8. GR No.

126568             April 30, 2003

QUIRINO GONZALES LOGGING CONCESSIONAIRE vs. CA

FACTS: Petitioner Quirino Gonzales Logging Concessionaire (QGLC), through its proprietor, general
manager — co-petitioner Quirino Gonzales, applied on October 15, 1962 for credit
accommodations1 with respondent Republic Bank (the Bank), later known as Republic Planters
Bank.

The Bank approved QGLC's application on December 21, 1962, granting it a credit line of
P900,000.00 broken into an overdraft line of P500,000.00 which was later reduced to P450,000.00
and a Letter of Credit (LC) line of P400,000.00.

Pursuant to the grant, the Bank and petitioners QGLC and the spouses Quirino and Eufemia
Gonzales executed ten documents: two denominated "Agreement for Credit in Current
Account,"4 four denominated "Application and Agreement for Commercial Letter of Credit," 5 and four
denominated "Trust Receipt."

Petitioners' obligations under the credit line were secured by a real estate mortgage on four parcels
of land: two in Pandacan, Manila, one in Makati (then part of Rizal), and another in Diliman, Quezon
City.

In separate transactions, petitioners, to secure certain advances from the Bank in connection with
QGLC's exportation of logs, executed a promissory note in 1964 in favor of the Bank. They were to
execute three more promissory notes in 1967.

In 1965, petitioners having long defaulted in the payment of their obligations under the credit line, the
Bank foreclosed the mortgage and bought the properties covered thereby, it being the highest bidder
in the auction sale held in the same year. Ownership over the properties was later consolidated in
the Bank on account of which new titles thereto were issued to it.8

On January 27, 1977, alleging non-payment of the balance of QGLC's obligation after the proceeds
of the foreclosure sale were applied thereto, and non-payment of the promissory notes despite
repeated demands, the Bank filed a complaint for "sum of money" (Civil Case No. 106635) against
petitioners before the Regional Trial Court (RTC) of Manila.

The complaint listed ten causes of action. The first concerns the overdraft line under which the Bank
claimed that petitioners withdrew amounts (unspecified) at twelve percent per annum which were
unpaid at maturity and that after it applied the proceeds of the foreclosure sale to the overdraft debt,
there remained an unpaid balance of P1,224,301.56.

The Bank's second to fifth causes of action pertain to the LC line under which it averred that on the
strength of the LCs it issued, the beneficiaries thereof drew and presented sight drafts to it which it
all paid after petitioners' acceptance; and that it delivered the tractors and equipment subject of the
LCs to petitioners who have not paid either the full or part of the face value of the drafts.

Specifically with respect to its second cause of action, the Bank alleged that it issued LC No. 63-
0055D on January 15, 1963 in favor of Monark International Incorporated 9 covering the purchase of
a tractor10 on which the latter allegedly drew a sight draft with a face value of P71,500.00, 11 which
amount petitioners have not, however, paid in full.
Under its third cause of action, the Bank charged that it issued LC No. 61-1110D on December 27,
1962 also in favor of Monark International covering the purchase of another tractor and other
equipment;12 and that Monark International drew a sight draft with a face value of P80,350.00, 13 and
while payments for the value thereof had been made by petitioners, a balance of P68,064.97
remained.

Under the fourth cause of action, the Bank maintained that it issued LC No. 63-0182D on February
11, 1963 in favor of J.B.L. Enterprises, Inc. 14 covering the purchase of two tractors, 15 and J.B.L.
Enterprises drew on February 13, 1963 a sight draft on said LC in the amount of P155,000.00 but
petitioners have not paid said amount.

On its fifth cause of action, the Bank alleged that it issued LC No. 63-0284D on March 14, 1963 in
favor of Super Master Auto Supply (SMAS) covering the purchase of "Eight Units GMC (G.I.)
Trucks"; that on March 14, 1963, SMAS drew a sight draft with a face value of P64,000.00 16 on the
basis of said LC; and that the payments made by petitioners for the value of said draft were deficient
by P45,504.74.

The Bank thus prayed for the settlement of the above-stated obligations at an interest rate of eleven
percent per annum, and for the award of trust receipt commissions, attorney's fees and other fees
and costs of collection.

The sixth to ninth causes of action are anchored on the promissory notes issued by petitioners
allegedly to secure certain advances from the Bank in connection with the exportation of logs as
reflected above.17 The notes were payable 30 days after date and provided for the solidary liability of
petitioners as well as attorney's fees at ten percent of the total amount due 18 in the event of their non-
payment at maturity.

The note dated June 18, 1964, subject of the sixth cause of action, has a face value of P55,000.00
with interest rate of twelve percent per annum;19 that dated July 7, 1967 subject of the seventh has a
face value of P20,000.00;20 that dated July 18, 1967 subject of the eighth has a face value of
P38,000.00;21 and that dated August 23, 1967 subject of the ninth has a face value of
P11,000.00.22 The interest rate of the last three notes is pegged at thirteen percent per annum.23

On its tenth and final cause of action, the Bank claimed that it has accounts receivable from
petitioners in the amount of P120.48.

In their Answer24 of March 3, 1977, petitioners admit the following: having applied for credit
accommodations totaling P900,000.00 to secure which they mortgaged real properties; opening of
the LC/Trust Receipt Line; the issuance by the Bank of the various LCs; and the foreclosure of the
real estate mortgage and the consolidation of ownership over the mortgaged properties in favor of
the Bank. They deny, however, having availed of the credit accommodations and having received
the value of the promissory notes, as they do deny having physically received the tractors and
equipment subject of the LCs.

As affirmative defenses, petitioners assert that the complaint states no cause of action, and
assuming that it does, the same is/are barred by prescription or null and void for want of
consideration.

By Order of March 10, 1977, Branch 36 of the Manila RTC attached the preferred shares of stocks of
the spouses Quirino and Eufemia Gonzales with the Bank with a total par value of P414,000.00.
Finding for petitioners, the trial court rendered its Decision of April 22, 1992 the dispositive portion of
which reads:

WHEREFORE, judgment is rendered as follows:

1. All the claims of plaintiff particularly those described in the first to the tenth causes of
action of its complaint are denied for the reasons earlier mentioned in the body of this
decision;

2. As regards the claims of defendants pertaining to their counterclaim (Exhibits "1", "2" and
"3"), they are hereby given ten (10) years from the date of issuance of the torrens title to
plaintiff and before the transfer thereof in good faith to a third party buyer within which to ask
for the reconveyance of the real properties foreclosed by plaintiff,

3. The order of attachment which was issued against the preferred shares of stocks of
defendants-spouses Quirino Gonzales and Eufemia Gonzales with the Republic Bank now
known as Republic Planters Bank dated March 21, 1977 is hereby dissolved and/or lifted,
and

4. Plaintiff is likewise ordered to pay the sum of P20,000.00, as and for attorney's fees, with
costs against plaintiff.

SO ORDERED.

In finding for petitioners, the trial court ratiocinated: 25

Art. 1144 of the Civil Code states that an action upon a written contract prescribes in ten (10)
years from the time the right of action accrues. Art. 1150 states that prescription starts to run
from the day the action may be brought. The obligations allegedly created by the written
contracts or documents supporting plaintiff's first to the sixth causes of action were
demandable at the latest in 1964. Thus when the complaint was filed on January 27, 1977
more than ten (10) years from 1964 [when the causes of action accrued] had already
lapsed. The first to the sixth causes of action are thus barred by prescription. . . .

As regards the seventh and eight causes of action, the authenticity of which documents were
partly in doubt in the light of the categorical and uncontradicted statements that in 1965,
defendant Quirino Gonzales logging concession was terminated based on the policy of the
government to terminate logging concessions covering less than 20,000 hectares. If this is
the case, the Court is in a quandary why there were log exports in 1967? Because of the
foregoing, the Court does not find any valid ground to sustain the seventh and eight causes
of action of plaintiff's complaint.

As regards the ninth cause of action, the Court is baffled why plaintiff extended to
defendants another loan when defendants according to plaintiff's records were defaulting
creditors? The above facts and circumstances has (sic) convinced this Court to give credit to
the testimony of defendants' witnesses thatthe Gonzales spouses signed the documents in
question in blank and that the promised loan was never released to them. There is therefore
a total absence of consent since defendants did not give their consent to loans allegedly
procured, the proceeds of which were never received by the alleged debtors, defendants
herein. . . .
 Plaintiff did not present evidence to support its tenth cause of action. For this reason, it must
consequently be denied for lack of evidence.

On the matter of [the] counterclaims of defendants, they seek the return of the real and
personal properties which they have given in good faith to plaintiff. Again, prescription may
apply. The real properties of defendants acquired by plaintiff were foreclosed in 1965 and
consequently, defendants had one (1) year to redeem the property or ten (10) years from
issuance of title on the ground that the obligation foreclosed was fictitious.

xxx           xxx           xxx

On appeal,26 the Court of Appeals (CA) reversed the decision of the trial court by Decision 27 of June
28, 1996 which disposed as follows:28

WHEREFORE, premises considered, the appealed decision (dated April 22, 1992) of the
Regional Trial Court (Branch 36) in Manila in Civil Case No. 82-4141 is hereby REVERSED
— and let the case be remanded back to the court a quo for the determination of the
amount(s) to be awarded to the [the Bank]-appellant relative to its claims against the
appellees.

SO ORDERED.

With regard to the first to sixth causes of action, the CA upheld the contention of the Bank that the
notices of foreclosure sale were "tantamount" to demand letters upon the petitioners which
interrupted the running of the prescriptive period. 29

As regards the seventh to ninth causes of action, the CA also upheld the contention of the Bank that
the written agreements-promissory notes prevail over the oral testimony of petitioner Quirino
Gonzales that the cancellation of their logging concession in 1967 made it unbelievable for them to
secure in 1967 the advances reflected in the promissory notes. 30

With respect to petitioners' counterclaim, the CA agreed with the Bank that: 31

Certainly, failure on the part of the trial court to pass upon and determine the authenticity and
genuineness of [the Bank's] documentary evidence [the trial court having ruled on the basis
of prescription of the Bank's first to sixth causes of action] makes it impossible for the trial
court' to eventually conclude that theobligation foreclosed (sic) was fictitious. Needless to
say, the trial court's ruling averses (sic) the well-entrenched rule that 'courts must render
verdict on their findings of facts." (China Banking Co. vs. CA, 70 SCRA 398)

Furthermore, the defendants-appellees' [herein petitioners'] counterclaim is basically an

action for the reconveyance of their properties, thus, the trial court's earlier ruling that the
defendants-appellees' counterclaim has prescribed is itself a ruling that the defendants-
appellees' separate action for reconveyance has also prescribed.

The CA struck down the trial court's award of attorney's fees for lack of legal basis. 32

Hence, petitioners now press the following issues before this Court by the present petition for review
on certiorari:
 1. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT
RESPONDENT-APPELLEES (SIC.) REPUBLIC PLANTERS BANK['S] FIRST, SECOND,
THIRD, FOURTH, FIFTH AND SIXTH CAUSES OF ACTION HAVE NOT PRESCRIBED
CONTRARY TO THE FINDINGS OF THE LOWER COURT, RTC BRANCH 36 THAT THE
SAID CAUSES OF ACTION HAVE ALREADY PRESCRIBED.

2. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT

RESPODNENT-APPELLEES (SIC.) REPUBLIC PLANTERS BANK['S] SEVENTH, EIGHT
AND NINTH CAUSES OF ACTION APPEARS (SIC.) TO BE IMPRESSED WITH MERIT
CONTRARY TO THE FINDINGS OF THE LOWER COURT RTC BRANCH 36 THAT THE
SAID CAUSES HAVE NO VALID GROUND TO SUSTAIN [THEM] AND FOR LACK OF
EVIDENCE.

3. WHETHER OR NOT RESPONDENT COURT [ERRED] IN REVERSING THE FINDINGS

OF THE REGIONAL TRIAL COURT BRANCH 36 OF MANILA THAT PETITIONERS-
APPELLANT (SIC.) MAY SEEK THE RETURN OF THE REAL AND PERSONAL
PROPERTIES WHICH THEY MAY HAVE GIVEN IN GOOD FAITH AS THE SAME IS
BARRED BY PRESCRIPTION AND THAT PETITIONERS-APPELLANT (SIC.) HAD ONE (1)
YEAR TO REDEEM THE PROPERTY OR TEN (10) YEARS FROM ISSUANCE OF THE
TITLE ON THE GROUND THAT THE OBLIGATION FORECLOSED WAS FICTITIOUS.

4. WHETHER OR NOT RESPONDENT COURT ERRED IN SO HOLDING THAT

PEITIONERS-APPELLANTS [SIC] ARE NOT ENTITLED TO AN AWARD OF ATTORNEY'S
FEES.

The petition is partly meritorious.

On the first issue. The Civil Code provides that an action upon written contract, an obligation created
by law, and a judgment must be brought within ten years from the time the right of action accrues. 33

The finding of the trial court that more than ten years had elapsed since the right to bring an action
on the Bank's first to sixth causes had arisen 34 is not disputed. The Bank contends, however, that
"the notices of foreclosure sale in the foreclosure proceedings of 1965 are tantamount to formal
demands upon petitioners for the payment of their past due loan obligations with the Bank, hence,
said notices of foreclosure sale interrupted/forestalled the running of the prescriptive period." 35

The Bank's contention does not impress. Prescription of actions is interrupted when they are filed
before the court, when there is a written extrajudicial demand by the creditors, and when there is any
written acknowledgment of the debt by the debtor. 36

The law specifically requires a written extrajudicial demand by the creditors which is absent in the
case at bar. The contention that the notices of foreclosure are "tantamount" to a written extrajudicial
demand cannot be appreciated, the contents of said notices not having been brought to light.

But even assuming arguendo that the notices interrupted the running of the prescriptive period, the
argument would still not lie for the following reasons:

With respect to the first to the fifth causes of action, as gleaned from the complaint, the Bank seeks
the recovery of the deficient amount of the obligation after the foreclosure of the mortgage. Such suit
is in the nature of a mortgage action because its purpose is precisely to enforce the mortgage
contract.37 A mortgage action prescribes after ten years from the time the right of action accrued. 38
The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in
the sale of the property at public auction and the outstanding obligation at the time of the foreclosure
proceedings.39 In the present case, the Bank, as mortgagee, had the right to claim payment of the
deficiency after it had foreclosed the mortgage in 1965. 40 In other words, the prescriptive period
started to run against the Bank in 1965. As it filed the complaint only on January 27, 1977, more
than ten years had already elapsed, hence, the action on its first to fifth causes had by then
prescribed. No other conclusion can be reached even if the suit is considered as one upon a written
contract or upon an obligation to pay the deficiency which is created by law, 41 the prescriptive period
of both being also ten years.42

As regards the promissory note subject of the sixth cause of action, its period of prescription could
not have been interrupted by the notices of foreclosure sale not only because, as earlier discussed,
petitioners' contention that the notices of foreclosure are tantamount to written extra-judicial demand
cannot be considered absent any showing of the contents thereof, but also because it does not
appear from the records that the said note is covered by the mortgage contract.

Coming now to the second issue, petitioners seek to evade liability under the Bank's seventh to ninth
causes of action by claiming that petitioners Quirino and Eufemia Gonzales signed the promissory
notes in blank; that they had not received the value of said notes, and that the credit line thereon
was unnecessary in view of their money deposits, they citing "Exhibits 2 to 2-B," 43 in, and unremitted
proceeds on log exports from, the Bank. In support of their claim, they also urge this Court to look at
Exhibits "B" (the Bank's recommendation for approval of petitioners' application for credit
accommodations), "P" (the "Application and Agreement for Commercial Letter of Credit" dated
January 16, 1963) and "T" (the "Application and Agreement for Commercial Letter of Credit" dated
February 14, 1963).

The genuineness and due execution of the notes had, however, been deemed admitted by
petitioners, they having failed to deny the same under oath. 44 Their claim that they signed the notes
in blank does not thus lie.

Petitioners' admission of the genuineness and due execution of the promissory notes
notwithstanding, they raise want of consideration 45 thereof. The promissory notes, however, appear
to be negotiable as they meet the requirements of Section 1 46 of the Negotiable Instruments Law.
Such being the case, the notes are prima faciedeemed to have been issued for consideration. 47 It
bears noting that no sufficient evidence was adduced by petitioners to show otherwise.

Exhibits "2" to "2-B" to which petitioners advert in support of their claim that the credit line on the
notes was unnecessary because they had deposits in, and remittances due from, the Bank deserve
scant consideration. Said exhibits are merely claims by petitioners under their then proposals for a
possible settlement of the case dated February 3, 1978. Parenthetically, the proposals were not
even signed by petitioners but by certain Attorneys Osmundo R. Victoriano and Rogelio P.
Madriaga.

In any case, it is no defense that the promissory notes were signed in blank as Section 14 48 of the
Negotiable Instruments Law concedes the prima facie authority of the person in possession of
negotiable instruments, such as the notes herein, to fill in the blanks.

As for petitioners' reliance on Exhibits "B", "P" and "T," they have failed to show the relevance
thereof to the seventh up to the ninth causes of action of the Bank.

On the third issue, petitioners asseverate that with the trial court's dismissal of the Bank's complaint
and the denial of its first to sixth causes of action, it is but fair and just that the real properties which
were mortgaged and foreclosed be returned to them. 49 Such, however, does not lie. It is not disputed
that the properties were foreclosed under Act No. 3135 (An Act to Regulate the Sale of Property
under Special Powers Inserted in or Annexed to Real Estate Mortgages), as amended. Though the
Bank's action for deficiency is barred by prescription, nothing irregular attended the foreclosure
proceedings to warrant the reconveyance of the properties covered thereby.

As for petitioners' prayer for moral and exemplary damages, it not having been raised as issue
before the courts below, it can not now be considered. Neither can the award of attorney's fees for
lack of legal basis.

8. GR No. L-18103             June 8, 1922

PNB vs. MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC., 

The question of first impression raised in this case concerns the validity in this jurisdiction of a
provision in a promissory note whereby in case the same is not paid at maturity, the maker
authorizes any attorney to appear and confess judgment thereon for the principal amount, with
interest, costs, and attorney's fees, and waives all errors, rights to inquisition, and appeal, and all
property exceptions.

On May 8, 1920, the manager and the treasurer of the Manila Oil Refining & By-Products Company,
Inc., executed and delivered to the Philippine National Bank, a written instrument reading as follows:

RENEWAL. 
P61,000.00

MANILA, P.I., May 8, 1920.

On demand after date we promise to pay to the order of the Philippine National Bank sixty-
one thousand only pesos at Philippine National Bank, Manila, P.I.

Without defalcation, value received; and to hereby authorize any attorney in the Philippine
Islands, in case this note be not paid at maturity, to appear in my name and confess
judgment for the above sum with interest, cost of suit and attorney's fees of ten (10) per cent
for collection, a release of all errors and waiver of all rights to inquisition and appeal, and to
the benefit of all laws exempting property, real or personal, from levy or sale. Value received.
No. ____ Due ____

MANILA OIL REFINING & BY-PRODUCTS CO., INC.,

(Sgd.) VICENTE SOTELO, 

Manager.

MANILA OIL REFINING & BY-PRODUCTS CO., INC.,

(Sgd.) RAFAEL LOPEZ,

Treasurer

The Manila Oil Refining and By-Products Company, Inc. failed to pay the promissory note on
demand. The Philippine National Bank brought action in the Court of First Instance of Manila, to
recover P61,000, the amount of the note, together with interest and costs. Mr. Elias N. Rector, an
attorney associated with the Philippine National Bank, entered his appearance in representation of
the defendant, and filed a motion confessing judgment. The defendant, however, in a sworn
declaration, objected strongly to the unsolicited representation of attorney Recto. Later, attorney
Antonio Gonzalez appeared for the defendant and filed a demurrer, and when this was overruled,
presented an answer. The trial judge rendered judgment on the motion of attorney Recto in the
terms of the complaint.

The foregoing facts, and appellant's three assignments of error, raise squarely the question which
was suggested in the beginning of this opinion. In view of the importance of the subject to the
business community, the advice of prominent attorneys-at-law with banking connections, was
solicited. These members of the bar responded promptly to the request of the court, and their
memoranda have proved highly useful in the solution of the question. It is to the credit of the bar that
although the sanction of judgement notes in the Philippines might prove of immediate value to
clients, every one of the attorneys has looked upon the matter in a big way, with the result that out of
their independent investigations has come a practically unanimous protest against the recognition in
this jurisdiction of judgment notes.1

Neither the Code of Civil Procedure nor any other remedial statute expressly or tacitly recognizes a
confession of judgment commonly called a judgment note. On the contrary, the provisions of the
Code of Civil Procedure, in relation to constitutional safeguards relating to the right to take a man's
property only after a day in court and after due process of law, contemplate that all defendants shall
have an opportunity to be heard. Further, the provisions of the Code of Civil Procedure pertaining to
counter claims argue against judgment notes, especially as the Code provides that in case the
defendant or his assignee omits to set up a counterclaim, he cannot afterwards maintain an action
against the plaintiff therefor. (Secs. 95, 96, 97.) At least one provision of the substantive law,
namely, that the validity and fulfillment of contracts cannot be left to the will of one of the contracting
parties (Civil Code, art. 1356), constitutes another indication of fundamental legal purposes.

The attorney for the appellee contends that the Negotiable Instruments Law (Act No. 2031)
expressly recognizes judgment notes, and that they are enforcible under the regular procedure. The
Negotiable Instruments Law, in section 5, provides that "The negotiable character of an instrument
otherwise negotiable is not affected by a provision which ". . . (b) Authorizes a confession of
judgment if the instrument be not paid at maturity." We do not believe, however, that this provision of
law can be taken to sanction judgments by confession, because it is a portion of a uniform law which
merely provides that, in jurisdiction where judgment notes are recognized, such clauses shall not
affect the negotiable character of the instrument. Moreover, the same section of the Negotiable
Instruments. Law concludes with these words: "But nothing in this section shall validate any
provision or stipulation otherwise illegal."

The court is thus put in the position of having to determine the validity in the absence of statute of a
provision in a note authorizing an attorney to appear and confess judgment against the maker. This
situation, in reality, has its advantages for it permits us to reach that solution which is best grounded
in the solid principles of the law, and which will best advance the public interest.

The practice of entering judgments in debt on warrants of attorney is of ancient origin. In the course
of time a warrant of attorney to confess judgement became a familiar common law security. At
common law, there were two kinds of judgments by confession; the one a judgment by cognovit
actionem, and the other by confessionrelicta verificatione. A number of jurisdictions in the United
States have accepted the common law view of judgments by confession, while still other jurisdictions
have refused to sanction them. In some States, statutes have been passed which have either
expressly authorized confession of judgment on warrant of attorney, without antecedent process, or
have forbidden judgments of this character. In the absence of statute, there is a conflict of authority
as to the validity of a warrant of attorney for the confession of judgement. The weight of opinion is
that, unless authorized by statute, warrants of attorney to confess judgment are void, as against
public policy.

Possibly the leading case on the subject is First National Bank of Kansas City vs. White ([1909], 220
Mo., 717; 16 Ann. Cas., 889; 120 S. W., 36; 132 Am. St. Rep., 612). The record in this case
discloses that on October 4, 1990, the defendant executed and delivered to the plaintiff an obligation
in which the defendant authorized any attorney-at-law to appear for him in an action on the note at
any time after the note became due in any court of record in the State of Missouri, or elsewhere, to
waive the issuing and service of process, and to confess judgement in favor of the First National
Bank of Kansas City for the amount that might then be due thereon, with interest at the rate therein
mentioned and the costs of suit, together with an attorney's fee of 10 per cent and also to waive and
release all errors in said proceedings and judgment, and all proceedings, appeals, or writs of error
thereon. Plaintiff filed a petition in the Circuit Court to which was attached the above-mentioned
instrument. An attorney named Denham appeared pursuant to the authority given by the note sued
on, entered the appearance of the defendant, and consented that judgement be rendered in favor of
the plaintiff as prayed in the petition. After the Circuit Court had entered a judgement, the
defendants, through counsel, appeared specially and filed a motion to set it aside. The Supreme
Court of Missouri, speaking through Mr. Justice Graves, in part said:

But going beyond the mere technical question in our preceding paragraph discussed, we
come to a question urged which goes to the very root of this case, and whilst new and novel
in this state, we do not feel that the case should be disposed of without discussing and
passing upon that question.

xxx     xxx     xxx

And if this instrument be considered as security for a debt, as it was by the common law, it
has never so found recognition in this state. The policy of our law has been against such
hidden securities for debt. Our Recorder's Act is such that instruments intended as security
for debt should find a place in the public records, and if not, they have often been viewed
with suspicion, and their bona fides often questioned.

Nor do we thing that the policy of our law is such as to thus place a debtor in the absolute
power of his creditor. The field for fraud is too far enlarged by such an instrument.
Oppression and tyranny would follow the footsteps of such a diversion in the way of security
for debt. Such instruments procured by duress could shortly be placed in judgment in a
foreign court and much distress result therefrom.

Again, under the law the right to appeal to this court or some other appellate court is granted
to all persons against whom an adverse judgment is rendered, and this statutory right is by
the instrument stricken down. True it is that such right is not claimed in this case, but it is a
part of the bond and we hardly know why this pound of flesh has not been demanded.
Courts guard with jealous eye any contract innovations upon their jurisdiction. The
instrument before us, considered in the light of a contract, actually reduces the courts to
mere clerks to enter and record the judgment called for therein. By our statute (Rev. St.
1899, sec. 645) a party to a written instrument of this character has the right to show a failure
of consideration, but this right is brushed to the wind by this instrument and the jurisdiction of
the court to hear that controversy is by the whose object is to oust the jurisdiction of the
courts are contrary to public policy and will not be enforced. Thus it is held that any
stipulation between parties to a contract distinguishing between the different courts of the
country is contrary to public policy. The principle has also been applied to a stipulation in a
 contract that a party who breaks it may not be sued, to an agreement designating a person
to be sued for its breach who is nowise liable and prohibiting action against any but him, to a
provision in a lease that the landlord shall have the right to take immediate judgment against
the tenant in case of a default on his part, without giving the notice and demand for
possession and filing the complaint required by statute, to a by-law of a benefit association
that the decisions of its officers on claim shall be final and conclusive, and to many other
agreements of a similar tendency. In some courts, any agreement as to the time for suing
different from time allowed by the statute of limitations within which suit shall be brought or
the right to sue be barred is held void.

xxx     xxx     xxx

We shall not pursue this question further. This contract, in so far as it goes beyond the usual
provisions of a note, is void as against the public policy of the state, as such public policy is
found expressed in our laws and decisions. Such agreements are iniquitous to the uttermost
and should be promptly condemned by the courts, until such time as they may receive
express statutory recognition, as they have in some states.

xxx     xxx     xxx

From what has been said, it follows that the Circuit Court never had jurisdiction of the
defendant, and the judgement is reversed.

The case of Farquhar and Co. vs. Dehaven ([1912], 70 W. Va., 738; 40 L.R.A. [N. S.], 956; 75 S.E.,
65; Ann. Cas. [1914-A], 640), is another well-considered authority. The notes referred to in the
record contained waiver of presentment and protest, homestead and exemption rights real and
personal, and other rights, and also the following material provision: "And we do hereby empower
and authorize the said A. B. Farquhar Co. Limited, or agent, or any prothonotary or attorney of any
Court of Record to appear for us and in our name to confess judgement against us and in favor of
said A. B. Farquhar Co., Limited, for the above named sum with costs of suit and release of all errors
and without stay of execution after the maturity of this note." The Supreme Court of West Virginia, on
consideration of the validity of the judgment note above described, speaking through Mr. Justice
Miller, in part said:

As both sides agree the question presented is one of first impression in this State. We have
no statutes, as has Pennsylvania and many other states, regulating the subject. In the
decision we are called upon to render, we must have recourse to the rules and principles of
the common law, in force here, and to our statute law, applicable, and to such judicial
decisions and practices in Virginia, in force at the time of the separation, as are properly
binding on us. It is pertinent to remark in this connection, that after nearly fifty years of
judicial history this question, strong evidence, we think, that such notes, if at all, have never
been in very general use in this commonwealth. And in most states where they are current
the use of them has grown up under statutes authorizing them, and regulating the practice of
employing them in commercial transactions.

xxx     xxx     xxx

It is contended, however, that the old legal maxim, qui facit per alium, facit per se, is as
applicable here as in other cases. We do not think so. Strong reasons exist, as we have
shown, for denying its application, when holders of contracts of this character seek the aid of
the courts and of their execution process to enforce them, defendant having had no day in
court or opportunity to be heard. We need not say in this case that a debtor may not, by
 proper power of attorney duly executed, authorize another to appear in court, and by proper
endorsement upon the writ waive service of process, and confess judgement. But we do not
wish to be understood as approving or intending to countenance the practice employing in
this state commercial paper of the character here involved. Such paper has heretofore had
little if any currency here. If the practice is adopted into this state it ought to be, we think, by
act of the Legislature, with all proper safeguards thrown around it, to prevent fraud and
imposition. The policy of our law is, that no man shall suffer judgment at the hands of our
courts without proper process and a day to be heard. To give currency to such paper by
judicial pronouncement would be to open the door to fraud and imposition, and to subject the
people to wrongs and injuries not heretofore contemplated. This we are unwilling to do.

A case typical of those authorities which lend support to judgment notes is First National Bank of Las
Cruces vs. Baker ([1919], 180 Pac., 291). The Supreme Court of New Mexico, in a per
curiam decision, in part, said:

In some of the states the judgments upon warrants of attorney are condemned as being
against public policy. (Farquhar and Co. vs. Dahaven, 70 W. Va., 738; 75 S.E., 65; 40 L.R.A.
[N. S.], 956; Ann. Cas. [1914 A]. 640, and First National Bank of Kansas City vs. White, 220
Mo., 717; 120 S. W., 36; 132 Am. St. Rep., 612; 16 Ann. Cas., 889, are examples of such
holding.) By just what course of reasoning it can be said by the courts that such judgments
are against public policy we are unable to understand. It was a practice from time
immemorial at common law, and the common law comes down to us sanctioned as justified
by the reason and experience of English-speaking peoples. If conditions have arisen in this
country which make the application of the common law undesirable, it is for the Legislature to
so announce, and to prohibit the taking of judgments can be declared as against the public
policy of the state. We are aware that the argument against them is that they enable the
unconscionable creditor to take advantage of the necessities of the poor debtor and cut him
off from his ordinary day in court. On the other hand, it may be said in their favor that it
frequently enables a debtor to obtain money which he could by no possibility otherwise
obtain. It strengthens his credit, and may be most highly beneficial to him at times. In some
of the states there judgments have been condemned by statute and of course in that case
are not allowed.

Our conclusion in this case is that a warrant of attorney given as security to a creditor
accompanying a promissory note confers a valid power, and authorizes a confession of
judgment in any court of competent jurisdiction in an action to be brought upon said note;
that our cognovit statute does not cover the same field as that occupied by the common-law
practice of taking judgments upon warrant of attorney, and does not impliedly or otherwise
abrogate such practice; and that the practice of taking judgments upon warrants of attorney
as it was pursued in this case is not against any public policy of the state, as declared by its
laws.

With reference to the conclusiveness of the decisions here mentioned, it may be said that they are
based on the practice of the English-American common law, and that the doctrines of the common
law are binding upon Philippine courts only in so far as they are founded on sound principles
applicable to local conditions.

Judgments by confession as appeared at common law were considered an amicable, easy, and
cheap way to settle and secure debts. They are a quick remedy and serve to save the court's time.
They also save the time and money of the litigants and the government the expenses that a long
litigation entails. In one sense, instruments of this character may be considered as special
agreements, with power to enter up judgments on them, binding the parties to the result as they
themselves viewed it.

On the other hand, are disadvantages to the commercial world which outweigh the considerations
just mentioned. Such warrants of attorney are void as against public policy, because they enlarge
the field for fraud, because under these instruments the promissor bargains away his right to a day
in court, and because the effect of the instrument is to strike down the right of appeal accorded by
statute. The recognition of such a form of obligation would bring about a complete reorganization of
commercial customs and practices, with reference to short-term obligations. It can readily be seen
that judgement notes, instead of resulting to the advantage of commercial life in the Philippines
might be the source of abuse and oppression, and make the courts involuntary parties thereto. If the
bank has a meritorious case, the judgement is ultimately certain in the courts.

We are of the opinion that warrants of attorney to confess judgment are not authorized nor
contemplated by our law. We are further of the opinion that provisions in notes authorizing attorneys
to appear and confess judgments against makers should not be recognized in this jurisdiction by
implication and should only be considered as valid when given express legislative sanction.

The judgment appealed from is set aside, and the case is remanded to the lower court for further
proceedings in accordance with this decision. Without special finding as to costs in this instance, it is
so ordered.