is synonymous with fraud, in purpose of securing a loan to finance the activities of the corporation is well
that it involves a design to mislead or deceive another. within the ambit of a valid corporate act, hence, not an ultra vires act.-
5. Civil Law; Damages; The exercise of a right, though legal by itself, must Hi-Cement, however, maintains that the checks were not issued for
nonetheless be done in accordance with the proper norm; When the right is consideration and that Lourdes and E.T. Henry engaged in a “kiting operation”
exercised arbitrarily, unjustly or excessively and results in damage to another, a to raise funds for E.T. Henry, who admittedly was in need of financial assistance.
legal wrong is committed for which the wrongdoer must be held responsible.- The Court finds that there was no sufficient evidence to show that such is the
Article 19 of the Civil Code expresses the fundamental principle of law on human case. Lourdes M. de Leon is the treasurer of the corporation and is authorized to
conduct that a person “must, in the exercise of his rights and in the performance sign checks for the corporation. At the time of the issuance of the checks, there
of his duties, act with justice, give every one his due, and observe honesty and were sufficient funds in the bank to cover payment of the amount of P2 million
good faith.” Under this basic postulate, the exercise of a right, though legal by pesos. It is, however, our view that there is basis to rule that the act of issuing
itself, must nonetheless be done in accordance with the proper norm. When the the checks was well within the ambit of a valid corporate act, for it was for
right is exercised arbitrarily, unjustly or excessively and results in damage to securing a loan to finance the activities of the corporation, hence, not an ultra
another, a legal wrong is committed for which the wrongdoer must be held vires act.
responsible. 2. Corporation Law; Ultra Vires Acts; Words and Phrases; “Ultra Vires Acts,”
6. Civil Law; Damages; Elements to be Liable under the Abuse-of-Rights Explained.-
Principle.- “An ultra vires act is one committed outside the object for which a corporation is
To be liable under the abuse-of-rights principle, three elements must concur: a) created as defined by the law of its organization and therefore beyond the
a legal right or duty, b) its exercise in bad faith, and c) the sole intent of power conferred upon it by law.” The term “ultra vires” is “distinguished from an
prejudicing or injuring another. Needless to say, absence of good faith must be illegal act for the former is merely voidable which may be enforced by
sufficiently established. performance, ratification, or estoppel, while the latter is void and cannot be
7. Civil Law; Damages; Malicious Prosecution; To justify an award of damages validated.”
for malicious prosecution, one must prove two elements: malice or sinister 3. Corporation Law; Ultra Vires Acts; Instances when personal liability of
design to vex or humiliate and want of probable cause.- corporate directors, trustees or officers may validly attach.-
For damages to be properly awarded under the above provisions, it is necessary The next question to determine is whether Lourdes M. de Leon and Antonio de
to demonstrate by clear and convincing evidence that the action instituted by las Alas were personally liable for the checks issued as corporate officers and
petitioner was clearly so unfounded and untenable as to amount to gross and authorized signatories of the check. “Personal liability of a corporate director,
evident bad faith. To justify an award of damages for malicious prosecution, one trustee or officer along (although not necessarily) with the corporation may so
must prove two elements: malice or sinister design to vex or humiliate and want validly attach, as a rule, only when: “1. He assents (a) to a patently unlawful act
of probable cause. of the corporation, or (b) for bad faith or gross negligence in directing its affairs,
8. Civil Law; Damages; Attorney’s Fees; In the absence of a stipulation, or (c) for conflict of interest, resulting in damages to the corporation, its
attorney’s fees cannot be recovered, exceptions.- stockholders or other persons; “2. He consents to the issuance of watered down
For the same reason, attorney’s fees cannot be granted. Article 2208 of the Civil stocks or who, having knowledge thereof, does not forthwith file with the
Code states that in the absence of a stipulation, attorney’s fees cannot be corporate secretary his written objection thereto; “3. He agrees to hold himself
recovered, except in any of the following circumstances: “(1) When exemplary personally and solidarily liable with the corporation; or “4. He is made, by a
damages are awarded; (2) When the defendant’s act or omission has compelled specific provision of law, to personally answer for his corporate action.”
the plaintiff to litigate with third persons or to incur expenses to protect his 4. Corporation Law; Ultra Vires Acts; Checks; A treasurer of a corporation
interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In whose negligence in signing a confirmation letter for rediscounting of crossed
case of a clearly unfounded civil action or proceeding against the plaintiff; (5) checks, knowing fully well that the checks were strictly endorsed for deposit only
Where the defendant acted in gross and evident bad faith in refusing to satisfy to the payee’s account and not to be further negotiated, resulting in damage to
the plaintiff’s plainly valid, just and demandable claim; (6) In actions for legal the corporation may be personally liable therefor.-
support; (7) In actions for the recovery of wages of household helpers, laborers In the case at bar, Lourdes M. de Leon and Antonio de las Alas as treasurer and
and skilled workers; (8) In actions for indemnity under workmen’s compensation Chairman of HiCement were authorized to issue the checks. However, Ms. de
and employer’s liability laws; (9) In a separate civil action to recover civil liability Leon was negligent when she signed the confirmation letter requested by Mr.
arising from a crime; (10) When at least double judicial costs are awarded; (11) Yap of Atrium and Mr. Henry of E.T. Henry for the rediscounting of the crossed
In any other case where the court deems it just and equitable that attorney’s checks issued in favor of E.T. Henry. She was aware that the checks were strictly
fees and expenses of litigation should be recovered.” endorsed for deposit only to the payee’s account and not to be further
negotiated. What is more, the confirmation letter contained a clause that was
Division: THIRD DIVISION not true, that is, “that the checks issued to E.T. Henry were in payment of Hydro
oil bought by Hi-Cement from E.T. Henry.” Her negligence resulted in damage to
Docket Number: G.R. No. 153535 the corporation. Hence, Ms. de Leon may be held personally liable therefor.
5. Negotiable Instrument Law; Checks; Words and Phrases; “Holder in Due
Course,” Explained.-
The next issue is whether or not petitioner Atrium was a holder of the checks in duty to promptly inform the presentor of the forgery upon discovery. If the
due course. The Negotiable Instruments Law, Section 52 defines a holder in due drawee bank delays in informing the presentor of the forgery, thereby depriving
course, thus: “A holder in due course is a holder who has taken the instrument said presentor of the right to recover from the forger, the former is deemed
under the following conditions: (a) That it is complete and regular upon its face; negligent and can no longer recover from the presentor.
(b) That he became the holder of it before it was overdue, and without notice 4. Same; Same; Same; Drawee banks not similarly situated as the collecting
that it had been previously dishonored, if such was the fact; (c) That he took it in bank.-
good faith and for value; (d) That at the time it was negotiated to him he had no —The drawee bank is not similarly situated as the collecting bank because the
notice of any infirmity in the instrument or defect in the title of the person former makes no warranty as to the genuineness of any indorsement. The
negotiating it.” drawee bank’s duty is but to verify the genuineness of the drawer’s signature
6. Negotiable Instrument Law; Checks; A person to whom a crossed check was and not of the indorsement because the drawer is its client.
endorsed by the payee of said check could not be considered a holder in due 5. Same; Same; Same; A collecting bank which indorses a check bearing a
course.- forged indorsement and presents it to the drawee bank guarantees all prior
In the instant case, the checks were crossed checks and specifically indorsed for indorsements including the forged indorsement.-
deposit to payee’s account only. From the beginning, Atrium was aware of the —More importantly, by reason of the statutory warranty of a general indorser in
fact that the checks were all for deposit only to payee’s account, meaning E.T. Section 66 of the Negotiable Instruments Law, a collecting bank which indorses
Henry. Clearly, then, Atrium could not be considered a holder in due course. a check bearing a forged indorsement and presents it to the drawee bank
7. Negotiable Instrument Law; Checks; A holder not in due course may still guarantees all prior indorsements, including the forged indorsement. It warrants
recover on the instrument.- that the instrument is genuine, and that it is valid and subsisting at the time of
It does not follow as a legal proposition that simply because petitioner Atrium his indorsement. Because the indorsement is a forgery, the collecting bank
was not a holder in due course for having taken the instruments in question with commits a breach of this warranty and will be accountable to the drawee bank.
notice that the same was for deposit only to the account of payee E.T. Henry 6. Same; Same; Same; Drawee bank can seek reimbursement or a return of the
that it was altogether precluded from recovering on the instrument. The amount it paid from the presentor bank or person.-
Negotiable Instruments Law does not provide that a holder not in due course —In cases involving checks with forged indorsements, such as the present
can not recover on the instrument. petition, the chain of liability does not end with the drawee bank. The drawee
8. Negotiable Instrument Law; Checks; The disadvantage of a holder not in due bank may not debit the account of the drawer but may generally pass liability
course is that the negotiable instrument is subject to defenses as if it were non- back through the collection chain to the party who took from the forger and, of
negotiable, such as absence or failure of consideration.- course, to the forger himself, if available. In other words, the drawee bank can
The disadvantage of Atrium in not being a holder in due course is that the seek reimbursement or a return of the amount it paid from the presentor bank
negotiable instrument is subject to defenses as if it were non-negotiable. One or person. Theoretically, the latter can demand reimbursement from the person
such defense is absence or failure of consideration. who indorsed the check to it and so on. The loss falls on the party who took the
check from the forger, or on the forger himself.
Division: FIRST DIVISION 7. Same; Same; Same; Drawer is precluded from asserting forgery where the
drawee bank can prove a failure by the customer/drawer to exercise ordinary
Docket Number: G.R. No. 109491, G.R. No. 121794 care that substantially contributed to the making of the forged signature.-
—However, if the drawee bank can prove a failure by the customer/drawer to
Counsel: Meer, Meer & Meer, Castillo, Laman, Tan, Pantaleon & San Jose exercise ordinary care that substantially contributed to the making of the forged
signature, the drawer is precluded from asserting the forgery.
Ponente: PARDO 8. Same; Same; Same; Payment under a forged indorsement is not to the
drawer’s order.-
Dispositive Portion: —The bank on which a check is drawn, known as the drawee bank, is under
WHEREFORE, the petitions are hereby DENIED. The decision and resolution of strict liability to pay the check to the order of the payee. The drawer’s
the Court of Appeals in CA-G.R. CV No. 26686, are hereby AFFIRMED in toto. instructions are reflected on the face and by the terms of the check. Payment
under a forged indorsement is not to the drawer’s order. When the drawee bank
pays a person other than the payee, it does not comply with the terms of the
Case Title : ASSOCIATED BANK, petitioner, vs. HON. COURT OF APPEALS, check and violates its duty to charge its customer’s (the drawer) account only for
PROVINCE OF TARLAC and PHILIPPINE NATIONAL BANK, respondents., properly payable items. Since the drawee bank did not pay a holder or other
PHILIPPINE NATIONAL BANK, petitioner, vs. HONORABLE COURT OF APPEALS, person entitled to receive payment, it has no right to reimbursement from the
PROVINCE OF TARLAC, and ASSOCIATED BANK, respondents.Case Nature : drawer. The general rule then is that the drawee bank may not debit the
PETITIONS for review of a decision of the Court of Appeals. drawer’s account and is not entitled to indemnification from the drawer. The risk
Syllabi Class : Commercial Law|Negotiable Instruments Law|Forgery of loss must perforce fall on the drawee bank.
Syllabi: 9. Same; Same; Same; A collecting bank where a check is deposited and which
1. Commercial Law; Negotiable Instruments Law; Forgery; A person whose indorses the check upon presentment with the drawee bank is such an indorser.-
signature to an instrument was forged was never a party and never consented —A collecting bank where a check is deposited and which indorses the check
to the contract which allegedly gave rise to such instrument.- upon presentment with the drawee bank, is such an indorser. So even if the
—A forged signature, whether it be that of the drawer or the payee, is wholly indorsement on the check deposited by the bank’s client is forged, the collecting
inoperative and no one can gain title to the instrument through it. A person bank is bound by his warranties as an indorser and cannot set up the defense of
whose signature to an instrument was forged was never a party and never forgery as against the drawee bank.
consented to the contract which allegedly gave rise to such instrument. Section 10. Same; Same; Same; Indorser cannot interpose the defense that signatures
23 does not avoid the instrument but only the forged signature. Thus, a forged prior to him are forged.-
indorsement does not operate as the payee’s indorsement. —An indorser of an order instrument warrants “that the instrument is genuine
2. Same; Same; Same; Rule mandates that the checks be returned within and in all respects what it purports to be; that he has a good title to it; that all
twenty-four hours after discovery of the forgery but in no event beyond the prior parties had capacity to contract; and that the instrument is at the time of
period fixed by law for filing a legal action.- his indorsement valid and subsisting.” He cannot interpose the defense that
—The rule mandates that the checks be returned within twenty-four hours after signatures prior to him are forged.
discovery of the forgery but in no event beyond the period fixed by law for filing 11. Same; Same; Same; When the holder’s indorsement is forged, all parties
a legal action. The rationale of the rule is to give the collecting bank (which prior to the forgery may raise the real defense of forgery against all parties
indorsed the check) adequate opportunity to proceed against the forger. If subsequent thereto.-
prompt notice is not given, the collecting bank may be prejudiced and lose the —Where the instrument is payable to order at the time of the forgery, such as
opportunity to go after its depositor. the checks in this case, the signature of its rightful holder (here, the payee
3. Same; Same; Same; Drawee bank has the duty to promptly inform the hospital) is essential to transfer title to the same instrument. When the holder’s
presentor of the forgery upon discovery.- indorsement is forged, all parties prior to the forgery may raise the real defense
—Hence, the drawee bank can recover the amount paid on the check bearing a of forgery against all parties subsequent thereto.
forged indorsement from the collecting bank. However, a drawee bank has the
12. Same; Same; Same; When the indorsement is a forgery, only the person P4,720,600.00, were issued for amounts different from those indicated in the
whose signature is forged can raise the defense of forgery against a holder in corresponding stubs. Petitioners (Mr. Antonio and his wife Amor) filed an action
due course.- against respondents with the trial court, and judgment was rendered in their
—In bearer instruments, the signature of the payee or holder is unnecessary to favor. The dispositive portion of the trial court's decision reads:
pass title to the instrument. Hence, when the indorsement is a forgery, only the WHEREFORE, appreciating the
person whose signature is forged can raise the defense of forgery against a preponderance of evidence sufficient to warrant
holder in due course. favorable action on plaintiffs-spouses Francisco and
13. Same; Same; Same; Parties who warrant or admit the genuineness of the Amor Antonio's stand, defendants Alice Omnes and
signature in question and those who, by their acts, silence or negligence are the Standard Chartered Bank are hereby ordered to
estopped from setting up the defense of forgery, are precluded from using this pay unto the herein plaintiffs, jointly and severally:
defense.- 1. The amount of
—The exception to the general rule in Section 23 is where “a party against P3,349,550.00 with 12% interest
whom it is sought to enforce a right is precluded from setting up the forgery or thereon computed from the date
want of authority.” Parties who warrant or admit the genuineness of the of filing of the complaint, i.e.,
signature in question and those who, by their acts, silence or negligence are July 29, 1991 until the said sum is
estopped from setting up the defense of forgery, are precluded from using this fully paid;
defense. Indorsers, persons negotiating by delivery and acceptors are 2. The sum of P200,000.00 as
warrantors of the genuineness of the signatures on the instrument. moral damages;
3. The sum of P100,000.00 as
Division: SECOND DIVISION exemplary damages;
4. The sum of P100,000.00 as
Docket Number: G.R. No. 107382, G.R. No. 107612 attorney's fees; and
5. Costs of suit.
Counsel: Jose A. Soluta, Jr. and Associates, Santiago, Jr., Vidad, Corpus & On the cross-claim, cross-defendant
Associates Spouses Teodoro and Alice Omnes are hereby ordered
to pay cross-plaintiff the Standard Chartered Bank the
Ponente: ROMERO above-enumerated amounts.
The counterclaims at the bar are hereby
Dispositive Portion: ordered DISMISSED for lack of factual basis.
IN VIEW OF THE FOREGOING, the petition for review filed by the Philippine The writ of attachment is hereby made
National Bank (G.R. No. 107612) is hereby PARTIALLY GRANTED. The petition for permanent. The 'Motion and Claim for Damages
review filed by the Associated Bank (G.R. No. 107382) is hereby DENIED. The Against The Bond' filed by defendant Teodoro Omnes
decision of the trial court is MODIFIED. The Philippine National Bank shall pay through counsel is hereby DENIED for lack of merit.
fifty percent (50%) of P203,300.00 to the Province of Tarlac, with legal interest On appeal, however, the Court of Appeals reversed the decision on
from March 20, 1981 until the payment thereof. Associated Bank shall pay fifty the following grounds: (a) in concluding that the signatures in the checks and
percent (50%) of P203,300.00 to the Philippine National Bank, likewise, with the standard signatures of Mr. Antonio were written by the same person, the
legal interest from March 20, 1981 until payment is made. handwriting expert presented by respondent bank, Atty. Desiderio Paqui,
specified the similarities and the difference between the signatures in the
checks and the standard signatures, while the handwriting experts of
[G.R. No. 140980. March 1, 2000] petitioners confined themselves to general statements regarding their alleged
SPS. FRANCISCO S. ANTONIO, et al. vs. SPS. TEODORICO C. OMNES, et al. differences; and (b) the negligence of petitioners was the proximate cause of
SECOND DIVISION the loss.
Gentlemen: Petitioners now raise the following assignment of errors:
Quoted hereunder, for your information, is a resolution of this Court dated MAR a. The Court of Appeals had committed grave
1 2000. abuse of discretion in its appreciation of facts in the
G.R. No. 140980 (SPS. Francisco S. Antonio and Amor W. Antonio vs. instant case.
Sps. Teodorico C. Omnes and Alice Omnes and the Standard Chartered Bank.) b. The findings of facts of the Court of Appeals,
This is a petition for review on certiorari of the decision, dated especially on the question of forgery of the drawer's
February 26, 1999, of the Court of Appeals. It appears that in 1988, Rarecrafts signature on the questioned checks, are at variance
Philippines (Rarecrafts), a handicrafts export business owned by petitioners, with that [of] the lower court, calling for review of the
hired respondent Alice Omnes as its accountant-bookkeeper. Her duties evidence to arrive at the correct findings based on the
included the preparation of checks for the payment of bills to the suppliers of record, pursuant to the rule enunciated in the case of
rarecrafts. Roblesa v. Court of Appeals, 174 SCRA 354, 362 (1989),
Sometime in July 1991, petitioner Francisco S. Antonio received a as an exception to the rule that findings of fact of the
telephone call from respondent Standard Chartered Bank seeking confirmation Court of Appeals are generally not subject to review on
of the issuance of a check for P105,750.00 payable to cash. He then asked Mrs. certiorari.
Omnes about the check in question, after which he went back to his office, c. And on the assumption that there was forgery,
while she went to her desk, presumably to verify the issuance of the check from the Court of Appeals erred in its conclusion that
the records. When Mrs. Omnes failed to return after some time, Mr. Antonio respondent drawee bank was not liable when it
decided to follow up the matter with her. As he was going out of his office, Mr. honored the forged checks of petitioner Francisco
Antonio saw Mrs. Omnes crossing the street and taking a jeepney bound for Antonio as drawer therein under Section 23 of the
Pasig. Alarmed, Mr. Antonio looked for the stub to the check, which he found Negotiable Instruments Law and pertinent
and saw that the amount indicated therein was P335.15. jurisprudence in relation thereto.
Later on the same day, respondent bank called Mr. Antonio The petition is without merit.
regarding a check for P97,500.00 payable to cash. Upon verification, Mr. First. The Court of Appeals properly gave credence to Atty. Desiderio
Antonio found that the stub of the check indicated a different amount. Paqui, the handwriting expert of respondent bank, rather than to the
It was found that the two checks were credited to the savings handwriting experts of petitioners. In his report, Atty. Paqui indicated in detail
account of Mrs. Omnes at the Far East Bank and Trust Company, Tanay Branch. the similarities and the difference between the signatures in the checks and the
At the request of Mr. Antonio, respondent bank furnished him with photocopies standard signatures of Mr. Antonio. He cited eight important similarities and
of the two checks, which he denied having signed. only one significant difference between the signatures in the checks and the
Subsequently, Mr. Antonio conducted an examination of the records standard signatures of Mr. Antonio. In contrasts, the handwriting experts of
pertaining to the issuance of checks from the time Mrs. Omnes was employed petitioners supported their finding that the signatures in the checks and the
by Rarecrafts. He found that 70 checks, involving a total amount of standard signatures of Mr. Antonio were written by different persons with mere
generalizations, such as alleged differences in "manner of execution of strokes," Ballesteros; and that by virtue of the negligent acts of petitioner bank, together
"structural patterns of letters," and "minute identifying details." Thus, with that of Eduardo Talaue, respondent had been damaged and prejudiced in
petitioners failed to meet the quantum of proof necessary to establish forgery, the total amount of P368,996.06.
the existence of which cannot be presumed. (Metropolitan Waterworks and Petitioner contends that respondent’s complaint does not state a
Sewerage System v. Court of Appeals, 143 SCRA 20 (1986)) cause of action against it, since the same does not allege that petitioner
Second. The Court of Appeals correctly observed that the failure of committed any wrongdoing or fraud but only alleges that petitioner agreed to
Mr. Antonio for over three years to detect the repeated commission of fraud act as collecting bank and did not honor the checks.
within his business, which he claims eventually involved the total amount of This contention is without merit. Section 23 of the Negotiable
P4,720,600.00, despite the fact that respondent bank sent monthly statements Instruments Law provides that when a signature is forged or made without
to Rarecrafts, is indicative of his extreme negligence. It appears that Mr. authority of the person whose signature it purports to be, it is wholly
Antonio completely left to Mrs. Omnes the management of such an important inoperative and no right to retain the instrument or to give a discharge therefor
aspect of his business. While the general rule is that a drawee bank which clears or to enforce payment thereof against any party thereto can be acquired
a forged check for payment should reimburse the drawer, this does not apply through or under such signature unless the party against whom it is sought to
when the failure of the latter to exercise ordinary care made the loss possible. enforce such right is precluded from setting up the forgery or want of authority.
Hence, even is the signatures in the checks were forged, petitioners have no In this case, it appears that Isabela State University issued two checks to
right of recourse against respondent bank. (Associated Bank v. Court of Appeals, “Sanvar c/o Engineer Jesus Urrea” which were later entrusted to Eduardo
252 SCRA 620 (1996)) Talaue by Engr. Jesus Urrea. Eduardo Talaue, however, forged the indorsements
It is settled that if the factual conclusions of the Court of Appeals are of Engr. Urrea which allowed the former to deposit the checks to the account of
borne out by the records, the same are binding on this Court, even when such Lily Ballesteros. The checks were then indorsed by petitioner Metrobank (as
are contrary to the findings of the trial court. (Uniland Resources v. collecting bank) to DBP, as drawee bank. Petitioner acted as a general indorser
Development Bank of the Philippines, 200 SCRA 751 (1991)) In the instant case, when it stamped “all prior indorsements and/or lack of indorsements
petitioners failed to show that the Court of Appeals committed a reversible guaranteed” because it thereby warranted the genuineness of all prior
error in the appreciation of the evidence presented by the parties. indorsenients. Petitioner is thus liable to DBP for the two checks as a forged
WHEREFORE, the petition is DENIED for lack of showing that the indorsement does not operate as the payee’s indorsement. The appellate court
Court of Appeals committed a reversible error. correctly relied on Associated Bank v. Court of Appeals, 252 SCRA 620 (1996) in
which it was held:
By reason of the statutory warranty of a general indorser in Section
[G.R. No. 145916. January 29, 2001] 66 of the Negotiable Instruments Law, a collecting bank which indorses a check
MBTC vs. SANVAR DEV’T CORP. bearing a forged indorsement and presents it to the drawee bank guarantees all
SECOND DIVISION prior indorsements, including the forged indorsement. It warrants that the
Gentlemen: instrument is genuine, and that it is valid and subsisting at the time of his
Quoted hereunder, for your information, is a resolution of this Court dated JAN indorsement. Because the indorsement is a forgery, the collecting bank
29 2001. commits a breach of this warranty and will be accountable to the drawee bank.
G.R. No. 145916 (Metropolitan Bank & Trust Company vs. Sanvar This liability scheme operates without regard to fault on the part of the
Development Corp.) collecting/presenting bank. Even if the latter bank was not negligent, it would
Isabela State University issued two Development Bank of the still be liable to the drawee bank because of its indorsement.
Philippines (DBP) checks to respondent Sanvar Development Corp. (“Sanvar c/o The Court has consistently ruled that "the collecting bank or last
Engineer Jesus Urrea”) as final payment for respondent’s construction of the indorser generally suffers the loss because it has the duty to ascertain the
school’s farm structures in Cabagan, Isabela. The two checks, amounting genuineness of all prior indorsements considering that the act of presenting the
to P207,428.26 andP161,567.80, dated July 8, 1992 and July 10, 1992 check for payment to the drawee is an assertion that the party making the
respectively, were given to respondent’s representative, Engr. Jesus Urrea, who presentment had done its duty to ascertain the genuineness of the
in turn entrusted them to one Eduardo Talaue. Talaue was supposed to bring indorsements.”
the two checks to respondent in order to enable him (Talaue) to clarify the The drawee bank is not similarly situated as the collecting bank
alleged obligation one Isidro Calueng (respondent’s sub-contractor) owed him. because the former makes no warranty as to the genuineness of any
However, instead of forwarding the checks to respondent, Eduardo Talaue indorsement. The drawee bank’s duty is but to verify the genuineness of the
forged the indorsements of Engr. Jesus Urrea and deposited the checks with drawer’s signature and not of the indorsement because the drawer is its client.
petitioner Metropolitan Bank & Trust Company (Metrobank) under the account Moreover, the collecting bank is made liable because it is privy to the
of Lily Ballesteros. depositor who negotiated the check. The bank knows him, his address and
For failure of petitioner to pay the two checks amounting history because he is a client. It has taken a risk on his deposit. The bank is also
to P368,996.06, respondent filed a case for collection against petitioner and in a better position to detect forgery, fraud or irregularity in the indorsement.
Eduardo Talaue with the Regional Trial Court, Branch 92, Quezon City. Petitioner alleges that the foregoing ruling does not apply where, as
Respondent prayed that petitioner and Talaue be held jointly and severally in this case, DBP, the drawee bank, failed to return the checks with the forged
liable for the amounts of P368,996.06, with interest thereon from September indorsements within the 24-hour clearing period. By reason thereof, petitioner
1992 until fully paid, P50,000.00 as attorney’s fees, and P100,000.00 as should be absolved from liability pursuant to §4(c) of Central Bank Circular No.
exemplary damages. 9. The argument, however, is a matter of defense which is better threshed out
Petitioner moved to dismiss respondent’s complaint on the ground in the proceedings before the trial court.
that it did not state a cause of action against it (petitioner bank). The trial court For the foregoing reasons, the petition is DENIED for lack of showing
granted the motion, holding that petitioner credited the two checks to the that the Court of Appeals committed reversible error.
account of Lily Ballesteros only after DBP (drawee bank) had accepted, cleared,
and honored the same and that, under §62 of the Negotiable Instruments Law,
DBP, as the acceptor/drawee bank, was primarily liable for accepting the Case Title : WESTMONT BANK (formerly ASSOCIATED BANKING CORP.),
checks. However, on appeal to the Court of Appeals, the decision was reversed petitioner, vs. EUGENE ONG, respondent.Case Nature : PETITION for review on
and the case was remanded to the trial court for further proceedings. certiorari of a decision of the Court of Appeals.
Hence, this present petition for review on certiorari. The issue in this Syllabi Class : Remedial Law|Banks and Banking|Civil Law|Action|Definition of
case is whether respondent’s complaint states a cause of action against a cause of action|Laches
petitioner bank, the collecting bank, as to the two checks. Syllabi:
The answer is in the affirmative. Respondent’s complaint alleges that 1. Remedial Law; Action; Definition of a cause of action; Essential elements of
Eduardo Talaue, instead of bringing the same to respondent’s office in Quezon a cause of action.-
City and contrary to his representation, deposited the checks to Account No. 68- As defined, a cause of action is the act or omission by which a party violates a
0867803-0 (account of Lily Ballesteros) with petitioner bank, by falsifying the right of another. The essential elements of a cause of action are: (a) a legal right
indorsements of Engr. Urrea; that petitioner bank, despite the falsification of or rights of the plaintiff, (b) a correlative obligation of the defendant, and (c) an
the indorsements of Engr. Urrea and the obvious irregularity of his alleged act or omission of the defendant in violation of said legal right.
indorsements, accepted the deposit of the two checks to the account of Lily
2. Banks and Banking; The collecting bank is liable to the payee and must bear 1. Banks and Banking; Negotiable Instruments; Checks; When a bank pays a
the loss because it is its legal duty to ascertain that the payee’s endorsement forged check, it must be considered as paying out of its funds and cannot charge
was genuine before the check.- the amount so paid to the account of the depositor.-
The collecting bank is liable to the payee and must bear the loss because it is its “When a signature is forged or made without the authority of the person whose
legal duty to ascertain that the payee’s endorsement was genuine before signature it purports to be, it is wholly inoperative, and no right to retain the
cashing the check. As a general rule, a bank or corporation who has obtained instrument, or to give a discharge therefor, or to enforce payment thereof
possession of a check upon an unauthorized or forged indorsement of the against any party thereto, can be acquired through or under such signature.”
payee’s signature and who collects the amount of the check other from the Consequently, if a bank pays a forged check, it must be considered as paying out
drawee, is liable for the proceeds thereof to the payee or other owner, of its funds and cannot charge the amount so paid to the account of the
notwithstanding that the amount has been paid to the person from whom the depositor.
check was obtained. 2. Banks and Banking; Negotiable Instruments; Checks; Where a check is
3. Banks and Banking; The position of the bank taking the check on the forged drawn payable to the order of one person and is presented for payment by
or unauthorized indorsement is the same as if it had taken the check and another and purports upon its face to have been duly indorsed by the payee of
collected the money without indorsement at all and the act of the bank amounts the check, it is the primary duty of the bank to know that the check was duly
to conversion of the check.- indorsed by the original payee and, where it pays the amount of the check to a
The theory of the rule is that the possession of the check on the forged or third person who has forged the signature of the payee, the loss falls on such
unauthorized indorsement is wrongful, and when the money had been collected bank who cashed the check.-
on the check, the bank or other person or corporation can be held as for moneys In the instant case, the 3 checks were payable to the BIR. It was established,
had and received, and the proceeds are held for the rightful owners who may however, that said checks were never delivered or paid to the payee BIR but
recover them. The position of the bank taking the check on the forged or were in fact presented for payment by some unknown persons who, in order to
unauthorized indorsement is the same as if it had taken the check and collected receive payment therefor, forged the name of the payee. Despite this fraud,
the money without indorsement at all and the act of the bank amounts to petitioner TRB paid the 3 checks in the total amount of P9,790,716.87. Petitioner
conversion of the check. ought to have known that, where a check is drawn payable to the order of one
4. Banks and Banking; Banks are engaged in a business impressed with public person and is presented for payment by another and purports upon its face to
interest, and it is their duty to protect in return their many clients and depositors have been duly indorsed by the payee of the check, it is the primary duty of
who transact business with them.- petitioner to know that the check was duly indorsed by the original payee and,
Admittedly, respondent Eugene Ong at the time the fraudulent transaction took where it pays the amount of the check to a third person who has forged the
place was a depositor petitioner bank. Banks are engaged in a business signature of the payee, the loss falls upon petitioner who cashed the check. Its
impressed with public interest, and it is their duty to protect in return their many only remedy is against the person to whom it paid the money.
clients and depositors who transact business with them. They have the 3. Banks and Banking; Negotiable Instruments; Checks; Crossed Checks; The
obligation to treat their client’s account meticulously and with the highest crossing of a check should put a bank on guard; The effects of a crossed check
degree of care, considering the fiduciary nature of their relationship. The are that (a) the check may not be encashed but only deposited in the bank, (b)
diligence required of banks, therefore, is more than that of a good father of a the check may be negotiated only once to one who has an account with a bank,
family. and, (c) the act of crossing the check serves as a warning to the holder that the
5. Civil Law; Laches; Laches is negligence or omission to assert a right within a check has been issued for a definite purpose so that he must inquire if he has
reasonable time, warranting a presumption that the party entitled thereto has received the check pursuant to that purpose, otherwise, he is not a holder in due
either abandoned or declined to assert it.- course.-
Laches may be defined as the failure or neglect for an unreasonable and It should be noted further that one of the subject checks was crossed. The
unexplained length of time, to do that which, by exercising due diligence, could crossing of one of the subject checks should have put petitioner on guard; it was
or should have been done earlier. It is negligence or omission to assert a right duty-bound to ascertain the indorser’s title to the check or the nature of his
within a reasonable time, warranting a presumption that the party entitled possession. Petitioner should have known the effects of a crossed check: (a) the
thereto has either abandoned or declined to assert it. It concerns itself with check may not be encashed but only deposited in the bank; (b) the check may be
whether or not by reason of long inaction or inexcusable neglect, a person negotiated only once to one who has an account with a bank and (c) the act of
claiming a right should be barred from asserting the same, because to allow him crossing the check serves as a warning to the holder that the check has been
to do so would be unjust to the person against whom such right is sought to be issued for a definite purpose so that he must inquire if he has received the check
enforced. pursuant to that purpose, otherwise, he is not a holder in due course. By
encashing in favor of unknown persons checks which were on their face payable
Division: SECOND DIVISION to the BIR, a government agency which can only act only through its agents,
petitioner did so at its peril and must suffer the consequences of the
Docket Number: G.R. No. 132560 unauthorized or wrongful endorsement. In this light, petitioner TRB cannot
exculpate itself from liability by claiming that respondent networks were
Counsel: Villanueva, Caña & Associates Law Offices, Alberto, Salazar & themselves negligent.
Associates 4. Banks and Banking; Negotiable Instruments; Checks; A bank is engaged in a
business impressed with public interest and it is its duty to protect its many
Ponente: QUISUMBING clients and depositors who transact business with it.-
A bank is engaged in a business impressed with public interest and it is its duty
Dispositive Portion: to protect its many clients and depositors who transact business with it. It is
WHEREFORE, the instant petition is DENIED for lack of merit. The assailed under the obligation to treat the accounts of the depositors and clients with
decision of the Court of Appeals, sustaining the judgment of the Regional Trial meticulous care, whether such accounts consist only of a few hundreds or
Court of Manila, is AFFIRMED. millions of pesos.
5. Banks and Banking; Negotiable Instruments; Checks; A collecting bank which
indorses a check bearing a forged indorsement and presents it to the drawee
Case Title : TRADERS ROYAL BANK, petitioner, vs. RADIO PHILIPPINES bank guarantees all prior indorsements, including the forged indorsement itself,
NETWORK, INC., INTERCONTINENTAL BROADCASTING CORPORATION and and ultimately should be held liable therefor.-
BANAHAW BROADCASTING CORPORATION, through the BOARD OF A collecting bank which indorses a check bearing a forged indorsement and
ADMINISTRATORS, and SECURITY BANK AND TRUST COMPANY, presents it to the drawee bank guarantees all prior indorsements, including the
respondents.Case Nature : PETITION for review on certiorari of a decision of the forged indorsement itself, and ultimately should be held liable therefor.
Court of Appeals. However, it is doubtful if the subject checks were ever presented to and
Syllabi Class : Banks and Banking|Negotiable Instruments|Checks|Crossed accepted by SBTC so as to hold it liable as a collecting bank, as held by the Court
Checks|The crossing of a check should put a bank on guard of Appeals.
Syllabi: 6. Banks and Banking; Negotiable Instruments; Checks; A bank who did not pay
the rightful holder or other person or entity entitled to receive payment has no
right to reimbursement.-
Since TRB did not pay the rightful holder or other person or entity entitled to payment thereof against any party, can be acquired through or under such
receive payment, it has no right to reimbursement. Petitioner TRB was remiss in signature. However, the rule does provide for an exception, namely: “unless the
its duty and obligation, and must therefore suffer the consequences of its own party against whom it is sought to enforce such right is precluded from setting
negligence and disregard of established banking rules and procedures. up the forgery or want of authority.” In the instant case, it is the exception that
applies. In our view, petitioner is precluded from setting up the forgery,
Division: THIRD DIVISION assuming there is forgery, due to his own negligence in entrusting to his
secretary his credit cards and checkbook including the verification of his
Docket Number: G.R. No. 138510 statements of account.
5. Civil Law; Estoppel; Petitioner cannot hold private respondent in estoppel for
Counsel: Herrera, Teehankee, Faylona, Cabrera Law Offices, Mercado, the latter is not the actual party to the criminal action.-
Aguillardo & Aceron Law Firm, Castro, Yan, Biñas, Ortile, Samillano & On the second issue, the fact that Manila Bank had filed a case for estafa
Mangrobang against Eugenio would not estop it from asserting the fact that forgery has not
been clearly established. Petitioner cannot hold private respondent in estoppel
Ponente: CORONA for the latter is not the actual party to the criminal action. In a criminal action,
the State is the plaintiff, for the commission of a felony is an offense against the
Dispositive Portion: State. Thus, under Section 2, Rule 110 of the Rules of Court the complaint or
WHEREFORE, the appealed decision is MODIFIED by deleting the award of information filed in court is required to be brought in the name of the “People of
exemplary damages. Further, respondent networks are granted the amount of the Philippines.”
P100,000 as attorney’s fees. In all other respects, the Court of Appeals’ decision
is hereby AFFIRMED. Division: SECOND DIVISION

Docket Number: G.R. No. 139130


Case Title : RAMON K. ILUSORIO, petitioner, vs. HON. COURT OF APPEALS, and
THE MANILA BANKING CORPORATION, respondents.Case Nature : PETITION for Counsel: People’s Law Office, Puyat, Jacinto & Santos, Asedillo and Associates
review on certiorari of a decision of the Court of Appeals.
Syllabi Class : Civil Law|Damages|Negligence|Criminal Law|Forgery|Estoppel Ponente: QUISUMBING
Syllabi:
1. Civil Law; Damages; Negligence; To be entitled to damages, petitioner has Dispositive Portion:
the burden of proving negligence on the part of the bank for failure to detect the WHEREFORE, the instant petition is DENIED for lack of merit. The assailed
discrepancy in the signatures on the checks.- decision of the Court of Appeals dated January 28, 1999 in CA-G.R. CV No.
On the first issue, we find that petitioner has no cause of action against Manila 47942, is AFFIRMED.
Bank. To be entitled to damages, petitioner has the burden of proving
negligence on the part of the bank for failure to detect the discrepancy in the
signatures on the checks. It is incumbent upon petitioner to establish the fact of Case Title : MICHAEL A. OSMEÑA, petitioner, vs. CITIBANK, N.A., ASSOCIATED
forgery, i.e., by submitting his specimen signatures and comparing them with BANK and FRANK TAN, respondents.Case Nature : PETITION for review on
those on the questioned checks. Curiously though, petitioner failed to submit certiorari of a decision of the Court of Appeals.
additional specimen signatures as requested by the National Bureau of Syllabi Class : Commercial Law|Banks and Banking|Negotiable Instruments Law
Investigation from which to draw a conclusive finding regarding forgery. The Syllabi:
Court of Appeals found that petitioner, by his own inaction, was precluded from 1. Commercial Law; Banks and Banking; Negotiable Instruments Law; The
setting up forgery. Negotiable Instruments Law was enacted for the purpose of facilitating, not
2. Civil Law; Damages; Negligence; Negligence is the omission to do something hindering or hampering transactions in commercial paper.-
which a reasonable man, guided by those considerations which ordinarily —The petitioner cites the ruling of the Court in Associated Bank v. Court of
regulate the conduct of human affairs would do, or the doing of something Appeals, in which we outlined the respective responsibilities and liabilities of a
which a prudent and reasonable man would do.- drawee bank, such as the respondent Citibank, and a collecting bank, such as
As borne by the records, it was petitioner, not the bank, who was negligent. the defendant Associated Bank, in the event that payment of a check to a
Negligence is the omission to do something which a reasonable man, guided by person not designated as the payee, or who is not a holder in due course, had
those considerations which ordinarily regulate the conduct of human affairs, been made. However, the ruling of the Court therein does not apply to the
would do, or the doing of something which a prudent and reasonable man present case for, as has been amply demonstrated, the petitioner failed to
would do.In the present case, it appears that petitioner accorded his secretary establish that the proceeds of the check was indeed wrongfully paid by the
unusual degree of trust and unrestricted access to his credit cards, passbooks, respondents Banks to a person other than the intended payee. In addition, the
check books, bank statements, including custody and possession of cancelled Negotiable Instruments Law was enacted for the purpose of facilitating, not
checks and reconciliation of accounts. hindering or hampering transactions in commercial paper. Thus, the said statute
3. Civil Law; Damages; Negligence; Petitioner’s failure to examine his bank should not be tampered with haphazardly or lightly. Nor should it be brushed
statements appears as the proximate cause of his own damage; Proximate aside in order to meet the necessities in a single case.
Cause Defined.-
Petitioner’s failure to examine his bank statements appears as the proximate Division: SECOND DIVISION
cause of his own damage. Proximate cause is that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the Docket Number: G.R. No. 141278
injury, and without which the result would not have occurred. In the instant
case, the bank was not shown to be remiss in its duty of sending monthly bank Counsel: Castillo, Laman, Tan, Pantaleon & San Jose, Agcaoili and Associates,
statements to petitioner so that any error or discrepancy in the entries therein Guerrero, Cabalum, Rabuya, Divina & Associates
could be brought to the bank’s attention at the earliest opportunity. But,
petitioner failed to examine these bank statements not because he was Ponente: CALLEJO, SR.
prevented by some cause in not doing so, but because he did not pay sufficient
attention to the matter. Had he done so, he could have been alerted to any Dispositive Portion:
anomaly committed against him. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision dated
4. Civil Law; Criminal Law; Forgery; When a signature is forged or made November 26, 1999 of the Court of Appeals in CA-G.R. CV No. 49529 is hereby
without the authority of the person whose signature it purports to be, the check AFFIRMED. Costs against the petitioner.
is wholly inoperative unless the party against whom it is sought to enforce such
right is precluded from setting up the forgery or want of authority.-
True, it is a rule that when a signature is forged or made without the authority Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. CASA
of the person whose signature it purports to be, the check is wholly inoperative. MONTESSORI INTERNATIONALE and LEONARDO T. YABUT, respondents., CASA
No right to retain the instrument, or to give a discharge therefor, or to enforce MONTESSORI INTERNATIONALE, petitioner, vs. BANK OF THE PHILIPPINE
ISLANDS, respondents.Case Nature : PETITION for review on certiorari of the coercion by the State that may lead the accused “to admit something false, not
decision and resolution of the Court of Appeals. prevent him from freely and voluntarily telling the truth.”
Syllabi Class : Negotiable Instruments Law|Administrative Investigations|Banks 5. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Under
and Banking|Accountants and Auditors|Damages|Rights of Suspects|Self- the best evidence rule as applied to documentary evidence, like the checks in
Incrimination|Bill of Rights|Checks|Evidence|Best Evidence Rule|Audit question, no secondary evidence or substitutionary evidence may inceptively be
Procedures|Estoppel|Words and Phrases|Proximate introduced, as the original writing itself must be produced in court, but when,
Cause|Negligence|Forgery|Negligence is not presumed|but proven by whoever without bad faith on the part of the offeror, the original checks have already
alleges it|Attorney’s Fees|Interest Rates|Negotiable Instruments Law|Code of been destroyed or cannot be produced in court, secondary evidence, like
Commerce microfilm copies, may be produced.-
Syllabi: Forgery “cannot be presumed.” It must be established by clear, positive and
1. Negotiable Instruments Law; A forged signature is a real or absolute defense, convincing evidence. Under the best evidence rule as applied to documentary
and a person whose signature on a negotiable instrument is forged is deemed to evidence like the checks in question, no secondary or substitutionary evidence
have never become a party thereto and to have never consented to the contract may inceptively be introduced, as the original writing itself must be produced in
that allegedly gave rise to it.- court. But when, without bad faith on the part of the offeror, the original checks
Section 23 of the NIL provides: “Section 23. Forged signature; effect of.—When a have already been destroyed or cannot be produced in court, secondary
signature is forged or made without the authority of the person whose signature evidence may be produced. Without bad faith on its part, CASA proved the loss
it purports to be, it is wholly inoperative, and no right x x x to enforce payment or destruction of the original checks through the Affidavit of the one person who
thereof against any party thereto, can be acquired through or under such knew of that fact—Yabut. He clearly admitted to discarding the paid checks to
signature, unless the party against whom it is sought to enforce such right is cover up his misdeed. In such a situation, secondary evidence like microfilm
precluded from setting up the forgery or want of authority.” Under this copies may be introduced in court.
provision, a forged signature is a real or absolute defense, and a person whose 6. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Even
signature on a negotiable instrument is forged is deemed to have never become with respect to documentary evidence, the best evidence rule applies only when
a party thereto and to have never consented to the contract that allegedly gave the contents of the document—such as the drawer’s signature on a check—is
rise to it. The counterfeiting of any writing, consisting in the signing of another’s the subject of inquiry.-
name with intent to defraud, is forgery. Even with respect to documentary evidence, the best evidence rule applies only
2. Administrative Investigations; Rights of Suspects; The mantle of protection when the contents of a document—such as the drawer’s signature on a check—
under Section 12 of Article III of the 1987 Constitution covers only the period is the subject of inquiry. As to whether the document has been actually
“from the time a person is taken into custody for investigation of his possible executed, this rule does not apply; and testimonial as well as any other
participation in the commission of a crime or from the time he is singled out as a secondary evidence is admissible. Carina Lebron herself, the drawer’s authorized
suspect in the commission of a crime although not yet in custody”—to fall within signatory, testified many times that she had never signed those checks. Her
the ambit of Section 12, there must be an arrest or a deprivation of freedom, testimonial evidence is admissible; the checks have not been actually executed.
with “questions propounded on him by the police authorities for the purpose of The genuineness of her handwriting is proved, not only through the court’s
eliciting admissions, confessions, or any information.”- comparison of the questioned hand-writings and admittedly genuine specimens
In the first place, he was not under custodial investigation. His Affidavit was thereof, but above all by her.
executed in private and before private individuals. The mantle of protection 7. Negotiable Instruments Law; Checks; Evidence; Best Evidence Rule; Of no
under Section 12 of Article III of the 1987 Constitution covers only the period consequence is the fact that the depositor did not present the signature card
“from the time a person is taken into custody for investigation of his possible containing the signatures with which those on the checks were compared—
participation in the commission of a crime or from the time he is singled out as a specimens of standard signatures are not limited to such a card.-
suspect in the commission of a crime although not yet in custody.” Therefore, to The failure of CASA to produce the original checks neither gives rise to the
fall within the ambit of Section 12, quoted above, there must be an arrest or a presumption of suppression of evidence nor creates an unfavorable inference
deprivation of freedom, with “questions propounded on him by the police against it. Such failure merely authorizes the introduction of secondary evidence
authorities for the purpose of eliciting admissions, confessions, or any in the form of microfilm copies. Of no consequence is the fact that CASA did not
information.” The said constitutional provision does “not apply to spontaneous present the signature card containing the signatures with which those on the
statements made in a voluntary manner” whereby an individual orally admits to checks were compared. Specimens of standard signatures are not limited to such
authorship of a crime. “What the Constitution proscribes is the compulsory or a card. Considering that it was not produced in evidence, other documents that
coercive disclosure of incriminating facts.” bear the drawer’s authentic signature may be resorted to. Besides, that card
3. Administrative Investigations; Self-Incrimination; The right against self- was in the possession of BPI—the adverse party.
incrimination, which is ordinarily available only in criminal prosecutions, extends 8. Banks and Banking; Checks; Since the banking business is impressed with
to all other government proceedings—including civil actions, legislative public interest, of paramount importance thereto is the trust and confidence of
investigations, and administrative proceedings that possess a criminal or penal the public in general—the highest degree of diligence is expected, and high
aspect—but not to private investigations done by private individuals.- standards of integrity and performance are even required of it; A bank is bound
The right against self-incrimination under Section 17 of Article III of the to know the signatures of its customers, and if it pays a forged check, it must be
Constitution, which is ordinarily available only in criminal prosecutions, extends considered as making the payment out of its own funds, and cannot ordinarily
to all other government proceedings—including civil actions, legislative charge the amount so paid to the account of the depositor whose name was
investigations, and administrative proceedings that possess a criminal or penal forged.-
aspect—but not to private investigations done by private individuals. Even in We have repeatedly emphasized that, since the banking business is impressed
such government proceedings, this right may be waived, provided the waiver is with public interest, of paramount importance thereto is the trust and
certain; unequivocal; and intelligently, understanding and willingly made. If in confidence of the public in general. Consequently, the highest degree of
these government proceedings waiver is allowed, all the more is it so in private diligence is expected, and high standards of integrity and performance are even
investigations. It is of no moment that no criminal case has yet been filed required, of it. By the nature of its functions, a bank is “under obligation to treat
against Yabut. The filing thereof is entirely up to the appropriate authorities or the accounts of its depositors with meticulous care, always having in mind the
to the private individuals upon whom damage has been caused. As we shall also fiduciary nature of their relationship.” BPI contends that it has a signature
explain later, it is not mandatory for CASA—the plaintiff below—to implead verification procedure, in which checks are honored only when the signatures
Yabut in the civil case before the lower court. therein are verified to be the same with or similar to the specimen signatures on
4. Administrative Investigations; Bill of Rights; The Bill of Rights does not the signature cards. Nonetheless, it still failed to detect the eight instances of
concern itself with the relation between a private individual and another forgery. Its negligence consisted in the omission of that degree of diligence
individual—the Bill of Rights “is a charter of liberties for the individual and a required of a bank. It cannot now feign ignorance, for very early on we have
limitation upon the power of the State.”- already ruled that a bank is “bound to know the signatures of its customers; and
Under these two constitutional provisions, “[t]he Bill of Rights does not concern if it pays a forged check, it must be considered as making the payment out of its
itself with the relation between a private individual and another individual. It own funds, and cannot ordinarily charge the amount so paid to the account of
governs the relationship between the individual and the State.” Moreover, the the depositor whose name was forged.” In fact, BPI was the same bank involved
Bill of Rights “is a charter of liberties for the individual and a limitation upon the when we issued this ruling seventy years ago.
power of the [S]tate.” These rights are guaranteed to preclude the slightest
9. Banks and Banking; Checks; Audit Procedures; The notice in the monthly indemnification from the drawer.” In both law and equity, when one of two
statements issued by the bank that if no error is reported in ten (10) days, the innocent persons “must suffer by the wrongful act of a third person, the loss
account will be correct cannot be considered a waiver, even if the depositor must be borne by the one whose negligence was the proximate cause of the loss
failed to report the error, and neither is it estopped from questioning the or who put it into the power of the third person to perpetrate the wrong.”
mistake after the lapse of the ten-day period—such notice is a simple 14. Banks and Banking; Checks; Proximate Cause; Words and
confirmation or “circularization,”—in accounting parlance, that requests client- Phrases; Proximate cause is that cause which, in natural and continuous
depositors to affirm the accuracy of items recorded by the banks.- sequence, unbroken by any efficient intervening cause, produces the injury, and
The monthly statements issued by BPI to its clients contain a notice worded as without which the result would not have occurred.-
follows: “If no error is reported in ten (10) days, account will be correct.” Such Proximate cause is determined by the facts of the case. “It is that cause which, in
notice cannot be considered a waiver, even if CASA failed to report the error. natural and continuous sequence, unbroken by any efficient intervening cause,
Neither is it estopped from questioning the mistake after the lapse of the ten- produces the injury, and without which the result would not have occurred.”
day period. This notice is a simple confirmation or “circularization”—in Pursuant to its prime duty to ascertain well the genuineness of the signatures of
accounting parlance—that requests client-depositors to affirm the accuracy of its client-depositors on checks being encashed, BPI is “expected to use
items recorded by the banks. Its purpose is to obtain from the depositors a direct reasonable business prudence.” In the performance of that obligation, it is
corroboration of the correctness of their account balances with their respective bound by its internal banking rules and regulations that form part of the
banks. Internal or external auditors of a bank use it as a basic audit procedure— contract it enters into with its depositors.
the results of which its client-depositors are neither interested in nor privy to—to 15. Banks and Banking; Checks; Proximate Cause; Negligence; Forgery; In this
test the details of transactions and balances in the bank’s records. Evidential jurisdiction, the negligence of the party invoking forgery is recognized as an
matter obtained from independent sources outside a bank only serves to provide exception to the general rule that a forged signature is wholly inoperative.-
greater assurance of reliability than that obtained solely within it for purposes of In this jurisdiction, the negligence of the party invoking forgery is recognized as
an audit of its own financial statements, not those of its client-depositors. an exception to the general rule that a forged signature is wholly inoperative.
10. Banks and Banking; Checks; Audit Procedures; Banks have no right to Contrary to BPI’s claim, however, we do not find CASA negligent in han- dling its
impose a condition unilaterally and thereafter consider failure to meet such financial affairs. CASA, we stress, is not precluded from setting up forgery as a
condition a waiver, and neither may a depositor renounce a right it never real defense.
possessed.- 16. Accountants and Auditors; The major purpose of an independent audit is to
There is always the audit risk that errors would not be detected for various investigate and determine objectively if the financial statements submitted for
reasons. One, materiality is a consideration in audit planning; and two, the audit by a corporation have been prepared in accordance with the appropriate
information obtained from such a substantive test is merely presumptive and financial reporting practices of private entities.-
cannot be the basis of a valid waiver. BPI has no right to impose a condition The major purpose of an independent audit is to investigate and determine
unilaterally and thereafter consider failure to meet such condition a waiver. objectively if the financial statements submitted for audit by a corporation have
Neither may CASA renounce a right it has never possessed. been prepared in accordance with the appropriate financial reporting practices
11. Banks and Banking; Checks; Audit Procedures; Every right has subjects— of private entities. The relationship that arises therefrom is both legal and
active and passive, the active subject being entitled to demand its enforcement moral. It begins with the execution of the engagement letter that embodies the
while the passive one being duty-bound to suffer such enforcement; The bank terms and conditions of the audit and ends with the fulfilled expectation of the
could not have been an active subject, because it could not have demanded auditor’s ethical and competent performance in all aspects of the audit. The
from the depositor a response to its notice, while, on the other hand, the financial statements are representations of the client; but it is the auditor who
depositor could not have been a passive subject because it had no obligation to has the responsibility for the accuracy in the recording of data that underlies
respond.- their preparation, their form of presentation, and the opinion expressed therein.
Every right has subjects—active and passive. While the active subject is entitled The auditor does not assume the role of employee or of management in the
to demand its enforcement, the passive one is duty-bound to suffer such client’s conduct of operations and is never under the control or supervision of
enforcement. On the one hand, BPI could not have been an active subject, the client.
because it could not have demanded from CASA a response to its notice. 17. Accountants and Auditors; Negligence; Nothing could be more horrible to a
Besides, the notice was a measly request worded as follows: “Please examine x x client than to discover later on that the person tasked to detect fraud was the
x and report x x x.” CASA, on the other hand, could not have been a passive same one who perpetrated it.-
subject, either, because it had no obligation to respond. It could—as it did— Yabut was an independent auditor hired by CASA. He handled its monthly bank
choose not to respond. reconciliations and had access to all relevant documents and checkbooks. In him
12. Banks and Banking; Checks; Estoppel; Words and Phrases; Estoppel was reposed the client’s trust and confidence that he would perform precisely
precludes individuals from denying or asserting, by their own deed or those functions and apply the appropriate procedures in accordance with
representation, anything contrary to that established as the truth, in legal generally accepted auditing standards. Yet he did not meet these expectations.
contemplation; Estoppel will not arise from a conduct due to ignorance founded Nothing could be more horrible to a client than to discover later on that the
upon an innocent mistake.- person tasked to detect fraud was the same one who perpetrated it.
Estoppel precludes individuals from denying or asserting, by their own deed or 18. Accountants and Auditors; Negligence; Awareness is not equipollent with
representation, anything contrary to that established as the truth, in legal discernment.-
contemplation. Our rules on evidence even make a juris et de jure presumption It is a non sequitur to say that the person who receives the monthly bank
that whenever one has, by one’s own act or omission, intentionally and statements, together with the cancelled checks and other debit/credit
deliberately led another to believe a particular thing to be true and to act upon memoranda, shall examine the contents and give notice of any discrepancies
that belief, one cannot—in any litigation arising from such act or omission—be within a reasonable time. Awareness is not equipollent with discernment.
permitted to falsify that supposed truth. In the instant case, CASA never made 19. Accountants and Auditors; Negligence; A preschool teacher charged with
any deed or representation that misled BPI. The former’s omission, if any, may molding the minds of the youth cannot be burdened with the intricacies or
only be deemed an innocent mistake oblivious to the procedures and complexities of corporate existence.-
consequences of periodic audits. Since its conduct was due to such ignorance Moreover, there was a time gap between the period covered by the bank
founded upon an innocent mistake, estoppel will not arise. A person who has no statement and the date of its actual receipt. Lebron personally received the
knowledge of or consent to a transaction may not be estopped by it. “Estoppel December 1990 bank statement only in January 1991—when she was also
cannot be sustained by mere argument or doubtful inference x x x.” CASA is not informed of the forgery for the first time, after which she immediately requested
barred from questioning BPI’s error even after the lapse of the period given in a “stop payment order.” She cannot be faulted for the late detection of the
the notice. forged December check. After all, the bank account with BPI was not personal
13. Banks and Banking; Checks; For allowing payment on the checks to a but corporate, and she could not be expected to monitor closely all its finances.
wrongful and fictitious payee, the drawee bank becomes liable to its depositor- A preschool teacher charged with molding the minds of the youth cannot be
drawer.- burdened with the intricacies or complexities of corporate existence.
For allowing payment on the checks to a wrongful and fictitious payee, BPI—the 20. Accountants and Auditors; Negligence; The depositor could only be blamed,
drawee bank—becomes liable to its depositor-drawer. Since the encashing bank if at all, for its unintelligent choice in the selection and appointment of an
is one of its branches, BPI can easily go after it and hold it liable for auditor—a fault that is not tantamount to negligence.-
reimbursement. It “may not debit the drawer’s account and is not entitled to
There is also a cutoff period such that checks issued during a given month, but For the failure of BPI to pay CASA upon demand and for compelling the latter to
not presented for payment within that period, will not be reflected therein. An resort to the courts to obtain payment, legal interest may be adjudicated at the
experienced auditor with intent to defraud can easily conceal any devious discretion of the Court, the same to run from the filing of the Complaint. Since a
scheme from a client unwary of the accounting processes involved by court judgment is not a loan or a forbearance of recovery, the legal interest shall
manipulating the cash balances on record—especially when bank transactions be at six percent (6%) per annum. “If the obligation consists in the payment of a
are numerous, large and frequent. CASA could only be blamed, if at all, for its sum of money, and the debtor incurs in delay, the indemnity for damages, there
unintelligent choice in the selection and appointment of an auditor—a fault that being no stipulation to the contrary, shall be the payment of x x x legal interest,
is not tantamount to negligence. which is six percent per annum.” The actual base for its computation shall be
21. Accountants and Auditors; Negligence; Negligence is not presumed, but “on the amount finally adjudged,” compounded annually to make up for the cost
proven by whoever alleges it; The Professional Regulation Commission, through of money already lost to CASA.
the Board of Accountancy, now requires not only accreditation for the practice 27. Damages; Negotiable Instruments Law; Code of Commerce; Under Section
of public accountancy, but also the registration of firms in the practice thereof.- 196 of the NIL, any case not provided for shall be “governed by the provisions of
Negligence is not presumed, but proven by whoever alleges it. Its mere existence existing legislation or, in default thereof, by the rules of the law merchant,” and,
“is not sufficient without proof that it, and no other cause,” has given rise to since damages are not provided for in the NIL, resort is had to the Code of
damages. In addition, this fault is common to, if not prevalent among, small and Commerce and the Civil Code.-
medium-sized business entities, thus leading the Professional Regulation Moreover, the failure of the CA to award interest does not prevent us from
Commission (PRC), through the Board of Accountancy (BOA), to require today granting it upon damages awarded for breach of contract. Because BPI evidently
not only accreditation for the practice of public accountancy, but also the breached its contract of deposit with CASA, we award interest in addition to the
registration of firms in the practice thereof. In fact, among the attachments now total amount adjudged. Under Section 196 of the NIL, any case not provided for
required upon registration are the code of good governance and a sworn shall be “governed by the provisions of existing legislation or, in default thereof,
statement on adequate and effective training. by the rules of the law merchant.” Damages are not provided for in the NIL.
22. Accountants and Auditors; Negligence; If auditors may be held liable for Thus, we resort to the Code of Commerce and the Civil Code. Under Article 2 of
breach of contract and negligence, with all the more reason may they be the Code of Commerce, acts of commerce shall be governed by its provisions
charged with the perpetration of fraud upon an unsuspecting client.- and, “in their absence, by the usages of commerce generally observed in each
Clearly then, Yabut was able to perpetrate the wrongful act through no fault of place; and in the absence of both rules, by those of the civil law.” This law being
CAS A. If auditors may be held liable for breach of contract and negligence, with silent, we look at Article 18 of the Civil Code, which states: “In matters which are
all the more reason may they be charged with the perpetration of fraud upon an governed by the Code of Commerce and special laws, their deficiency shall be
unsuspecting client. CASA had the discretion to pursue BPI alone under the NIL, supplied” by its provisions. A perusal of these three statutes unmistakably shows
by reason of expediency or munificence or both. Money paid under a mistake that the award of interest under our civil law is justified.
may rightfully be recovered, and under such terms as the injured party may
choose. Division: FIRST DIVISION
23. Damages; The adverse result of an action does not per se make the action
wrongful, or the party liable for it.- Docket Number: G.R. No. 149454, G.R. No. 149507
In the absence of a wrongful act or omission, or of fraud or bad faith, moral
damages cannot be awarded. The adverse result of an action does not per se Counsel: Benedicto, Verzosa, Geslogo, Burkley & Associates, Oscar F. Martinez,
make the action wrongful, or the party liable for it. One may err, but error alone Mauricio Law Office
is not a ground for granting such damages. While no proof of pecuniary loss is
necessary therefor—with the amount to be awarded left to the court’s Ponente: PANGANIBAN
discretion—the claimant must nonetheless satisfactorily prove the existence of
its factual basis and causal relation to the claimant’s act or omission. Dispositive Portion:
24. Damages; As a general rule, a corporation is not entitled to moral damages WHEREFORE, the Petition in G.R. No. 149454 is hereby DENIED, and that in G.R.
because it cannot experience physical suffering and mental anguish, but, for No. 149507 PARTLY GRANTED. The assailed Decision of the Court of Appeals is
breach of the fiduciary duty required of a bank, a corporate client may claim AFFIRMED with modification: BPI is held liable for P547,115, the total value of
such damages when its good reputation is besmirched by such breach, and the forged checks less the amount already recovered by CASA from Leonardo T.
social humiliation results therefrom.- Yabut, plus interest at the legal rate of six percent (6%) per annum—
As a general rule, a corporation—being an artificial person without feelings, compounded annually, from the filing of the complaint until paid in full; and
emotions and senses, and having existence only in legal contemplation—is not attorney’s fees of ten percent (10%) thereof, subject to reimbursement from
entitled to moral damages, because it cannot experience physical suffering and Respondent Yabut for the entire amount, excepting attorney’s fees. Let a copy
mental anguish. However, for breach of the fiduciary duty required of a bank, a of this Decision be furnished the Board of Accountancy of the Professional
corporate client may claim such damages when its good reputation is Regulation Commission for such action as it may deem appropriate against
besmirched by such breach, and social humiliation results therefrom. CASA was Respondent Yabut. No costs.
unable to prove that BPI had debased the good reputation of, and consequently
caused incalculable embarrassment to, the former. CASA’s mere allegation or
supposition thereof, without any sufficient evidence on record, is not enough. Case Title : SAMSUNG CONSTRUCTION COMPANY PHILIPPINES, INC., petitioner,
25. Damages; Attorney’s Fees; When the act or omission of the defendant has vs. FAR EAST BANK AND TRUST COMPANY AND COURT OF APPEALS,
compelled the plaintiff to incur expenses to protect the latter’s interest, or respondents.Case Nature : PETITION for review on certiorari of a decision of the
where the court deems it just and equitable, attorney’s fees may be recovered.- Court of Appeals.
Although it is a sound policy not to set a premium on the right to litigate, we Syllabi Class : Negotiable Instruments Law|Checks|Forgery|Negligence
find that CASA is entitled to reasonable attorney’s fees based on “factual, legal, Syllabi:
and equitable justification.” When the act or omission of the defendant has 1. Negotiable Instruments Law; Checks; A forged signature is “wholly
compelled the plaintiff to incur expenses to protect the latter’s interest, or inoperative” and payment made “through or under such signature” is ineffectual
where the court deems it just and equitable, attorney’s fees may be recovered. or does not discharge the instrument.-
In the present case, BPI persistently denied the claim of CASA under the NIL to The general rule is to the effect that a forged signature is “wholly inoperative,”
recredit the latter’s account for the value of the forged checks. This denial and payment made “through or under such signature” is ineffectual or does not
constrained CASA to incur expenses and exert effort for more than ten years in discharge the instrument. If payment is made, the drawee cannot charge it to
order to protect its corporate interest in its bank account. Besides, we have the drawer’s account. The traditional justification for the result is that the
already cautioned BPI on a similar act of negligence it had committed seventy drawee is in a superior position to detect a forgery because he has the maker’s
years ago, but it has remained unrelenting. Therefore, the Court deems it just signature and is expected to know and compare it. The rule has a healthy
and equitable to grant ten percent (10%) of the total value adjudged to CASA as cautionary effect on banks by encouraging care in the comparison of the
attorney’s fees. signatures against those on the signature cards they have on file. Moreover, the
26. Damages; Interest Rates; Since a court judgment is not a loan or a very opportunity of the drawee to insure and to distribute the cost among its
forbearance of recovery, the legal interest shall be at six percent (6%) per customers who use checks makes the drawee an ideal party to spread the risk to
annum.- insurance.
2. Negotiable Instruments Law; Checks; Forgery; Forgery is a real or absolute Syllabi Class : Remedial Law|Civil Law|Actions|Party-in-Interest|Banks|Forgery
defense by the party whose signature is forged.- Syllabi:
Under Section 23 of the Negotiable Instruments Law, forgery is a real or 1. Remedial Law; Actions; Party-in-Interest; It is elementary that it is only in the
absolute defense by the party whose signature is forged. On the premise that name of a real party-in-interest that a civil suit may be prosecuted; To qualify a
Jong’s signature was indeed forged, FEBTC is liable for the loss since it person to be a real party-in-interest in whose name an action must be
authorized the discharge of the forged check. Such liability attaches even if the prosecuted, he must appear to be the present real owner of the right sought to
bank exerts due diligence and care in preventing such faulty discharge. Forgeries be enforced.-
often deceive the eye of the most cautious experts; and when a bank has been It is elementary that it is only in the name of a real party-in-interest that a civil
so deceived, it is a harsh rule which compels it to suffer although no one has suit may be prosecuted. Under Section 2, Rule 3 of the Rules of Civil Procedure, a
suffered by its being deceived. The forgery may be so near like the genuine as to real party-in-interest is the party who stands to be benefited or injured by the
defy detection by the depositor himself, and yet the bank is liable to the judgment in the suit, or the party entitled to the avails of the suit. “Interest”
depositor if it pays the check. within the meaning of the rule means material interest, an interest in issue and
3. Negotiable Instruments Law; Checks; Forgery; A document formally to be affected by the decree, as distinguished from mere interest in the question
presented is presumed to be genuine until it is proved to be fraudulent.- involved, or a mere incidental interest. One having no right or interest to protect
Thus, the first matter of inquiry is into whether the check was indeed forged. A cannot invoke the jurisdiction of the court as a party plaintiff in an action. To
document formally presented is presumed to be genuine until it is proved to be qualify a person to be a real party-in-interest in whose name an action must be
fraudulent. In a forgery trial, this presumption must be overcome but this can prosecuted, he must appear to be the present real owner of the right sought to
only be done by convincing testimony and effective illustrations. be enforced. Since a contract may be violated only by the parties thereto as
4. Negotiable Instruments Law; Checks; Forgery; Bare fact that the forgery was against each other, in an action upon that contract, the real parties-in-interest,
committed by an employee of the party whose signature was forged cannot either as plaintiff or as defendant, must be parties to the said contract.
necessarily imply that such party’s negligence was the cause for the forgery.- 2. Remedial Law; Actions; A court may grant relief to a party even if the party
The bare fact that the forgery was committed by an employee of the party awarded did not pray for it in his pleadings.-
whose signature was forged cannot necessarily imply that such party’s There is no merit to the claim that the CA erred in affirming the RTC’s order
negligence was the cause for the forgery. Employers do not possess the directing BPI-FB to pay the balance of their account plus interest although the
preternatural gift of cognition as to the evil that may lurk within the hearts and prayer was only to reinstate their Current Account. The complaint does contain a
minds of their employees. general prayer “for such other relief as may be just and equitable in the
5. Negotiable Instruments Law; Checks; Forgery; If a bank pays a forged check, premises.” And this general prayer is broad enough “to justify extension of a
it must be considered as paying out of its funds and cannot charge the amount remedy different from or together with the specific remedy sought.” Indeed, a
so paid to the account of the depositor.- court may grant relief to a party, even if the party awarded did not pray for it in
Still, even if the bank performed with utmost diligence, the drawer whose his pleadings.
signature was forged may still recover from the bank as long as he or she is not 3. Civil Law; Banks; The contract between a bank and its depositors is governed
precluded from setting up the defense of forgery. After all, Section 23 of the by the provisions of the Civil Code on simple loan.-
Negotiable Instruments Law plainly states that no right to enforce the payment The contract between a bank and its depositor is governed by the provisions of
of a check can arise out of a forged signature. Since the drawer, Samsung the Civil Code on simple loan. Thus, there is a debtor-creditor relationship
Construction, is not precluded by negligence from setting up the forgery, the between a bank and its depositor. The bank is the debtor and the depositor is
general rule should apply. Consequently, if a bank pays a forged check, it must the creditor. The depositor lends the bank money and the bank agrees to pay
be considered as paying out of its funds and cannot charge the amount so paid the depositor on demand. The savings or current deposit agreement between
to the account of the depositor. A bank is liable, irrespective of its good faith, in the bank and the depositor is the contract that determines the rights and
paying a forged check. obligations of the parties.
6. Negotiable Instruments Law; Checks; Forgery; Negligence; The presumption 4. Civil Law; Banks; Forgery; Unless a forgery or alteration is attributable to the
remains that every person takes ordinary care of his concerns, and that the fault or negligence of the drawer himself, the remedy of the drawee bank that
ordinary course of business has been followed; Negligence is not presumed but negligently clears a forged and/or altered check for payment is against the party
must be proven by him who alleges it.- responsible for the forgery or alteration, otherwise it bears the loss.-
Still, in the absence of evidence to the contrary, we can conclude that there was Every bank that issues checks for the use of its customers should know whether
no negligence on Samsung Construction’s part. The presumption remains that or not the drawer’s signature thereon is genuine, whether there are sufficient
every person takes ordinary care of his concerns, and that the ordinary course of funds in the drawers account to cover checks issued, and it should be able to
business has been followed. Negligence is not presumed, but must be proven by detect alterations, erasures, superimpositions or intercalations thereon, for
him who alleges it. While the complaint was lodged at the instance of Samsung these instruments are prepared, printed and issued by itself, it has control of the
Construction, the matter it had to prove was the claim it had alleged—whether drawer’s account, and it is supposed to be familiar with the drawer’s signature.
the check was forged. It cannot be required as well to prove that it was not It should possess appropriate detecting devices for uncovering forgeries and/or
negligent, because the legal presumption remains that ordinary care was alterations on these instruments. Unless a forgery or alteration is attributable to
employed. the fault or negligence of the drawer himself, the remedy of the drawee bank
that negligently clears a forged and/or altered check for payment is against the
Division: SECOND DIVISION party responsible for the forgery or alteration, otherwise, it bears the loss.

Docket Number: G.R. No. 129015 Division: SECOND DIVISION

Counsel: Alan A. Leynes, Angara, Abello, Concepcion, Regala & Cruz Docket Number: G.R. No. 148196, G.R. No. 148259

Ponente: TINGA Counsel: Bargas, Benedicto, Tale, Verzosa & Associates, Ernesto L. Pineda

Dispositive Portion: Ponente: AUSTRIA-MARTINEZ


WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals
dated 28 November 1996 is REVERSED, and the Decision of the Regional Trial Dispositive Portion:
Court of Manila, Branch 9, dated 25 April 1994 is REINSTATED. Costs against WHEREFORE, the petition in G.R. No. 148196 is DENIED and the petition in G.R.
respondent. No. 148259 is GRANTED. The assailed Decision dated November 27, 2000 and
Resolution dated May 3, 2001 of the Court of Appeals in CA-G.R. CV No. 53962,
which affirmed with modification the Decision ren- dered by the Regional Trial
Case Title : BPI FAMILY BANK, petitioner, vs. EDGARDO BUENAVENTURA, Court, Branch 25, Manila, dated August 11, 1995 in Civil Case No. 90-53154, are
MYRNA LIZARDO and YOLANDA TICA, respondents., EDGARDO hereby AFFIRMED with the MODIFICATION that BPI Family Bank is directed to
BUENAVENTURA, MYRNA LIZARDO and YOLANDA TICA, petitioners, vs. BPI pay Buenaventura, et al. the amount of P50,000.00 as exemplary damages.
FAMILY BANK, respondent.Case Nature : PETITIONS for review on certiorari of Costs against BPI Family Bank.
the decision and resolution of the Court of Appeals.
of a third person, the payment to one who is not in fact his creditor, or
Case Title : ALLIED BANKING CORPORATION, petitioner, vs. LIM SIO WAN, authorized to receive such payment, is void, except as provided in Article 1241.
METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents Such payment does not prejudice the creditor, and accrual of interest is not
Case Nature : PETITION for review on certiorari of a decision of the Court of suspended by it. (Emphasis supplied.)
Appeals. Same; Proximate Cause; Words and Phrases; Proximate cause is “that cause,
Syllabi Class :Banks and Banking ; Unjust Enrichment ; Words and Phrases ; which, in natural and continuous sequence, unbroken by any efficient
Division: SECOND DIVISION intervening cause, produces the injury and without which the result would not
have occurred”; To determine the proximate cause of a controversy, the
Docket Number: G.R. No. 133179 question that needs to be asked is: If the event did not happen, would the injury
have resulted? If the answer is NO, then the event is the proximate cause.—
Counsel: Ocampo, Tejada, Guevarra & Associates Proximate cause is “that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
Ponente: VELASCO, JR. which the result would not have occurred.” Thus, there is an efficient
supervening event if the event breaks the sequence leading from the cause to
Dispositive Portion: the ultimate result. To determine the proximate cause of a controversy, the
“WHEREFORE, premises considered, the decision appealed from is MODIFIED. question that needs to be asked is: If the event did not happen, would the injury
Judgment is rendered ordering and sentencing defendant-appellant Allied have resulted? If the answer is NO, then the event is the proximate cause.
Banking Corporation to pay sixty (60%) percent and defendant-appellee Same; Negotiable Instruments; Checks; An exception to the rule that the
Metropolitan Bank and Trust Company forty (40%) of the amount of collecting bank which indorses a check bearing a forged indorsement and
P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully presents it to the drawee bank guarantees all prior indorsements, including the
paid. The moral damages, attorney’s fees and costs of suit adjudged shall forged indorsement itself, and ultimately should be held liable therefor is when
likewise be paid by defendant-appellant Allied Banking Corporation and the issuance of the check itself was attended with negligence.—The warranty
defendant-appellee Metropolitan Bank and Trust Company in the same “that the instrument is genuine and in all respects what it purports to be”
proportion of 60-40. Except as thus modified, the decision appealed from is covers all the defects in the instrument affecting the validity thereof, including a
AFFIRMED. forged indorsement. Thus, the last indorser will be liable for the amount
indicated in the negotiable instrument even if a previous indorsement was
Banks and Banking; Fundamental and familiar is the doctrine that the forged. We held in a line of cases that “a collecting bank which indorses a check
relationship between a bank and a client is one of debtor-creditor.—As to the bearing a forged indorsement and presents it to the drawee bank guarantees all
liability of the parties, we find that Allied is liable to Lim Sio Wan. Fundamental prior indorsements, including the forged indorsement itself, and ultimately
and familiar is the doctrine that the relationship between a bank and a client is should be held liable therefor.” However, this general rule is subject to
one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide: Art. exceptions. One such exception is when the issuance of the check itself was
1953. A person who receives a loan of money or any other fungible thing attended with negligence. Thus, in the cases cited above where the collecting
acquires the ownership thereof, and is bound to pay to the creditor an equal bank is generally held liable, in two of the cases where the checks were
amount of the same kind and quality. Art. 1980. Fixed, savings, and current negligently issued, this Court held the institution issuing the check just as liable
deposits of money in banks and similar institutions shall be governed by the as or more liable than the collecting bank.
provisions concerning simple loan.
Same; Same; Same; Given the relative participation of two banks to the instant
Same; Money Market Transactions; Words and Phrases; A money market is a case, both banks cannot be adjudged as equally liable—hence, the 60:40 ratio
market dealing in standardized short-term credit instruments (involving large of the liabilities.—In the instant case, the trial court correctly found Allied
amounts) where lenders and borrowers do not deal directly with each other but negligent in issuing the manager’s check and in transmitting it to Santos without
through a middle man or dealer in open market—in a money market even a written authorization. In fact, Allied did not even ask for the certificate
transaction, the investor is a lender who loans his money to a borrower through evidencing the money market placement or call up Lim Sio Wan at her
a middleman or dealer; The creditor of the bank for her money market residence or office to confirm her instructions. Both actions could have
placement is entitled to payment upon her request, or upon the maturity of the prevented the whole fraudulent transaction from unfolding. Allied’s negligence
placement, or until the bank is released from its obligation as debtor.—We have must be considered as the proximate cause of the resulting loss. To reiterate,
ruled in a line of cases that a bank deposit is in the nature of a simple loan or had Allied exercised the diligence due from a financial institution, the check
mutuum. More succinctly, in Citibank, N.A. (Formerly First National City Bank) v. would not have been issued and no loss of funds would have resulted. In fact,
Sabeniano, 504 SCRA 378 (2006), this Court ruled that a money market there would have been no issuance of indorsement had there been no check in
placement is a simple loan or mutuum. Further, we defined a money market in the first place. The liability of Allied, however, is concurrent with that of
Cebu International Finance Corporation v. Court of Appeals, 316 SCRA 488 Metrobank as the last indorser of the check. When Metrobank indorsed the
(1999), as follows: [A] money market is a market dealing in standardized short- check in compliance with the PCHC Rules and Regulations without verifying the
term credit instruments (involving large amounts) where lenders and borrowers authenticity of Lim Sio Wan’s indorsement and when it accepted the check
do not deal directly with each other but through a middle man or dealer in open despite the fact that it was cross-checked payable to payee’s account only, its
market. In a money market transaction, the investor is a lender who loans his negligent and cavalier indorsement contributed to the easier release of Lim Sio
money to a borrower through a middleman or dealer. In the case at bar, the Wan’s money and perpetuation of the fraud. Given the relative participation of
money market transaction between the petitioner and the private respondent Allied and Metrobank to the instant case, both banks cannot be adjudged as
is in the nature of a loan. Lim Sio Wan, as creditor of the bank for her money equally liable. Hence, the 60:40 ratio of the liabilities of Allied and Metrobank,
market placement, is entitled to payment upon her request, or upon maturity of as ruled by the CA, must be upheld.
the placement, or until the bank is released from its obligation as debtor. Until Same; Quasi-Delicts; Art. 2180 of the Civil Code pertains to the vicarious liability
any such event, the obligation of Allied to Lim Sio Wan remains unextinguished. of an employer for quasi-delicts that an employee has committed—such
Same; Same; Payment made by the debtor to a wrong party does not extinguish provision of law does not apply to civil liability arising from delict.—As to
the obligation as to the creditor, if there is no fault or negligence which can be Producers Bank, Allied Bank’s argument that Producers Bank must be held liable
imputed to the latter.—From the factual findings of the trial and appellate as employer of Santos under Art. 2180 of the Civil Code is erroneous. Art. 2180
courts that Lim Sio Wan did not authorize the release of her money market pertains to the vicarious liability of an employer for quasi-delicts that an
placement to Santos and the bank had been negligent in so doing, there is no employee has committed. Such provision of law does not apply to civil liability
question that the obligation of Allied to pay Lim Sio Wan had not been arising from delict. One also cannot apply the principle of subsidiary liability in
extinguished. Art. 1240 of the Code states that “payment shall be made to the Art. 103 of the Revised Penal Code in the instant case. Such liability on the part
person in whose favor the obligation has been constituted, or his successor in of the employer for the civil aspect of the criminal act of the employee is based
interest, or any person authorized to receive it.” As commented by Arturo on the conviction of the employee for a crime. Here, there has been no
Tolentino: Payment made by the debtor to a wrong party does not extinguish conviction for any crime.
the obligation as to the creditor, if there is no fault or negligence which can be Same; Unjust Enrichment; Words and Phrases; There is unjust enrichment when
imputed to the latter. Even when the debtor acted in utmost good faith and by a person unjustly retains a benefit to the loss of another, or when a person
mistake as to the person of his creditor, or through error induced by the fraud retains money or property of another against the fundamental principles of
justice, equity and good conscience.—As to the claim that there was unjust with damages to another.” [59] In the instant case, Lim Sio Wan ’s money
enrichment on the part of Producers Bank, the same is correct. Allied correctly market placement in Allied Bank was pre-terminated and withdrawn without
claims in its petition that Producers Bank should reimburse Allied for whatever her
judgment that may be rendered against it pursuant to Art. 22 of the Civil Code, 7. consent. Moreover, the proceeds of the placement were deposited in
which provides: “Every person who through an act of performance by another, Producers Bank’s account in Metrobank without any justification. In other
or any other means, acquires or comes into possession of something at the words, there is no reason that the proceeds of Lim Sio Wans’ placement should
expense of the latter without just cause or legal ground, shall return the same be deposited in FCC’s account purportedly as payment for FCC’s money market
to him.” The above provision of law was clarified in Reyes v. Lim, 408 SCRA 560 placement and interest in Producers Bank. With such payment, Producers
(2003), where we ruled that “[t]here is unjust enrichment when a person Bank’s indebtedness to FCC was extinguished, thereby benefitting the former.
unjustly retains a benefit to the loss of another, or when a person retains Clearly, Producers Bank was unjustly enriched at the expense of Lim Sio Wan .
money or property of another against the fundamental principles of justice, Based on the facts and circumstances of the case, Producers Bank should
equity and good conscience.” In Tamio v. Ticson, 443 SCRA 44 (2004), we reimburse Allied and Metrobank for the amounts the two latter banks are
further clarified the principle of unjust enrichment, thus: “Under Article 22 of ordered to pay Lim Sio Wan . It cannot be
the Civil Code, there is unjust enrichment when (1) a person is unjustly 8. jurisdiction over her. [60] We, therefore, cannot ascribe to her liability in the
benefited, and (2) such benefit is derived at the expense of or with damages to instant case. Clearly, Producers Bank must be held liable to Allied and
another.” [Allied Banking Corporation vs. Lim Sio Wan, 549 SCRA 504(2008)] Metrobank for the amount of the check plus 12% interest per annum, moral
damages, attorney’s fees, and costs of suit which Allied and Metrobank are
Excerpt : 1. SCRA 360 [2007]) ——o0o—— G.R. No. 133179. March 27, 2008. adjudged to pay Lim Sio Wan based on a proportion of 60:40. WHEREFORE, the
[*] ALLIED BANKING CORPORATION, petitioner, vs . LIM SIO WAN , petition is PARTLY GRANTED. The March 18, 1998 CA Decision in CA-G.R. CV No.
METROPOLITAN BANK AND TRUST CO., and PRODUCERS BANK, respondents. 46290 and the November 15, 1993 RTC Decision in Civil Case No. 6757 are
Banks and Banking ; Fundamental and familiar is the doctrine that the AFFIRMED with MODIFICATION. Thus, the CA Decision is AFFIRMED, the fallo of
relationship between a bank and a client is one of debtor-creditor.—As to the which is reproduced, as follows: “WHEREFORE, premises considered, the
liability of the parties, we find that Allied is liable to Lim Sio Wan . Fundamental decision appealed from is MODIFIED
and familiar is the doctrine that the relationship between a bank and a client is 9. . Judgment is rendered ordering and sentencing defendant-
one of debtor-creditor. Articles 1953 and 1980 of the Civil Code provide: Art. appellant Allied Banking Corporation to pay sixty (60%) percent and defendant-
1953. A person who receives a loan of money or any other fungible thing appellee Metropolitan Bank and Trust Company forty (40%) of the amount of
acquires the ownership thereof, and is bound to pay P1,158,648.49 plus 12% interest per annum from March 16, 1984 until fully
2. middle man or dealer in open market. In a money market transaction, the paid. The moral damages, attorney’s fees and costs of suit adjudged shall
investor is a lender who loans his money to a borrower through a middleman or likewise be paid by defendant-appellant Allied Banking Corporation and
dealer. In the case at bar, the money market transaction between the petitioner defendant-appellee Metropolitan Bank and Trust Company in the same
and the private respondent is in the nature of a loan. Lim Sio Wan , as creditor proportion of 60-40. Except as thus modified, the decision appealed from is
of the bank for her money market placement, is entitled to payment upon her AFFIRMED. SO ORDERED.” Additionally and by way of MODIFICATION,
request, or upon maturity of the placement, or until the bank is released from Producers Bank is hereby ordered to pay Allied and Metrobank the
its obligation as debtor. Until any such event, the obligation 10. aforementioned amounts. The liabilities of the parties are concurrent and
of Allied to Lim Sio Wan remains unextinguished. Same; Same; Payment made independent of each other. SO ORDERED. Quisumbing (Chairperson), Carpio-
by the debtor to a wrong party does not extinguish the obligation as to the Morales, Tinga and Chico-Nazario, [**] JJ., concur. Petition partly granted,
creditor, if there is no judgment affirmed with modification. Notes.—A money market transaction
3. fault or negligence which can be imputed to the latter.—From the factual partakes of the nature of a loan and nonpayment thereof would not give rise to
findings of the trial and appellate courts that Lim Sio Wan did not authorize the criminal liability for estafa through misappropriation or conversion.
release of her money market placement to Santos and the bank had been (Sesbreno vs . Court of Appeals, 240 SCRA 606 [1995]) The quasi-contract of
negligent in so doing, there is no question that the obligation of Allied to solutio indebiti harks back to the ancient principle that no one shall enrich
pay Lim Sio Wan had not been extinguished. Art. 1240 of the Code states that himself unjustly at the expense of another. (MoreÑo-Lentfer vs . Wolff, 441
“payment shall be made to the person in whose favor the obligation has been SCRA 584 [2004])
constituted, or his successor in interest, or any person authorized to receive it.”
As commented by Arturo Tolentino: Payment made by the debtor to a wrong
party does not extinguish the obligation as to the creditor, if there is no fault or Case Title : TERESITA VILLALUZ, CHIT ILAGAN, Spouses ADOR and TESS TABERNA
4. ...Page Edit Line Top SO ORDERED. Quisumbing (Chairperson), Carpio- and MARIO LLAMAS, petitioners, vs. THE HONORABLE COURT OF APPEALS and
Morales, Chico-Nazario and Velasco, Jr., JJ., concur. Judgment modified. SPOUSES REYNALDO AND ZENAIDA ANZURES, respondents.Case Nature :
Notes.—Prosecutors designated by the COMELEC to prosecute the cases act as PETITION for review on certiorari of a decision of the Court of Appeals.
its deputies. They derive their authority from it and not from their offices. Syllabi Class : Criminal Law|Remedial Law|B.P. 22|Appeal|Ejectment
(Commission on Elections vs . Silva, Jr., 286 SCRA 177 [1998]) It is a Syllabi:
jurisprudential rule that the testimony of a self-confessed accomplice or co- 1. Criminal Law; B.P. 22; Appeal; It is well-settled that cases brought to the
conspirator imputing the blame to or implicating his co-accused cannot, by itself Supreme Court from the CA are limited to a review of questions of law, as the
and without corroboration, be regarded as proof with a moral certainty that the factual findings thereon are conclusive on the Court.-
latter committed or participated in the commission of the crime. (People vs . —The contention of petitioner Villaluz essentially strikes at a factual question. It
Farjardo, Jr., 512 is well-settled, however, that cases brought to this Court from the CA are limited
5. request, or upon the maturity of the placement, or until the bank is released to a review of questions of law, as the factual findings thereon are conclusive on
from its obligation as debtor.—We have ruled in a line of cases that a bank this Court. In addition, it is also well-settled that the factual findings of the trial
deposit is in the nature of a simple loan or mutuum. More succinctly, in court if supported by substantial evidence on record are likewise conclusive on
Citibank, N.A. (Formerly First National City Bank) v. Sabeniano, 504 SCRA 378 this Court and even carries more weight when affirmed by the CA. These
(2006), this Court ruled that a money market placement is a simple loan or doctrines find applicability in this case considering that the assailed findings do
mutuum. Further, we defined a money market in Cebu International not fall under any of the recognized exceptions where the lower courts’ factual
FinanceCorporation v. Court of Appeals, 316 SCRA 488 (1999), as follows: [A] findings are not binding on this Court.
money market is a market dealing in standardized short-term credit 2. Same; Same; Petitioners are not lessees but their status is analogous to that
instruments (involving large amounts) where lenders and borrowers do not deal of a lessee or tenant whose term of lease has expired but whose occupancy
directly with each other but through a continued by tolerance of the owner.-
6. The above provision of law was clarified in Reyes v. Lim , where we ruled that —In this case, although possession by petitioners (other than Villaluz) lasted
“[t]here is unjust enrichment when a person unjustly retains a benefit to the beyond March 31, 1988 (the date they were supposed to vacate the premises in
loss of another, or when a person retains money or property of another against accordance with the agreement between petitioner Villaluz and private
the fundamental principles of justice, equity and good conscience.” [58] In respondents), nevertheless their continued possession from April 1, 1988 up to
Tamio v. Ticson, we further clarified the principle of unjust enrichment, thus: the time they received the demand to vacate on February 23, 1989, is
“Under Article 22 of the Civil Code, there is unjust enrichment when (1) a considered as possession by tolerance. Said petitioners are not lessees but their
person is unjustly benefited, and (2) such benefit is derived at the expense of or status is analogous to that of a lessee or tenant whose term of lease has expired
but whose occupancy continued by tolerance of the owner. Their right of continued by tolerance of the owner. Their right of possession of the said
possession of the said property stems from their being employees of petitioner property stems from their being employees of petitioner Villaluz who only
Villaluz who only allowed them to occupy the premises for a certain period. As allowed them to occupy the premises for a certain period. As such, their
such, their possession depends upon the possession of petitioner Villaluz. Having possession depends upon the possession of petitioner Villaluz. Having merely
merely stepped stepped into the shoes of the latter, said petitioners cannot acquire superior
3. Remedial Law; Ejectment; The one-year reglementary period under Section 1, rights than that of petitioner Villaluz. It has been ruled, that “the person who
Rule 70 for filing an unlawful detainer case is counted from the time of the occupies the land of another at the latter’s tolerance or permission, without any
unlawful deprivation or withholding of possession.- contract between them, is necessarily bound by an implied promise that he will
—Anent the ejectment case, the one-year reglementary period under Section 1, vacate the same upon demand,” otherwise the remedy of ejectment may be
Rule 70 for filing an unlawful detainer case is counted from the time of the availed to oust him from the premises. In such case, the one year prescriptive
“unlawful deprivation or withholding of possession.” Such unlawful deprivation period for filing the appropriate action to remedy the unlawful withholding of
occurs upon expiration or termination of the right to hold possession. And such possession is to be counted from the date of receipt of the last demand to
right legally expires or terminates upon receipt of the last demand to vacate. vacate because it is only from that time that possession becomes illegal.
4. Same; Same; Though petitioner was acquitted of the criminal offense, she Accordingly, since the complaint for ejectment was instituted on July 12, 1989,
may still be held civilly liable for the checks she issued.- or a mere four (4) months from the time of the last demand to vacate, the same
—Moreover, it is totally misleading for petitioner Villaluz’s to say that the trial was timely filed within the prescriptive period. [Villaluz vs. Court of Appeals,
court found that she has no liability to private respondents. The mere fact that 278 SCRA 540(1997)]
the trial court as affirmed by the CA ordered her to pay P2,123,400.00 to private
respondents belies her claim. In addition, it is absurd for her to issue checks in Case Title : REMIGIO S. ONG, petitioner, vs. PEOPLE OF THE PHILIPPINES and
such a huge amount to private respondents had this not been for the COURT OF APPEALS (EIGHTH DIVISION), respondents.Case Nature : PETITION
satisfaction of a monetary obligation. It is well to emphasize at this point, that for review on certiorari of a decision of the Court of Appeals.
though petitioner was acquitted of the criminal offense, she may still be held Syllabi Class : Criminal Law||Negotiable Instruments
civilly liable for the checks she issued. Such pronouncement as to her civil liability Law|Witnesses|Indeterminate Sentence Law
is sanctioned under Section 2 of Rule 120 which provides in part: “In case of Syllabi:
acquittal, unless there is a clear showing that the act from which the civil 1. Criminal Law; Bouncing Checks (Batas Pambansa Blg. 22); The gravamen of
liability might arise did not exist, the judgment shall make a finding on the civil the offense punished by B.P. 22 is the act of making and issuing a worthless
liability of the accused in favor of the offended party.” check or a check that is dishonored upon its presentation for payment—it is not
the non-payment of an obligation which the law punishes.-
Division: THIRD DIVISION On petitioner’s contention that the check was not drawn on account or for
value, the law and jurisprudence is clear on this matter In the case of Cruz vs.
Docket Number: G.R. No. 106214 Court of Appeals, this Court had occasion to rule that: What the law punishes is
the issuance of a bouncing check, not the purpose for which it was issued nor
Counsel: Jaime S. Linsangan, Jaime V. Villanueva the terms and conditions relating to its issuance. The mere act of issuing a
worthless check is malum prohibitum. The gravamen of the offense punished by
Ponente: FRANCISCO B.P. 22 is the act of making and issuing a worthless check or a check that is
dishonored upon its presentation for payment. It is not the non-payment of an
Dispositive Portion: obligation which the law punishes. The law is not intended or designed to coerce
WHEREFORE, premises considered, the decision of the Court of Appeals in the a debtor to pay his debt. The thrust of the law is to prohibit, under pain of penal
assailed consolidated case is hereby AFFIRMED in toto. sanctions, the making of worthless checks and putting them in circulation.
Same; Same; Though petitioner was acquitted of the criminal offense, she may 2. Criminal Law; Negotiable Instruments Law; In actions based upon a
still be held civilly liable for the checks she issued.—Moreover, it is totally negotiable instrument, it is unnecessary to aver or prove consideration, for
misleading for petitioner Villaluz’s to say that the trial court found that she has consideration is important and presumed from the fact that it is a negotiable
no liability to private respondents. The mere fact that the trial court as affirmed instrument.—Petitioner’s argument that the subject check was issued without
by the CA ordered her to pay P2,123,400.00 to private respondents belies her consideration is inconsequential. The law invariably declares the mere act of
claim. In addition, it is absurd for her to issue checks in such a huge amount to issuing a worthless check as malum prohibitum. We quote with approval the
private respondents had this not been for the satisfaction of a monetary appellate court’s findings on this matter: In actions based upon a negotiable
obligation. It is well to emphasize at this point, that though petitioner was instrument, it is unnecessary to aver or prove consideration, for consideration is
acquitted of the criminal offense, she may still be held civilly liable for the important and presumed from the fact that it is a negotiable instrument. The
checks she issued. Such pronouncement as to her civil liability is sanctioned presumption exists whether the words “value received” appear on the
under Section 2 of Rule 120 which provides in part: “In case of acquittal, unless instrument or not (Agbayani, A.F Commentaries and Jurisprudence on the
there is a clear showing that the act from which the civil liability might arise did Commercial Laws of the Philippines, 1989 Ed., Vol. 1, p. 227, emphasis supplied).
not exist, the judgment shall make a finding on the civil liability of the accused Furthermore, such contention is also inconsequential in Batas Pambansa Blg. 22.
in favor of the offended party.” x x x In Que vs. People (154 SCRA 161 [1987]), the Supreme Court stated that it is
the clear intention of the framers of Batas Pambansa Blg. 22 to make the mere
Remedial Law; Ejectment; The one-year reglementary period under Section 1, act of issuing a worthless check malum prohibitum. In prosecutions for violation
Rule 70 for filing an unlawful detainer case is counted from the time of the of B.P. Blg. 22, therefore, prejudice or damage is not a prerequisite for
unlawful deprivation or withholding of possession.—Anent the ejectment case, conviction. In the more recent case of People vs. Nitafan (215 SCRA 79 [1992]),
the one-year reglementary period under Section 1, Rule 70 for filing an unlawful the Supreme Court ruled that the argument surrounding the issuance of the
detainer case is counted from the time of the “unlawful deprivation or checks need not be first looked into, since the law clearly provides that the mere
withholding of possession.” Such unlawful deprivation occurs upon expiration issuance of any kind of check, regardless of the intent of the parties; i.e.,
or termination of the right to hold possession. And such right legally expires or whether the check was intended merely to serve as a guarantee or deposit, but
terminates upon receipt of the last demand to vacate. which check was subsequently dishonored, makes the person who issued the
check liable. The intent of the law is to curb the proliferation of worthless checks
Same; Same; Petitioners are not lessees but their status is analogous to that of a and to protect the stability and integrity of checks as a means of payment of
lessee or tenant whose term of lease has expired but whose occupancy obligation (Lazaro vs. Court of Appeals, 227 SCRA 723, 726-727 [1993]).-
continued by tolerance of the owner.—In this case, although possession by 3. Criminal Law; Witnesses; It is well-settled in criminal jurisprudence that
petitioners (other than Villaluz) lasted beyond March 31, 1988 (the date they where the issue is one of credibility of witnesses, the appellate court will
were supposed to vacate the premises in accordance with the agreement generally not disturb the findings of the trial court.-
between petitioner Villaluz and private respondents), nevertheless their It is well-settled in criminal jurisprudence that where the issue is one of
continued possession from April 1, 1988 up to the time they received the credibility of witnesses, the appellate court will generally not disturb the findings
demand to vacate on February 23, 1989, is considered as possession by of the trial court, considering it was in a better position to settle such issue.
tolerance. Said petitioners are not lessees but their status is analogous to that Indeed, the trial court has the advantage of hearing the witness and observing
of a lessee or tenant whose term of lease has expired but whose occupancy
his conduct during trial, circumstances which carry a great weight in 4. Criminal Law; Batas Pambansa Blg. 22; Evidence; The maker’s knowledge is
appreciating his credibility. presumed from the dishonor of the check for insufficiency of funds.-
4. Criminal Law; Indeterminate Sentence Law; In light of the rulings in the As to the second element, B.P. Blg. 22 creates a presumption juris tantum that
recent cases of Vaca v. Court of Appeals, 298 SCRA 656 (1998) and Rosa Lim v. the second element prima facie exists when the first and third elements of the
People, 340 SCRA 497, G.R. No. 130038, 18 September 2000, the Court deems it offense are present. Thus, the maker’s knowledge is presumed from the
best in the instant case, to limit the penalty for violation of B.P. Blg. 22 to dishonor of the check for insufficiency of funds.
payment of a fine; It would best serve the ends of criminal justice if in fixing the 5. Criminal Law; Batas Pambansa Blg. 22; Evidence; Nowhere in Section 2 of
penalty within the range of discretion allowed by Sec. 1, par. 1, the same the law does it require a maker to maintain funds in his bank account for only 90
philosophy underlying the Indeterminate Sentence Law is observed, namely, that days; That the check must be deposited within ninety (90) days is simply one of
of redeeming valuable human material and preventing unnecessary deprivation the conditions for the prima facie presumption of knowledge of lack of funds to
of personal liberty and economic usefulness with due regard to the protection of arise.-
the social order.- Contrary to petitioner’s assertions, nowhere in said provision does the law
In light, however, of the rulings in the recent cases of Vaca v. Court of Appeals require a maker to maintain funds in his bank account for only 90 days. Rather,
and Rosa Lim v. People, the Court deems it best in the instant case, to limit the the clear import of the law is to establish a prima facie presumption of
penalty for violation of B.P. Blg. 22 to payment of a fine in the amount of knowledge of such insufficiency of funds under the following conditions (1)
P150,000.00. Following our rationale in the aforesaid cases, the Court believes presentment within 90 days from date of the check, and (2) the dishonor of the
that it would best serve the ends of criminal justice if in fixing the penalty within check and failure of the maker to make arrangements for payment in full within
the range of discretion allowed by Sec. 1, par. 1, the same philosophy underlying 5 banking days after the notice thereof. That the check must be deposited within
the Indeterminate Sentence Law is observed, namely, that of redeeming ninety (90) days is simply one of the conditions for the prima facie presumption
valuable human material and preventing unnecessary deprivation of personal of knowledge of lack of funds to arise. It is not an element of the offense.
liberty and economic usefulness with due regard to the protection of the social 6. Criminal Law; Batas Pambansa Blg. 22; Evidence; By current banking
order. practice a check becomes stale after more than six (6) months or 180 days.-
Under Section 186 of the Negotiable Instruments Law, “a check must be
Division: FIRST DIVISION 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
Docket Number: G.R. No. 139006 delay.” By current banking practice, a check becomes stale after more than six
(6) months, or 180 days. Private respondent herein deposited the checks 157
Counsel: Raymundo G. Hipolito II, Melchor Monsod days after the date of the check. Hence, said checks cannot be considered stale.
Only the presumption of knowledge of insufficiency of funds was lost, but such
Ponente: KAPUNAN knowledge could still be proven by direct or circumstantial evidence.
7. Criminal Law; Batas Pambansa Blg. 22; Penalty; Pursuant to the policy
Dispositive Portion: guidelines in Administrative Circular No. 12-2000, the penalty imposed on
WHEREFORE, in view of the foregoing, we AFFIRM the decision of the Court of petitioner should now be modified to a fine of not less than but not more than
Appeals WITH THE MODIFICATION that the sentence of imprisonment is double the amount of the checks that were dishonored.-
DELETED. Petitioner is hereby ordered to pay a fine of P150,000.00. He is Pursuant to the policy guidelines in Administrative Circular No. 12-2000, which
likewise ordered to pay civil indemnity in the amount of P130,000.00, and the took effect on November 21, 2000, the penalty imposed on petitioner should
costs of the suit. now be modified to a fine of not less than but not more than double the amount
of the checks that were dishonored.

Case Title : LUIS S. WONG, petitioner, vs. COURT OF APPEALS and PEOPLE OF Division: SECOND DIVISION
THE PHILIPPINES, respondents.Case Nature : PETITION for review on certiorari
of a decision of the Court of Appeals. Docket Number: G.R. No. 117857
Syllabi Class : Criminal Law|Batas Pambansa Blg. 22|Evidence|Penalty
Syllabi: Counsel: Agapito P. Pagayanan, Jr. and Tañada, Vivo, Tan, The Solicitor General
1. Criminal Law; Batas Pambansa Blg. 22; Evidence; Findings of fact of the
Court of Appeals are generally conclusive.- Ponente: QUISUMBING
Although Manuel Limtong was the sole witness for the prosecution, his
testimony was found sufficient to prove all the elements of the offense charged. Dispositive Portion:
We find no cogent reason to depart from findings of both the trial and appellate WHEREFORE, the petition is DENIED. Petitioner Luis S. Wong is found liable for
courts. In cases elevated from the Court of Appeals, our review is confined to violation of Batas Pambansa Blg. 22 but the penalty imposed on him is hereby
alleged errors of law. Its findings of fact are generally conclusive. Absent any MODIFIED so that the sentence of imprisonment is deleted. Petitioner is
showing that the findings by the respondent court are entirely devoid of any ORDERED to pay a FINE of (1) P6,750.00, equivalent to double the amount of
substantiation on record, the same must stand. the check involved in Criminal Case No. CBU-12057, (2) P12,820.00, equivalent
2. Criminal Law; Batas Pambansa Blg. 22; Evidence; What the law punishes is to double the amount of the check involved in Criminal Case No. CBU-12058,
the issuance of a bouncing check and not the purpose for which it was issued nor and (3) P11,000.00, equivalent to double the amount of the check involved in
the terms and conditions relating to its issuance; The mere act of issuing a Criminal Case No. CBU-12055, with subsidiary imprisonment
worthless check is malum prohibitum.-
In Llamado v. Court of Appeals, we held that “[t]o determine the reason for
which checks are issued, or the terms and conditions for their issuance, will Case Title : CHARLES LEE, CHUA SIOK SUY, MARIANO SIO, ALFONSO YAP,
greatly erode the faith the public reposes in the stability and commercial value RICHARD VELASCO and ALFONSO CO, petitioners, vs. COURT OF APPEALS and
of checks as currency substitutes, and bring about havoc in trade and in banking PHILIPPINE BANK OF COMMUNICATIONS, respondents., MICO METALS
communities. So what the law punishes is the issuance of a bouncing check and CORPORATION, petitioner, vs. COURT OF APPEALS and PHILIPPINE BANK OF
not the purpose for which it was issued nor the terms and conditions relating to COMMUNICATIONS, respondents.
its issuance. The mere act of issuing a worthless check is malum prohibitum.” Syllabi Class : Civil Procedure|Commercial Law|Negotiable Instruments
Nothing herein persuades us to hold otherwise. Law|Essential Requisites of a Negotiable Instrument
3. Criminal Law; Batas Pambansa Blg. 22; Evidence; Two (2) ways of violating Syllabi:
Batas Pambansa Blg. 22.- 1. Civil Procedure; During the trial of an action, the party who has the burden of
There are two (2) ways of violating B.P. Blg. 22: (1) by making or drawing and proof upon an issue may be aided in establishing his claim or defense by the
issuing a check to apply on account or for value knowing at the time of issue operation of a presumption, or, expressed differently, by the probative value
that the check is not sufficiently funded; and (2) by having sufficient funds in or which the law attaches to a specific state of facts; A presumption may operate
credit with the drawee bank at the time of issue but failing to keep sufficient against his adversary who has not introduced proof to rebut the presumption.-
funds therein or credit with said bank to cover the full amount of the check when During the trial of an action, the party who has the burden of proof upon an
presented to the drawee bank within a period of ninety (90) days. issue may be aided in establishing his claim or defense by the operation of a
presumption, or, expressed differently, by the probative value which the law is not necessarily a negative element which should be taken as diminishing the
attaches to a specific state of facts. A presumption may operate against his credit otherwise accorded to it.
adversary who has not introduced proof to rebut the presumption. The effect of 2. Evidence; Documentary Evidence; Genuineness of Signature; Deceased
a legal presumption upon a burden of proof is to create the necessity of presumed to be a party to the check for value by proof of the genuineness of the
presenting evidence to meet the legal presumption or the prima facie case deceased’s signature.-
created thereby, and which if no proof to the contrary is presented and offered, The genuineness of the deceased’s signature having been shown, he is prima
will prevail. The burden of proof remains where it is, but by the presumption the facie presumed to have become a party to the check for value, following Section
one who has that burden is relieved for the time being from introducing 24 of the Negotiable Instruments Law which reads: Section 24. Presumption of
evidence in support of his averment, because the presumption stands in the Consideration.—Every negotiable instrument is deemed prima facie to have
place of evidence unless rebutted. been issued for a valuable consideration; and every person whose signature
2. Commercial Law; Negotiable Instruments Law; Essential Requisites of a appears thereon to have become a party thereto for value.
Negotiable Instrument;Letters of credit and trust receipts are not negotiable 3. Evidence; Testimonial Evidence; Hearsay Rule; Exception; Dead Man’s
instruments.- Statute; The Dead Man’s Statute renders incompetent certain persons from
Negotiable instruments which are meant to be substitutes for money, must testifying.-
conform to the following requisites to be considered as such a) it must be in As for the administratrix’s invocation of the Dead Man’s Stat- ute, the same
writing; b) it must be signed by the maker or drawer; c) it must contain an does not likewise lie. The rule renders incompetent: 1) parties to a case; 2) their
unconditional promise or order to pay a sum certain in money; d) it must be assignors; or 3) persons in whose behalf a case is prosecuted. x x x The rule is
payable on demand or at a fixed or determinable future time; e) it must be exclusive and cannot be construed to extend its scope by implication so as to
payable to order or bearer; and f) where it is a bill of exchange, the drawee must disqualify persons not mentioned therein. Mere witnesses who are not included
be named or otherwise indicated with reasonable certainty. Negotiable in the above enumeration are not prohibited from testifying as to a conversation
instruments include promissory notes, bills of exchange and checks. Letters of or transaction between the deceased and a third person, if he took no active
credit and trust receipts are, however, not negotiable instruments. But drafts part therein. x x x
issued in connection with letters of credit are negotiable instruments. 4. Evidence; Testimonial Evidence; Hearsay Rule; Exception; Dead Man’s
3. Commercial Law; Negotiable Instruments Law; Essential Requisites of a Statute; What the Dead Man’s Statute proscribes is the admission of testimonial
Negotiable Instrument; A trust receipt is a document of security pursuant to evidence upon a claim which arose before the death of the deceased.-
which a bank acquires a “security interest” in the goods under trust receipt.- In any event, what the Dead Man’s Statute proscribes is the admission of
A trust receipt is considered as a security transaction intended to aid in financing testimonial evidence upon a claim which arose before the death of the
importers and retail dealers who do not have sufficient funds or resources to deceased. The incompetency is confined to the giving of testimony. Since the
finance the importation or purchase of merchandise, and who may not be able separate claims of Sanson and Celedonia are supported by checks-documentary
to acquire credit except through utilization, as collateral of the merchandise evidence, their claims can be prosecuted on the bases of said checks.
imported or purchased. A trust receipt, therefor, is a document of security
pursuant to which a bank acquires a “security interest” in the goods under trust Division: THIRD DIVISION
receipt. Under a letter of credit-trust receipt arrangement, a bank extends a
loan covered by a letter of credit, with the trust receipt as a security for the loan. Docket Number: G.R. No. 127745
The transaction involves a loan feature represented by a letter of credit, a
security feature which is in the covering trust receipt which secures an Counsel: Jerry P. Trenas, Efrain B. Trenas, Tirol
indebtedness.
Ponente: CARPIO-MORALES
Division: SECOND DIVISION
Dispositive Portion:
Docket Number: G.R. No. 117913, G.R. No. 117914 WHEREFORE, the impugned May 31, 1996 Decision of the Court of Appeals is
hereby SET ASIDE and another rendered ordering the intestate estate of the
Counsel: Lim, Duran & Associates, Silvestre J. Acejas & Associates, Laogan, Silva, late Juan Bon Fing Sy, through Administratrix Melecia T. Sy, to pay:
Baeza & Llantino Law Office

Ponente: DE LEON, JR. Case Title : LEODEGARIO BAYANI, petitioner, vs. PEOPLE OF THE PHILIPPINES,
respondent.Case Nature : PETITION for review on certiorari of the decision of
Dispositive Portion: the Court of Appeals.
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. Syllabi Class : Commercial Law|Criminal Law|Negotiable Instruments
27480 entitled, “Philippine Bank of Communications vs. Mico Metals Law|Holder in Due Course|Special Law
Corporation, Charles Lee, Chua Siok Suy, Mariano Sio, Alfonso Yap, Richard Syllabi:
Velasco and Alfonso Co,” is AFFIRMED in toto. 1. Commercial Law; Negotiable Instruments Law; Holder in Due Course; The
evidence on record shows that Evangelista rediscounted the check and gave
P55,000.00 to Rubia after the latter endorsed the same—as such, Evangelista is
Case Title : FELICITO G. SANSON, CELEDONIA SANSON-SAQUIN, ANGELES A. a holder of the check in due course; Under Section 28 of the Negotiable
MONTINOLA, EDUARDO A. MONTINOLA, JR., petitioners-appellants, vs. Instruments Law, absence or failure of consideration is a matter of defense only
HONORABLE COURT OF APPEALS, FOURTH DIVISION and MELECIA T. SY, As as against any person not a holder in due course.-
Administratrix of the Intestate Estate of the Late Juan Bon Fing Sy, respondents- The evidence on record shows that Evangelista rediscounted the check and gave
appellees.Case Nature : PETITION for review on certiorari of the decision and P55,000.00 to Rubia after the latter endorsed the same. As such, Evangelista is a
resolution of the Court of Appeals. holder of the check in due course. Under Section 28 of the Negotiable
Syllabi Class : Evidence|Witnesses|Relationship|Documentary Instruments Law (NIL), absence or failure of consideration is a matter of defense
Evidence|Genuineness of Signature|Testimonial Evidence|Hearsay only as against any person not a holder in due course, thus: SECTION 28. Effect
Rule|Exception|Dead Man’s Statute of want of consideration.—Absence or failure of consideration is a matter of
Syllabi: defense as against any person not a holder in due course; and partial failure of
1. Evidence; Witnesses; Relationship; Relationship to a party has never been consideration is a defense pro tanto, whether the failure is an ascertained and
recognized as an adverse factor in determining either the credibility of the liquidated amount or otherwise.
witness or the admissibility of the testimony.- 2. Criminal Law; Special Law; Violation of B.P. Blg. 22; For the accused to be
Relationship to a party has never been recognized as an adverse factor in guilty of violation of Section 1 of B.P. Blg. 22, the prosecution is mandated to
determining either the credibility of the witness or—subject only to well prove the essential elements thereof, to wit: (1) that a person makes or draws
recognized exceptions none of which is here present—the admissibility of the and issues any check; (2) that the check is made or drawn and issued to apply on
testimony. At most, closeness of relationship to a party, or bias, may indicate account or for value; (3) that the person who makes or draws and issues the
the need for a little more caution in the assessment of a witness’ testimony but check knows at the time of issue that he does not have sufficient funds in or
credit with the drawee bank for the payment of such check in full upon its
presentment; (4) that the check is subsequently dishonored by the drawee bank been brought about by the negligence or imprudence, more so, the willful
for insufficiency of funds or credit, or would have been dishonored for the same inaction of the actor.-
reason had not the drawer, without any valid reason, ordered the bank to stop For the defense of state of necessity to be availing, the greater injury feared
payment.- should not have been brought about by the negligence or imprudence, more so,
For the accused to be guilty of violation of Section 1 of B.P. Blg. 22, the the willful inaction of the actor. In this case, the issuance of the bounced checks
prosecution is mandated to prove the essential elements thereof, to wit: 1. That was brought about by Ty’s own failure to pay her mother’s hospital bills.
a person makes or draws and issues any check; 2. That the check is made or 6. Criminal Law; Bouncing Checks Law; Evidence; It is presumed, upon the
drawn and issued to apply on account or for value; 3. That the person who issuance of the checks, in the absence of evidence to the contrary, that the same
makes or draws and issues the check knows at the time of issue that he does not was issued for valuable consideration.-
have sufficient funds in or credit with the drawee bank for the payment of such As to the issue of consideration, it is presumed, upon issuance of the checks, in
check in full upon its presentment; 4. That the check is subsequently dishonored the absence of evidence to the contrary, that the same was issued for valuable
by the drawee bank for insufficiency of funds or credit, or would have been consideration. Section 24 of the Negotiable Instruments Law creates a
dishonored for the same reason had not the drawer, without any valid reason, presumption that every party to an instrument acquired the same for a
ordered the bank to stop payment. consideration or for value. In alleging otherwise, Ty has the onus to prove that
the checks were issued without consideration. She must present convincing
Division: SECOND DIVISION evidence to overthrow the presumption.
7. Criminal Law; Bouncing Checks Law; Evidence; The law punishes the mere
Docket Number: G.R. No. 154947 act of issuing a bouncing check, not the purpose for which it was issued nor the
terms and conditions relating to its issuance.-
Counsel: Emmanuel C. Velasco, The Solicitor General The law punishes the mere act of issuing a bouncing check, not the purpose for
which it was issued nor the terms and conditions relating to its issuance. B.P. 22
Ponente: CALLEJO, SR. does not make any distinction as to whether the checks within its contemplation
are issued in payment of an obligation or to merely guarantee the obligation.
Dispositive Portion: The thrust of the law is to prohibit the making of worthless checks and putting
IN LIGHT OF ALL THE FOREOING, the petition is DENIED DUE COURSE. The them into circulation. As this Court held in Lim v. People of the Philippines,
decision of the Court of Appeals is AFFIRMED. “what is primordial is that such issued checks were worthless and the fact of its
worthlessness is known to the appellant at the time of their issuance, a required
element under B.P. Blg. 22.”
Case Title : VICKY C. TY, petitioner, vs. PEOPLE OF THE PHILIPPINES, 8. Criminal Law; Bouncing Checks Law; Evidence; Knowledge of insufficiency of
respondent.Case Nature : PETITION for review on certiorari of a decision of the funds legally presumed from the dishonor of the checks for insufficiency of
Court of Appeals. funds.-
Syllabi Class : Criminal Law|Exempting Circumstances|Defense of Such knowledge is legally presumed from the dishonor of the checks for
Uncontrollable Fear|Justifying Circumstances|State of Necessity|Bouncing insufficiency of funds. If not rebutted, it suffices to sustain a conviction.
Checks Law|Evidence|Penalty 9. Criminal Law; Bouncing Checks Law; Evidence; The gravamen of the offense
Syllabi: is the issuance of a bad check, hence, malice and intent in the issuance thereof is
1. Criminal Law; Exempting Circumstances; Defense of Uncontrollable inconsequential.-
Fear; Requisites for the defense of acting under an uncontrollable fear to be The knowledge of the payee of the insufficiency or lack of funds of the drawer
invoked.- with the drawee bank is immaterial as deceit is not an essential element of an
The only question of law raised—whether the defense of uncontrollable fear is offense penalized by B.P. 22. The gravamen of the offense is the issuance of a
tenable to warrant her exemption from criminal liability—has to be resolved in bad check, hence, malice and intent in the issuance thereof is inconsequential.
the negative. For this exempting circumstance to be invoked successfully, the 10. Criminal Law; Bouncing Checks Law; Penalty; Administrative Circular 12-
following requisites must concur: (1) existence of an uncontrollable fear; (2) the 2000, adopting the rulings in Vaca v. Court of Appeals and Lim v. People,
fear must be real and imminent; and (3) the fear of an injury is greater than or authorizes the non-imposition of the penalty of imprisonment in B.P. 22 cases
at least equal to that committed. subject to certain conditions.-
2. Criminal Law; Exempting Circumstances; Defense of Uncontrollable Fear; A We agree with the Court of Appeals in deleting the penalty of imprisonment,
person invoking uncontrollable fear must show that the compulsion was such absent any proof that petitioner was not a first-time offender nor that she acted
that it reduced him to a mere instrument acting not only without will but in bad faith. Administrative Circular 12-2000, adopting the rulings in Vaca v.
against his will as well.- Court of Appeals and Lim v. People, authorizes the non-imposition of the penalty
It must appear that the threat that caused the uncontrollable fear is of such of imprisonment in B.P. 22 cases subject to certain conditions.
gravity and imminence that the ordinary man would have succumbed to it. It
should be based on a real, imminent or reasonable fear for one’s life or limb. A Division: SECOND DIVISION
mere threat of a future injury is not enough. It should not be speculative,
fanciful, or remote. A person invoking uncontrollable fear must show therefore Docket Number: G.R. No. 149275
that the compulsion was such that it reduced him to a mere instrument acting
not only without will but against his will as well. It must be of such character as Counsel: Marvin L. Herrera, The Solicitor General
to leave no opportunity to the accused for escape.
3. Criminal Law; Justifying Circumstances; State of Necessity; Requisites to Ponente: TINGA
exempt the actor from liability under par. 4, Art. II of the Revised Penal Code.-
The law prescribes the presence of three requisites to exempt the actor from Dispositive Portion:
liability under this paragraph: (1) that the evil sought to be avoided actually WHEREFORE, the instant Petition is DENIED and the assailed Decision of the
exists; (2) that the injury feared be greater than the one done to avoid it; (3) Court of Appeals, dated 31 July 2001, finding petitioner Vicky C. Ty GUILTY of
that there be no other practical and less harmful means of preventing it. violating Batas Pambansa Bilang 22 is AFFIRMED with MODIFICATIONS.
4. Criminal Law; Justifying Circumstances; State of Necessity; If the evil sought Petitioner Vicky C. Ty is ORDERED to pay a FINE equivalent to double the
to be avoided is merely expected or anticipated or may happen in the future, this amount of each dishonored check subject of the seven cases at bar with
defense is not applicable.- subsidiary imprisonment in case of insolvency in accordance with Article 39 of
In the instant case, the evil sought to be avoided is merely expected or the Revised Penal Code. She is also ordered to pay private complainant, Manila
anticipated. If the evil sought to be avoided is merely expected or anticipated or Doctors’ Hospital, the amount of Two Hundred Ten Thousand Pesos
may happen in the future, this defense is not applicable. Ty could have taken (P210,000.00) representing the total amount of the dishonored checks. Costs
advantage of an available option to avoid committing a crime. By her own against the petitioner.
admission, she had the choice to give jewelry or other forms of security instead
of postdated checks to secure her obligation.
5. Criminal Law; Justifying Circumstances; State of Necessity; For the defense
of state of necessity to be availing, the greater injury feared should not have
Case Title : VICTOR ONGSON, petitioner, vs. PEOPLE OF THE PHILIPPINES, issuance of a bum check and not the purpose for which the check was issued nor
respondent.Case Nature : PETITION for review on certiorari of a decision of the the terms or conditions relating to its issuance. Thus, even if there had been
Court of Appeals. payment through compensation or some other means, there could still be
Syllabi Class : Criminal Law|Bouncing Checks Law (B.P. 22)|Judgments|Due prosecution for violation of B.P. 22.
Process|Right to be Informed|Admissions|Administrative Circular Nos. 12-2000 6. Criminal Law; Bouncing Checks Law (B.P. 22); For the prima facie
and 13-2001|Interest Rates presumption that the drawer had knowledge of the insufficiency of his funds in
Syllabi: or credit with the bank at the time of the issuance and on the check’s
1. Criminal Law; Bouncing Checks Law (B.P. 22); Judgments; The absence of presentment for payment, the prosecution must prove that (a) the check is
relevant antecedents as well as the lack of evaluation of the evidence adduced presented within ninety (90) days from the date of the check, (b) the drawer or
by the parties and justification for its conclusion render the trial court’s decision maker of the check receives notice that such check has not been paid by the
void.- drawee, and (c) the drawer or maker of the check fails to pay the holder of the
Based on the foregoing considerations, we find that the trial court’s decision in check the amount due thereon, or make arrange-ments for payment in full
the case at bar did not state the material facts, i.e., the transaction that led to within five (5) banking days after receiving notice that such check has not been
the issuance of the checks, their respective amounts, the date and reason for paid by the drawee; The presumption or prima facie evidence cannot arise, if
dishonor. The decision likewise failed to discuss the elements of B.P. 22 and such notice of nonpayment by the drawee bank is not sent to the maker or
other pertinent facts. Clearly, the absence of relevant antecedents as well as the drawer, or if there is no proof as to when such notice was received by the
lack of evaluation of the evidence adduced by the parties and justification for its drawer since there would simply be no way of reckoning the crucial 5-day
conclusion render the instant decision void. period.-
2. Criminal Law; Bouncing Checks Law (B.P. 22); Elements.- As to the second element, we have held that knowledge involves a state of mind
The elements of violation of B.P. 22 are: (1) making, drawing, and issuance of which is difficult to establish, thus the statute itself creates a prima facie
any check to apply on account or for value; (2) knowledge of the maker, drawer, presumption that the drawer had knowledge of the insufficiency of his funds in
or issuer that at the time of issue he does not have sufficient funds in or credit or credit with the bank at the time of the issuance and on the check’s
with the drawee bank for the payment of the check in full upon its presentment; presentment for payment if he fails to pay the amount of the check within five
and (3) subsequent dishonor of the check by the drawee bank for insufficiency of (5) banking days from notice of dishonor. For this presumption to arise, the
funds or credit, or dishonor for the same reason had not the drawer, without prosecution must prove the following: (a) the check is presented within ninety
any valid cause, ordered the bank to stop payment. (90) days from the date of the check; (b) the drawer or maker of the check
3. Criminal Law; Bouncing Checks Law (B.P. 22); Due Process; Right to be receives notice that such check has not been paid by the drawee; and (c) the
Informed; Where the date of the check and the amount thereof as stated in the drawer or maker of the check fails to pay the holder of the check the amount
Informations vary with the exhibits submitted by the prosecution, which due thereon, or make arrangements for payment in full within five (5) banking
inconsistencies violate the accused’s constitutional right to be informed, he days after receiving notice that such check has not been paid by the drawee. In
should be acquitted; Without a sufficient identification of the dishonored check other words, the presumption is brought into existence only after it is proved
in the Information, the conviction of the accused should be set aside for being that the issuer had received a notice of dishonor and that within five days from
violative of the constitutional requirement of due process.- receipt thereof, he failed to pay the amount of the check or to make
The first element, i.e., making, drawing, and issuance of any check, requires that arrangements for its payment. The presumption or prima facie evidence as
the check be properly described in the Information to inform the accused of the provided in this section cannot arise, if such notice of nonpayment by the
nature and cause of the accusation against him. Without a sufficient drawee bank is not sent to the maker or drawer, or if there is no proof as to
identification of the dishonored check in the Information, the conviction of the when such notice was received by the drawer, since there would simply be no
accused should be set aside for being violative of the constitutional requirement way of reckoning the crucial 5-day period. Furthermore, the notice of dishonor
of due process. In the instant case, petitioner should be acquitted in Criminal must be in writing; a verbal notice is not enough.
Case Nos. Q-93-43437 and Q-93-43442, because the date of the check and the 7. Criminal Law; Bouncing Checks Law (B.P. 22); Admissions; The accused’s
amount thereof as stated in the Informations vary with the exhibits submitted admission through counsel, made during the trial, binds the client.-
by the prosecution, which inconsistencies violate petitioner’s constitutional right In King v. People,it was held that the accused’s admission through counsel,
to be informed of the nature of the offense charged. made during the trial, binds the client. Similarly, in Rigor v. People, the Court
4. Criminal Law; Bouncing Checks Law (B.P. 22); Upon issuance of a check, in ruled that the accused cannot pretend that he did not receive the notice of
the absence of evidence to the contrary, it is presumed that the same was issued dishonor of the check because the transcript of records shows that the accused
for valuable consideration, which may consist either in some right, interest, admitted knowledge of the dishonor of his check through a demand letter
profit or benefit accruing to the party who makes the contract, or some received by him.
forbearance, detriment, loss or some responsibility, to act, or labor, or service 8. Criminal Law; Bouncing Checks Law (B.P. 22); The reason for dishonor as
given, suffered or undertaken by the other side.- stamped in the dorsal portion of the checks is prima facie presumptions of such
There is no merit in petitioner’s contention that the checks were issued without dishonor and the reasons therefor.-
valuable consideration. We have held that upon issuance of a check, in the The third element of violation of B.P. 22, i.e., the dishonor of the check by the
absence of evidence to the contrary, it is presumed that the same was issued for drawee bank, is also attendant in the present case as shown by the reason for
valuable consideration, which may consist either in some right, interest, profit or the dishonor as stamped in the dorsal portion of the checks which are also prima
benefit accruing to the party who makes the contract, or some forbearance, facie presumptions of such dishonor and the reasons therefor. In Garcia v. Court
detriment, loss or some responsibility, to act, or labor, or service given, suffered of Appeals, it was held that while it is true that the presumption is merely prima
or undertaken by the other side. It is an obligation to do, or not to do in favor of facie, the accused must, nonetheless, present proof to the contrary to overcome
the party who makes the contract, such as the maker or endorser. In the case at this presumption. Here, other than the bare allegations of petitioner, he
bar, the prosecution established beyond reasonable doubt that petitioner presented no well-grounded defense to prove that the subject checks were not
received money in various amounts from private complainant. Whether the dishonored by the drawee banks.
amounts were loans or investment in the business of petitioner, the checks were 9. Criminal Law; Bouncing Checks Law (B.P. 22); It is not required, much less
issued for valuable consideration. Either way, petitioner is under obligation to indispensable, for the prosecution to present the drawee bank’s representative
pay private complainant. Likewise, the prosecution proved that some of the as a witness to testify on the dishonor of the checks.-
checks were payment for private complainant’s commission from selling the In Recuerdo v. People, the court emphasized that it is not required much less
products of petitioner. Hence, the latter cannot successfully claim that the indispensable, for the prosecution to present the drawee bank’s representative
issuance of the checks were not for a valuable consideration. as a witness to testify on the dishonor of the checks. The prosecution may
5. Criminal Law; Bouncing Checks Law (B.P. 22); What the law punishes is the present, as it did in this case, only private complainant as a witness to prove all
issuance of a bum check and not the purpose for which the check was issued nor the elements of the offense charged. Said witness is competent and qualified to
the terms or conditions relating to its issuance.- testify that upon presentment for payment, the subject checks were dishonored
The gravamen of the offense punished by B.P. 22 is the act of making and by the drawee bank.
issuing a worthless check, that is, a check that is dishonored upon its 10. Criminal Law; Bouncing Checks Law (B.P. 22); Administrative Circular Nos.
presentation for payment. The mere act of issuing a worthless check is malum 12-2000 and 13-2001;Imprisonment need not be imposed on those found guilty
prohibitum. So also, it is not the nonpayment of the obligation that is being of violating B.P. Blg. 22—courts are vested the discretion to determine, taking
punished, but the making of worthless checks. What the law punishes is such into consideration the peculiar circumstances of each case, whether the
imposition of fine would best serve the interest of justice, or whether forbearing 1. Criminal Law; Bouncing Checks Law; Jurisdictions; Jurisdiction of the Court
to impose imprisonment would depreciate the seriousness of the offense, work over cases elevated from the Court of Appeals is limited to reviewing or revising
violence on the social order, or otherwise contrary to the imperatives of justice; errors of law ascribed to the Court of Appeals, whose factual findings are
Whether there is neither proof nor allegation that the accused is not a first time conclusive and carry even more weight when said court affirms the findings of
offender, imposition of the penalty of fine instead of imprisonment is proper.- the trial court, absent any showing that the findings are totally devoid of
Under Administrative Circular No. 12-2000, imprisonment need not be imposed support in the record or that they are so glaringly erroneous as to constitute
on those found guilty of violating B.P. Blg. 22. Administrative Circular No. 13- serious abuse of discretion.-
2001, issued on February 14, 2001, vests in the courts the discretion to Well-settled is the rule that the factual findings and conclusions of the trial court
determine, taking into consideration the peculiar circumstances of each case, and the CA are entitled to great weight and respect, and will not be disturbed on
whether the imposition of fine (of not less than but not more than double the appeal in the absence of any clear showing that the trial court overlooked
amount of the check, but in no case exceeding P200,000.00), would best serve certain facts or circumstances which would substantially affect the disposition of
the interest of justice, or whether forbearing to impose imprisonment would the case. Jurisdiction of this Court over cases elevated from the CA is limited to
depreciate the seriousness of the offense, work violence on the social order, or reviewing or revising errors of law ascribed to the CA, whose factual findings are
otherwise contrary to the imperatives of justice. In Recuerdo v. People, and conclusive and carry even more weight when said court affirms the findings of
Young v. Court of Appeals, it was held that where there is neither proof nor the trial court, absent any showing that the findings are totally devoid of
allegation that the accused is not a first time offender, imposition of the penalty support in the record or that they are so glaringly erroneous as to constitute
of fine instead of imprisonment is proper. Likewise, in Lee v. Court of Appeals, serious abuse of discretion.
we ruled that the policy laid down in Vaca v. Court of Appeals, and Lim v. 2. Criminal Law; Bouncing Checks Law; Evidence; Hearsay Evidence; Under
People, of redeeming valuable human material and preventing unnecessary Section 36 of Rule 130 of the Rules of Court, any evidence—whether oral or
deprivation of personal liberty and economic usefulness, should be considered in documentary—is hearsay if its probative value is not based on the personal
favor of the accused who is not shown to be a habitual delinquent or a recidivist. knowledge of the witness but on that of some other person who is not on the
Said doctrines squarely apply in the instant case there being no proof or witness stand.-
allegation that petitioner is not a first time offender. Section 36 of Rule 130 of the Rules of Court provides for the rule on hearsay
11. Criminal Law; Bouncing Checks Law (B.P. 22); Interest Rates; When an evidence, to wit: Sec. 36. Testimony generally confined to personal knowledge;
obligation is breached, and it consists in the payment of a sum of money, the hearsay ex-cluded.—A witness can testify only to those facts which he knows of
interest due should be that which may have been stipulated in writing and in the his personal knowledge; that is, which are derived from his own perception,
absence of such stipulation, the rate shall be 12% per annum computed from except as otherwise provided in these rules. Under the above rule, any
judicial or extrajudicial demand; From the finality of this decision, the total evidence—whether oral or documentary—is hearsay if its probative value is not
amount of the dishonored checks inclusive of interest shall further earn 12% based on the personal knowledge of the witness, but on that of some other
interest per annum until fully paid.- person who is not on the witness stand. Hence, information that is relayed to the
Petitioner should be ordered to pay interest of 12% per annum pursuant to former by the latter before it reaches the court is considered hearsay.
Cabrera v. People, that when an obligation is breached, and it consists in the 3. Criminal Law; Bouncing Checks Law; Evidence; In failing to object to the
payment of a sum of money, the interest due should be that which may have testimony on the ground that it was hearsay, the evidence offered may be
been stipulated in writing. In the absence of such stipulation, the rate shall be admitted.-
12% per annum computed from judicial or extrajudicial demand. In this case, Petitioner is barred from questioning the admission of Evangelista’s testimony
there was no stipulated interest on petitioner’s obligation to pay the value of the even if the same is hearsay. Section 34, Rule 132 of the Rules of Court requires
dishonored checks. Demand for payment was made extrajudicially as evidenced that the trial court shall not consider any evidence which has not been finally
by petitioner’s receipt of private complainant’s demand letter with notice of offered. Section 35 of the same Rule provides that as regards the testimony of a
dishonor. The applicable interest rate is therefore 12% per annum from the date witness, the offer must be made at the time the witness is asked to testify. And
of receipt of the demand letter on December 7, 1992 for Check Nos. 492666, under Section 36 of the same Rule, objection to a question propounded in the
492482, 492581 and 492319; December 10, 1992 for Check No. 119789; and course of the oral examination of a witness shall be made as soon as the ground
December 18, 1992 for Check No. 492837 until finality of this decision. From the therefor becomes reasonably apparent. Thus, it has been held that “in failing to
finality of this decision, the total amount of the dishonored checks inclusive of object to the testimony on the ground that it was hearsay, the evidence offered
interest shall further earn 12% interest per annum until fully paid. may be admitted.” Since no objection to the admissibility of Evangelista’s
testimony was timely made—from the time her testimony was offered and up to
Division: FIRST DIVISION the time her direct examination was conducted—then petitioner has effectively
waived any objection to the admissibility thereof and his belated attempts to
Docket Number: G.R. No. 156169 have her testimony excluded for being hearsay has no ground to stand on.
4. Criminal Law; Bouncing Checks Law; Evidence; Although hearsay evidence
Counsel: Llosa, Bonganciso, Ruperto, Abiera, Zerna Law Offices, The Solicitor may be admitted because of lack of objection by the adverse party’s counsel, it
General is nonetheless without probative value, unless the proponent can show that the
evidence falls within the exception to the hearsay evidence rule.-
Ponente: YNARES-SANTIAGO While Evangelista’s statement may be admitted in evidence, it does not
necessarily follow that the same should be given evidentiary weight.
Dispositive Portion: Admissibility of evidence should not be equated with weight of evidence. In this
WHEREFORE, the petition is PARTIALLY GRANTED. The June 27, 2002 decision of regard, it has been held that although hearsay evidence may be admitted
the Court of Appeals in CA-G.R. CR No. 18662 is AFFIRMED with because of lack of objection by the adverse party’s counsel, it is nonetheless
MODIFICATIONS.In Criminal Case Nos. Q-93-43437 and Q-93-43442, petitioner without probative value, unless the proponent can show that the evidence falls
Victor Ongson is ACQUITTED of violation of B.P. Blg. 22 on the ground that his within the exception to the hearsay evidence rule.
guilt has not been proved beyond reasonable doubt.In Criminal Case Nos. Q-93- 5. Criminal Law; Bouncing Checks Law; Elements of the Offense Penalized by
43435, Q-93-43436, Q-93-43438, Q-93-43439, Q-93-43440 and Q-93-43441 Batas Pam-bansa Blg. 22; Upon the issuance of the checks and in the absence of
petitioner is found guilty beyond reasonable doubt of violation of B.P. Blg. 22 evidence to the contrary, it is presumed that the same was issued for valuable
and is sentenced as follows:The total amount of the dishonored checks inclusive consideration.-
of interest shall further earn 12% interest per annum from the finality of the The elements of the offense penalized by Batas Pambansa Blg. 22 are: (1) the
decision until fully paid. making, drawing, and issuance of any check to apply for account or for value; (2)
the knowledge of the maker, drawer, or issuer that at the time of issue there are
no sufficient funds in or credit with the drawee bank for the payment of such
Case Title : LEODEGARIO BAYANI, petitioner, vs. PEOPLE OF THE PHILIPPINES, check in full upon its presentment; and (3) the subsequent dishonor of the check
respondent.Case Nature : PETITION for review on certiorari of a decision of the by the drawee bank for insufficiency of funds or credit or dishonor for the same
Court of Appeals. reason had not the drawer, without any valid cause, ordered the bank to stop
Syllabi Class : Criminal Law|Bouncing Checks payment. As regards the first element, it is presumed, upon issuance of the
Law|Jurisdictions|Evidence|Hearsay Evidence checks and in the absence of evidence to the contrary, that the same was issued
Syllabi: for valuable consideration. Under the Negotiable Instruments Law, it is
presumed that every party to an instrument acquired the same for a draws, or issues any check to apply on account or for value; (2) the accused
consideration or for value. In alleging that there was no consideration for the knows at the time of issue that he does not have sufficient funds in or credit
subject check, it devolved upon petitioner to present convincing evidence to with the drawee bank for the payment of such check in full upon its
overthrow the presumption and prove that the check was issued without presentment; and (3) the check is subsequently dishonored by the drawee bank
consideration. for insufficiency of funds or credit or would have been dishonored for the same
6. Criminal Law; Bouncing Checks Law; What the law punishes is the mere act reason had not the drawer, without any valid reason, ordered the bank to stop
of issuing a bouncing check, not the purpose for which it was issued or the terms payment.-
and conditions relating to its issuance.- —This Court sustains petitioner’s conviction for violation of B.P. Blg. 22. The
What the law punishes is the mere act of issuing a bouncing check, not the elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the
purpose for which it was issued or the terms and conditions relating to its accused makes, draws, or issues any check to apply on account or for value; (2)
issuance. The law does not make any distinction on whether the checks within the accused knows at the time of issue that he does not have sufficient funds in
its contemplation are issued in payment of an obligation or to merely guarantee or credit with the drawee bank for the payment of such check in full upon its
the obligation. The thrust of the law is to prohibit the making of worthless presentment; and (3) the check is subsequently dishonored by the drawee bank
checks and putting them in circulation. for insufficiency of funds or credit or would have been dishonored for the same
reason had not the drawer, without any valid reason, ordered the bank to stop
Division: THIRD DIVISION payment.
5. Same; Same; Where a court has already obtained and is exercising
Docket Number: G.R. No. 155619 jurisdiction over a controversy, its jurisdiction to proceed to the final
determination of the cause is not affected by new legislation placing jurisdiction
Counsel: Emmanuel Z. Velasco, Jr., The Solicitor General over such proceedings in another tribunal unless the statute expressly provides,
or is construed to the effect that it is intended to operate on actions pending
Ponente: AUSTRIA-MARTINEZ before its enactment.-
—The subsequent amendment of B.P. 129 by R.A. No. 7691, “An Act Expanding
Dispositive Portion: the Jurisdiction of the Municipal Trial Courts, Municipal Circuit Trial Courts and
WHEREFORE, the petition is DENIED. the Metropolitan Trial Court” on June 15, 1994 cannot divest the Regional Trial
Court of jurisdiction over petitioner’s case. Where a court has already obtained
and is exercising jurisdiction over a controversy, its jurisdiction to proceed to the
Case Title : ISIDRO PABLITO M. PALANA, petitioner, vs. PEOPLE OF THE final determination of the cause is not affected by new legislation placing
PHILIPPINES, respondent.Case Nature : APPEAL from a decision of the Court of jurisdiction over such proceedings in another tribunal unless the statute
Appeals. expressly provides, or is construed to the effect that it is intended to operate on
Syllabi Class : Remedial Law|Criminal Law|Jurisdictions|Violation of B.P. Blg. actions pending before its enactment. Indeed, R.A. No. 7691 contains retroactive
22|Elements|Gravamen of the Offense|Criminal Procedure provisions. However, these only apply to civil cases that have not yet reached
Syllabi: the pre-trial stage. Neither from an express proviso nor by implication can it be
1. Remedial Law; Jurisdictions; It is hornbook doctrine that jurisdiction to try a construed that R.A. No. 7691 has retroactive application to criminal cases
criminal action is determined by the law in force at the time of the institution of pending or decided by the Regional Trial Courts prior to its effectivity. The
the action and not during the arraignment of the accused.- jurisdiction of the RTC over the case attached upon the commencement of the
—It is hornbook doctrine that jurisdiction to try a criminal action is determined action by the filing of the Information and could not be ousted by the passage of
by the law in force at the time of the institution of the action and not during the R.A. No. 7691 reapportioning the jurisdiction of inferior courts, the application of
arraignment of the accused. The Information charging petitioner with violation which to criminal cases is prospective in nature.
of B.P. Blg. 22 was filed on August 19, 1991. At that time, the governing law
determinative of jurisdiction is B.P. Blg. 129. Division: THIRD DIVISION
2. Same; Criminal Procedure; The rule is that a variance between the allegation
in the information and proof adduced during trial shall be fatal to the criminal Docket Number: G.R. No. 149995
case if it is material and prejudicial to the accused so much that it affects his
substantial rights.- Counsel: Zacarias L. Canonigo, The Solicitor General
—The rule is that a variance between the allegation in the information and
proof adduced during trial shall be fatal to the criminal case if it is material and Ponente: YNARES-SANTIAGO
prejudicial to the accused so much so that it affects his substantial rights. In a
prosecution for violation of B.P. 22, the time of the issuance of the subject check Dispositive Portion:
is material since it forms part of the second element of the offense that at the WHEREFORE, the assailed decision of the Court of Appeals in CA-G.R. CR No.
time of its issuance, petitioner knew of the insufficiency of funds. However, it 21879 dated September 17, 2001, finding petitioner ISIDRO PABLITO M.
cannot be said that petitioner was prejudiced by such variance nor was PALANA guilty of violating Batas Pambansa Blg. 22, is AFFIRMED with
surprised by it. Records show that petitioner knew at the time he issued the MODIFICATION. Petitioner is ordered to pay private complainant the amount of
check that he does not have sufficient funds in the bank to cover the amount of P590,000.00, representing the value of the check, with six (6%) percent interest
the check. Yet, he proceeded to issue the same claiming that the same would from date of filing of the Information until the finality of the decision, the
only be shown to prospective suppliers, a defense which is not valid. amount of which, inclusive of the interest, is subject to twelve percent (12%)
3. Same; Same; Gravamen of the Offense; The allegation of petitioner that the interest, from finality of the decision until fully paid. In lieu of imprisonment,
checks were merely intended to be shown to prospective investors of her petitioner is ordered to pay a fine of P200,000.00.
corporation is, to say the least, not a defense;The gravamen of the offense
punished under B.P. Blg. 22 is the act of making or issuing a worthless check or a
check that is dishonored upon its presentment for payment.- Case Title : CARMENCITA G. CARIÑO, petitioner, vs. MERLIN DE CASTRO,
—The allegation of petitioner that the checks were merely intended to be shown respondentCase Nature : PETITION for review on certiorari of the decision and
to prospective investors of her corporation is, to say the least, not a defense. The resolution of the Court of Appeals.
gravamen of the offense punished under B.P. Blg. 22 is the act of making or Syllabi Class : Bouncing Checks ;
issuing a worthless check or a check that is dishonored upon its presentment for Syllabi:
payment. The law has made the mere act of issuing a bad check malum 1. Criminal Procedure; Appeals; Solicitor General; In criminal proceedings on
prohibitum, an act proscribed by the legislature for being deemed pernicious appeal in the Court of Appeals or in the Supreme Court, the authority to
and inimical to public welfare. Considering the rule in mala prohibita cases, the represent the People is vested solely in the Solicitor General; The conformity of
only inquiry is whether the law has been breached. Criminal intent becomes the Assistant City Prosecutor to a petition for review before the Court of Appeals
unnecessary where the acts are prohibited for reasons of public policy, and the is insufficient as the rules and jurisprudence mandate that the same should be
defenses of good faith and absence of criminal intent are unavailing. filed by the Solicitor General.-
4. Criminal Law; Violation of B.P. Blg. 22; Elements; The elements of the —In criminal proceedings on appeal in the Court of Appeals or in the Supreme
offense penalized under B.P. Blg. 22 are as follows: (1) the accused makes, Court, the authority to represent the People is vested solely in the Solicitor
General. Under Presidential Decree No. 478, among the specific powers and 1. Remedial Law; Appeals; Factual findings of the trial court especially when
functions of the OSG was to “represent the government in the Supreme Court affirmed by the appellate court are accorded the highest degree of respect
and the Court of Appeals in all criminal proceedings.” This provision has been and are considered conclusive between the parties;Exceptions.-
carried over to the Revised Administrative Code particularly in Book IV, Title III, —Well-entrenched in jurisprudence is the rule that factual findings of the trial
Chapter 12 thereof. Without doubt, the OSG is the appellate counsel of the court, especially when affirmed by the appellate court, are accorded the highest
People of the Philippines in all criminal cases. Although the petition for review degree of respect and are considered conclusive between the parties. A review
before the Court of Appealswas filed with the conformity of the Assistant City of such findings by this Court is not warranted except upon a showing of highly
Prosecutor, such conformity is insufficient, as the rules and jurisprudence meritorious circumstances, such as: (1) when the findings of a trial court are
mandate that the same should be filed by the Solicitor General. grounded entirely on speculation, surmises or conjectures; (2) when a lower
2. Bouncing Checks; Checks issued to a person who was not authorized to collect court’s inference from its factual findings is manifestly mistaken, absurd or
and receive the same are without valuable consideration and are also impossible; (3) when there is grave abuse of discretion in the appreciation of
considered issued for a non-existing account.- facts; (4) when the findings of the appellate court go beyond the issues of the
—Both the Metropolitan Trial Court and the Regional Trial Court found that case, or fail to notice certain relevant facts which, if properly considered, will
petitioner was not duly authorized by the owner of the subject property to justify a different conclusion; (5) when there is a misappreciation of facts; (6)
collect and receive rentals thereon. Thus, not only were the checks without when the findings of fact are conclusions without mention of the specific
valuable consideration; they were also issued for a non-existing account. With evidence on which they are based, are premised on the absence of evidence, or
these undisputed findings, we cannot reconcile petitioner’s allegation that she is are contradicted by evidence on record.
the aggrieved party. Finally, petitioner cannot validly claim that she was denied 2. Corporation Law; Piercing the Veil of Corporate Fiction; The general rule that
due process considering that she availed of every opportunity to present her a corporation will be deemed a separate legal entity until sufficient reason to
case. Thus, we find no grave abuse of discretion on the part of the lower courts the contrary appears, but the rule is not absolute.-
in dismissing the complaints. —As a general rule, a corporation will be deemed a separate legal entity until
3. Same; Same; Same; Only the Office of the Solicitor General (OSG) can bring or sufficient reason to the contrary appears. But therule is not absolute. A
defend actions on behalf of the Republic or represent the People or state in corporation’s separate and distinct legal personality may be disregarded and
criminal proceedings pending in the Supreme Court and the Court of Appeals.- the veil of corporate fiction pierced when the notion of legal entity is used to
—We are cognizant of our ruling in the cases of Perez v. Hagonoy, 327 SCRA 588 defeat public convenience, justify wrong, protect fraud, or defend crime.
(2000), Mobilia Products, Inc. v. Umezawa, 452 SCRA 736 (2005), People v. 3. Same; Evidence; Disputable Presumptions; A disputable presumption is
Santiago, 174 SCRA 143 (1989), and Narciso v. Sta. Romana-Cruz, 328 SCRA 505 satisfactory if uncontradicted and not overcome by other evidence.-
(2000), where we held that only the OSG can bring or defend actions on behalf —Unmistakably, from the foregoing chain of transactions, a presumption has
of the Republic or represent the People or state in criminal proceedings pending arisen that the loan documents were supported by a consideration. Rule 131,
in the Supreme Court and the Court of Appeals. At the same time, we Section 3 of the Rules of Court specifies that a disputable presumption is
acknowledged in those cases that a private offended party, in the interest of satisfactory if uncontradicted and not overcome by other evidence.
substantial justice, and where there appears to be a grave error committed by
the judge, or where there is lack of due process, may allow and give due course Division: THIRD DIVISION
to the petition filed. However, the special circumstances prevailing in the
abovementioned cases are not present in the instant case. In those cases, the Docket Number: G.R. No. 170782
petitioners availed of petition for certiorari under Rule 65. In the instant case,
the petition was filed under Rule 45. Counsel: Misa & Gonzales Law Offices
4. Same; Same; Same; While a private prosecutor may be allowed to intervene
in criminal proceedings on appeal in the Court of Appeals or the Supreme Court, Ponente: NACHURA
his participation is subordinate to the interest of the People, hence, he cannot be
permitted to adopt a position contrary to that of the Solicitor General.- Dispositive Portion:
—While a private prosecutor may be allowed to intervene in criminal WHEREFORE, premises considered, the petition is DENIED. The Decision of the
proceedings on appeal in the Court of Appeals or the Supreme Court, his Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the
participation is subordinate to the interest of the People, hence, he cannot be petitioner.
permitted to adopt a position contrary to that of the Solicitor General. To do so
would be tantamount to giving the private prosecutor the direction and control
of the criminal proceeding, contrary to the provisions of law. In the instant case,
the Solicitor General opined that petitioner had no legal standing to file the FIRST DIVISION
petition for review and that the Court of Appeals correctly dismissed the
petition. As such, the Assistant City Prosecutor or the private prosecutor cannot ENGR. JOSE E. CAYANAN, G.R. No. 172954
take a contrary view. Petitioner,
Present:
Division: THIRD DIVISION
CORONA, C.J.,
Docket Number: G.R. No. 176084 Chairperson,
- versus - LEONARDO-DE CASTRO,
Counsel: R.A. Din, Jr. & Associates Law Offices BERSAMIN,
DEL CASTILLO, and
Ponente: YNARES-SANTIAGO VILLARAMA, JR., JJ.

Dispositive Portion: NORTH STAR INTERNATIONAL TRAVEL, Promulgated:


WHEREFORE, the petition for review is DENIED. The Decision of the Court of INC.,
Appeals dated August 18, 2006 dismissing the petition as well as the Resolution Respondent. October 5, 2011
dated December 29, 2006 denying the motion for reconsideration, are x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
AFFIRMED.
DECISION
VILLARAMA, JR., J.:
Case Title : SIAIN ENTERPRISES, INC., petitioner, vs. CUPERTINO REALTY CORP. Petitioner Engr. Jose E. Cayanan appeals the May 31, 2006 Decision[1] of
and EDWIN R. CATACUTAN, respondents.Case Nature : PETITION for review on the Court of Appeals (CA) in CA-G.R. SP No. 65538 finding him civilly liable for
certiorari of a decision of the Court of Appeals. the value of the five checks which are the subject of Criminal Case Nos. 166549-
Syllabi Class : Corporation Law|Piercing the Veil of Corporate Fiction 53.
Syllabi: The antecedent facts are as follows:
North Star International Travel Incorporated (North Star) is a corporation arrangement for full payment thereof within five (5)
engaged in the travel agency business while petitioner is the owner/general banking days after receiving notice.
manager of JEAC International Management and Contractor Services, a Contrary to law.
recruitment agency. Upon arraignment, petitioner pleaded not guilty to the charges.
On March 17,[2] 1994, Virginia Balagtas, the General Manager of North After trial, the MeTC found petitioner guilty beyond reasonable doubt of
Star, in accommodation and upon the instruction of its client, petitioner herein, violation of B.P. 22. Thus:
sent the amount of US$60,000[3] to View Sea Ventures Ltd., in Nigeria from her WHEREFORE, finding the accused, ENGR. JOSE E.
personal account in Citibank Makati. On March 29, 1994, Virginia again sent CAYANAN GUILTY beyond reasonable doubt of Violation
US$40,000 to View Sea Ventures by telegraphic transfer,[4] with US$15,000 of Batas Pambansa Blg. 22 he is hereby sentenced to
coming from petitioner. Likewise, on various dates, North Star extended credit suffer imprisonment of one (1) year for each of the
to petitioner for the airplane tickets of his clients, with the total amount of such offense committed.
indebtedness under the credit extensions eventually reaching P510,035.47.[5] Accused is likewise ordered to indemnify the
To cover payment of the foregoing obligations, petitioner issued the complainant North Star International Travel, Inc.
following five checks to North Star: represented in this case by Virginia Balagtas, the sum
Check No : 246822 of TWO MILLION FIVE HUNDRED THIRTY THOUSAND
Drawn Against : Republic Planters Bank AND SEVEN HUNDRED THREE PESOS (P2,530,703.00)
Amount : P695,000.00 representing the total value of the checks in [question]
Dated/Postdated : May 15, 1994 plus FOUR HUNDRED EIGHTY[-]FOUR THOUSAND
Payable to : North Star International Travel, Inc. SEVENTY[-]EIGHT PESOS AND FORTY[-]TWO CENTAVOS
(P484,078.42) as interest of the value of the checks
Check No : 246823 subject matter of the instant case, deducting therefrom
Drawn Against : Republic Planters Bank the amount of TWO HUNDRED TWENTY THOUSAND
Amount : P278,000.00 PESOS (P220,000.00) paid by the accused as interest on
Dated/Postdated : May 15, 1994 the value of the checks duly receipted by the complainant
Payable to : North Star International Travel, Inc. and marked as Exhibit “FF” of the record.
xxxx
Check No : 246824 SO ORDERED.[10]
Drawn Against : Republic Planters Bank On appeal, the Regional Trial Court (RTC) acquitted petitioner of the
Amount : P22,703.00 criminal charges. The RTC also held that there is no basis for the imposition of
Dated/Postdated : May 15, 1994 the civil liability on petitioner. The RTC ratiocinated that:
Payable to : North Star International Travel, Inc. In the instant cases, the checks issued by the
accused were presented beyond the period of NINETY
Check No : 687803 (90) DAYS and therefore, there is no violation of the
Drawn Against : PCIB provision of Batas Pambansa Blg. 22 and the accused is
Amount : P1,500,000.00 not considered to have committed the offense. There
Dated/Postdated : April 14, 1994 being no offense committed, accused is not criminally
Payable to : North Star International Travel, Inc. liable and there would be no basis for the imposition of
the civil liability arising from the offense.[11]
Check No : 687804 Aggrieved, North Star elevated the case to the CA. On May 31, 2006,
Drawn Against : PCIB the CA reversed the decision of the RTC insofar as the civil aspect is concerned
Amount : P35,000.00 and held petitioner civilly liable for the value of the subject checks. The fallo of
Dated/Postdated : April 14, 1994 the CA decision reads:
Payable to : North Star International Travel, Inc.[6]
When presented for payment, the checks in the amount of P1,500,000 WHEREFORE, the petition is GRANTED. The
and P35,000 were dishonored for insufficiency of funds while the other three assailed Decision of the RTC insofar as Cayanan's civil
checks were dishonored because of a stop payment order from liability is concerned, is NULLIFIED and SET ASIDE. The
petitioner.[7] North Star, through its counsel, wrote petitioner on September indemnity awarded by the MeTC in its September 1, 1999
14, 1994[8] informing him that the checks he issued had been Decision is REINSTATED.
dishonored. North Star demanded payment, but petitioner failed to settle his SO ORDERED.[12]
obligations. Hence, North Star instituted Criminal Case Nos. 166549-53 The CA ruled that although Cayanan was acquitted of the criminal
charging petitioner with violation of Batas Pambansa Blg. 22, or the Bouncing charges, he may still be held civilly liable for the checks he issued since he never
Checks Law, before the Metropolitan Trial Court (MeTC) of Makati City. denied having issued the five postdated checks which were dishonored.
The Informations,[9] which were similarly worded except as to the check Petitioner now assails the CA decision raising the lone issue of whether
numbers, the dates and amounts of the checks, alleged: the CA erred in holding him civilly liable to North Star for the value of the
That on or about and during the month of March checks.[13]
1994 in the Municipality of Makati, Metro Manila, Petitioner argues that the CA erred in holding him civilly liable to
Philippines, a place within the jurisdiction of this North Star for the value of the checks since North Star did not give any valuable
Honorable Court, the above-named accused, being the consideration for the checks. He insists that the US$85,000 sent to View Sea
authorized signatory of [JEAC] Int’l Mgt & Cont. Serv. did Ventures was not sent for the account of North Star but for the account of
then and there willfully, unlawfully and feloniously make Virginia as her investment. He points out that said amount was taken from
out[,] draw and issue to North Star Int’l. Travel Inc. herein Virginia’s personal dollar account in Citibank and not from North Star’s
rep. by Virginia D. Balagtas to apply on account or for corporate account.
value the checks described below: Respondent North Star, for its part, counters that petitioner is liable
xxxx for the value of the five subject checks as they were issued for
said accused well knowing that at the time of issue value. Respondent insists that petitioner owes North Star P2,530,703 plus
thereof, did not have sufficient funds in or credit with the interest of P264,078.45, and that the P220,000 petitioner paid to North Star is
drawee bank for the payment in full of the face amount conclusive proof that the checks were issued for value.
of such check upon its presentment, which check when The petition is bereft of merit.
presented for payment within ninety (90) days from the We have held that upon issuance of a check, in the absence of
date thereof was subsequently dishonored by the drawee evidence to the contrary, it is presumed that the same was issued for valuable
bank for the reason PAYMENT STOPPED/DAIF and despite consideration which may consist either in some right, interest, profit or benefit
receipt of notice of such dishonor the accused failed to accruing to the party who makes the contract, or some forbearance, detriment,
pay the payee the face amount of said check or to make loss or some responsibility, to act, or labor, or service given, suffered or
undertaken by the other side.[14] Under the Negotiable Instruments Law, it is payee, he did so to settle his obligation with North Star for the US$85,000. And
presumed that every party to an instrument acquires the same for a since the only payment petitioner made to North Star was in the amount
consideration or for value.[15] As petitioner alleged that there was no of P220,000.00, which was applied to interest due, his liability is not
consideration for the issuance of the subject checks, it devolved upon him to extinguished. Having failed to fully settle his obligation under the checks, the
present convincing evidence to overthrow the presumption and prove that the appellate court was correct in holding petitioner liable to pay the value of the
checks were in fact issued without valuable consideration.[16] Sadly, however, five checks he issued in favor of North Star.
petitioner has not presented any credible evidence to rebut the presumption, WHEREFORE, the present appeal by way of a petition for review on
as well as North Star’s assertion, that the checks were issued as payment for the certiorari is DENIED for lack of merit. The Decision dated May 31, 2006 of the
US$85,000 petitioner owed. Court of Appeals in CA-G.R. SP No. 65538 is AFFIRMED.
Notably, petitioner anchors his defense of lack of consideration on With costs against petitioner.
the fact that he did not personally receive the US$85,000 from SO ORDERED.
Virginia. However, we note that in his pleadings, he never denied having
instructed Virginia to remit the US$85,000 to View Sea Ventures. Evidently, [1] Rollo, pp. 35-45. Penned by Associate Justice Roberto A. Barrios with
Virginia sent the money upon the agreement that petitioner will give to North Associate Justices Mario L. Guariña III and Santiago Javier Ranada
Star the peso equivalent of the amount remitted plus interest. As testified to by concurring.
Virginia, Check No. 246822 dated May 15, 1994 in the amount of P695,000.00 is [2] March 15 in some parts of the records but the date appearing on the
equivalent to US$25,000; Check No. 246823 dated May 15, 1994 in the amount telegraphic transfer receipt/money transfer slip is March 17.
[3]
of P278,000 is equivalent to US$10,000; Check No. 246824 in the amount Exh. “8”, records, p. 262.
of P22,703 represents the one month interest for P695,000 and P278,000 at the [4] Exh. “9”, id. at 263.
rate of twenty-eight (28%) percent per annum;[17] Check No. 687803 dated April [5] Id. at 35.
[6]
14, 1994 in the amount of P1,500,000 is equivalent to US$50,000 and Check No. Id. at 36, 53-54.
687804 dated 14 April 1994 in the amount of P35,000 represents the one [7] Id. at 56.
month interest for P1,500,000 at the rate of twenty-eight (28%) percent per [8] Exh. “R”, id. at 291.
annum.[18] Petitioner has not substantially refuted these averments. [9]
Id. at 1-10.
Concomitantly, petitioner’s assertion that the dollars sent to Nigeria [10] Rollo, pp. 57-58.
was for the account of Virginia Balagtas and as her own investment with View [11] Id. at 61.
Sea Ventures deserves no credence. Virginia has not been shown to have any [12] Id. at 44.
business transactions with View Sea Ventures and from all indications, she only [13] Id. at 26.
remitted the money upon the request and in accordance with petitioner’s [14] Palana v. People, G.R. No. 149995, September 28, 2007, 534 SCRA 296,
instructions. The evidence shows that it was petitioner who had a contract with 305.
View Sea Ventures as he was sending contract workers to Nigeria; Virginia [15] Section 24, Negotiable Instruments Law.
Balagtas’s participation was merely to send the money through telegraphic Sec. 24. Presumption of consideration. – Every negotiable instrument is
transfer in exchange for the checks issued by petitioner to North Star. Indeed, deemed prima facie to have been issued for a valuable consideration; and
the transaction between petitioner and North Star is actually in the nature of a every person whose signature appears thereon to have become a party
loan and the checks were issued as payment of the principal and the interest. thereto for value.
[16]
As aptly found by the trial court: See Bayani v. People, G. R. No. 155619, August 14, 2007, 530 SCRA 84, 95.
[17]
It is to be noted that the checks subject matter of TSN, July 31, 1996, p. 4; records, p. 429.
the instant case were issued in the name of North Star [18] See Exh. “DD”, records, p. 307; see also TSN, July 27, 1998, p. 4; records, p.
International Inc., represented by private complainant 544; TSN, August 17, 1998, p. 8; records, p. 563.
[19]
Virginia Balagtas in replacement of the amount of dollars Rollo, pp. 54-55.
remitted by the latter to Vie[w] Sea Ventures in Nigeria. x [20] Records, pp. 62-65.
[21]
x x But Virginia Balagtas has no business transaction with Id. at 88.
Vie[w] Sea Ventures where accused has been sending his
contract workers and the North Star provided the trip [G.R. No. 146663. March 14, 2001]
tickets for said workers sent by the accused. North Star PERPETUAL SAVINGS BANK vs. BRONDIAL, et al.
International has no participation at all in the transaction FIRST DIVISION
between accused and the Vie[w] Sea Ventures except in Gentlemen:
providing plane ticket used by the contract workers of the Quoted hereunder, for your information, is a resolution of this Court dated MAR
accused upon its understanding with the latter. The 14 2001.
contention of the accused that the dollars were sent by G.R. No. 146663 (Perpetual Savings Bank vs. Dolores Brondial, et al.)
Virginia Balagtas to Nigeria as business investment has - Petitioner Bank filed a complaint for sum of money against respondent
not been shown by any proof to set aside the foregoing Dolores Brondial and her husband. Petitioner Bank alleged that, for value
negative presumptions, thus negates accused contentions received, respondent Dolores executed a promissory note (PN) in the amount of
regarding the absence of consideration for the issuance P826,315.00 in favor of petitioner Bank payable in lump sum on 11 February
of checks. x x x[19] 1984 plus interests. The PN had allegedly long matured but respondents failed
Petitioner claims that North Star did not give any valuable to pay the amount thereon.
consideration for the checks since the US$85,000 was taken from the personal Among others, respondents raised the defense of lack of
dollar account of Virginia and not the corporate funds of North Star. The consideration for the PN. According to respondent Dolores, she was required to
contention, however, deserves scant consideration. The subject checks, bearing sign the loan instruments and execute the PN by petitioner Bank as condition to
petitioner’s signature, speak for themselves. The fact that petitioner himself her appointment as Senior Manager of Perpetual Capital Investments & Finance
specifically named North Star as the payee of the checks is an admission of his Corp. an affiliate of petitioner Bank.
liability to North Star and not to Virginia Balagtas, who as manager merely Both the RTC and CA ruled in favor of respondents upon the
facilitated the transfer of funds. Indeed, it is highly inconceivable that an following factual findings: petitioner Bank was originally named Perpetual
experienced businessman like petitioner would issue various checks in sizeable Savings Loan and Association. On 8 February 1983, it changed its name to
amounts to a payee if these are without consideration. Moreover, we note Perpetual Savings Bank under the management of Danilo Natividad, President;
that Virginia Balagtas averred in her Affidavit[20] that North Star caused the Crisanto Norofla, Executive Vice-President; Zoilo Gabriel, Vice-President for
payment of the US$60,000 and US$25,000 to View Sea Ventures to Operations. Petitioner Bank designated Metropolitan Batik, Baclaran Branch as
accommodate petitioner, which statement petitioner failed to refute. In its depository bank with Account No. 070-15004-9. Natividad, Norofla and
addition, petitioner did not question the Statement of Account No. Gabriel were the authorized check signatories. These three officers, together
8639[21] dated August 31, 1994 issued by North Star which contained itemized with Roberto and Adora Baes, also had a joint account with the same bank
amounts including the US$60,000 and US$25,000 sent through telegraphic under Account No. 070-00490-5. The authorized check signatories were the
transfer to View Sea Ventures per his instruction. Thus, the inevitable same bank officers.
conclusion is that when petitioner issued the subject checks to North Star as
On 11 February 1983, respondent Dolores purportedly applied for a was likewise correct in ordering appellants to pay interest at the legal rate of
loan and simultaneously executed the subject PN. Earlier, on 10 February 1983, 12% per annum counted from the filing of the complaint. This is in accordance
City Estate Developers, Inc. executed a real estate mortgage of several parcels with Article 2209 of the Civil Code which provides that if the obligation consists
of land to secure, among others, the loan of respondent Dolores. The check in the payment of a sum of money, and the debtor incurs in delay, the indemnity
issued to respondent Dolores as proceeds of the loan was endorsed and for damages, there being no stipulation to the contrary, should be the payment
deposited on 14 February 1983 to Metro Bank Account No. 070-00490-5, the of the interest agreed upon, and in the absence of stipulation, the legal rate of
personal account ofNatividad., Norofia, Gabriel and the Baeses. interest which is now 12 percent per annum. (National Power Corporation vs.
The other documentary evidence further showed that the personal Agnar, G.R. Nos. 60225-26, May 8, 1992). The trial court was likewise correct in
account of Natividad, et al. (Account No. 070-00490-5) was used to transfer the granting attorney’s fees in the amount of P50,000.00. As found by the court a
purported loan of respondent Dolores to petitioner Bank’s account (Account quo, appellants acted in gross evident bad faith in refusing to pay appellee’s just
No. 070-15004-9). Thus, the CA ruled that petitioner Bank as holder of the and demandable claim (Reyes v. Zubirri, 208 SCRA 561; Maersk Line vs. Court of
check, is not a holder in due course and accordingly, not entitled to enforce or Appeals, 222 SCRA 108).”
collect payment from the maker (respondent Dolores) because of absence or 3. Obligations and Contracts; Guarantee; Surety; Accommodation Parties; An
lack of consideration. Absence or lack of consideration is a valid defense against accommodation party and the party accommodated is in effect one of principal
any person not a holder in due course (Section 28, Negotiable Interests Law). and surety.-
It was further held that contrary to petitioner Bank’s insistence, —Petitioner Noelli’s defense that she was merely an accommodation party was
respondent Dolores is not liable as an “accommodation maker.” Section 29 of rightly rejected by the Court of Appeals which ruled: “x x x “Appellants
the NIL defines the term as — persistently insist that when appellant Noelli Gardose issued the three (3) checks
x x x one who has signed the instrument as maker, drawer, acceptor, to appellee she merely acted as a guarantor and therefore should not be held
or indorser, without receiving value therefor, and for the purpose of lending his primarily liable to appellee. We disagree, the mere fact that appellant Noelli
name to some other person. Such a person is liable on the instrument to a Gardose issued the three (3) checks to appellee make her liable to the latter
holder for value, notwithstanding such holder, at the time of taking the without the need for the appellee to first go after Cecilia Cacnio because the
instrument, knew him to be only an accommodation party. relationship between an accommodation party and the party accommodated is
As held by the CA, it was petitioner Bank who was accommodated by in effect one of principal and surety (Coneda, Jr. vs. Court of Appeals, 181 SCRA
respondent Dolores when she executed the PN, thus, petitioner Bank cannot 673; Prudencio vs. Court of Appeals, 143 SCRA 7). In the recent case of Town
collect from respondent Dolores. Savings & Loan Bank, Inc. vs. Court of Appeals, 223 SCRA 459, the Supreme
In this petition, petitioner Bank avers that the CA erred in, among Court held: ‘An accommodation party is one who has signed the instrument as
others, not according the presumption of regularity in the execution by maker, drawer, indorser, without receiving value therefor and for the purpose of
respondent Dolores of the subject PN; the CA erred in ruling that petitioner lending his name to some other person. Such person is liable on the instrument
Bank is not a holder in due course and that respondent Dolores is not liable as to a holder for value, notwithstanding such holder, at the time of the taking of
“accommodation maker;” and the CA erred in awarding the counterclaims of the instrument knew him to be only an accommodation party is in effect a
respondents. surety for the latter. He lends his name to enable the accommodated party to
Petitioner Bank has failed to show any cogent reasons to deviate obtain credit or to raise money. He receives no part of the consideration for the
from the general rule that factual findings of the lower court are accorded great instrument but assumes liability to the other parties thereto because he wants
weight. In this case, both the RTC and CA found that there was no consideration to accommodate another (The Phil. Bank of Commerce vs. Aruego, 102 SCRA
for the issuance by respondent Dolores of the PN. Upon appreciation of the 530, 539, 540).’ ”
evidence presented by the parties, the RTC and CA found that respondent 4. Same; Due Process; Speedy Disposition of Cases; The essence of due process
Dolores was not indebted to petitioner Bank because the amounts is a fair opportunity to be heard; The right of one party to speedy justice is just
(P826,315.00) she purportedly received were returned to and received by as valuable as the right of the other party to due process.-
petitioner Bank on the very day the checks were released. Respondent Dolores —Petitioners cannot claim denial of due process. The essence of due process is a
did not receive a single centavo from the loan. fair opportunity to be heard. Petitioners were given all the opportunities to
Contrary to petitioner Bank’s position, the presumption of regularity cross-examine the private respondent and to present their evidence. They failed
in the issuance of the PN had been sufficiently overthrown upon showing that to make use of these opportunities either through negligence or unpreparedness
the checks released to respondent Dolores as proceeds of the loan were of their counsel. The right of private respondent to speedy justice is just as
immediately deposited to the personal account of Natividad et al, the officers of valuable as the right of petitioners to due process.
petitioner Bank. Thereafter, the funds in this account were credited to the 5. Same; Forum Shopping; Revised Circular No. 28-91, the anti-forum shopping
account of petitioner Bank. rule, took effect on January 1, 1992, and initially applied only to the Court of
WHEREFORE, the petition is DENIED for lack of merit. Appeals, while Administrative Circular No. 04-94, which extended the
application of the rule to trial courts and administrative agencies, took effect
only on April 1, 1994.-
Case Title : SPOUSES GIL AND NOELLI GARDOSE, petitioners, vs. REYNALDO S. —Petitioners’ charge of forum shopping is baseless. To start with, petitioners did
TARROZA, respondent.Case Nature : PETITION for review on certiorari of a not raise the issue in the trial court. Moreover, Revised Circular No. 28-91, the
decision of the Court of Appeals. anti-forum shopping rule, took effect on January 1, 1992, and it initially applied
Syllabi Class : Actions|Obligations and Contracts|Interests|Judgments|Res only to the Court of Appeals. Administrative Circular No. 04-94, which extended
Judicata|Jurisdiction|Forum Shopping|Due Process|Speedy Disposition of the application of the rule to trial courts and administrative agencies, took effect
Cases|Guarantee|Surety|Accommodation Parties only on April 1, 1994. The second case against petitioners, Civil Case No. Q-91-
Syllabi: 7959, was filed on February 13, 1991 or before the effectivity of the rules on
1. Actions; Judgments; Res Judicata; “Bar by Former Judgment,” Requisites.- forum shopping on trial courts.
—The rule in Section 49(b) is known as “bar by former judgment” while the rule 6. Same; Same; Same; Jurisdiction; If a court did not acquire jurisdiction over a
embodied in paragraph (c) of the same section is known as “conclusiveness of party in a case, it cannot render any binding decision, favorable or adverse to
judgment.” There are four (4) requisites which must concur in order for res them, or dismiss the case with prejudice which, in effect, is an adjudication on
judicata as a “bar by former judgment” to attach, viz.: (1) the former judgment the merits.-
must be final; (2) it must have been rendered by a court having jurisdiction over —The Court of Appeals correctly ruled that petitioners cannot rely on the
the subject matter and the parties; (3) it must be a judgment or order on the principle of bar by former judgment. Civil Case No. Q-89-3500 was dismissed for
merits; and (4) there must be between the first and second action identity of the continuing failure of private respondent to effect service of summons by
parties, identity of subject matter and identity of causes of action. publication on the petitioners. In other words, the dismissal was made before
2. Interests; If the obligation consists in the payment of a sum of money, and the the trial court acquired jurisdiction over the petitioners. In Republic Planters
debtor incurs in delay, the indemnity for damages, there being no stipulation to Bank vs. Molina, we held: x x x “In the very order of dismissal of Civil Case No.
the contrary, should be the payment of the interest which is now 12 percent per 116028, the trial court admitted that it did not acquire jurisdiction over the
annum.- persons of private respondents and yet, it held that it was of no moment as to
—Petitioners cannot assert that the award of 12% interest and attorney’s fees the dismissal of the case. We disagree. For the court to have authority to dispose
to private respondent is not justified. The Court of Appeals correctly affirmed the of the case on the merits, it must acquire jurisdiction over the subject matter
trial court’s monetary award to private respondent, viz.: “x x x The lower court and the parties. If it did not acquire jurisdiction over the private respondents as
parties to Civil Case No. 116028, it cannot render any binding decision, favorable the object or principal conditions, or by substituting another in place of the
or adverse to them, or dismiss the case with prejudice which, in effect, is an debtor, or by subrogating a third person in the rights of the creditor.-
adjudication on the merits. The controverted orders in Civil Case No. 116028 Novation is the extinguishment of an obligation by the substitution or change of
disregarded the fundamental principles of remedial law and the meaning and the obligation by a subsequent one which extinguishes or modifies the first,
the effect of jurisdiction. A judgment, to be considered res judicata, must be either by changing the object or principal conditions, or by substituting another
binding, and must be rendered by a court of competent jurisdiction. Otherwise, in place of the debtor, or by subrogating a third person in the rights of the
the judgment is a nullity. creditor. In order that a novation can take place, the concurrence of the
following requisites are indispensable: 1) There must be a previous valid
Division: SECOND DIVISION obligation; 2) There must be an agreement of the parties concerned to a new
contract; 3) There must be the extinguishment of the old contract; and 4) There
Docket Number: G.R. No. 130570 must be the validity of the new contract.
4. Contracts; Novation; There is no novation by “substitution” of debtor where
Counsel: Cesar M. Cariño, Jose F. Manacop there is no prior obligation which is substituted by a new contract.-
In the instant case, the first requisite for a valid novation is lacking. There was
Ponente: PUNO no novation by “substitution” of debtor because there was no prior obligation
which was substituted by a new contract. It will be noted that the promissory
Dispositive Portion: notes, which bound the petitioners to pay were executed after the addendum.
IN VIEW WHEREOF, the petition is dismissed. Costs against the petitioners. The addendum modified the contract of sale, not the stipulations in the
promissory notes which pertain to the surety contract. At this instance,
Wonderland apparently assured the payment of future debts to be incurred by
Case Title : AGRO CONGLOMERATES, INC. and MARIO SORIANO, petitioners, vs. the petitioners. Consequently, only a contract of surety arose. It was wrong for
THE HON. COURT OF APPEALS and REGENT SAVINGS and LOAN BANK, INC, petitioners to presume a novation had taken place. The well-settled rule is that
respondents.Case Nature : PETITION for review on certiorari of a decision of the novation is never presumed, it must be clearly and unequivocally shown.
Court of Appeals. 5. Contracts; Interpretation of Contracts; In order to judge the intention of the
Syllabi Class : parties, their contemporaneous and subsequent acts should be considered.-
Contracts|Actions|Sales|Suretyships|Novation|Requisites|Words and It is true that the basic and fundamental rule in the interpretation of contract is
Phrases|Interpretation of Contracts|Parties|Pleadings and Practice that, if the terms thereof are clear and leave no doubt as to the intention of the
Syllabi: contracting parties, the literal meaning shall control. However, in order to judge
1. Contracts; Sales; A contract of sale is a reciprocal transaction, the obligation the intention of the parties, their contemporaneous and subsequent acts should
or promise of each party being the cause or consideration for the obligation or be considered.
promise of the other.- 6. Actions; Parties; Pleadings and Practice; The non-inclusion of a necessary
A contract of sale is a reciprocal transaction. The obligation or promise of each party does not prevent the court from proceeding in the action, and the
party is the cause or consideration for the obligation or promise by the other. judgment rendered therein shall be without prejudice to the rights of such
The vendee is obliged to pay the price, while the vendor must deliver actual necessary party.-
possession of the land. In the instant case the original plan was that the initial Petitioners had no legal or just ground to retain the proceeds of the loan at the
payments would be paid in cash. Subsequently, the parties (with the expense of private respondent. Neither could petitioners excuse themselves and
participation of respondent bank) executed an addendum providing instead, hold Wonderland still liable to pay the loan upon the rescission of their sales
that the petitioners would secure a loan in the name of Agro Conglomerates Inc. contract. If petitioners sustained damages as a result of the rescission, they
for the total amount of the initial payments, while the settlement of said loan should have impleaded Wonderland and asked damages. The non-inclusion of a
would be assumed by Wonderland. Thereafter, petitioner Soriano signed several necessary party does not prevent the court from proceeding in the action, and
promissory notes and received the proceeds in behalf of petitioner-company. the judgment rendered therein shall be without prejudice to the rights of such
2. Contracts; Sales; Suretyships; Accommodation Parties; Words and Phrases; necessary party. But respondent appellate court did not err in holding that
An accommodation party is a person who has signed the instrument as maker, petitioners are duty-bound under the law to pay the claims of respondent bank
acceptor, or indorser, without receiving value therefor, and for the purpose of from whom they had obtained the loan proceeds.
lending his name to some other person and is liable on the instrument to a
holder for value, notwithstanding such holder at the time of taking the Division: SECOND DIVISION
instrument knew (the signatory) to be an accommodation party; Suretyship is
defined as the relation which exists where one person has undertaken an Docket Number: G.R. No. 117660
obligation and another person is also under the obligation or other duty to the
obligee, who is entitled to but one performance, and as between the two who Counsel: Quiason, Makalintal, Barot, Torres, Ibarra, Cesar M. Cariño
are bound, one rather than the other should perform.-
By this time, we note a subsidiary contract of suretyship had taken effect since Ponente: QUISUMBING
petitioners signed the promissory notes as maker and accommodation party for
the benefit of Wonderland. Petitioners became liable as accommodation party. Dispositive Portion:
An accommodation party is a person who has signed the instrument as maker, WHEREFORE, the petition is DENIED for lack of merit. The assailed decision of
acceptor, or indorser, without receiving value therefor, and for the purpose of the Court of Appeals dated October 17, 1994 is AFFIRMED. Costs against
lending his name to some other person and is liable on the instrument to a petitioners.
holder for value, notwithstanding such holder at the time of taking the
instrument knew (the signatory) to be an accommodation party. He has the
right, after paying the holder, to obtain reimbursement from the party [G.R. No. 147920. April 3, 2002]
accommodated, since the relation between them has in effect become one of MAJESTIC FINANCE CO., INC. vs. BONIFACIO
principal and surety, the accommodation party being the surety. Suretyship is FIRST DIVISION
defined as the relation which exists where one person has undertaken an Gentlemen:
obligation and another person is also under the obligation or other duty to the Quoted hereunder, for your information, is a resolution of this Court
obligee, who is entitled to but one performance, and as between the two who dated 03 APR 2002.
are bound, one rather than the other should perform. The surety’s liability to the G.R. No. 147920 (Majestic Finance & Investment Co., Inc. vs. Amelia
creditor or promisee of the principal is said to be direct, primary and absolute; in L. Bonifacio.)
other words, he is directly and equally bound with the principal. And the creditor This petition for review on certiorari assails the Decision of the Court
may proceed against any one of the solidary debtors. of Appeals in CA-G.R. CV No. 60662[1] which affirmed the Decision of the
3. Contracts; Novation; Requisites; Words and Phrases; Novation is the Regional Trial Court of Pasig City in Civil Case No. 62277, and the Resolution
extinguishment of an obligation by the substitution or change of the obligation dated April 23, 2001 which denied petitioner Majestic Finance & Investment
by a subsequent one which extinguishes or modifies the first, either by changing Co., Inc.’s motion for reconsideration.
On December 6, 1989, petitioner entered into a Contract of Lease tax (BIR’s Official receipts of which LESSEE shall furnished
with Japanese nationals Yasutsugu Uoyama and Hiroyuki Shibutani (the the LESSOR), payable within the first five days of every
“lessees”) for the lease of Condominium Unit No. 5-K of the Legaspi Towers calendar month without need of demand. Failure to pay
located at Roxas Boulevard corner Vito Cruz St. , Manila. The term of the lease the agreed monthly rental, the LESSOR shall forfeit the
was for one (1) year. two (2) months deposit as penalty. All furnitures and
Respondent Amelia Bonifacio, the girlfriend of T. Sakamoto who in equipments listed in Annex “A” belong to the
turn was the friend of the lessees, actively participated in negotiating the terms LESSOR. The LESSOR and the LESSEE mutually agree that
of the contract of lease because the lessees could hardly speak English or the amount of ONE HUNDRED NINETY TWO THOUSAND
Tagalog. PESOS (P192,000.00) Philippine Currency, which the
On that same day (December 6, 1989), the lessees paid petitioner LESSEE now tenders and pays to the LESSOR represents
One Hundred Ninety Two Thousand Pesos (P192,000.00) to cover the deposit of as follows:
P48,000.00 and the advance rentals for the first six months of the lease period, a) ONE HUNDRED FORTY FOUR THOUSAND PESOS
from December, 1989 to June, 1990 amounting to P148,000.00. (P144,000.00) as advance rental for the first six (6) months
Upon request of the lessees, respondent issued in petitioner’s favor covering the period from December 6, 1989 to June 5, 1990.
a postdated United Coconut Planters Bank (Puyat-Bautista Branch) Check No. b) FORTY EIGHT THOUSAND PESOS (P48,000.00) fixed non-
PUB 285072 in the amount of One Hundred Forty Four Thousand Pesos interest bearing deposit applicable to Item No. 4.
(P144,000.00) to guarantee the payment of the rentals for last six months of the 4. DEPOSIT - Upon signing of this contract LESSEE
lease, from July to December, 1990. shall deposit in cash the amount of FORTY EIGHT
On April 24, 1990, petitioner’s counsel received a letter from THOUSAND PESOS (P48,000.00) Philippine Currency
respondent and the lessees that the latter were vacating the condominium by which shall be non-interest bearing guaranty for the
May 1, 1990. Respondent also requested that the postdated check which she faithful compliance by LESSEE of all covenants and
had earlier issued in petitioner’s favor be returned to her since there was no conditions of this Contract and to answer for any unpaid
longer any need for the said check to be in petitioner’s possession. bills for association dues and special assessments, water,
However, petitioner refused to return the check and instead gas, electricity, telephone and other utilities and damages
deposited the same in its account with the Philippine Commercial International suffered by LESSOR, and other momentary liabilities or
Bank. The check was later dishonored and returned pursuant to the stop obligations of LESSEE under this Contract for the leased
payment order made by respondent. premises, said deposit can’t be applied by LESSEE to any
On August 4, 1992, petitioner filed with the Regional Trial Court of unpaid rent and shall be kept intact throughout the life of
Pasig City (RTC) a complaint for collection of sum of money with prayer for the this Contract. It shall be returned to LESSEE ninety days
issuance of a writ of preliminary attachment against respondent due to the after LESSEE shall have completely and satisfactorily
latter’s refusal to make good her check. vacated and delivered the leased premises to LESSOR in
On September 30, 1997, the RTC issued its Decision dismissing the the same condition the unit is first delivered to the
case against respondent. Petitioner thereafter filed a motion for LESSEE: less whatever amount the LESSEE may owe
reconsideration but the same was dismissed by the trial court in an Order dated LESSOR at the time of said termination or expiration.
January 22, 1998. Provided, that if LESSEE shall terminate this lease
Not satisfied with the decision of the trial court, petitioner filed an contract before the expiration thereof, then said deposit
appeal thereof with the Court of Appeals. and advanced rental paid shall be automatically
On February 13, 2001, the Court of Appeals promulgated its Decision forfeited in favor of LESSOR since the parties herein
affirming the RTC’s Decision. The appellate court ruled that respondent is an agree that time is of the essence and the period for
accommodation party and may be held solidarily liable for the amount of the payment of rent, as well as the period of this contract, as
check under Section 29 of the Negotiable Instruments Law, subject to fixed for the benefit of LESSOR, PROVIDED, further that
reimbursement from the lessees. However, it ruled that the respondent was not the LESSEE liability for any breach of this Contract or any
under any obligation to pay the P144,000.00 corresponding to advance rental obligation to the amount of said deposit. (Emphasis
payments for the months of July to December 1990 because the lease contract supplied.)[4]
did not authorize the petitioner as lessor to automatically forfeit the advance There is nothing in the said contract which allows the petitioner as lessor to
rentals for the last six months of the lease period should the lessees terminate automatically forfeit the advance rental for the last six months of the lease
the lease before the end of said period. period from July to December, 1990. Since the amount covered by respondent’s
The appellate court also dismissed petitioner’s motion for postdated check pertained to the rentals for the last six months of the lease
reconsideration in a Resolution dated April 23, 2001. period, the appellate court was correct in holding that she was under no
Hence, this petition. obligation as accommodation party of the lessees to make good her check.
Petitioner contends that the Court of Appeals misapplied and Considering the foregoing, no reversible error was committed by the
misinterpreted the real import of the automatic forfeiture clause in relation to Court of Appeals in affirming the decision of the trial court dismissing the
pars. “3.a” and “3.b” of the Contract of Lease, and that even without the complaint for collection filed by petitioner against respondent.
automatic forfeiture clause, it can still recover the amount of P144,000.00 WHEREFORE, the petition is hereby DENIED for lack of merit and the
corresponding to the rent of the condominium unit for the last six months of assailed Decision dated February 13, 2001 and the Resolution dated April 23,
the lease period because the lessees breached their contract with petitioner.[2] 2001 in CA-G.R. CV No. 60662 are hereby AFFIRMED. PUNO, J., on official leave.
On July 25, 2001, the Court resolved to require respondent to file her V
Comment to the petition[3] but respondent failed to file the same. In a
Manifestation filed with the Court on December 13, 2001, respondent’s [1] Majestic Finance & Investment Co., Inc, Plaintiff-Appellant, vs. Amelia L.
counsel of record explained that he had lost contact with respondent even Bonifacio, Defendant-Appellee.
while the case was still pending before the trial court. He likewise prayed that [2] Petition, Rollo, pp. 17-35.
[3]
the case be decided based on the records of the case. Resolution dated July 25, 2001, Id., at 72.
There is no merit in the petition. [4] Decision of the Court of Appeals, Id., at 46-47.

Both the Court of Appeals and the trial court found that what the
Contract of Lease stipulated under paragraph 4 thereof was that if the lessees Case Title : GENEVIEVE LIM, petitioner, vs. FLORENCIO SABAN, respondent.Case
terminated the lease before the expiration of the one-year period, the lessor Nature : PETITION for review on certiorari of a decision of the Court of Appeals.
may automatically forfeit the deposit of P48,000.00 and the advance rental of Syllabi Class : Civil Law|Commercial Law|Agency|Agency Coupled with an
P144,000.00 for the first six months of the lease period. The pertinent portions Interest|Negotiable Instruments Law
of the Contract of Lease state: Syllabi:
3. RENTAL - The parties herein agree that the monthly 1. Civil Law; Agency; The right of a broker to his commission for finding a
rental of the leased premises and the listed furnishings suitable buyer for the seller’s property even though the seller himself
and equipment shall be TWENTY FOUR THOUSAND PESOS consummated the sale with the buyer recognized by the Court.-
(P24,000.00) Philippine Currency, net of any withholding
In Macondray Co. v. Sellner, the Court recognized the right of a broker to his issue may be raised on appeal unless it has been brought before the lower
commission for finding a suitable buyer for the seller’s property even though the tribunal for its consideration. Higher courts are precluded from entertaining
seller himself consummated the sale with the buyer. The Court held that it would matters neither alleged in the pleadings nor raised during the proceedings
be in the height of injustice to permit the principal to terminate the contract of below, but ventilated for the first time only in a motion for reconsideration or on
agency to the prejudice of the broker when he had already reaped the benefits appeal. However, as with most procedural rules, this maxim is subject to
of the broker’s efforts. exceptions. Indeed, our rules recognize the broad discretionary power of an
2. Civil Law; Agency; The seller’s withdrawal in bad faith of the broker’s appellate court to waive the lack of proper assignment of errors and to consider
authority cannot unjustly deprive the brokers of their commission as the seller’s errors not assigned. Section 8 of Rule 51 of the Rules of Court provides: SEC. 8.
duly constituted agents.- Questions that may be decided.—No error which does not affect the jurisdiction
In Infante v. Cunanan, et al., the Court upheld the right of the brokers to their over the subject matter or the validity of the judgment appealed from or the
commissions although the seller revoked their authority to act in his behalf after proceedings therein will be considered, unless stated in the assignment of errors,
they had found a buyer for his properties and negotiated the sale directly with or closely related to or dependent on an assigned error and properly argued in
the buyer whom he met through the brokers’ efforts. The Court ruled that the the brief, save as the court may pass upon plain errors and clerical errors. Thus,
seller’s withdrawal in bad faith of the brokers’ authority cannot unjustly deprive an appellate court is clothed with ample authority to review rulings even if they
the brokers of their commissions as the seller’s duly constituted agents. are not assigned as errors in the appeal in these instances: (a) grounds not
3. Civil Law; Agency; Agency Coupled with an Interest; An agency is deemed as assigned as errors but affecting jurisdiction over the subject matter; (b) matters
one coupled with an interest where it is established for the mutual benefit of the not assigned as errors on appeal but are evidently plain or clerical errors within
principal and of the agent, or for the interest of the principal and of third contemplation of law; (c) matters not assigned as errors on appeal but
persons, and it cannot be revoked by the principal so long as the interest of the consideration of which is necessary in arriving at a just decision and complete
agent or of a third person subsists.- resolution of the case or to serve the interests of justice or to avoid dispensing
Under Article 1927 of the Civil Code, an agency cannot be revoked if a bilateral piecemeal justice; (d) matters not specifically assigned as errors on appeal but
contract depends upon it, or if it is the means of fulfilling an obligation already raised in the trial court and are matters of record having some bearing on the
contracted, or if a partner is appointed manager of a partnership in the contract issue submitted which the parties failed to raise or which the lower court
of partnership and his removal from the management is unjustifiable. Stated ignored; (e) matters not assigned as errors on appeal but closely related to an
differently, an agency is deemed as one coupled with an interest where it is error assigned; and (f) matters not assigned as errors on appeal but upon which
established for the mutual benefit of the principal and of the agent, or for the the determination of a question properly assigned is dependent.
interest of the principal and of third persons, and it cannot be revoked by the 2. Same; Same; Since the liability of an accommodation party remains not only
principal so long as the interest of the agent or of a third person subsists. In an primary but also unconditional to a holder for value, even if the
agency coupled with an interest, the agent’s interest must be in the subject accommodated party receives an extension of the period for payment without
matter of the power conferred and not merely an interest in the exercise of the the consent of the accommodation party, the latter is still liable for the whole
power because it entitles him to compensation. When an agent’s interest is obligation and such extension does not release him because as far as a holder
confined to earning his agreed compensation, the agency is not one coupled for value is concerned, he is a solidary co-debtor; It is a recognized doctrine in
with an interest, since an agent’s interest in obtaining his compensation as such the matter of suretyship that with respect to the surety, the creditor is under no
agent is an ordinary incident of the agency relationship. obligation to display any diligence in the enforcement of his rights as a creditor.-
4. Commercial Law; Negotiable Instruments Law; Requisites of an —Since the liability of an accommodation party remains not only primary but
Accommodation Party.- also unconditional to a holder for value, even if the accommodated party
As gleaned from the text of Section 29 of the Negotiable Instruments Law, the receives an extension of the period for payment without the consent of the
accommodation party is one who meets all these three requisites, viz.: (1) he accommodation party, the latter is still liable for the whole obligation and such
signed the instrument as maker, drawer, acceptor, or indorser; (2) he did not extension does not release him because as far as a holder for value is concerned,
receive value for the signature; and (3) he signed for the purpose of lending his he is a solidary co-debtor. In Clark v. Sellner, 42 Phil. 384 (1921), this Court held:
name to some other person. In the case at bar, while Lim signed as drawer of x x x The mere delay of the creditor in enforcing the guaranty has not by any
the checks she did not satisfy the two other remaining requisites. means impaired his action against the defendant. It should not be lost sight of
that the defendant’s signature on the note is an assurance to the creditor that
Division: SECOND DIVISION the collateral guaranty will remain good, and that otherwise, he, the defendant,
will be personally responsible for the payment. True, that if the creditor had
Docket Number: G.R. No. 163720 done any act whereby the guaranty was impaired in its value, or discharged,
such an act would have wholly or partially released the surety; but it must be
Counsel: Palermo C. Belciña, Jr., Basilio E. Duaban born in mind that it is a recognized doctrine in the matter of suretyship that with
respect to the surety, the creditor is under no obligation to display any diligence
Ponente: TINGA in the enforcement of his rights as a creditor. His mere inaction indulgence,
passiveness, or delay in proceeding against the principal debtor, or the fact that
Dispositive Portion: he did not enforce the guaranty or apply on the payment of such funds as were
WHEREFORE, in view of the foregoing, the petition is DISMISSED. available, constitute no defense at all for the surety, unless the contract
expressly requires diligence and promptness on the part of the creditor, which is
not the case in the present action. There is in some decisions a tendency toward
Case Title : TOMAS ANG, petitioner, vs. ASSOCIATED BANK AND ANTONIO ANG holding that the creditor’s laches may discharge the surety, meaning by laches a
ENG LIONG, respondents.Case Nature : PETITION for review on certiorari of the negligent forbearance. This theory, however, is not generally accepted and the
decision and resolution of the Court of Appeals. courts almost universally consider it essentially inconsistent with the relation of
Syllabi Class : Appeals|Asset Privatization Trust|Negotiable Instruments the parties to the note. (21 R.C.L., 1032-1034)
Law|Obligations and Contracts|Assignment of Errors|Pleadings and 3. Same; Same; Upon the maturity of the note, a surety may pay the debt,
Practice|Actions|Parties|Accommodation Party|Requisites|Words and demand the collateral security, if there be any, and dispose of it to his benefit,
Phrases|Suretyship or, if applicable, subrogate himself in the place of the creditor with the right to
Syllabi: enforce the guaranty against the other signers of the note for the
1. Appeals; Assignment of Errors; Pleadings and Practice; It is well within the reimbursement of what he is entitled to recover from them.-
authority of the Court of Appeals to raise, if it deems proper under the —Under the law, upon the maturity of the note, a surety may pay the debt,
circumstances obtaining, error/s not assigned on an appealed case- demand the collateral security, if there be any, and dispose of it to his benefit,
—an appellate court has the broad discretionary power to waive the lack of or, if applicable, subrogate himself in the place of the creditor with the right to
proper assignment of errors and to consider errors not assigned.—Procedurally, enforce the guaranty against the other signers of the note for the
it is well within the authority of the Court of Appeals to raise, if it deems proper reimbursement of what he is entitled to recover from them. Regrettably, none of
under the circumstances obtaining, error/s not assigned on an appealed case. In these we prudently done by petitioner. When he was first notified by the bank
Mendoza v. Bautista, 453 SCRA 691 (2005), this Court recognized the broad sometime in 1982 regarding his accountabilities under the promissory notes, he
discretionary power of an appellate court to waive the lack of proper lackadaisically relied on Antonio Ang Eng Liong, who represented that he would
assignment of errors and to consider errors not assigned, thus: As a rule, no take care of the matter, instead of directly communicating with the bank for its
settlement. Thus, petitioner cannot now claim that he was prejudiced by the collection was instituted, the issue had been rendered moot with the occurrence
supposed “extension of time” given by the bank to his co-debtor. of a supervening event-
4. Negotiable Instruments Law; Accommodation Party; Words and —the reacquisition of the bank by its former owner when the case was still
Phrases; The phrase “without receiving value therefor” used in Sec. 29 of the pending in the lower court, thus reclaiming its real and actual interest over the
Negotiable Instruments Law (NIL) means “without receiving value by virtue of unpaid promissory notes.—Based on the above backdrop, respondent Bank does
the instrument” and not as it is apparently supposed to mean, “without not appear to be the real party in interest when it instituted the collection suit
receiving payment for lending his name”- on August 28, 1990 against Antonio Ang Eng Liong and petitioner Tomas Ang. At
—when a third person advances the face value of the note to the the time the complaint was filed in the trial court, it was the Asset Privatization
accommodated party at the time of its creation, the consideration for the note Trust which had the authority to enforce its claims against both debtors. In fact,
as regards its maker is the money advanced to the accommodated party.—In during the pre-trial conference, Atty. Roderick Orallo, counsel for the bank,
issuing the two promissory notes, petitioner as accommodating party warranted openly admitted that it was under the trusteeship of the Asset Privatization
to the holder in due course that he would pay the same according to its tenor. It Trust. The Asset Privatization Trust, which should have been represented by the
is no defense to state on his part that he did not receive any value therefor Office of the Government Corporate Counsel, had the authority to file and
because the phrase “without receiving value therefore” used in Sec. 29 of the prosecute the case. The foregoing notwithstanding, this Court can not, at
NIL means “without receiving value by virtue of the instrument” and not as it is present, readily subscribe to petitioner’s insistence that the case must be
apparently supposed to mean, “without receiving payment for lending his dismissed. Significantly, it stands without refute, both in the pleadings as well as
name.” Stated differently, when a third person advances the face value of the in the evidence presented during the trial and up to the time this case reached
note to the accommodated party at the time of its creation, the consideration the Court, that the issue had been rendered moot with the occurrence of a
for the note as regards its maker is the money advanced to the accommodated supervening event—the “buy-back” of the bank by its former owner, Leonardo
party. It is enough that value was given for the note at the time of its creation. Ty, sometime in October 1993. By such re-acquisition from the Asset
As in the instant case, a sum of money was received by virtue of the notes, Privatization Trust when the case was still pending in the lower court, the bank
hence, it is immaterial so far as the bank is concerned whether one of the reclaimed its real and actual interest over the unpaid promissory notes; hence, it
signers, particularly petitioner, has or has not received anything in payment of could rightfully qualify as a “holder” thereof under the NIL.
the use of his name. 9. Asset Privatization Trust; History.-
5. Obligations and Contracts; Suretyship; Article 2080 of the Civil Code does not —Taking into account the imperative need of formally launching a program for
apply in a contract of suretyship- the rationalization of the government corporate sector, then President Corazon
—Articles 1207 up to 1222 of the Code (on joint and solidary obligations) govern C. Aquino issued Proclamation No. 50 on December 8, 1986. As one of the twin
the relationship.—Contrary to petitioner’s adamant stand, however, Article cornerstones of the program was to establish the privatization of a good
2080 of the Civil Code does not apply in a contract of suretyship. Art. 2047 of the number of government corporations, the proclamation created the Asset
Civil Code states that if a person binds himself solidarily with the principal Privatization Trust, which would, for the benefit of the National Government,
debtor, the provisions of Section 4, Chapter 3, Title I, Book IV of the Civil Code take title to and possession of, conserve, provisionally manage and dispose of
must be observed. Accordingly, Articles 1207 up to 1222 of the Code (on joint transferred assets that were identified for privatization or disposition. In
and solidary obligations) shall govern the relationship of petitioner with the accordance with the provisions of Section 23 of the proclamation, then President
bank. Aquino subsequently issued Administrative Order No. 14 on February 3, 1987,
6. Same; Same; Suretyship; The relation between an accommodation party and which approved the identification of and transfer to the National Government of
the accommodated party is one of principal and surety- certain assets (consisting of loans, equity investments, accrued interest
—the accommodation party being the surety; Although a contract of suretyship receivables, acquired assets and other assets) and liabilities (consisting of
is in essence accessory or collateral to a valid principal obligation, the surety’s deposits, borrowings, other liabilities and contingent guarantees) of the
liability to the creditor is immediate, primary and absolute—he is directly and Development Bank of the Philippines (DBP) and the Philippine National Bank
equally bound with the principal.—As petitioner acknowledged it to be, the (PNB). The transfer of assets was implemented through a Deed of Transfer
relation between an accommodation party and the accommodated party is one executed on February 27, 1987 between the National Government, on one hand,
of principal and surety—the accommodation party being the surety. As such, he and the DBP and PNB, on the other. In turn, the National Government
is deemed an original promisor and debtor from the beginning; he is considered designated the Asset Privatization Trust to act as its trustee through a Trust
in law as the same party as the debtor in relation to whatever is adjudged Agreement, whereby the non-performing accounts of DBP and PNB, including,
touching the obligation of the latter since their liabilities are interwoven as to be among others, the DBP’s equity with respondent Bank, were entrusted to the
inseparable. Although a contract of suretyship is in essence accessory or Asset Privatization Trust. As provided for in the Agreement, among the powers
collateral to a valid principal obligation, the surety’s liability to the creditor is and duties of the Asset Privatization Trust with respect to the trust properties
immediate, primary and absolute; he is directly and equally bound with the consisting of receivables was to handle their administration and collection by
principal. As an equivalent of a regular party to the undertaking, a surety bringing suit to enforce payment of the obligations or any installment thereof or
becomes liable to the debt and duty of the principal obligor even without settling or compromising any of such obligations or any other claim or demand
possessing a direct or personal interest in the obligations nor does he receive which the Govern- ment may have against any person or persons, and to do all
any benefit therefrom. acts, institute all proceedings, and to exercise all other rights, powers, and
7. Negotiable Instruments Law; Accommodation Party; Requisites; Words and privileges of ownership that an absolute owner of the properties would
Phrases; An accommodation party is a person “who has signed the instrument otherwise have the right to do.
as maker, drawer, acceptor, or indorser, without receiving value therefor, and
for the purpose of lending his name to some other person.”- Division: FIRST DIVISION
—Notably, Section 29 of the NIL defines an accommodation party as a person
“who has signed the instrument as maker, drawer, acceptor, or indorser, Docket Number: G.R. No. 146511
without receiving value therefor, and for the purpose of lending his name to
some other person.” As gleaned from the text, an accommodation party is one Counsel: Breva, Breva Law Firm, Hildegardo F. Iñigo, Bernardino Bolcan, Jr.
who meets all the three requisites, viz.: (1) he must be a party to the instrument,
signing as maker, drawer, acceptor, or indorser; (2) he must not receive value Ponente: AZCUNA
therefor; and (3) he must sign for the purpose of lending his name or credit to
some other person. An accommodation party lends his name to enable the Dispositive Portion:
accommodated party to obtain credit or to raise money; he receives no part of WHEREFORE, the October 9, 2000 Decision and December 26, 2000 Resolution
the consideration for the instrument but assumes liability to the other party/ies of the Court of Appeals in CA-G.R. CV No. 53413 are AFFIRMED. The petition is
thereto. The accommodation party is liable on the instrument to a holder for DENIED for lack of merit.
value even though the holder, at the time of taking the instrument, knew him or
her to be merely an accommodation party, as if the contract was not for
accommodation. G.R. No. 154740. April 16, 2008.*
8. Same; Actions; Parties; While a bank held by the Asset Privatization Trust HENRY DELA RAMA CO, petitioner, vs. ADMIRAL UNITED SAVINGS BANK,
may not appear to be the real party in interest at the time the action for respondent.
Civil Law; Negotiable Instruments Law; Loans; Accommodation Party; An all the three requisites, viz.: (1) he must be a party to the instrument, signing as
accommodation party who leads his name to enable the accommodated party maker, drawer, acceptor, or indorser; (2) he must not receive value therefor; and
to obtain credit or raise money is liable on the instrument to a holder for value (3) he must sign for the purpose of lending his name or credit to some other
even if he receives no part of the consideration.—Co’s assertion that he merely person. An accommodation party lends his name to enable the accommodated
acted as an accommodation party for METRO RENT cannot release him from party to obtain credit or to raise money; he receives no part of the consideration
liability under the note. An accommodation party who lends his name to enable for the instrument but assumes liability to the other party/ies thereto. The first
the accommodated party to obtain credit or raise money is liable on the two elements are present here, however there is insufficient evidence presented
instrument to a holder for value even if he receives no part of the in the instant case to show the presence of the third requisite. All that the
consideration. He assumes the obligation to the other party and binds himself evidence shows is that petitioner signed Check No. 58832, which is drawn
to pay the note on its due date. By signing the note, Co thus became liable for against his personal account. The said check, dated December 15, 2000,
the debt even if he had no direct personal interest in the obligation or did not corresponds to the value of 24 sets of tires received by Cruiser Bus Lines and
receive any benefit therefrom. Transport Corporation on August 29, 2000. There is no showing of when
petitioner issued the check and in what capacity. In the absence of concrete
Same; Mortgages; Payment; The receipts of payment although not exclusive evidence it cannot just be assumed that petitioner intended to lend his name to
were deemed to be the best evidence of the fact of payment; Cancellation of the corporation. Hence, petitioner cannot be considered as an accommodation
mortgage is not conclusive proof of payment of a loan even as it may serve as party.
basis for an inference that payment of the principal obligation had been
made.—Co also offered the alternative defense that the loan had already been Division: SECOND DIVISION
extinguished by payment. He testified that METRO RENT paid the loan a week
before April 11, 1983. In Alonzo v. San Juan, 451 SCRA 45 (2005), we held that Docket Number: G.R. No. 166405
the receipts of payment, although not exclusive, were deemed to be the best
evidence of the fact of payment. In this case, no receipt was presented to Counsel: Rodolfo B. Ta-asan, Jr.
substantiate the claim of payment. Instead, Co presented a Release of Real
Estate Mortgage dated April 11, 1983 to prove his assertion. But a cancellation Ponente: QUISUMBING
of mortgage is not conclusive proof of payment of a loan, even as it may serve
as basis for an inference that payment of the principal obligation had been Dispositive Portion:
made. I, THEREFORE, VOTE TO DISMISS THE PETITION.

Same; Same; Same; When the plaintiff alleges nonpayment, still the general rule
is that the burden rests on the defendant to prove payment rather than on the Case Title : BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF
plaintiff to prove nonpayment.—Juris-prudence is replete with rulings that in APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO,
civil cases, the party who alleges a fact has the burden of proving it. Burden of respondents.Case Nature : PETITION for review on certiorari of the decision and
proof is the duty of a party to present evidence on the facts in issue necessary resolution of the Court of Appeals.
to prove the truth of his claim or defense by the amount of evidence required Syllabi Class : Certiorari|Negotiable Instruments Law|Checks|Crossed
by law. Thus, a party who pleads payment as a defense has the burden of Checks|Presumptions|Words and Phrases|Banks and Banking|Damages
proving that such payment had, in fact, been made. When the plaintiff alleges Syllabi:
nonpayment, still, the general rule is that the burden rests on the defendant to 1. Certiorari; Only questions of law may be raised in an appeal by certiorari
prove payment, rather than on the plaintiff to prove nonpayment. [Co vs. under Rule 45 of the Rules of Court; Factual findings of the Court of Appeals
Admiral United Savings Bank, 551 SCRA 472(2008)] are entitled to great weight and respect, especially when the CA affirms the
factual findings of the trial court; Exceptions.-
—Generally, only questions of law may be raised in an appeal by certiorari
Case Title : CLAUDE P. BAUTISTA, petitioner, vs. AUTO PLUS TRADERS, under Rule 45 of the Rules of Court. Factual findings of the CA are entitled to
INCORPORATED and COURT OF APPEALS (Twenty-First Division), great weight and respect, especially when the CA affirms the factual findings of
respondentsCase Nature : PETITION for review on certiorari of the decision and the trial court. Such questions on whether certain items of evidence should be
resolution of the Court of Appeals. accorded probative value or weight, or rejected as feeble or spurious, or
Syllabi Class : Negotiable Instruments Law ; Words and Phrases ; whether or not the proofs on one side or the other are clear and convincing and
Accommodation Party ; adequate to establish a proposition in issue, are questions of fact. The same
Syllabi: holds true for questions on whether or not the body of proofs presented by a
1. Corporation Law; Generally, the stockholders and officers are not personally party, weighed and analyzed in relation to contrary evidence submitted by the
liable for the obligations of the corporation except only when the veil of adverse party may be said to be strong, clear and convincing, or whether or not
corporate fiction is being used as a cloak or cover for fraud or illegality, or to inconsistencies in the body of proofs of a party are of such gravity as to justify
work injustice.- refusing to give said proofs weight—all these are issues of fact which are not
—Juridical entities have personalities separate and distinct from its officers and reviewable by the Court. This rule, however, is not absolute and admits of
the persons composing it. Generally, the stockholders and officers are not certain exceptions, namely: a) when the conclusion is a finding grounded
personally liable for the obligations of the corporation except only when the veil entirely on speculations, surmises, or conjectures; b) when the inference made is
of corporate fiction is being used as a cloak or cover for fraud or illegality, or to manifestly mistaken, absurd, or impossible; c) when there is a grave abuse of
work injustice. These situations, however, do not exist in this case. The evidence discretion; d) when the judgment is based on a misapprehension of facts; e)
shows that it is Cruiser Bus Lines and Transport Corporation that has obligations when the findings of fact are conflicting; f) when the CA, in making its findings,
to Auto Plus Traders, Inc. for tires. There is no agreement that petitioner shall be went beyond the issues of the case and the same are contrary to the admissions
held liable for the corporation’s obligations in his personal capacity. Hence, he of both appellant and appellee; g) when the findings of the CA are contrary to
cannot be held liable for the value of the two checks issuedin payment for the those of the trial court; h) when the findings of fact are conclusions without
corporation’s obligation in the total amount of P248,700. citation of specific evidence on which they are based; i) when the finding of fact
2. Negotiable Instruments Law; Words and Phrases; Accommodation of the CA is premised on the supposed absence of evidence but is contradicted
Party; Section 29 of the Negotiable Instruments Law defines an accommodation by the evidence on record; and j) when the CA manifestly overlooked certain
party as a person who has signed the instrument as maker, drawer, acceptor, or relevant facts not disputed by the parties and which, if properly considered,
endorser, without receiving value therefor, and for the purpose of lending his would justify a different conclusion.
name to some other person.- 2. Same; Same; Damages; A depositor has the right to recover reasonable moral
—Contrary to private respondent’s contentions, petitioner cannot be considered damages even if the bank’s negligence may not have been attended with malice
liable as an accommodation party for Check No. 58832. Section 29 of the and bad faith, if the former suffered mental anguish, serious anxiety,
Negotiable Instruments Law defines an accommodation party as a person “who embarrassment and humiliation.-
has signed the instrument as maker, drawer, acceptor, or indorser, without —This whole incident would have been avoided had petitioner adhered to the
receiving value therefor, and for the purpose of lending his name to some other standard of diligence expected of one engaged in the banking business. A
person.” As gleaned from the text, an accommodation party is one who meets depositor has the right to recover reasonable moral damages even if the bank’s
negligence may not have been attended with malice and bad faith, if the former assurance that it had ascertained the genuineness of all prior endorsements.
suffered mental anguish, serious anxiety, embarrassment and humiliation. Having assumed the liability of a general indorser, petitioner’s liability to the
Moral damages are not meant to enrich a complainant at the expense of designated payee cannot be denied.
defendant. It is only intended to alleviate the moral suffering she has 7. Same; Same; Presumptions; Words and Phrases; The presumption under
undergone. The award of exemplary damages is justified, on the other hand, Section 131(s) of the Rules of Court stating that a negotiable instrument was
when the acts of the bank are attended by malice, bad faith or gross negligence. given for a sufficient consideration will not inure to the benefit of someone who
The award of reasonable attorney’s fees is proper where exemplary damages was merely the transferee of the physical possession of the instrument-
are awarded. It is proper where depositors are compelled to litigate to protect —the phrase “given or indorsed” in the context of a negotiable instrument refers
their interest. to the manner in which such instrument may be negotiated.—The presumption
3. Same; Same; The taking and collection of a check without the proper under Section 131(s) of the Rules of Court stating that a negotiable instrument
indorsement amount to a conversion of the check by the bank.- was given for a sufficient consideration will not inure to the benefit of Salazar
—To begin with, the irregularity appeared plainly on the face of the checks. because the term “given” does not pertain merely to a transfer of physical
Despite the obvious lack of indorsement thereon, petitioner permitted the possession of the instrument. The phrase “given or indorsed” in the context of a
encashment of these checks three times on three separate occasions. This negotiable instrument refers to the manner in which such instrument may be
negates petitioner’s claim that it merely made a mistake in crediting the value of negotiated. Negotiable instruments are negotiated by “transfer to one person or
the checks to Salazar’s account and instead bolsters the conclusion of the CA another in such a manner as to constitute the transferee the holder thereof. If
that petitioner recognized Salazar’s claim of ownership of checks and acted payable to bearer it is negotiated by delivery. If payable to order it is negotiated
deliberately in paying the same, contrary to ordinary banking policy and